Transcripts For CNBC Squawk On The Street 20141001

Crowds continue to grow in hong kong. And the first patient diagnosed with the ebola virus in the United States isolated at a dallas hospital. Well tell you everything we know this morning. First up, new data from adp shows private payroll increased by 213,000 in september driven by hiring in manufacturing. The markets wrapped up a positive third quarter. The dow rising almost 1. 3 . The nasdaq gaining 1. 9 despite that decline in september. Now we begin q4, jim, where it sounds like you think there are going to be opportunities somewhere. Yeah, i dont like the industrials. Its very interesting. You see that rates are down again. This is all for europe. When you see the number from germany, its obviously very weak. By the way, 49. 9 is their pmi, the first contraction in 15 months. What you keep coming back to is a bifurcated market. I always read criticism of the show. You learn. I was listening to ray dalia. You always read and understand the criticism. How could you be negative . Now, carl, we sit here and im negative on industrials because the numbers are coming down. The industrials diversify very heavily into europe. China sells a lot into europe. You have this bad reverberation going on. Not negative on u. S. I see a lot of good things retail, a lot of good things for restaurant. I have gasoline coming under 3. So were a bifurcated market. Stay domestic, do better. The domestics went down yesterday. Thats where the opportunities are. I am by no means saying, listen, get out of the market. I am saying reevaluate. If youre international industrials, youre not going to make the numbers. Numbers are coming down for multinationals. Period. And listen, the worlds a volatile place right now with whats going on in hong kong. Not to mention our war against isis and the ukraine, which has figured so prominently into significant slowdown. We just got some numbers out this morning out of the eurozone. People really have to understand, our Interest Rates are really controlled by foreigners right now. The dollar is strong. People dont want to be in those other countries. Theyre not reacting to adp. Though germany is able to sell tenyear debt below 1 . When you see the adp number come out, it looks like things are strong and rates go down and commodities are plummeting around the world. You mentioned gas prices. 3. 33 is the average now. Sevenmonth low. 26 states have 3 or less. Unbelievable how much money people are going to save. Natural gas has not moved up at all. You see conoco selling oil to alaska. We have no place to put all our oil. Were going to go up were going to have 10 Million Barrels per day were going to be producing next year. Maybe 10. 5 billion if you read some of these numbers. Were not going to be importing that much. Were going to cut back on everything, includining oil fro saudi arabia. Doesnt oil prices coming down and commodity deflation help in terms of the fed offsetting and therefore kind of keep them on the sideline . Yes, and i think that we are bearing the brunt of the negatives right now. Obviously theres going to be a recession in europe. I dont think anyone doubts that anymore. You cant. You have too much on the line with russia and ukraine. All of south america is in recession. These are givens. China continuing to slow rather aggressively. You got this hong kong problem. We dont want to see that turn violent. I come back and i say, okay, so people are going to shop more here. Theres a very interesting note. Its just a little throwaway note. Listen, we see momentum, texas roadhouse we talked about mcdonalds and jack yesterday. Jack is doing incredibly well. They spin off qudoba. Do you really just go out there and buy and sell them . Yes, but you have to be careful. Whole foods, i was reading the Austin American statesman this morning. Speaking of lower prices. Slashing prices on 400 produce items. Thats where companies have been losing a lot of money in the Retail Business of supermarkets. Interesting to see if that happens. Corn, fiveyear low. Wheat plummeting. Soy down 35 . These are the Building Blocks of inflation. And theyre not there. Its obviously helpful to the consum consumer. Yes, so i dont want to be as negative about the consumer. We had chiller here yesterday. I was struck by the fact housing prices peaked. We may say thats going to hurt the net worth of people. People havent been buying houses because they went up a lot. Short term, yes. Does that hurt poulty . Maybe the margins wont be there. Does it help the American Consumer . Yes. We can be as negative as we want, but the American Consumer is not negative. Still one of the highest numbers weve had. Its like, geez, you pick up the paper, ebola, hong kong, isis. These are not the president. Honestly, you read we havent even talked about the idea of a guy who breaches the security in the white house, which i think a