Transcripts For CNBC Squawk On The Street 20130920

All around the world today. Well talk a lot about what the baseline is for sales this weekend in just a moment. People lining up all around the world, trying to get their hands on the new iphone. With enthusiasm translate to investors enthusiasm as well . And were days away from a possible Government Shutdown. President obama already promising to veto the bill. Sales at olive garden and red lobster falling sharply. And Steve Ballmer saying its weird for him to come to work these days. Apples new 5s and 5c going on sale in the central zone now. They went on sale on the east coast about an hour ago. Courtney reagan is tracking all the action. Good morning. Reporter good morning to you, carl. They did go on sale here about an hour ago. In my hand i have the iphone 5s. This is the beautiful gold version. Im gripping it very tightly and i have the iphone 5c. This is the blue one. This line has been growing throughout the morning. Yesterday there were about 30 people in line in the afternoon. The first handful had been here for two weeks. This morning when we got here at about 5 00 in the morning, we would guess there were about 450 in line. It only grew by the hundreds. If youre familiar with this area, the line wrapped down 58th street, back up madison avenue, back around 59th and is trickling on to 5th avenue. Folks are going into the store. The Apple Employees are clapping for them as they go in. It took about ten minutes for the very first person in line to walk out with that prized iphone. Many of the folks are not selling the iphone, theyre keeping one for themselves, buying one for a friend or cousin. There was no preorder for the iphone 5s this time and we have the better camera, the faster processor, the fingerprint sensor. So folks are really, really excited about it. As you can see, the excitement is still growing here. Now theyre on sale in the central time zone as well. Carl . Courtney reagan, thank you so much. Our next guest predicts 6 million new iphones will be sold this weekend. He has a buy rating on apple at a 540 price target. Good to see you again. Thanks, carl. A lot of this that were looking at this morning is clearly optics. What leads you to 6 and what happens if they dont get there . It is optics. Its definitely the longest line weve ever seen. The iphone 4 was very long. The reason we dont put too much faith in trying to translate line numbers finto sales, the 4 was longer lines than the 4. The company has added china to the mix. The Addressable Market is about 2 billion wireless customers where in the past four years its been more around 700 million. You would think that has a huge opportunity. Obviously there was no preorders for the 5s and we dont know what the supply situation is like. Walter, how important are these Opening Weekend figures . You mentioned of course the 4s being more of a success. Did that success build . What happened in the Opening Weekend generally tell you the theme of how well these phones will do . I dont think it does. Again, with the 4s, the first weekend numbers were good, the lines werent that good relative to the growth that you saw of the 4s, which had like 32 million in the december quarter, 30 someodd million for the total phone sales versus the number of phones sold when the 4 was launched. I think its helpful. Its great press for apple to have people waiting in these long lines but its not necessarily demonstrative of how successful the phone will be over the next couple of quarters. The journal this morning reports theyre asking suppliers to increase production of the gold 5s. People are gravitating to some of these new colors. How do you think strategically the company has positioned its supply . Are they intentionally keeping it hard to get to build some of the scenes like were seeing this morning . I think theres always that type of Conspiracy Theory but i think at the end of the day, you want to get as much product into the stores as quickly as possible because there is a compressed product cycle that has occurred. Youve seen a quicker falloff in sales in recent phones compared to past phones. Obvio obviously theyre stacking more countries into the launch. Before three, four months into the cycle you say to people maybe ill just wait for the next phone given how quickly new products come out. I dont think there is that issue. Its difficult to make 6 million phones for delivery in the first weekend that the product is for sale. What about china . I dont think were seeing pictures from there but im curious as to what your read is on that market. We do have video from beijing. Well show that while youre talking. I dont know what youre going to show on the video. There were pictures last night what didnt show lines but i think there was a difference in how they were setting it, whether you had to set up an appointment. We cant get too caught up in the actual pictures. China is a huge opportunity. I think apple lost an opportunity here because i think the growth is going to take off. The phones are too expensive for china mobiles customers, which are obviously prepaid. They will sell a ton of the 5s and 5c. I think theres a bigger opportunity for apple that theyre missing by not having a lower price phone in the market. Tim cook tries to push back on that in business week this week saying were not in the junk business. They go back to old quotes by steve jobs who say mercedes, bmw, their market shares about the market share we have. Is that okay . Is this pricing complaint by investors going to go away by any point . Earnings were down 20 last quarter. I dont know what bmws Earnings Growth is like but at the end of the day, a Management Team is there to represent its shareholders. What they should be doing is trying to maximize growth. You cant necessarily associate junk with low price. Theres an iphone 4 that at full price is 450. Does the company consider the iphone 4 junk at this point . Its saying we dont ever want to hurt our brand by coming out with a product that people will perceive as low end. If they decide to forego the market, i think it hard for them to grow earnings over the longer term. Its a big debate thats not going to go away soon. Well talk more about the supplier later on today. Meantime, the house aiming to pass a measure to keep the government funded through middecember. This despite a veto threat from the white house. John harwood is in our Nations Capital in what could be a big, so symbolic day. Reporter it is. We dont know how this is going to work out the end and how john boehner can lead his troops to extend government funding in the absence of a defunding of obama care. The good news is were starting the process of figuring that out. The vote will come by noon, unless democrats try to gum up the works with procedural tricks. Can you expect that to pass with republican votes today. The senate is going to consider that bill next week. They will not accept the defending of obama care. Theyll seasonnd Something Back the house, if they can pass it. There is the possibility the senate couldnt get 60 votes to pass anything. Youll also have a debate on a separate bill in the house which also has a provision to block obama care to raise the debt limit. Thats the more critical problem in terms of the health of the economy. The house is going to act on that sometime late next week and then the senate will act as well. So were still looking at the likelihood of a Government Shutdown based on current events, but the fact that things are moving legislatively and that is going to provoke discussion between the two sides and with the white house is at least some positive sign, carl. I think timingwise we may get that vote before noon. If so well bring it to you on squawk on the street. In the meantime, two of the most wellnone investments are giving us their take. Speaking with Warren Buffett, he had this to say about market valuation now. They moved a long way. They were very cheap five years ago, ridiculously cheap and thats been corrected. Theyre probably more or less fairly priced now. I mean, i dont think we dont find bargains around, but we dont think things are way overvalued either. Carl icahn weighing in as well. He this had this to say on closing bell. I think right now the market is giving you a false picture. The market tells you youre doing well but i dont think a lot of companies are doing that well. They are taking advantage of very low Interest Rates. So obviously you dont have to be a financial genius to understand if i can borrow at 3 or 4 and buy assets, maybe my own stock thats yielding 9 , 10 , 11 , im going to make a lot of money. Now, if the market is fairly valued or fully valued, what does it all mean for investors now . Joining us, john manly, chief equity strategist and david seburg. Good morning. Good morning. John, is the market fully valued . What does that mean . How do you view valuations here . Thats a great question. I love the way you phrased. I think its at the low end of valuation. Markets are extreme live cheap it matters, when its extremely expensive it matters, when its in the middle, i dont think its the driving force. Are were talking price relative to earnings . Yesterday we were told on a price to sales basis the dow was going to raise 3,000 points from here. Theres no hard rule. Its more of a soft science. The pe is a good measure right now because precisely people are so concerned about future Earnings Growth. Theres no one rule that you say thats the one you apply. Its an art, a soft science. The argument that barrWarren Buffett was making is the super era is ending. You might expect it to turn to more of a headwind from here. How do you see things . Are they right about that . When i listen to warren talk and saying the market is fairly valued here or listen to paul make the same sort of comment, i think that youre looking at from a fundamental perspective, we probably are fairly valued but when you see whats happening with the institutions and how theyre investing, it tells a different story. The accounts have been riding the longs and letting them go. Theyre up about 21 and theyre not making sales. The hedge funds are active. Theyre the ones underperforming, theyre chasing the tape. They got very active in the highbeta names. The mutual funds are sitting back and letting it go. They have the ability to lose or give up 5 should some bad news come out. Worst Case Scenario they buy a put but theyre not making sales. As money comes in, theyre adding to their winners and i can see this playing out. So with the market being lets say fairly valued or starting to price in growth, even in that scenario we could see the market drift higher until the end of the year on very low volume because youre going to have hedge funds chasing performance and the big vanillas sitting back letting it happen. That would be interesting, especially if a Government Shutdown were to happen. Buffett said it doesnt really matter because in his words d. C. Can only act irrationally for a certain length of time. Do those with more than a threemonth time horizon ignore this whole thing . I hope so. Im going to try to ignore it. I think its between a 3 and 7 correction. Getting in and out of the market for 5 to 10 corrections is a really hard thing to do, especially if youre taxable. I dont think its more than that. I think mr. Buffett is saying theyll keep at this until one of them is hurt and then theyll stop and thats not going to kill the market. Thats a 5 to 10 correction. I dont think its worth moving for that. Its interesting that all of this is going on while theres still debate about whats going to happen over at the fed. Among the comments that buffett made yesterday, he said he thinks bernanke should stay on. Do you think thats a view wild live held wildly held in markets here . I absolutely do. The market i think trends higher. The Economic Conditions need to improve. Were starting to see improvements but i think they need to improve. We need to see topline growth improvement. If all that pans out by the end of the year, and like i said, this market is going to drift higher and its going to be light volumes. I think were in a position where we can tape ar and ease o of this. Unless we see improvement in the economy and topline improvement, the fed is going to need to be there. It looks like they will be at least for now. John manley and david seaburg, thank you very much, guys. Coming up, Darden Restaurants missed today. Well dig deeper into their earnings. And a live interview with the head of nyses listings coming up. We have one eye on a lot of fed speak today. Apple lines around the stores and well talk about all of it and more when squawk on the street continues. Therell be the usual presentations on research. And development. Some new members of the team will be introduced. The chairman emeritus will distribute his usual wisdom. And you . Well, youre the chief life officer. You just need the right professional to help you take charge. To help you take charge. Seasonal. Doesnt begin to describe it. Running a bike shop has its ups and downs. My cashflow can literally change with the weather. Anything that gives me some breathing room makes a big difference. The plum card from American Express gives your business flexibility. Get 1. 5 discount for paying early, or up to 60 days to pay without interest, or both each month. Im Nelson Gutierrez and im a member of the smarter money. This is what membership is. This is what membership does. Welcome back. As we wait for the opening bell, shares of Darden Restaurants taking a hit, earnings coming in at 53 cents a share, well below street forecasts. The company was hurt by samestore restaurant declines. It says it is identifying areas to make thoughtful and significant spending cuts. It appears the two areas olive garden and red lobster have been looking for them isnt cutting it. 50 million in cost cuts, which is going to include layoffs. For a string of quarters they had been preannounces and missing, preannouncing and missing. The last couple of quarters, it look like they had broken that chain. Theyre calling for more volatility in future results. Unclear what you can expect here or how you mix it into the mosaic of Consumer Spending. Exactly. Which has also had its share of volatility and hardtoread signals, whether its decline in apparel sales, home depot or iphones. Its getting hard for darden to argue its not their own operations. Some might argue look at what qsrs have done, wendys stocks have rocketed. That pretzel i havent tried it. You havent tried it . No, but i love the story, that they can have an 5 sales increase. I havent tried the french fry burger at burger king either. Tear aheyre all doing this,g so innovative. Darden does stick by its yearly guidance. The coo is retiring so the story is clearly not over there. When we come back, as we head into the final trading session of the week, what number is number one on our cashin radar. And take another look at futures. What a couple of weeks it has been. No syria, no summers, no taper. For that the s p has rallied 10 in two weeks. Well see how we close out this friday in just a few moments. Ivu the most Free Research reports, customizable charts, powerful screening tools, and guaranteed 1second trades. And at the center of it all is a surprisingly low price just 7. 