lot of people around the country say, well, geez what about the guy in the elevator who had a gun on him . Thats more unbelievable. With the president in the elevator. These are not things that say i got to go buy some chipotle. This isnt jimmy carter. I just hope president obama has no sweaters that look like jimmy carter sweaters. That cardigan. Hes still out there at 90 years of age, by the way. I think hes 90. Maybe 89. Did he burn that cardigan . I dont know what he did with the cardigan. Hes probably still got it. Nice checkers reference. You mentioned the hong kong situation. Markets are closed for the holiday in hong kong. Prodemocracy protests taking place for a sixth consecutive day. Our susan lee is in hong kong with the latest. Susan, hello once again. Reporter hi, carl. We took a walk around the protest. A few things stood out from the previous nights protest. I just want to point out we were looking for the police presence. Theyre keeping a pretty low profile out here tonight. The only ones we could find were the ones guarding government buildings close by to the protest site. Other than that, theyre staying well back from the crowds tonight. Also, the composition of the protesters has changed a little given that today is a holiday here in hong kong. Tomorrow is also a holiday. It seems like the composition has been more representative of what we usually see in the city of hong kong. So for the last few nights out here, its been mostly student led. Tonight were looking at more professionals now in the crowds. A little bit more mature. Also, you can see some gatherings of families as well streaming in here in the heart of the protest site. Also, i want to talk about the radius expanding as well. Were expecting 250,000 here according to the protest leaders. If you look behind me, were stretching well past the east and the west sides, further than what weve seen for the last few nights as well. I also want to point out we got some business headlines today. There are questions about whether or not these protests are going to hamper hong kong in the long term. They just issued a Business Travel ban for all their employees here. People are thinking, if this goes on for longer, what does it mean for the economy. Back to you in new york. Susan, thank you so much for that. There is a sense that this is going to continue for a while. Washington post today recommends that the u. S. Tell china you use force, there will be consequences. That would alter the narrative here, wouldnt it . Well, i said that yesterday, and people just said thats scare mongering. I think our president uniquely is not sitting there thinking, you know what, maybe we got to be careful about trade. President is thinking about free speech. If we put sanctions on china, then theyll put sanctions on us and well have a further ratcheting down in the economy. Its funny. You go back to 1940, okay, and you see that china you know, japan had taken over china. Sometimes history matters. We put an embargo on japanese oil. They overthrew a political a government that was peace oriented and went to a waroriented economy because they were going to be choked by our oil embargo. We are taking consequences here with embargoes. Were putting sanctions as if somehow this does not this does not transcend economics. It does transcend economics, which makes me a little more nervous. We just got a number cut. Russia, were not going to drill in russia, which is the largest untapped oil reserve in the world. Why are we not doing it . Because were not safe. Theyre not safe there. These are things there are consequences that are not economic. And that makes it so we are not thats what im saying. You know what, dont worry about a thing. Thats crazy. If the numbers are slowing and they have a giant oil project, what does it mean . Its a little more consequential. All right. You mentioned the other problem, of course, and that is ebola. The first patient diagnosed with the ebola virus in the u. S. Remains in isolation at a dallas hospital. The patient sought treatment six days after arriving in texas from liberia. Viewers do not like hearing the news of stocks that are reacting to this. But the tickers are all out there today. Tkmr. Last time someone said, how can you not like tkmr . I dont know. Im trying to make sense of things. Im not going to tell people to buy a drug stock that in 2015 perhaps they have something. Every Airline Stock is being killed today. Theres no research other than the fact that people feel i dont want to travel on an airline, despite the fact we had multiple people saying this is not how its no, the facts are that the virus is not transmissable until someone is showing symptoms. When they are showing symptoms, they are not in a position to travel. The fact is, in the countries in western africa, these extraordinarily poor countries with not anything close to what we have as a health care system, burial has ended up being the most dangerous part of the process because, in fact, that is when it is at its most infectious. You have 20, 30, 40 people touching a body at one time, many of them men, getting the disease. That does not take place here. Its a very different protocol. Although, worstcase scenario out of the cdc and we have a million and a half cases by january. Thats not positive for us. Million and a half cases over there. Exactly. That would be terrible. Its a horrible Health Consequence for whats going on in western africa. Not to mention, the last of Health Care Workers overall is actually resulted in more people dying from other diseases because they cant get treatment for those. This is what people are focused on. It does not create an environment where you feel confident. But that being said, and i think well hear from a lot of different people, there is a lot to be said for why there is not going to be an outbreak of ebola in this country. Were going to need vaccines, period, around the world. Whos going to develop them . Tkmr. Why would you develop for incredibly poor countries that cant pay for it . Lets be honest. Glaxo. Johnson johnson downgraded today, incorrectly, i thought. But theyre working on mass production. One of the reasons i dont want to speculate on tech miro, if you want mass production, its going to have to come from Companies Like merck. These companies, by the way, they do have an element to them, lets not forget, of just giving the stuff. Great American Companies that have not thinking about how to make money. Theyre not mercenaries. Okay. I got to make a phone call. Got to make a phone call . All right. Fannie and freddie. Theres a lot going on. I got to make some calls. Right during the break, lets all make some calls. When we come back, signs that the standoff between amazon and disney could be nearing an end. Also, maynard webb live in an exclusive. Well be right back. Having a fe checked bag. With my united mileageplus explorer card. I have saved 75 in checked bag fees. Priority boarding is really important to us. You can just get on the plane and relax. I love to travel, no foreign transaction fees means real savings. We can go to any country and spend money the way we would in the us. When i spend money on this card i can see brazil in my future. I use the explorer card to earn miles in order to go visit my family which means a lot to me. Theres a difference when you trade with fidelity. One you wont find anywhere else. Onesecond trade execution. Guaranteed. Did you see it . In one second, he made a trade, we looked for the best price, and the trade went through. Do the other guys guarantee that . Didnt think so. Open an account and find more of the expertise you need to be a better investor. Amazon and disney reportedly close to settling that nearly twomonth dispute during which the online retailer stopped offering disney dvds for preorder. A source telling upcoming releases were back on amazon last night. The company has been at odds over issues including pricing and promotion on the amazon website. Nice to see at least some disputes getting solved is here. I thought the article today about facebook getting involved in the mini series thats right. Mini movie, airs first on facebook. Ive always felt that youtube is the place that would go. Facebook is doing so many things to monetize their Revenue Streams that thats why that stock is held up during this period. I think its worth noting in a world of gloom that there are some companies that are not put up in the cyclicality at all and are just taking share and doing quite well. In terms of amazon, the Amazon Disney dispute was a traditional dispute between a very powerful retailer and a powerful supplier. And its different than the dispute between amazon and hashet to a certain extent and the authors and what they want to be lower price points for digital books. Where James Patterson says, for example, that its not toilet paper were talking about here. Its books. Its a different kind of a thing. So i draw distinctions between the two even though we tended to lump these disputes together. You cant roll disney. You can roll individual writers who live off that money. Although, James Patterson doesnt. He knows how to get the word out. For the most part, writers are powerless against amazon. Disney is powerless against no one. Disney is at one point, i would have said like the nfl. Were going to talk to one of the fcc commissioners later on this hour about the blackout rule. 40year rule thats essentially gone. People are rolling the nfl right now. They really are. Its rather amazing. You never take on the nfl. Isnt this notion youre going to watch a game no matter what the ticket sales were. Youre going to put a movie out on netflix and in theaters. Content, its like trying to hold back water right now. I think youre totally right. Great depiction. Fabulous. When