95. In fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. Im monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Nascar is ab. Out excitement but tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. Do you remember september, love was changing her mind while chasing the clouds away we have a number of ipos pricing up this morning, including club court. But it may be two at the nasdaq that catch investors eyes. Im talking about fire eye and rocket fuel. By the way, great names, guys. Love those names. Rocket fuel, couldnt find a better name for an ipo. On that one, 30 times over subscribed, 20 of the offering was sold to insiders or an insider so thats a positive. As for fire eye, which im hearing may be a double at the open, well see, priced at 29. Well see where that opens excuse me, priced at i believe that was 20. Rocket fuel was 20. You have 65 of the offering going to the top 25 accounts but they distributed about 600 accounts. Well keep an eye on both of those companies. Well talk to the ceo of rocket fuel in a little bit. Very Interesting Company there in the advertising arena. Looking forward to that one. Weve only got about five minutes left before the bell. Lets bring in our director of floor operations over the ubs. Good morning. Good morning. I cant believe david is talking about ipos that are 30, 35 times oversubscribed. When is the last time weve seen that . As david pointed out in the past, this has been a pretty good year for the ipos. I think things are starting to catch fire again. Twitter as back drop has everybody interested. If you have anything that even hints at being social network and otherwise, i wont say were back quite to dotcom but were beginning to bubble up. When you see a double, it does put you in mind of that time frame. Look at noodles. We have seen some successful ipos. Do you think this is rational, though . Are people just trying to chase here paubecause they dont see other great prospects . You cant make money on Interest Rates. Pension funds and others are desperately behind. I dont know they would be the kind of people that would step into this ipo. I do think youre beginning to see some chasing of return and its getting aggressive. You say to watch for volatility today. We got some expirations and we got additions and deletions to the close yesterday. The close should be very exciting and possibly a tense final ten minutes. Were certainly going to see whopping volume. I dont know if well see a record, but we may come reasonably close. It could be pretty big stuff. When you hear carl icahn and Warren Buffett say maybe not quite undervalued, maybe overvalued, does it give you pause at all . It does. I think obviously there are some extreme values coming off that deep bottom that we had. I think where Interest Rates go will make you revalue things. I think fully priced is a word im beginning to hear more and more around. In there with helicopter ben, which ive also noticed is making a bit of a comeback. Art cashman, thank you very much, sir. Stick around to see the opening trades in just a moment. After last weeks record high, is 50 a share right around high, is 50 a share right around the corner. Would you mind if i go ahead of you . Instead we had someone go ahead of him and win fifty thousand dollars. Congratulations you are our one millionth customer. Nobody likes to miss out. Thats why ally treats all their customers the same. Whether youre the first or the millionth. If your bank doesnt think youre special anymore, you need an ally. Ally bank. Your money needs an ally. [ babies crying ] surprise your house was built on an ancient burial ground. [ ghosts moaning ] surprise your car needs a new transmission. [ coyote howls ] how about no more surprises . Now you can get all the online Trading Tools you need without any surprise fees. Its not rocket science. Its just common sense. From td ameritrade. Youre watching cnbc squawk on the street, live from the Financial Capital of the world. Busy friday morning setting up as the opening bell is in about 40 seconds or so. We are on track for our best week on the s p since july. Thats a couple of months. Barring a disaster, it is the first time, guys, the first three quarters of the year were positive for the dow since 06, the s p since 07. Youre looking at gains as we hover here at 1722 trying to put the first three quarters into perspective and theres only one more full week of the quarter, as we get closer and closer to the end of september. Theres the opening bell, a look at the s p, here at the big Board Operator clubcorp celebrating its ipo today. I know youre keeping an eye on some of these. Clubcorp did price below the range at 14, raising about 252 million. Not quite perhaps as exciting as whether it be ad buying or a new technology that at least rocket fuel uses to try to add great value to inventory it buys and then sells to actual advertisers or cyber security, which is fire eye, what were talking about there and what we know is a huge issue overall. Well keep an eye on both of those stocks. Im very curious to see when they open, they were vastly oversubscribed. David, i wonder if you hear anything about this. When we think back to the late 90s, we were talking about the differences then versus now. Yes, the jobs act has helped make more companies go public, theres interest in social media and twitterrelated names, but is it hedge funds chasing these flyers . Are they doing so trying to catch up . The s p is up 21 for the year. We havent seen that many ipos where theres almost an automatic there have been significant increases but im not sure its been as solidly known that they were going to blow out at the top. Today may be an example of that. You want to get as much of an allocation as you can. Typically retail gets shut out often times of those kinds of deals. Hedge funds, yes, but a lot of institutions have been there as well. The key for the underwriter, you dont want flippers. You want to know theyre going to hold it, own it. Well see how they perform in the after market. Meantime among some of the big gainers at the top, apple will be one to watch. Its in the top ten or so, up better than a percentage points. The range of estimates for the iphone 5s, 5. 5 million to 8 million. A pretty wide range of Opening Weekend sales. For both handsets . I think this is 5s. The baseline right around 7. The ipo Opening Weekend, 1 million, the 41. 7 and the 4s 4 million. They now have 2 billion customers up from 800 million just from the last launch. I did want to mention a bit of news involving an active takeover situation, that being smithfield foods. Viewers may recall schjuanway in an act to buy that company. An activist opposed the deal saying we think theres value above 34 a share, we want to sell them perhaps separately. This morning they essentially throw in the towel on that effort saying while they believe there is value above the 34 a share, they havent been able to make it happen and therefore, unless another proposal emerges, they plan to vote in favor of the proposed merger. Not that it was going to fail anyway, its going to succeed, its gotten the approvals, the chinese are going to own smithfield. Bloomberg did appear this morning asked why they did not taper. They got some weak data. He said the decision between small taper and no taper was a borderline call. Es tra george at 12 30, and the president at 1 45. Its going to be a busy afternoon. This is the first time were going to hear from a lot of these fed officials since that meeting obviously, a ton of interest about what could happen before year end. One of the comments bullard made was they could taper in october if they felt it was necessary. Or as bernanke said himself the other day, they could do a conference call. Really . Conference call . Absolutely. Why not. He said they could have people call in. If theyre like our Conference Calls in the morning, god help them. Facebook did get an upgrade this morning, outperform. Their price target is 53, talking about multiple revenue drivers on facebook. All of these upgrades on facebook keep coming and targets are inching into the 50s. Clorox cut to an outperform saying growth trends, raw material costs and competition will make it hard to achieve their targets for fiscal year end. I know youd love to see a chart of some of these names. I think were going to stay with the shot of the post that is going to take clubcorp public. We should point out that shares of microsoft are actually down almost 2 this morning, 1. 6 after yesterdays analyst meeting. Steve ballmer making a number of comments regarding the fact that he will in the not too distant future be simply a shareholder of the company but believes that it still has shoot the moon power, does microsoft, to Shape Technology in the years ahead. Interesting of course. Still many investors are mightily upset about that nokia deal, succession of course is one of the key issues now. And no update yesterday, according to all the reports. Maybe some of the reasons the stock is seeing softness, theyre not giving any guidance how its going, how long it will take or whether theyre looking inside or outside. Keep an eye on netflix. Its up and maybe it has to do with the emmys this weekend. 14 noms for netflix, 108 for hbo. Wow. Still a little asymmetry there between the two. Its going to be fun on sunday night. Bob pisani is somewhere near post 8. I am. Were waiting for clubcorp to go public here. They operate private golf clubs and country clubs around the country. Priced at 14, its below the price target of 16 to 18. Its been a very busy week for ipos. Theres seven at the nasdaq. David mentioned some of the big ones that happened there. Fire eye, a big corporate Security Protection company. Theyre pricing above the range, 20. Rocket fuel, Digital Advertising for clients. Thats priced at the high end of the range. Neither of them have opened yet. Theyre going to be over at the nasdaq. And some very well known companies have said theyre going to go public recently. The most famous of which is the Empire State Building or rather people who own the Empire State Building, Empire State Reality trust, which is going to file for an ipo and a number of other big Office Buildings in new york have filed and they go public october 1st. A rapid ability to file now. Hilton worldwide, 1. 25 billion ipo, dont know the exact date for that one yet and univision, talk that they may be going. A lot of wellknown names may be going. Well talk to scott cutler about the ipo business, whats hot and whats not and what we can expect in the near future. Were getting a rewading in the s p 500, the quarterly rewading. First, apple is reducing share cap by 3 . Remember that big buyback they had, thats going to change weighting in the s p. The second big stock is google. Google is increasing its weighting. Thats a big, big stock. Youll see heavy volume near the clothes. People investing in gold stocks, theyre going to see shuffling around. Ill give you more information on that later on today. Four fed speakers today. Did you all look at that article in the wall street journal today explaining how the fed kind of got things wrong and the communication issues the fed is having, so bullard was out saying the fed could taper in october and that mr. Bernanke has put on the table the possibility of holding a press conference if they do announce that taper. Well be back in ten minutes with scott cutler. David, back to you. Thanks very much, bob. We want to take a look at a deal we havent visited in a while. Both stocks took off after it. Im talking about gannett and belo. There had been talk that belo would not go for the deal given how much value was delivered to gannett. Now 42. 5 of the vote was already locked up when they did the deal, but they needed a 67 66 2 3 yes vote to get the yes to get the deal to close next week. Or i should say when they take the vote. And its been trading up well above the 13. 75 price more or less since the day the deal was announced back in june. That being said, i can tell you right now that when they count the votes as of now, and this can change because people can pull their votes, its not like an election where you just press the lever and youre done but right now theyre above the 66 2 3 yes vote threshold. Why is that important . Because its a 13. 75 deal and this stock has traded as high as 14. 30, 14. 35. Percentagewise thats a lot higher than the 13. 75 deal and you would certainly expect those shares would begin to fall. Many are hoping you would see an increase in the price of gannett and now it seems if there was an interloper but that doesnt seem likely because if there was another company interested, they would have made that known. So for now they have the yes votes to carry the vote and this will be a done deal in the near future, unless things change. You see the stock is weakening a bit as we talk about it now. Gannett up almost 30 since the deal was announced, belo up about 33 . Big one for aerial. Longtime holding of aerial. Were watching that closely. Shift to bonds in the dollar. Rick santelli at the cme. Good morning, rick. Good morning, carl. Its always, sighting ing exci friday in the eye if youre a technician to see what kind of mean reversion are you going to get, how will the aftermath of triple witching have any lingering effects in the marketplace, looking at a 24hour chart of five years, can you see the rates moved up a bit. It is the fulcrum of much of the pivoting going on. Just think as you look at a chart from july 1st, ive really harped on this, that top on the far left, that first significant high at 2. 75, right where were at, an important pivot. Were done a bakers dozen, down 13 base points. Remember i used to say were guns hot in treasuries, pro active . Were not now. Were not quite in consolidation mode. Were a bit on the cold side. Its super important to where were going to test next. Traders think its going to be 2. 90 or will it be 2. 55 to 2. 