we come back, well get cramers mad dash. Well count down toward the opening bell. Take one more look at the premarket. By the way, vivint solar going public today at the big board. The opening trade and an interview with the ceo coming up. When the world moves, futures move first. Learn futures from experienced pros with dedicated chats and daily live webinars. And trade with paper money to testdrive the market. All on thinkorswim from td ameritrade. Know that chasing performance and fewer choices in retirement. Know that proper allocation could help increase returns so you can enjoy that second home sooner. Know the right Financial Planning can help you save for college and retirement. Know where you stand with pnc total insight. A new investing and Banking Experience with personalized guidance and online tools. Visit a branch, call or go online today. Watch this. Sam always gives you the good news in person, bad news in email. Good news fedex has flat rate shipping. Its called fedex one rate. And its affordable. Sounds great. [ cell phone typing ] [ typing continues ] [ whoosh ] [ cell phones buzz, chirp ] and we have to work the weekend. Great. More good news its friday woo [ male announcer ] ship a pak via Fedex Express saver® for as low as 7. 50. [ male announcer ] ship a pak via Fedex Express saver® this is kathleen. Setting up the perfect wedding day begins with arthritis pain and two pills. Afternoon arrives and feeling good, but her knee pain returns. Thats two more pills. The evenings event brings laughter, joy, and more pain. When jamie says. Whats that like six pills today . Yeah. I can take 2 aleve for all day relief. Really, and. And thats it. This is kathleen. For my arthritis pain, i now choose aleve. Get all day arthritis pain relief with an easyopen cap. It is a mad dash for what we like to call hump day over here at squawk on the street. Were starting off where, west port . And im not talking connecticut. This is a company that makes natural gas engines. People ask me, jim, why have you got an little more negative . Were just a few percent from the high for the whole market. When you see Something Like this, which is really terrible, you know when you go through the release, theyre saying theres a 25 reduction in engine sales. They cite europe, russia, and china. Well, thats what im worried about. I think this is truck orders. Be very careful. These are engines that run on natural gas. But this is purely a reflection of slowdowns in those economies, not anything to do with the fuel itself . You know what, west port has not necessarily been as, lets say they have never been really clear about whats wrong. But the main takeaway is theres just less business in europe, russia, and china, which is why ive gone more negative. These are head winds. They were tail winds coming into 2014. People, the world is changing. Are we sure this is not Company Specific . This is down 68 this year. They botched it. By the way, the trucking companies, theyre not falling all over the place to buy natural gas trucks because we dont have any places to fill them for the most part. Its not being adopted anywhere near what we thought it would. Potentially with the positive ramifications that would come, if we had a lot of surface transportation running on natural gas. Its underpowered and got to stop a lot. My friends in the trucking industry, theyre saying, listen, the technology will eventually come along. Now ebay, lets not lose sight of this. Jpmorgan, jmp, jeffries all downgra downgraded. Were now hearing the backlash, which is this was a dispute with apple. Apple was going to build papal in. Papal went apparently with samsung. Apple decided, you know what, were going to eviscerate papal. Can they do it . When youre teamed it up with visa and mastercard and the banks, even though you dont have samsung, you know what, apple has the ability to do a payment plan that can destroy the industry like they did with itunes. In my interview with the ceo, i said, you started this whole process deciding you were going to split the companies before we heard about apple pay. He said, absolutely. But we knew changes were coming. Although, many people are pointing to apple pay as one of the reasons papal needs to be on its own. Its got to start innovating. It does. Now, other investors are saying is, man, you should have started this even three months earlier, the process to get it done as soon as possible because the clock is ticking. I have really good sources at visa, at mastercard, at jpmorgan. Really good. No one saw this coming. Apple put the tightest lid on all right. That is not cheering for the opening bell. Just some of the Management Team from vivint solar, which will be ringing that bell. Well be talking to the ceo. By the way, the opening bell about 4 1 2 minutes away. We got a lot more squawk on the street after this. Act i. Scene 3. Open port twentytwoohoneseven on the firewall for customer db access. Install version twopointthree of db connector and ensure verbose flag is set in case of problems. clapping sound isnt the cloud supposed to make business easier . Get the one that can connect to the systems that you already have. Today theres a new way to work. And its made with ibm. Thats a good thing, but it doesnt cover everything. Only about 80 of your part b medical expenses. The rest is up to you. So consider an aarp Medicare Supplement insurance plan, insured by unitedhealthcare insurance company. 