58 . If you look at the bunds, they have an election sunday. Theyre up around 2 . If we look at the dollar index, yes, its up a little bit but it really hasnt had much momentum to the up side. Maybe the better trade is to look at the euro versus the dollar, just like the dollar index hovering at an extreme index since early february. Kelly, carl, back to you. As you already know, ipos on parade today, including this Ad Technology firm rocket fuel. What a great name as david points out. Well talk live about his companys debut in just a moment. [ tires screech ] [ male announcer ] 1. 21 gigawatts. Today, thats easy. Ge is revolutionizing power. Supercharging turbines with advanced hardware and innovative software. Using data predictively to help power entire cities. So the turbines of today. Will power us all. Into the future. With my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. [ male announcer ] staying warm and dry has never been our priority. Our priority is, was and always will be serving you, the American People. So we improved Priority Mail flat rate to give you a more reliable way to ship. Now with tracking up to eleven scans, specified delivery dates, and free insurance up to 50 all for the same low rate. [ woman ] we are the United States postal service. [ man ] we are the United States postal service. [ male announcer ] and our priority is you. Go to usps. Com® and try it today. The Advertising Technology Company Rocket fuel pricing its ipo last night at the top of a revised range, 29 a share. It raised 116 million. It will begin trading at the nasdaq today under the ticker fuel. Joining us for a first time cnbc interview, george john, ceo of rocket fuel. Great name, great ticker. Companies like yours, what i hear from some investors is i get it but i always say challenges in terms of getting to a revenue rate that allows you to scale a business to get a healthy and sustainable operating margin. How are you going to do that . Id say we are already. We did over 50 million of revenue in our Second Quarter this year. Weve been showing margins continually improving over the history of the company. As customers have been coming back, spending more money with us at an increasing rate over time as well. We think weve already got a nice scale. An important part of their own operations is how they acquire and develop their own customers. We think were already there. Thats why we made the decision to address Public Markets today. You made the decision because youre already there. There being what . Im sorry, restate that for us. You said companies in our sector have trouble getting scale. I feel like weve got a very nice scale right now. You do. Can you explain what your company does and what the barriers to competitors are that you will put up to prevent them from having the same technology. Right. Our customers are great brands you would know, allstate, bmw, kraft, zappos. They give us the ad revenue to put their ads around the world. Can you think of us as having robots that are shooting ads all over the place in realtime. Whenever an ad works, meaning someone goes and buys some shoes or signing up with a leader form for a highercost survey or responds to a survey saying i am aware of that shampoo, thats like the robot getting a pat on the head, good robot. And was it the type of person that was seeing the ad, is it a certain time of day on an ipad in dallas, texas. What was it that made that happen . Our systems are constantly churning through this giant database that we have trying to figure out these patterns and it means our advertisers campaigns run better and better and better over time. George, just a quick question. I know you are one of only 20 companies allowed to buy within facebooks ad exchange. How well is that, change working . Thats a good question. Facebook, we have an offering right now, which is the rocket fuel fbx product. I think facebook is sort of deserves to be a part of an advertisers overall portfolio. They just have so much consumer attention on facebook all the time. And we think its fantastic that theyve chosen to augment their own kind of direct model with an exchange model, where our robots can buy ad space on facebook in realtime also the way the stuff works is as somebody is looking at a web page, maybe facebook, maybe something else, in realtime, our systems get an alert saying right now theres a chance to put an ad in front of somebody and do you want to buy it. Our system can deploy the math and science of whats the value of that one little spot of attention for all the advertisers we have running on our platform and we can choose the right one and bid the right price for that tiny slice of attention. To the extent you are perceived as a middle man, what stops you from being squeezed. If the buyer and seller of the inventory says im making a lot of money on that, arent you in a position where your margins could contract . Yeah, thats a good question. Thats where we spent a lot of time with investors. Right now our middleman nest, its a really valueadded one. Its not a guy who sells ad space for 1 and we resell it for 2. The machines are selecting out of 36 billion opportunities a day which ones they think are the best for each of our advertisers. And thats a hard thing to replicate, the level of science, artificial intelligence, the big data thats within that. So you might liken it in the finance world to were not like an index fund really, were like a very actively managed Quantitative Fund thats applying a lot of brands. Weve got to leave it there. Thank you very much for joining us. The stock has yet to open but as we said this morning, it does appear it will open with a sharp increase. Thanks to george john. Absolutely. Coming up, the head of nyse talks about ipos, especially in the tech sector. And heres a look on how some of the social media stocks are faring today. Facebook up, others like groupon are lagging. Well be right back. [ woman ] id be a writer. [ man ] id be a baker. [ woman ] i wanna be a pie maker. [ man ] i wanna be a pilot. [ woman ] id be an architect. What if i told you someone could pay you and what if that person were you . When you think about it, isnt that what retirement should be, paying ourselves to do what we love . Amelia. Neil and buzz for teaching us that you cant create the future. By clinging to the past. And with that youre history. Instead of looking behind. Delta is looking beyond. 80 thousand of us investing billions. In everything from the best experiences below. To the finest comforts above. Were not simply saluting history. Were making it. The california teachers association. 150 years of making a difference that lasts a lifetime. The dow is off about 15 points, although were seeing some pretty good action out the transports, new alltime highs for amazon, facebook. It really is an ipo friday. Of all of them, you seem to think the best chances for a pop coming from rocket fuel and fire eye. Just based on subscriptions. We were talking to managers allocated stock and heard from underwriters and making some other calls. Fire eye was priced at 20. Thats in cyber security. Then of course we just spoke to the ceo of rocket fuel. There you had 20 of the actual shares being sold to insiders, which is always a positive, that they want to buy off the offering price at 29. It had been moved up sharply. That looks like its going to have a very strong debut, 30 times over subscribed. These are strong floats were talking about but larger valuations. A lot of these companies are going public because of the jobs act. Theres going to be scrutiny in the coming months about less transparency are a good thing for some of these companies. Rocket fuel talked about how theyre using the jobs act with regard to less oversight. Makes it quicker. Thats the point. Quicker but to what expense long term. Still a lot coming up. Simon hobbs is here. Team coverage of apples big launch. With two iphones, how high is the bar . Well hear from Warren Buffett, why he feels the debt ceiling debate is done. That and more heading into the weekend, guys. And hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. Welcome back to squawk on the street. Our road map begins with apple. Huge lines forming at apple stories around the world as people clamor for the new iphones. Is this good for the stock . And meanwhile, ten days away from a possible Government Shutdown. The president has said he will veto a bill that will defund obama care. And the stocks falling as sales at olive garden and red lobster decline. We have an iphone right here on set as well. I believe this is one of the gold ones. Its frankly hard to tell because its a champagne gold, almost looks a little bit silver and the background kind of floats. Jon fortt is in palo alto, company. Iphones about to go on sale where you are. Whats the atmosphere . Its festive. The lines are about three times longer than they typically are. I have the gold one here, expected to be in short supply. 250 people in line. Thats pretty good. Im sure there are more now. The twist this morning is going to be tradeins. Theres only so much you can glean from the fact we have long lines this time because this is the first time they havent done online preorder since the iphone launch. Theres only so much can you read into that, though it makes a good picture certainly for apple. A couple of people i talked to in the line on the way up to the camera didnt know about the tradein program. Its going to be important to see if that slows down the process at all. And if people trade in and trade up to more expensive iphones because they have more money to play with here. Now practically everyone of course seems to be online for the 5. A couple people seem to be picking up 5cs for family members and getting the 5s for themselves. Thank you, jon fortt. You might have heard applause a few moments ago. Clubcorp has opened up, priced at 16 to 18. 15 1 4 of the open. Founded and now owns 102 clubs in major metropolitan areas. Courtney reagan is outside the Flagship Apple story. Reporter lines of people waiting for days on end attracting attention in the nations biggest cities. Apple fans line up and its created a new kind ofline marketing. Sell your mac. Com buys and sells different products. The goal was for them to be first in line to go ahead and promote their Online Business but the plan had to change a little bit once they got here. Found two other people here so we decided we would sponsor them and give them clothing and buy their iphones at the end of the duration. They offered us a deal, we advertise their company, theyll pay us 800 each or to get whatever phone we want. They got the idea from competitors, like gazel. Gazel is sponsoring the first five people in line at the San Francisco store and the one in boston, offering them gazelle gear and paying for their iphone. This year shes a veteran and bye back world approached her. We get food, a phone, tshirts, sweat shirts, sleeping bags. They told us anything you need, let us know. Theyre just very open, very cool, theyre very close by. If we need them to charge something for us, its all good. So they know that they dont have to do this. Hundreds of people got in line just this morning and will more than likely also be able to walk away for an iphone but they do it for the experience, they love it and they get some free gear out of it, too. Courtney at the apple store on 5th avenue, thank you very much. So the hype is there. Joining us, guys, welcome to the program. Before we go any further, lets mark the fact that whatever critics may say about apple, and there are many, theyre still capable of having a worldwide consumer event. People still cue from tokyo to london to paris, to new york to cupertino. Nokia, samsung, all the stores would like to draw in the crowds the way apple is doing. Pete, how high is the bar here . Each time weve had a launch when steve jobs first came through with the iphone, every time they beat the record on the last year. This time there are two phones and of course china is also now selling the phones, which usually was delayed by three months. So how many do they have to sell in order to move the needle . Well, analysts are predicting this summer between 5 million and 8 million phones. I think theyre going to have to get on the higher end of that to really satisfy analysts. I think they can do it. This is the first time theyre launching two phones at the same time. Its really a repositioning of their whole mobile strategy. It used to be there was one phone, this is the phone you want and sure there were the older phones but this the is one phone for the masses today theres the 5c for everybody but if you want a step up, theres the 5s. Last year they sold 5 million oft phones on the first weekend and 2 million later when china kicked in. So the bar here is 7 million or more to break the record. You have the two models and you have tight supply on the 5s. Well see whether that puts a dent in sales at all. Its interesting because there seems to be a lot of demand for the gold iphone 5s in particular, especially in places like china. Thats all they wanted. How important is that ultimately if theres a shortage in say just the gold one . Are we making a lot out of just these anecdotal reports . No, the 5s is a shortage, especially in gold. It is an issue. Its always good to is a little bit of scarcity. Apple. Com is already quoting october if you want to order a 5s off their web site. This is going to be an issue and something to watch. Pete, we always talk about a supplier halo when we see a new phone. Im wondering how familiar you are with component makers. Who would you have your eye on with some of these gold phones or the 5s or 5c . Whoever is making that fingerprint sensor,s that someone to keep your eye on. Thats one of the big new highlights in the phone. The camera components are a big deal. The gold im sure thats just a very sort of simple thing they do. Supplywise its probably complicated. I think thats really adding a wow factor, something that is the new of the new to sort of have that extra wow, this thing is in super short supply, its very coveted. And just a final point on that sapphire crystal sensor, which is the trigger within the phone for the thumb print. I see the hackers are now attempting to break that. Is that a normal chain of events that when they come through with a new product theyll attempt to break it . Or is it something apple needs to be worried out . Theres competition with all the money and the rest of it. I think apple is sensitive that people are really concerned about biometrics and personal data. Apple is using the sensor only to unlock the phone and make itunes purchases. If there are any issues, they can get ironed out quickly, hopefully before making broader use, getting rid of passwords, which is something wed always like. Thank you for your time. Straight ahead, the war of words in washington is heating up as we approach the next possible Government Shutdown deadline. Will lawmakers be able to find Common Ground this time around . Were expecting a key house vote in just a couple of minutes. Well keep you posted on that. Plus the oracle of omaha saying hes finding it hard to buy stocks now. Well talk to Warren Buffett when we come back. Clients are always learning more to make their money do more. ann to help me plan my next move, i take scottrades free, inbranch seminars. Plus, their live webinars. I use daily market commentary to improve my strategy. And my local scottrade Office Guides my learning every step of the way. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Ranked highest in Customer Loyalty for brokerage and investment companies. Welcome back. Were just ten days away from a possible Government Shutdown. The president has said he will veto the bill. John harwood joins us from washington. Reporter kelly, it leaves us still searching for a solution. The bill thats about to pass the house is not going to pass the senate. But politics is about choices. Everybody has got priorities and youve got to figure out which ones are most important. Republicans are staying on the floor right now as they prepare for this vote we do not want a Government Shutdown, however, they dont oppose a shutdown as much as they want to get rid of obama care. Heres one representative, ted poe. Its time to free americans from the shackles of obama care, defend obama care and tell the senate to do the same and thats just the way it is. Now, the senate is going to leave those shackles on, if thats what you want to call them. Theyre going to pass a government funding bill that will come back to the house at some point and the house is going to have to make a decision whether that goal is such a high priority that they continue to insist on it and allow government to shut down. Also weve got next week, the house and senate beginning to deal with the question of the debt limit. That ripens two weeks after the government runs out of money on september 30th. Still looking for a solution, kelly. John, thanks very much for that update as we of course are watching the deadline. Well hear from the president later as well. 1 45. Talking about the progress weve made since the financial crisis. Were joined here by cnbcs larry kudlow, anchor of the kudlow report. Thank you. Nice to be here. Have you invested yet . Ive got the 401 k . My parents pounded it into me. Now youre cooking. Where are we headed with this thing . I think its unknown right now. I think that its going to pass the house today, thats easy. This is the defunding along with the continuing resolution. By the way, theyre going to put the defunding inside the c. R. Thats very important legislatively. Okay. So it passes, it goes over to the senate. The senate is tricky. I think at the end of the day harry reed is going to win and hell be able to knock out the defunding of obama care and send a clean c. R. Back to the house. With a simple majority on that language stripstripping . I think the answer is yes. But i can tell you, senators ive spoken to, a couple have come on the show, it isnt clear. It isnt clear. These are money bills. The difference between 51 votes and 60 votes is huge. Then the question is whether ted cruz is going to filibuster. He wont stop it but that will slow it down by 15 hours, lets call it 24 hours. That takes a lot of time. The other question is if you have a vote in the senate, what will the reelection senators do, the Mary Landrieus of the world, well leave it at that. I dont mean to pick on her, shes a great woman. Defunding to shut down the government is really unpopular as the karl rove poll showed yesterday. This is my advice and i was ignored, i lost this. Grover norquist and myself, we said delay the personal mandate for a year, delay it for a year and a senate vote on it will win because its so unpopular. But they didnt. So its pingpong. The paddles literally. Senate, house, senate, house. My guess is it comes back to the house, boehner accepts it but he says there will be a sequester at the 2014 level so the spending goes down. Thats my sense. You mentioned the possible delay, the individual mandate. There are people around the world trying to say whats the way out . Are you saying theres no way in whichi which trying to punt on that is not an option here . Its not going to be ready. The debt ceiling, point number two and you cant hardly separate these because theyre so close in timing. If you look at the debt ceiling, he has a whole laundry list, the pipeline, tax reform. He also has a delay of obama care, which could be switched in the defunding of obama care. Now, his aides arent talking to me this morning yet. On that theyre saying they dont think theyre going to win on the defending but theyll come back on a oneyear delay on the debt ceiling. We will see. This is tricky. Its kind of fun actually. A perverted sense of fun. Even if theres a shutdown for a day or two, no economic impact. Thats not true. If you shut down the government and by definition, theres Less Government spending than the day before, by definition theres thank heavens, positive. Lets get the government out of the larry, its automatic . The sequester would cost 750,000 jobs. Do you remember that forecast . Were gaining jobs. They were wrong. None of that happened. It could be gaining a lot more without the sequester, larry. Perhaps but they could also be gaining a lot more without obama care, which has cut back on hours worked and cut back on hiring. Im worried. If youre talking about a month shutdown, ill change my mind. About three days shutdown, who cares. Eugene robinson republicans in the house are like a bunch of 3yearolds playing with matches. They cannot constitutionally defeat obama care. I dont want to get too technical but youre asking me technical. The continuing resolution affects appropriations for discretionary accounts, not entitlements. So if they won on defunding, only 20 of obama care would be stopped, 80 of its entitlements would not be affected. Thats why i keep telling you. Im an old omb under reagan. You cant knock out an entitlement through a continuing resolution. You just cant. Thats the flaw in this whole process. Its an important point. And we know you know what youre talking about. Its a weird i talked to ted cruz about this. Ted cruz is smarter than i am. Ted cruz is a u. S. Senator. Hes a lawyer. But hes wrong on this point. Hes wrong on this point. Hes too angry. A c. R. Does not affect entitlements. We will see you tonight. Thank you for having me. The kudlow report airs weeknights at 7 p. M. Eastern. Bob pisani talking to the head of the big board. You know all, you see all. Weve been talking about the big week in ipos. Twitter recently said theyre going to go public. What can you tell us about that . We operate in a cloud, were glob globally connected, were social. These are big sweeping trends, companies are taking advantage of it and were going to go public. Is twitter going to go public at the New York Stock Exchange . The best team in the business and Association Among the best brands in the world, the only chase is the nyse. Is it fair to say you know or dont know whether theyre going to go public here . We dont know. Were working with them. Two years from now the company will be going public. Its not uncommon for to us have long dialogues with companies. Youve made your pitch but you dont know if theyve chosen you or the nasdaq now . Were still working on it. Let me move on. The jobs act enables them to file confidential. Unfortunately, we dont know anything. We dont have the information we need to evaluate the company and that people who are investors do. Youve been big backers of the jobs act. Why is this a good thing we dont know about these companies until just before they go public . 81 of the companies that have filed this year have filed under the jobs act. 95 of them are taking advantaadvantage of the if you doesnt have the tonight to respond to it, youre in a bad position so most companies are taking advantage of the confidentiality. What other sectors are really hot now and what are we going to be seeing in the coming weeks . This week has been a very active week in biotech. So the Biotech Health care trend continues. We also see exciting names in consumer. Thats going to be an exciting area for us to watch. Weve seen a lot of exits in private equity. Well continue to see that. Biotech, were not going to cure cancer but well be able to live with it essentially. Its a wonderful time to be in biotechnology. And companies are developing new technologies and being on the cutting edge. Thats happening with Small Companies that are building up their research and development. Can you tell us more about hilton . Theyve filed for an ipo . Also working with them as well. No news on that . No. Youll tell us about twitter as soon as we learn something . Youll know before i will. Scott cutler, head of ipos here. I tried, simon. I know, i know. Hes never boring, the infamous john mcafee is in the spotlight again. Our own jane wells sat down with him for an exclusive interview. You dont want to miss this next. [ tires screech ] [ male announcer ] 1. 21 gigawatts. Today, thats easy. Ge is revolutionizing power. Supercharging turbines with advanced hardware and innovative software. Using data predictively to help power entire cities. So the turbines of today. Will power us all. Into the future. [ female announcer ] youre the boss of your life. In charge of long weekends and longer retirements. Ask your financial professional how lincoln financial can help you take charge of your future. John mcafee, the infamous founder of Mcafee Software is back in Silicon Valley and is back in the spotlight. Jane wells sat down with him for an exclusive interview with fascinating details. Last seen, he faked a heart attack to go to guatemala. Hes also getting back into technology development, selffunding a project and in an exclusive interview, we caught up with him in the bay area this week, 26 years after creating Antivirus Software to protect people online, john mcafee says theres only one tech leader now. Theres really only one hot tech company and thats google. The owner of the information is the ruler of the world. What do you think about google giving information to them . If i were google, id give it to them, too. They have guns. Its not much different than hitlers germany, if we want information, were going to get it. Hes been mocking his former company in racy videos. Mcafee updates at horrible times, almost like the creators want you to die. This not safe for work video has gotten almost 4 million hits. The woman on the right is his new wife, janice. Then there were reports last week that he died of a drug overdose. He went on twitter to prove he was alive and said this was not some publicity stunt. I spent the entire day frantically trying to get in touch with my friends, this is not true, some friend himself been crying all morning, they couldnt get in touch with me, i was on the phone trying to get in touch with them or other people. No, thats not a fun thing. Next, john mcafee on running microsoft. Some people want him to get that job. And why you can forget about getting paid for your ideas. Guys . I think that Health Insura e says more about microsoft. Still ahead, well speak to the hacker being paid thousands of dollars to try to hack apples new sensor. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Thank you orville and wilbur. Amelia. Neil and buzz for teaching us that you cant create the future. By clinging to the past. And with that youre history. Instead of looking behind. Delta is looking beyond. 80 thousand of us investing billions. In everything from the best experiences below. To the finest comforts above. Were not simply saluting history. Were making it. I got the eye of the tiger if youre just joining us, were just an hour into trading. 10 31 here on wall street. Goodyear tire is up to a new 52week high, restoring its dividend for the first time in 11 years at a nickel a share and offering a buyback. Chrysler and tesla among the stocks hitting new alltime highs and clubcorp rising in its ipo debut. In fairness, that is below what was the expected range of 16 to 18 a share. Meantime, billionaire Warren Buffett and Bryan Moynihan sitting down with our own becky quick talking about everything from the markets to the fed. Becky joins us on that. Good morning, carl. The fed has plenty of people reassessing their opinion of the stock market. Notable investors have told us they think the feds reluctance to taper makes stocks much more attractive at least for the immediate term. Warren buffett doesnt disagree but he also thinks stocks dont look cheap at these prices. Heres his explanation. The lower Interest Rates are, the lower assets are worth and to the extent that qe3 is keeping Interest Rates lower than it would otherwise, it probably keeps asset prices somewhat higher than they would be otherwise. But there are other variables. If that doesnt exist its maybe because business is a lot better. There are dozens of variable. But Interest Rates are a terribly important variable in the valuation of assets. When you look around, do you still see good positions or have stocks just moved too far . They moved a long way. They were very cheap five years ago, ridiculously cheap, and thats been corrected. Theyre probably more or less fairly priced now. We dont find bargains around but we dont find things that are way overvalued either. Were having a hard time finding things to buy. When he says things like fairly valued to him right now he says that the economy continues to chug along, at least as best as he can tell. Burlington northern moved 237 cars last week. His Furniture Stores you 8 to 9 . Bryan moynihan has seen similar trends. He said Consumer Spending on his card was up 5 to 6 . One out of two households bank with bank of america. They do see things in the economy continue to chug along. Not a terrible economy. I thought it was interesting the way buffett had enormous praise for bernanke, not wanting to pull him out, calling him a. 400 hitter, the best hedge fund in history. Couple that with what Larry Lindsey told you this morning, talking about the unwinding that has to go on and thinking to bust out of that 2 growth range is Wishful Thinking in his words. It was pretty telling. We asked buffett who he would put in charge of the fed if he had a choice. He is he bernanke. I