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Recent episodes when thats happened, it hasnt been a longterm positive. No, and this is one of those moments right now where its very clear, very clear that the index funds are winning, hedge funds are losing, lots of stock picking funds are losing. Youre going to hear another big backlash coming in the next few weeks about how you have to be in index funds. This was a quarter that proved the worth of index funds. Im not going to deny that. But there are segments of the market that are still going higher. But were in a speculative phase too. Im watching the background. But im seeing the go pro, the mobile eye, these are signs that what is working is very speculative. What isnt working are industrials. Thats a problem for me. You see General Mills cutting back people in order to be able to make the numbers. Thats a problem for me. 700 to 800 jobs at General Mills. The opening bell here. Big crowd this morning as we get a look at the s p at the top of your screen. At the big board today, as david just said, vivint solar, a provider of residential Solar Systems in the u. S. , celebrating its ipo. Were going to talk to the companys ceo in the next hour. Before we get to anything else, getting a lot of auto sales out today. Ford is now out with its figures for september. For that we go to phil lebeau in chicago. Carl, Ford September auto sales dropping 2. 7 . That is a smaller than expected decline. Edmonds. Com was forecasting a decline of 3. 9 last month. But again, ford down 2. 7 for the month of september. Guys, this is three straight automakers who have already reported better than expected sales numbers. Were going to get gm in about 15 minutes. Interesting to see if we have a number that at the end of the day is a little better than people previously forecasted. Remember, theyre looking at 16. 5 for the month of september. Although, i wouldnt be surprised if we see perhaps a little bit higher. All right. Phil, thank you for that. By the way, fords been taken off the bank of america u. S. One list. I guess they run it for 12 months and reevaluate. The ford meeting was a game changer. Europe, bad. South america, bad. South america, bad. I think theyre honest people. The downturn here severe and quick. Again, the ford meeting is what changed this landscape and made it very clear. This plus oil decline, very important. And dont forget, the industries that are growth stlis that are hiring people in this country. Housing, slowing. Autos, slowing. Oil and gas, slowing. So fewer pickups. Not a good time to roll out a new f150. Well, everyone is rallying around aluminum because its the only commodity doing better. Alcoa has had so many recommendations its hurting. On the oil and gas, i want to make it clear when i say slowing. We have such a glut that youre going to begin to start questioning whether you want to continue to drill. If you cant export the stuff, there are people making decisions. You know what, we cant export it, we cant drill it. Weve got suchz a glut. We have such a glut of oil. Some of these places you get 70 for the oil. I have enbridge on today. A third of energy, and they have solar. A third of energy is transported by them. I cannot wait to hear what al monaco says about the glut in places where we dont have pipe to get the stuff out of the ground. Such a glut. Its just amazing to hear about that. It wasnt that long ago, less than a decade ago, people were talking about peak oil. Remember that one . We have so much. After we get horizontal drilling and co2 pumped in there, its going to be it the Largest Oil Field in the world. No one believes that now, but you Better Believe it because its happening. Its happening right before our eyes. Theyre going to be doing 3 Million Barrels a day. Meantime, we did get chrysler up 19 for september. Better than expected. Do you think peak auto as a notion is correct or not . I dont want to go peak because i only think that theyre still 12 years on the road. These cars are older. I think theres a pause. To say peak is to really say that we are done with the auto cycle. I cant go there. I think in europe, yes. Latin america, yes. I think were pausing. All right. You know whats so funny . You know whats going up . So hilarious the way the market work. Tyson foods overpays dramatically. What do they buy in order to feed all those chickens . They buy all that stuff, the feed and grains. By the way, a fox got in the hen house and ripped off 12 heads. Is that true . 12 heads gone in the morning. But you feed them corn. I was giving them all sorts of corn. The rotten corn, really ugly corn. Credits up today to neutral in large part because the margins in the core business, they think, are going to smooth out any potholes in the hillshire integration. You feed these animals all this stuff thats going down 30 , 40 , 50 . This is a windfall for tyson. I wish it were a windfall for us. I wish Buffalo Wild Wings would lower its prices if the wings cost less. You mentioned airlines earlier in the hour. Southwest and delta the worst performers on the s p. 3 losses, even with oil coming down. Thats weird. We can surmise as to why, right . Ebola. Look, is it a panic . Then you start getting the charters. The charters tell me, look, these stocks are finished. Again, i dont want to fight these things right now. Let them come in. We dont need to be heroes here. Tina turner market, david. Oh, im sorry. Youre focused on real work. Yeah, i did want to get to this, actually. Its a note this morning from iss. I go after these proxy Advisory Firms because i think they have undo influence. But they do have influence. I think these shareholders should make up their own minds. They advise the index funds. They advise the large mutual funds. But they weigh in on the current allergan, salix dispute. They have some very strident, strong words for allergan. If it should try to buy salix without in effect not giving its shareholders a voice, because that would be a cash acquisition, a tender offer. And by the way, i have no updates for you on this. Things have gotten very quiet. A lot of people believe that allergans issuance of a letter from its board or a press release from its board on monday was essentially saying were not going to do it. I cant tell you one way or the other where that stands right now. What i can tell you is that iss is saying, hey, listen, board, dont do it without giving your shareholders an opportunity to have their voices is heard here when more than a third of outstanding shares consent to call a special meeting, particularly amid restrictions so onerous. They should give shareholders a real and binding choice between the buyout offer and the plan assembled in response. So they go on with some very strong words to basically say, if you do this without giving them an opportunity to voice their opinions at the december 18th meeting, you will be running afoul of us. For whatever that is worth, of course its a special meeting. They could conceivably say, throw all the directors it out, which might help. But saying this morning there are so many different choices. I continue to think that you want to own allergan. Theres just a lot of ways to win allergan. Iss can do what it wants. There are forces in play that make it so allergan is worth more both on an earnings per share basis and a takeover basis. All right. Lets get to dominic chu, see whats moving on the floor. All right. So im in that crowd that youre showing is just on the righthand side of your screen. Next to post five. More on that in a second. What we have right now are markets that are lower. The dow is down about 45 points. And the concern right now is really about global growth. There really isnt that much robust growth to be concerned about if youre a bear. So if you take a look at the global markets, the dow is down, the s p is down, but european markets are down as well. Youre seeing concerns there as well. The euro also at a twoyear low right now. As you see whats happening with the euro, if you wanted that european vacation, you can get it on the discount, on sale right now for what the euro is trading at. And thats all because you take a look at the European Growth situation. Youve got some disappointing data with regard to manufacturing. Also, factory prices, inflation not really a worry in europe at all, and Economic Sentiment is not really all that robust. Of course, you have a slight uptick in german unemployment that was unexpected. Of course, all of that puts the ecb, the European Central bank, in focus tomorrow with its Rate Decision and its rate commentary on whats happening. Of course, thats leading to the First Time Ever that the German Government was able to sell tenyear government bonds for germany at a yield below 1 . That gives you an idea theres not a lot of concern about inflation coming out of europe. Now, as we go towards our own treasury side of the equation, youre seeing treasury yields on the tenyear specifically down around 2. 45 , 2. 46 . Thats near a onemonth low. The shorter term, mediumterm trend for treasury yields has been more to the downside. As we look at whats happening overall, thats carrying through into the rest of the market sentiment. What we want to talk about quickly is whats happening behind me. All of this sea of orange and white is vivint, a residential solar company. They priced on the low end of their guidance. They sold 20. 