asked him who his number two choice was and he said nobody. He knows this is unprecedented territory. Its been a massive buildup and i think hed like to see someone he trusts in terms of winding it down. That was fascinating this morning. Do we know that bernanke is leaving the fed . Steve liesman asked him in the News Conference and he said hes not prepared to comment on it. It goes back to the president s comments saying bernankes time is up period. If he cant get summers in, does he revert to bernanke . Bernanke has indicated this was it. Let me put it this way. I dont know if the answer is no. Whatever happens, theyll float it over the weekend in some form. One of the foeatures of the iphone 5 is the new fingerprint scanner. One company is offering cash and alcohol for the first hacker to break that device. Welcome to the program. Good morning. Thanks for having me. What is the Hacking Community now doing with the phone . You know, once we started fingerprint testing coming outs are we knew it was a risky move by apple. You cant change your fingerprint just like you can change your credit card and change your bank account. Basically we are trying to make sure that this is as secure as possible before it becomes a problem. We dont want to see this happen in the next coming up weeks where someone gets a fingerprint and sells it for 50,000 on the black market. So why do you personally put up 10,000 of your own money . Because we want this we want to make sure we figure out how to get into it before other people do. We need to make sure that its the most secure fingerprint sensor. And if we cant break into it, if a group of people, hundreds of people who have said theyre going to try to do this cant get into it, its going to be hard to anybody else. We owe it to users of the iphone. You have this sapphire crystal sensor embedded in the home button, thats what we views the fingerprint and the data to verify is scored in the sensor chip. Nothing goes back into the cloud. Does that make it quite difficult to achieve a hack in your view . Not necessarily. Humans created software to communicate with the iphone. That can be intercepted. I cant tell you how easy or hard its going to be. Were going to find out. The part of the fingerprint sensor that scares us the most is the authenticating the fingerprint download application. That is using an Internet Connection to tell the app store there is a positive authentication of the fingerprint. So if somebody does get through, if they get through, what do they then do with the information . Do they go straight to apple . If they get through that will go straight to apple and every National Security agency that wants it. We estimate there will be an update to cure that within 24 hours. They might even turn off the fingerprint sensor as a whole until its fixed. Wow. Lets see if it comes to that. Good to talk to you, sir. Also interesting regarding the iphone 5, they may believe the touch screen is making a move forward. Its all we ever hear about on this phone and rightly so. Its the one thing that all the reviewers have described as the first time someone has ever gotten this technology right. Coming up, Darden Restaurants looking unappetizing today. Find out how you should play it after the break. Plus, we are awaiting the house vote that would avoid a Government Shutdown. It would, however, defund obama care. Well take you live to the hill as we follow the story. My doctor and i went with axiron, the only underarm low t treatment. Axiron can restore t levels to normal in about 2 weeks in most men. Axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. 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 symptoms to your doctor. Tell your doctor about all medical conditions and medications. 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. Ask your doctor about the only underarm low t treatment, axiron. Nascar is ab. Out excitement but tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. [ male announcer ] some things are designed to draw crowds. Others are designed to leave them behind. The allnew 2014 lexus is. Its your move. Welcome back. Shares of Restaurant Operator darden are lower this morning after the reported earnings well below estimates. Restaurants like olive garden and red lobster reported lower sales this summer. Lets bring in jeff bernstein, senior restaurant manager. Jeff, first to you. Theres clearly a problem here with dardens ability to draw customers into these two chains. Is there really a fix here or is the consumer just changing and looking for different options when it comes to what theyre eati eating . That has been the popular question over the last number of quarters. Darden is having their challenge driving traffic. The industry is having very similar challenges. Its a broader industry problem. Everyone is focusing on making a more compelling offering to drive in traffic. Youre talking about a si sitdown, tradition an Restaurant Industry. If we think about the debut of noodles company, its a fast food chain that is doing well. So who in this restaurant space is doing it right . Noodles and a couple of others are anomalies. Sitdown restaurants are struggling. Most of the industry is struggling. We saw Many Companies talk about the slowdown in the january february time frame, weve seen a slowdown in the summer time frame, most are struggling this year. Is that because there is more weakness among the u. S. Consumer than anyone was anticipating at the beginning of the year . I think the casual dining space is more correlated to the housing market. I think with the volatility in the Mortgage Rates and the frugalness of the consumer, that sector is very discretionary and you saw contraction there. I think youre seeing strength in chipotle, theyre recovering and seeing momentum, starbucks, dunkin donuts. I think there are some winners out there. I think its the casual dining space that is uniquely seeing the contracting sales growth. Jeff, when it comes to darden specifically, weve had plenty of time to discussion their internal execution and it always comes down that olive garden is too big to be offset by red lobster. If they were to make progress on garden specifically, would that be enough . I think investors first and foremost focus on olive guard i dont know garden. Red lobster has been more vol ti volatile. Its a special occasiontype restaurant. Getting olive garden right about be a big step in the right direction. Mark, can we come back to what structurally may be wrong. Youll see it bar bell. We talk about the mcdonalds menu as a bar bell, either youre at the top or the bottom. In fashion, weve seen the middle items fall away. Is that the same thing that is happening in the Restaurant Industry . You see them pushing some of these brands down to lower andm. Or go the other way and go up market more . I agree. Its what we call the aspirational consumer. They really havent returned since the recession began. Thats where you get the value equation back. Olive garden has taken an excessive amount of price over the last couple of years and theyve lost or abandoned that value consumer what happens if darden turned all of its red lobsters into capital grills . I dont think the country can handle 700 capital grills. Its more high end, corporate related. Matt and jeff, thank you very. Another sector sign where we see this bifurcation between the high and low end. The shrimp would like it. I dont think any shrimp are being saved at capital grill. I think thats a popular item as well. When we return, he was employee number 66 at apple, the man who designed the apple system as you know it. Hell join us when we return. Dont go away. I love having a free checked bag with my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. Ask me what its like to get your best nights sleep every night. [announcer] why not talk to someone whos sleeping on the most highly recommended bed in america . Ask me about my tempurpedic. Ask me how fast i fall asleep. Ask me about staying asleep. [announcer] tempurpedic owners are more satisfied than owners of any traditional mattress brand. Tempurpedic. The most highly recommended bed in america. Now sleep cooler with extra cooling comfort on our bestselling tempurbreeze beds. Visit tempurpedic. Com to learn more, and find a retailer near you. The dow is off about 16. Lets get to chicago and rick san telly and the cme. Rick . Carl, its been an interesting week, especially after wednesday, of course. Weve talked many times on many shows about whats priced in, what isnt priced in. And i think what we now should have learned from the no taper is that, a, its very difficult to try to put a percentage of probability on decisions that are being made in a very fluid environment. As ira harris said as our guest many times, the fed has taken us to marz, and we can bebait if its worth it, but the real question is going from mars back to home. Im not sure they can accomplish this in a smooth path without a lot of bumps. But one thing i am sure of, i agree with mr. Druckenmiller, and i think many of my sources and traders on this floor agree with all of that, that ultimately the fed may have missed an opportunity for normalization. Only history will tell. I like doing things the oldfashioned way. What were going to do very quickly is look to 5s and 10s and give you some of the key retracements to watch as weve shaken up the yields. For 5year and 10year, the extremes on the big move, may 2nd, 69 basis point, for the 10s, 1. 63 to 2. 89. So 20basis point on the fiveyear, and 136basis point move on the 10year move. You take the major retracement, for all of you out there, if you take the 38 times each of those ranges, you come up with 46 basis points in 5s, 52 basis points in 10s. Subtract that from your high yields and you end up with 1. 39 for your major 1. 38 on 5s, 2. 47 on 10s. Heres where it gets interesting, okay . If you look at where the settlements were on wednesday after the immediating, theyre at 1. 42 on the fiveyear and at 2. 68 on the tenyear. So you can see which ones are closer. Why am i talking about this . Because the five to tenyear curve, steepened against the fed meeting, thats your key. Thats your key to trading the individual components of the coupon curve, because if we hold the zone in 5s without ever testing this in 10s, based on the curve steepening i see, that would be very bearish. Look for more curve steepening. If we get under this, look for reversal, more buying in treasuries, more flattening. Thats my interpretation. Back to you. Love a little bear steepening talk on friday, rick. Thank you very much, sir. Plenty more from rick in a little bit. Now, were keeping an eye on rocket fuel shares which have just opened for trading after their ipo debuted. Open 90 at 55. We knew that per david brothers talking about this, these were well oversubscribed, so perhaps not a huge surprise there. It is a bit of an abe racial that given for the most part ad tech startup, which is what this company falls into, havent been an outperformer when debuting this year. Tremor media, trading below the ipo prices. This one is showing a healthy gain on the first day of trading. 95 . Theres a shakeup going on at house of mouse, meanwhile. Find out why disney is cutting ties with one of the most wellknown producers in hollywood. More when we come back. [ female announcer ] its time for the annual shareholders meeting. Therell be the usual presentations on research. And development. Some new members of the team will be introduced. The chairman emeritus will distribute his usual wisdom. And you . Well, youre the chief life officer. You just need the right professional to help you take charge. [ male announcer ] 1. 21 gigawatts. Today, thats easy. Ge is revolutionizing power. Supercharging turbines with advanced hardware and innovative software. Using data predictively to help power entire cities. So the turbines of today. Will power us all. Into the future. Amelia. Neil and buzz for teaching us that you cant create the future. By clinging to the past. And with that youre history. Instead of looking behind. Delta is looking beyond. 80 thousand of us investing billions. In everything from the best experiences below. To the finest comforts above. Were not simply saluting history. Were making it. [ male announcer ] staying warm and dry has never been our priority. Our priority is, was and always will be serving you, the American People. So we improved Priority Mail flat rate to give you a more reliable way to ship. Now with tracking up to eleven scans, specified delivery dates, and free insurance up to 50 all for the same low rate. [ woman ] we are the United States postal service. [ man ] we are the United States postal service. [ male announcer ] and our priority is you. Go to usps. Com® and try it today. Welcome back. Theres a shakeup over at disney. The company will end its longrunning relationship with jerry bruckheimer, the producer behind the blockbuster pirates of the caribbean franchise. And Julia Boorstin is following this for us in los angeles. Good morning. Good morning. Big brands seem more important than bigname producers. After a 20year relationship and dozens of movies, disney studios has decided not to renew bruckheimers production deal, in which they paid for his overhead in exchange for a first look at his projects. With disney shares trading around an alltime high, the company says it will focus on the Branded Properties disney, pixar, marvel and now lucas films, calling the relationship an incredibly successful collaboration over the years. Disney and bruckheimer will continue to Work Together on a range of projects, including sequels to pirates of the Caribbean National treasure. It has been a huge success, grossing 3. 7 billion in worldwide ticket sales. More from Consumer Products and home entertainment. While National Treasures two films have grossed over 800 million worldwide. Bruckheim bruckheimers last several films have been high budget but neither successful. Only one of the last five has broken 100 million in u. S. Ticket sales. With gforce, prince of person sha, the apprentice, and, of course, lone ranger falling far short of estimates. The lone ranger which cost 225 million to produce was such a disappointment, the studio announced it would lose as much as 190 million on the film. The first signs of the break coming between bruckheimer and disney were earlier this month when disney pushed back the release of the fifth pirates of the caribbean from the summer of 2015. Back to you. Interesting, julia. Although hostages, the new cbs show with toni colette, produced by him, rang the bell the other day, see if he makes a bigger play in television. Yeah, he has a big tv business. He says he wants to move into the kinds of films he does enjoy doing, like black hawk down. Good stuff, julia. Thank you so much. Covering disney and bruckheimer. Well talk about the elections, what sunday may bring. If you are just joining us, heres what you missed earlier on. Announcer welcome to squawk on the street. Heres whats happened so far. Apples latest Iphone Models are officially on sale. Youre looking right now at a live shot of apples flagship fifth avenue store in new york city. The next time there is a crisis, everyone is going to remember this. And when the government needs help in the future, this administration has just cost the next crisis, administrator, a lot of potential help. Its great, obviously, press for apple to have people waiting in the long lines. Its not necessarily demonstrative of how successful the phone will be over the next couple of quarters. I think were in a position where we could start to taper and we could start to ease out of this. But unless we start to see improvement in the economy, and obviously topline growth improvement, the fed will need to be there. [ bell ] theres the opening bell. We did over 50 million in revenue in our Second Quarter this year. You know, weve been showing margins continuously improving over the history of the company as customers have been coming back, you know, spending more money with us, and at an increasing rate over time, as well. Theyre probably more or less fairly priced now. I mean, i dont we dont find bargains around. But we dont think everything things are way overvalued either. Were having a hard time finding things to buy. And good morning. Were live here at post 9 of the New York Stock Exchange. Well start with a check on the markets. The dow and the s p, the nasdaq, all fairly flat this morning, although the nasdaq is at fresh 13year highs, i believe, by adding just about 6 points there. 18 points lower for the dow, and just a hair lower for the s p 500 this morning, too. Shares of a. K. Steel are down big this, after the company predicted a wider than expected Third Quarter loss and that producers say much of the loss is due to shipment volumes and prices falling versus a year earlier. Also, shares of Darden Restaurants slipping today. The Parent Company of red lobster and olive garden reported First Quarter results well below analysts estimates. It said it has identified areas where it can make thoughtful spending cuts. Shares down 5. 5 now. On the roadmap, the debt fight heating up in washington. At this hour, House Republicans getting ready to vote on a bill that would avert a Government Shutdown and defund obamacare. But with the president already threatening to veto that bill, is a shutdown inevitable . Plus, new phones, new colors, and a whole lot of buzz for apple. People across the country are lining up to buy the latest version of the iphone this morning. But is that good news for the stock . Well take a closer look. Are the markets cheap, fairly valued, or overvalued . Thats a question on the minds of a lot of investors today. Well tell you what two of the best in the business, Warren Buffett and carl icahn, had to say in just a few moments. Now, the new iphones have arrived. Two new versions of the iphone, the 5s, which is available in gold and silver, and has the fingerprint scanner, and the 5c, which comes in the brighter colors, are now on sale at Stores Across the country. Jon fortt is live at an apple store in palo alto, california, so, jon, it would have just opens. Did i hear you guy had a special visitor . Yes, indeed, kelly. You asked me what the mood was like an hour ago. I said festive. It kicked up 10 notches because tim cook showed up. Hes still here. Hes inside the store greeting the first group of customers to go in for the new iphones. He went down the line here and shook hands with, you know, some of the first about 100 people who were in line. Starstruck Apple Employees were kind of slackjawed the entire time. [ cheers ] and theyre cheering in there. Definitely, it seems the apple strategy this time around is a little bit more of the spectacle. You couldnt preorder this latest iphone. Its the first time you couldnt preorder since the first iphone came out. Thats a big part of the reason why so many people are lined up here. I hear that some other apple executives are over at the Stanford Shopping Center store, also. So the executives showing up to give a personal touch for the people who are loyal and showing up the first day for this big, big launch for them, guys. Back to you. That is some good video. Seeing team cook on the sidewalk, greeting fans. Meantime, apple fans are standing anxiously in line for new phones from beijing to new york. The iphone 5c and 5s being released on the heels of a newly released operating system. The next guest is the man behind the first human interface. Bruce tognazzini is a principal with the nielsen group, employee 66 at both apple and webmd. Good to have you here. Good morning. Good morning. Your thoughts on the ios as youve seen it so far. Well, its a mixed bag. Theres some really powerful improvements, and yet its going to be very difficult for people over about 45 to be able to use it, because the fonts are so thin and it makes it difficult for older people to use it. Even if they go into the area for people with disabilities and start turning on systems there, it helps minimally. Yeah. However, for the rest of the people, it will be wonderful. Yeah. Its so funny you mentioned that. I tweeted the other day, i said, i love the look. But god help you if you dont have the eyesight of a fighter pilot. Johnny ive profiled on the cover of usa today this morning. Did he make changes that you think steve jobs would not have liked . Its beautiful. And steve always had a tremendous interest in selling products, even more so than making them usable. But steve was also getting to the age where he would have found it difficult or impossible to see what was on the screens, like the new control center. So he might have put a stop to this. It came up within a few hours of the time the beta was released, and obviously, there was nobody at apple willing to stop it. And it actually didnt have to be stripped away. It just had to be there had to be a switch for the rest of us that would thicken those particular fonts. This crowbar switch that makes everything thick and makes the whole phone look ugly and actually more difficult to use for the standard applications. But this should never have happened. On the other hand, theres a lot of really great stuff, including the control center, once i memorized where everything was, the various smudges, it make it is a great deal easier to use. So it is a mixed bag. Bruce, i wonder, as well, as we start to look beyond the iphones into the next generation of products from apple, if you think the iwatch will be a success in terms of design and creating a new product category, and what the hurdles are to get there. I think its going to be a killer product. I find it very interesting, this new lowpower chip inside a phone that essentially has lots and lots of power. Its designed to make products from Companies Like nike work better by virtue of tracking the person all the time. The thing about a phone is that people not everybody has their phone connected to their body at all times. Women carry them in their purses. Lots of people are not enslaved to having the phone with them just every second. They put it down on the chair beside them when theyre watching tv, et cetera. So what is with this chip . Is this chip actually the forerunner to the chip thats going to be the heart and soul of the iwatch . Its ideal. It is low power. Its designed specifically to pick up on all the sensors and the control and store and forward information. And thats exactly what you need for the watch. So i tend to think that maybe were seeing a hint of whats going to come. I wonder theres also tremendous go ahead, bruce, sorry. Theres tremendous go ahead. There are some analysts who believe that television is still a 2013 phenomenon, but obviously the watch has gotten a lot of attention after the galaxy gear was shown publicly. What do you think is going to be next . Well, you cant tell with apple. You know, everything ive read about the Television Project is it seems to be a matter of intrenched interests fighting it, and when apple can overcome that, i dont know. The watch, however, doesnt have intrenched interests fighting it. Its a completely open field. And apple can do as much as there as they want. It will be a killer product because of the synergy between the watch and the phone. If the watch needs a gps location, it can ask the phone. It can store and forward data coming from the body. It can let you know on the watch that not only is your phone ringing, but whos on the phone without your having to fetch it out of your pocket or your purse. It will hold the chip you use for buying products in the future, so you can just hold your watch up to a terminal, you dont, again, have to go find your phone. Right. Right. So its going to be an absolute killer product. But whether it or the tv gets there first, i dont know. Well, certainly for all of the App Developers who want us to check their apps with more frequency, its going to be whoever makes it first, in a good way, will move the ball forward. Thank you so much, bruce. Good to have you. Bruce tognazzini, principal with apple, employee 66. By the way, we do have the 5s here in the gold, which is kellys color of choice. And our thanks to at t for bringing it here and letting us play around with it for a bit. These will be hard to get. The gold availability is really youre looking at october right now. Not the next couple of weeks. Whether its here or overseas, its creating a little bit of a frenzy. Ill turn around and sell this after the program. No. Sorry, apple. Lets get back to washington, where any moment now House Republican also vote on a bill that will avert a Government Shutdown but strips the health care law. John, do we likely know what the votes will be here . We expect a very, very partisan vote here, with republicans almost unanimously supporting this. They may lose a few. Democrats will be very, very strongly against the republican move. Were seeing a preview of that on the vote thats playing out right now, which is on a Democratic Alternative. It is in the process of being defeated by republicans. You had one republican yes vote, voting with the democrats, a short while ago. I dont know what the final count will end up at. We know the outcome here. The only question is, what the next move is going to be whether the senate can, in fact, pass a continuing resolution without the obamacare provision, or whether they could not pass anything at all, in which case we would head toward a shutdown until we get a different action out of the house. So this is a slowly unfolding drama. It will unfold over the next ten days or so. And chapter one is playing out probably within the hour, kelly. John, just curious, for people looking at their screens, what theyre seeing are running voting in the nay column and democrats voting in the yea. Its a Democratic Alternative to the republican plan. So what you have is republican members of Congress Voting no to defeat the democratic plan, then their own plan is going to come up after that in the subsequent vote. Got it. Okay, great. John harwood, thank you very much, sir. Well have plenty more with john coming up. A lot more on the debt fight in congress with senator bob casey later this hour. Thats coming up on squawk on the street. Heres a question on the mind of a lot of investors. Are markets here cheap, or are they fairly valued . We asked that question to some of the biggest names in investing Warren Buffett and carl icahn. Youll want to stay tuned to what they had to say. In the meantime, Rick Santelli looking at the strengths and weaknesses of the u. S. Economy. Rick . Absolutely. Were going to talk to ron mckindry about what he and his customers may be looking at when it comes to issues with the global economy. How much will or it wont be affected by the german elections sunday. Whats the postmortem for hedgers in the mortgage arena after the nontaper. All of the issues. Well have a mono e mono talk. Ask me what its like to get your best nights sleep every night. [announcer] why not talk to someone whos sleeping on the most highly recommended bed in america . Ask me about my tempurpedic. Ask me how fast i fall asleep. Ask me about staying asleep. [announcer] tempurpedic owners are more satisfied than owners of any traditional mattress brand. Tempurpedic. The most highly recommended bed in america. Now sleep cooler with extra cooling comfort on our bestselling tempurbreeze beds. Visit tempurpedic. Com to learn more, and find a retailer near you. I want to take you live to breaking news out of washington, d. C. The house of representatives has begun the vote that Speaker John Boehner promised his House Republicans namely, a bill that does remove some core language in terms of funding obamacare. It does put into action the pingpong battle with the senate that we have been expecting, into play, and once we get results on the vote, well bring them to you live. Once again, the house has begun the vote to defund obamacare. More on that as the vote becomes available. Yeah, almost entirely along the party lines. Keeping an eye down here on a lot of the ipos weve been seeing starting to trade. Heres fire eye doubling like rocket fuel did a second ago. Well try to bring that up back. It showed a gain of 102 . Fire eye had priced at 220. Its trading in the range of 40 again. Rocket fuel priced at 29. And we saw a doubling there, as well. Heres fireeye, now just above 40 and you know, thats up 101 . So thats twofortwo in terms of stocks that have doubled at the open. Well talk with bob about that in a moment. The market is hovering near record highs. Two of the biggest names in investing giving their tames on the markets here on cnbc. The oracle of omaha, Warren Buffett spoke to becky quick and had this to say about market valuation. They moved a long way. They were very cheap five years ago. And ridiculously cheap. And thats been corrected. Theyre probably more or less fairly priced now. I mean, i dont think we dont find bargains around, but we dont think everything things are way overvalued either. Meanwhile, on closing bell, carl icahn talked about the deceptive bull market. I think that right now the market is giving you a false picture. The market tells you youre doing well, but i dont think a lot of companies are doing that well. They are taking advantage of very low Interest Rates. So obviously, you dont have to be a financial genius to understand, if i can borrow at 3 or 4 and buy assets maybe my own stock, thats yielding 9 , 10 , 11 , im going to make a lot of money. So what does that mean for investors if the market is truly fairly valued . Bob pisani is here with more on it. Bob, we heard from icahn, buffett, druckenmiller, a lot of the gianting weighing in. And remember, buffett is a value guy. He wants stuff really cheap. Hes not looking to overpay anything. And with the market this high, he would come out and say its fairly valued, i think thats an endorsement from, my point of view, looking at Warren Buffett, an endorsement of the stock market. Lets answer the question. Is the market fally valued, overvalued . It depends on what time period youre looking at. Here, right now, trading at the historical average. 14, 15 times forward earnings. Thats where its been historically. It doesnt mean overvalued or undervalued. You have to make that valuation. John harwood, i think we have breaking news. John, what have we got . The house is still in the process of voting, but republicans have passed the 218 votes they need to pass their extension of government funding with the defunding of obamacare. So far, with a couple of minutes to go on the vote, weve only had one republican voting no. One democrat voting yes. Or now, im told, two democrats voting yes. You can see its a very, very clean Party Line Vote here, an indication of what will happen on the flip side in the senate. Youre not going to have democratic support for this. You will have republican support, although i would expect that the republicans are divided, because Many Republican senators bob corker, people like that, Lindsey Graham are saying that this obamacare defunding strategy is part of the continuing resolution is a deadend strategy that wont work. So that will play out. We know it wont work. The only question is, how do they finally get to a resolution. John, the best guessing, as people try to lay out what the next few days are going to look like, appears to suggest that the senate strips out this language with a simple majority, that harry reid is able to do that, and that returns it into boehners hands. In the eyes of the Washington Post today, with 48 hours before the shutdown. Is that a likely scenario . Yes. Were talking about them the Senate Getting the bill back to the house in the latter part of next week, and they would have a very short time to decide what to do. Remember, Republican Leaders very, very strongly want to avoid a shutdown. John boehner doesnt like the strategy that hes pursuing now. He was forced into it by the set of conservatives within his caucus. And once this fails you know, a democratic aide was telling me yesterday this is a strategy of feed the beast, the beast being the conservative 40 or 50 republicans within the house caucus who are insisting on this, and that once the beast is fed, the beast might be content to go along with an extension of government funding without this. Well see if thats how it plays out. Of course, we mentioned in the past few days, john, the karl roves, the wall street journal op ed pages, republicans telling the ted cruz element not to go forward with this strategy, calling it a kamikaze mission. And then you have a bob corker today who says boxed canyon, here we come. Are any of the voices having the influence on the hardcore republicans . Not so far. Remember, john boehner didnt have any influence on these people. He didnt want this strategy. He said explicitly earlier in the year it was a bad idea. He came up with an alternative strategy with eric cantor alongside him last week to avoid the situation that theyre in now. But they were overrun by the Tea Party Wing within their caucus, and now theyre playing it out in this fashion. It means it ensures that we get much closer to the deadline. Still possible they could avoid a shutdown. But were not clear, and there are some democrats, some republicans who think that a shutdown will have to happen and generate heat on those republican members within the house caucus to force them to back down and extend the government funding and raise the debt limit. But thats ahead of us, a week or so. John harwood, thank you so much, as we continue to follow all of this out of washington this morning. Bob, just want to turn and ask again, as we see stocks down 40 points, as john said, the real pressure, the heat weve mentioned this before generally comes from the stock market with regard to getting to a solution where there appears to be none. Remember, so far this year the crises have not really come. We have seen, for example, no crisis in europe. Weve seen no crisis in china. The slowdown there didnt materialize the way some people thought. Syria turned out okay, so far its moving through. The next logical worry here is a potential Government Shutdown. A lot of traders have been acting under the assumption so far this year, everything has worked out. Therefore, its going to continue to work out. A bit of a tough call right now. And when you see stocks, bob, now down about 45 points on the dow, so we are weakening, in your view, is that pricing higher odds of what john was talking about . Yes, because the near term the primary nearterm catalyst right now for the stock market is a potential negative event, and thats the potential the government could shut down in the next week and a half. Thats the issue the market has to deal with. You can see 42 points is not a huge move to the downside. I want to point out, though, that Warren Buffetts comment was extremely important today. This guy does not want to buy stocks highpriced. And you would expect the value guy like Warren Buffett to turn around and say, my heavens, i cannot believe how expensive the stock market is right now, the fact he said its fairly valued, i know it doesnt sound like an endorsement, but the way he looks at things, years and years down he is saying the market is not expensive. Short term, were likely overbought. Short term i mean for the next few weeks. Given what the earnings situation remains, i think so far the market long term, you can argue is undervalued right now. I think thats the important thing. Buffett was also asked about the possibility of a shutdown. In his view, washington can only act irrationally for a certain period of time. Hes likely to ignore Something Like that. Yes. Hes not different than our purposes. For the purposes of watching this market, that will affect the psychology. Bous once if there is some kind of shutdown, the market will now have essentially, he said, we dodged a lot of bullets all throughout the year. Now we didnt dodge this particular one. And now its an issue. So now the market might price in more probability of things going wrong. My point is, weve had a string of things that could have gone wrong this year that didnt. Europe didnt, china didnt, syria hasnt so far. Yes. And a lot of other thing summer. Summers. Taper. And a big issue for the markets, weve sort of skirted around the issues so far. Well see what happens. Bob, thank you so much. Bob pisani here at post 9. When we come back, he is back after a crazy year involving a Murder Investigation in belize. John mcafee is back in california. He is speaking to jane wells. Well hear what he has to say after a short break. With my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. In order to go visit my family, which means a lot to me. Nascar is ab. Out excitement but tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. The u. S. House of representatives has passed legislation to fund the government to december 15th, but also derailing obamacare, almost an entirely partisan vote. 230189. And in an almost carboncopy of yesterday, the market started in the green right about this time washington, d. C. , raises its head, and we trade down. Worse than yesterday, down 46 points. Yesterday was the worst day since late august. Thats right. We also have Federal Reserve speakers were going to hear from in the next hour. And the president himself, carl, shortly before 2 00 p. M. So with that and all of the fed speak were going to get, really in the next couple of hours here, Esther George will speak. I think the lone discenter from the vote. Thats right. The other day. Turillo, and lakota to end the day with a nice dovish tone. Well see what the fed speak, if they add any clarity to the decision they made earlier in the week. Thats right. The dow off about 45 points. Only the nasdaq trying to hold onto positive gains here for the moment. Squawk on the street will be right back. 1 million businesse. If you have a business idea, we have a personalized legal solution thats right for you. With easy stepbystep guidance, were here to help you turn your dream into a reality. Start your Business Today with legalzoom. [ male announcer ] you know that family . The one whose eye for design is apparent in every detail . Whose refined taste is best characterized by the company they keep . Well. Say hello to the newest member of the family. The cadillac srx. Awarded best interior design of any luxury brand. Take advantage of this exceptional offer on the 2013 cadillac srx with premium Care Maintenance included. The most Free Research reports, customizable charts, powerful screening tools, and guaranteed 1second trades. And at the center of it all is a surprisingly low price just 7. 95. In fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. Im monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Welcome back to squawk on the street, jon fortt outside the apple store in palo alto. I just chased down tim cook before he drove himself off in his audi. Heres what he told me. He said, hey, the europe and asia launches thus far for the iphone today have been phenomenal. Japan was especially excited. He asked me if i had seen the video. Im out here on location, so i wasnt able to see that. He said its already been a good day. Trying to sneak in a question, i did, about supply of the phone and the tech sensor specifically. P. R. Shut me down a bit. It looks like hes heading over to the Stanford Shopping Center store right now. Hes in good spirits. Well see how the sales go when the numbers come in probably on monday. Guys, back to you. Hey, jon, tim cook showing up at the stores, cover of usa today, a profile of johnny ive who never talks, theyre on the cover of business week, at least from a pr you mentioned pr it looks a lot different from the apple weve known over the past few months. It strikes me as sort of fullfrontal pr and marketing offensive, particularly because the effect you get with no preorder is longer lines and cook did also mention, as we were talking and walking, these are some of the longest lines theyve seen in quite a while. You mentioned the two profiles as well. It looks like theyre trying toer more front and center with the crowds, with more executives out. He was in here for about 20 minutes, even after the doors opened, greeting customers, taking pictures with customers. Steve jobs, of course, did that, as well. They seem to be amping it up a little bit this year, guys. All right, jon fortt with some tim cook exclusives there. Jon, thank you very much. Now, lets bring in steve millen, a technology strategist, neutral rating on apple with 520 price target. Steve, if you dont mind, well hold this for a second while we get breaking news out of washington. I think this will become more common, john boehner speaking. Senator baucus said it right several months ago when he said this law is a train wreck. And it is a train wreck. And all the president said, you know, if we pass this law, Health Care Costs will go down. Well, now we find out that Health Care Costs are going up for most americans. The president said if you like to help insurance policy the Health Insurance policy you have, you can keep it. We found out thats not quite accurate either. And in the coming months, millions of americans will find out its not quite true. Listen, this is hurting our constituents. Its hurting the American People. At a time when the economy is barely eeking along, wages arent increasing, new jobs arent available, and what are we doing . Were putting more costs and more inconvenience on the American People. Its time for us to say no. Its time to stop this before it causes any more damage to American Families and american businesses. Now, you have businesses all over the country who are not hiring because of the impact of this law. Youve got other businesses that are reducing the hours for their employees because of this law. And so, our message to the United States senate is real simple. The American People dont want the government shut down, and they dont want obamacare. The house has listened to the American People. Now its time for the United States senate to listen to them as well. Thank you. That is Speaker Boehner talking after that vote did pass the house, and what john harwood referred to as a feed the beast republicans. If he can placate some of the republicans, maybe theyll be likely to vote for what would be a compromise compared to this bill. We will see. Either way, the clock is ticking, kelly, as we get closer and closer to october 1st. Thats right. Ten days left to go, fewer days than that to get work done. Markets are still close to session lows. Dow is down about 45. Apologize to steve milanovic, thank you for waiting wrong. No problem. Give us a view of the weekend in terms of units. The best guess here would be maybe 5. 5 million. At the end of the day, i guess what im more interested in is tim cooks comment a few days ago about were not in the junk business. I think weve all been trying to figure out what is the strategy here. We all expected the lowerpriced phone, and they didnt. So apple clearly wants to stay at the high end. Either they cant or wont go down market. And that has real strategic implications longer term. Yeah. We talked about this quote earlier on, the junk business. I assume hes referring to a phone that, what, costs less than 300 in china unsubsidized . Essentially. Of course, apple right now is above 500. The problem is that apple really needs to maintain differentiation if its going to stick to the high end. It looks like it could be increasingly difficult in this market. If you believe junk is at 300 today in the android world, in a year or two it wont be. That will be a very good phone. Apple will have to continue to move the yard marker if they expect people to continue to flock to a highend phone. 5. 5, steve, is at the low end of, i think, the range, looking at some estimates closer to 6, 7, or 8. Do you think this is going to be a supply constraint launch . Are the things were seeing today in terms of video the lines around the blocks, is that a headfake . Its hard to say without preorders. It could very well be youre seeing the longer lines for that reason. Theres a lot of variables at play here, because you do have issues about the fingerprint yields. We think they may be down near 50 . You had the fire in memory recently. So its kind of hard to say what the numbers going to be. Again, you know, it could be 6, it could be 6 1 2. What im more concerned about is longerterm, what does this mean in terms of apples Earnings Growth and differentiation. Steve, just curious, we were just speaking with former Apple Employee commenting on the design. But he was saying that one of the real problems is the fact that the text is so thin, its hard to see for some older users perhaps. Would apple ever do Something Like follow up with an update to the operating system or some way of correcting that flaw, in your view, if it is a flaw . Well, as an older user myself, i guess i would hope so. Yeah, if look even since they announced the beta a few months ago, there have been changes. Even though apple sometimes is viewed as not listening at all to consumers. This is what you want, buy it. They do, in fact, very much listen to voices out there. So if they feel a quell of concern about that, i think you could see some changes. All right. Steve, thank you very much. Appreciate your patience this morning as we keep an eye on markets back here. Thank you, steve. Dow is down about 50. Our producer robert points out weve now lost half of the fed day bounce of 147. Wow. Looking at about 90 points of losses over the over yesterday and now todays session, too. Speaking of the fed, the president of the st. Louis fed, james bullard, speaking out this morning. Our Steve Liesman has the latest back at hq. Good morning, steve. Good morning. Two days after the feds controversial decision not to taper, st. Louis fed president jim bullard telling our own Maria Bartiromo this morning that it was a close call and could have gone either way. I think it was a close call. You know, basically what happened was when we when we laid out this roadmap in june, what we said was were looking for a stronger economy in the second half of 2013. And so far, you know, were only part way through the third i guess most of the way through the Third Quarter, and the datas been mixed and it doesnt really look like things that we were looking for in june are really materializing, at least not yet. And so, i think the Committee Just came down on the side of lets wait and see. Bullard saying that with the inflation low, the fed has room to maneuver and be patient. And he wasnt satisfied in the decline in the unemployment rate, because a lot of the declines came from people dropping out of the workforce. He did say that a taper is possible in october, and hes calling for a press conference. Then, maria asked bullard what the appointment of a new fed chair mean for policy. I will say in general, no matter who the chairman is, i think therell be a lot of continuity in policy. Its not the kind of thing that changes abruptly. Its a big committee. There are a lot of people with a lot of experience and a lot of expertise on the committee. So it would i would see it as a slowchanging kind of thing. And obviously, janet has been in the middle of the action for quite a while. So i would expect a lot of continuity here. And just a note about who to listen to on the fomc. I interviewed three fed president s in jackson hole, and of the three, bullard was the most pessimistic of tapering in september. Youll want to listen to more of this interview with maria later on closing bell and on sunday with on the money. All right, steve, thank you. Lots of action on capitol hill. House republicans passing the bill to defund obamacare. But that bill has essentially no chance of passing in the senate, which leaves us right back where we started. Is a Government Shutdown inevitable . Well talk to senator bob casey in just a moment. Thank you orville and wilbur. Amelia. Neil and buzz for teaching us that you cant create the future. By clinging to the past. And with that youre history. Instead of looking behind. Delta is looking beyond. 80 thousand of us investing billions. In everything from the best experiences below. To the finest comforts above. Were not simply saluting history. Were making it. [ male announcer ] 1. 21 gigawatts. Today, thats easy. Ge is revolutionizing power. Supercharging turbines with advanced hardware and innovative software. Using data predictively to help power entire cities. So the turbines of today. Will power us all. Into the future. Just want to say, i bundled home and auto with state farm, saved 760 bucks. Love this guy. So sorry. Okay, does it bothee that the mime is talking . Frrreeeeaky [ male announcer ] savings worth talking about. State farm. Coming up on the half, rob macks money for ubss top clients and now sharing 5 billion worth of advice with you. What does one techfocused Hedge Fund Manager buying and selling now . Tiger cub lynn hatcher is our guest host for the year. Plus the death threat and what it means for the markets with harold ford jr. , and all of that with a debate on the builders. At the top of the hour, easy for me to say, but were looking forward to it nonetheless. It is friday. Thanks a lot. The house, as you know, passed a continuing resolution that defunds obamacare. However, Senate Majority leader harry reid has said its dead on arrival. Whats the next step in preventing a Government Shutdown . Joining us is democratic senator bob casey of pennsylvania is with us. Senator, good to have you with us again. Good to be with you, thank you. I guess you guys knew this was coming, right . Sure. But we hope that we can have a resolution of this, because any process that results in a Government Shutdown is bad for the country. I think we can get this resolved. What makes you say that . And what do you expect the senate to hand back to the house . Well, i dont know for certain, but im certain about one thing itll be a measure that will not have the provisions that the house had as it relates to the Affordable Care act. But i think we can get to some resolution of this, and then, soon thereafter, we have a much bigger and more difficult challenge, which is on the debt ceiling itself. So thats a very difficult task, and theres some people in washington, for whatever reason, seem to want to go over that line and have us default. But i hope we can come together and resolve that, as well. We all remember the last time that almost happened. Certainly the s p had a huge spill. But youve said that if we have a Government Shutdown and or a problem with the debt ceiling, the economic consequences are hard to imagine. You say it could ab recession, maybe even a very bad recession. Some out there still want to point to, senator, a year in which we had a sequester and the market, arguably the economy, barely felt it at all. What do you make of that . Well, i think the economists on both sides of the aisle are pretty clear about this, which is, number one, a Government Shutdown in and of itself is bad for all of the reasons we know of. But that coupled with any kind of a problem with the debt ceiling i think would be very harmful to markets, to invest s investors, and it would make taxpayers who are already many of whom are already still feeling a lot of problems from the recession and have a level of anxiety already about the future, feel even worse and really damage Consumer Confidence. We know last time that even the debate about the debt ceiling had an adverse impact. Vanguard had a vanguard economist said they had a twoyear impact on the economy of 112 billion. That is something we cannot afford. Senator, at the same time, this is going to come down to politics, and so, regardless of what those outcomes may be, we still know were facing a deadline in ten days and then the debt ceiling, and another couple of rounds. Can you give people on wall street who are just trying to figure out what the compromise here is ultimately going to be a sense of a path, a way out, that you can foresee . I dont think theres a clear path right now, but there is, i think, a sense of urgency the closer that we get, especially on the debt ceiling. I have more confidence right now that were going to get through this budget question for the september 30th, october 1. I have more confidence on that than i do on a resolution on the debt ceiling question. Why is that . Can you explain that a little bit . Well, ill give you one example. We had a meeting in the finance committee this week with jack lew i guess it was wednesday. But sitting around the table, democrats and republicans, talking to him about just mostly about the debt ceiling question. And i came out of that meeting more discouraged than i was encouraged about getting a resolution of the debt ceiling. What were you hearing from the other side of the aisle in that meeting that makes you so concerned . Well, just from several republican senators talking about going over the going over the deadline on the debt ceiling. And i think thats very dangerous. I think its reckless to have a debate about it in and of itself. I think you saw the story or an op ed recently, Glenn Hubbard was talking about, lets talk about debt and spending and trying to reduce spending more and also trying to come up with a compromise on the revenue my words, on revenue but instead of having a debate about the debt ceiling, have a debate about debt and spending. And i think that kind of admonition is very wise. Finally, senator, people a are were talking about the jack lew meeting earlier in the week. Accusing him of using scare tactics, right, talking about Senior Citizens getting their Social Security checks, talking about National Security, homeland security, funding going away. Is that a fair charge, or not . No. I dont think hes using scare tactics. Jack lew is a very measured person. Very measured measured person. Very measured guy. Hes worked in the congress. He worked in this administration, worked in the clinton administration. Hes been through a lot of battles and through a lot of difficult issues. And is someone who likes to work things out. But the concerns he has are widely shared throughout the country by people on both sides of the political debate. But heres the problem, we have direct evidence its irrefutable about what happened in the debate on the debt ceiling, or as a result of the debate of the debt ceiling in 2011. So that is irrefutable. That was bad enough where Consumer Confidence took a hit for months and the economy did take a hit. Saw the adverse impact of actually missing the deadline. I think the federal government has missed a payment once in our history back in the 70s. Yeah. Believe me, a lot of investors remember those days. Well see what happens over the. Cog weeks. Senator, thanks so much for your time. Now the bad boy of Silicon Valley, hes back. John mcafee sitting down with our own jane wells and well bring you some highlights from that interview when we come back. Dont go anywhere. I love having a free checked bag with my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. You really love, what would you do . [ woman ] id be a writer. [ man ] id be a baker. [ woman ] i wanna be a pie maker. [ man ] i wanna be a pilot. [ woman ] id be an architect. What if i told you someone could pay you and what if that person were you . When you think about it, isnt that what retirement should be, paying ourselves to do what we love . Paying ourselves maestro of project management. Baron of the buildout. You need a permit. To be this awesome. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. aaron purrrfect. vo meeeow, business pro. Meeeow. Go national. Go like a pro. Where in the world is john mcafee . After making headlines late last year for a Murder Investigation in belize, john mcafee is back in Silicon Valley. Sat down with an interview with our own jane welsh. Shes in los angeles with more. Out of the jungle and into portlandia. Insisting he did not kill his neighbor in belize, but as we met up with him in San Francisco with his new wife, mcafee says weirder than anything during his escape from Central America was readers from tech week overwhelmingly selecting him to be the next ceo of microsoft ahead of bill gates. So what would you do as ceo . I would fire anybody whos been there for more than ten years, number one. Because its become archaic and its stinking. And its because for so long, there was only one thinker in the company and that was bill gates. A mighty fine thinker, i admit. Not very good socially and i wouldnt want to have dinner with him, however, a fine thinker. He made an unusual choice. Kim. Com. The hacker accused of copyright infringement. Mcafee says kim dotcom managed to single handedly gain double digit share of internet traffic, though some would say he did it by stealing. He was a criminal only if you believe the party line that if i created it, it is mine. Thats fine if its your car. If i take it away from you, youve physically lost something. What if youre a writer or a movie director. A way to make money. Really . Im sorry, but heres the problem. This is why we need change, real change in hollywood, we need change in microsoft, we need change in all of these old tired companies. Do you realize how expensive it is to make it . What can the value of that be . Zero. Im sorry, another paradigm is necessary. Im a software person, i want to get paid, too. But i do not expect to get paid in the same way that i got paid 30 years ago. It cant work. The world cant. Because you cannot stop whats happening on the internet. You cant stop things like big coin, money that cant possibly be traced. You cant stop it. Its like trying to stop gun powder. Later on power lunch, mcafee on mcafee. Karl . Jane wells in los angeles. Great stuff. Thank you so much. Were losing some ground here, kelly, with the dow down now 69. Weve still got to get through german elections. Weve still got to get through the next hour of fed speak. The dow has lost 2 3 of that fed day balance, which we were all excited about on wednesday. Good weekend to you. You, too. Lets get back to headquarters. Welcome to the halftime show. Four hours to go until the close. Lets take a look at where we stand on this friday on the sheet. The dow is down nearly 71 points. S p and nasdaq are negative as well. Heres what were following on the half. View from the top. An adviser to some of ubss wealthiest clients gives his outlook and where to invest right now. Eye of the tiger. A Julian Robinson disciple is here with what hes buying, selling, and shorting. Glen is our g