6 million shares. Were just waiting for an indication right now. Were seeing about 16 1 2 to 17 1 2 for the opening indication. Thats going to shift around as we head toward the opening of this trade. At least for right now, theyre trying to see if this ipo can get off without a hitch on the heels of some other big ones over the course of the past couple weeks. Back over to you. Very big. Biggest of all time, in fact. Thank you, dominic chu. Wanted to move ahead to a story that weve been following for quite some time here. There was a Significant Development late yesterday in what have been the challenges by a number of prominent hedge funds to the treasurys right to basically sweep all the profits from fannie mae and freddie mac into is the treasury of the United States and replace what was a significant dividend being paid to all of us, the u. S. Taxpayer, as a result of the bailout, so to speak, of those two mortgage giants. Last night a judge actually thought to have been very favorable for the plaintiffs in the case shockingly and this is shockingly without even a hearing issued a decision that said youre done, youre out of here, im throwing all of this out, your lawsuits. Yes, he said in his conclusion, its understandable for that third amendment which sweeps nearly all gse profits to treasury to raise eyebrows or even engender a feeling of discomfort, but any sense of unease over the defendants conduct is not enough to overcome the plain meaning of the rule under which they did it. The plaintiffs grievance is really with congress itself, said the judge. Vicious ruling. When you hear plain meaning, it says your suit should never have been brought. It was congress after all that parted the legal seas so that are the fhfa and treasury could effectively do whatever they thought was needed to stabilize and if necessary liquidate the gses. Thus, for the Court Dismissed the cross motion for summary judgment. What im hearing out of perry, who led this charge, theyre going to look for opportunities to appeal here, but this is shocking. Its going to have an impact. Weve taken a look. Fannie and freddie, the preferred being the key securities here. Look at whats going on here with fannie and freddie. Go back to delivering. When i asked treasury secretary lew what to do i dont know if we have a tape of it. We do. Just listen to this. 4. 40. Thats where it was. Youve got fannie mae paying you 126 billion. The only obligation was for 116 billion. Can this continue, or are you going to make it so or do you recommend, because i know its congressional, that the preferred be made good and even the common stock be made good because treasurys gotten all its money back . I think if you look at the most recent exposure report, stress test reports on the gses, it shows that in a crisis, the exposure would still be to the taxpayer, and it would still vastly outweigh what current profits are. I think as long as u. S. Taxpayers are on the hook, it is appropriate for us to stay in the structure of conservatorship that were in. What we need to do is get on with Housing Finance reform. We need to have a clear plan for future that circumscribes the taxpayers exposure in a very limited way. And the sooner we do that, the better. Told you to sell them. Meanwhile, the sweeping of these profits from fannie and freddie is having a discernible impact on the budget deficit. Were talking tens of billions. Thats about to reverse because a lot of it a lot of it was last year. Also marking things back. They will start losing money very soon. Losing money . They can lose money. Theyre giving away the darn stuff. They should get out of the market and let the wells fargos handle it. That was not that long ago that lew said were going to keep it as it is. Nothings changed. Now theyre not going to be forced to by the courts. Believe me, youre not going to get a lot of fannie mae beginning in the next few months. I totally agree. Jack lew is right. Taxpayer is still on the hook. It was absurd. The lawsuit was absurd. Listen, when ted olsen thinks hes got a strong case, you have to listen. Im sorry. Nobodys one more cases in front of the Supreme Court than that man. This was a shock. Let me leave it at that. Obviously, shocking for many of the good call by jack lew to short fannie. Made a lot of money off that call. Thats true. Timely. All right. Lets head to the bond pits now. Rick santelli is at the cme group in chicago. Rick . Thanks, david. Well, we had a better adp number. What did the market think of it . These are kind of sessions where you get a glimpse at a momentary trade, but it gives you a sense of how markets still can move on data and give you an estimate of the strength or weakness or just the mediocre nature of a number. So at 8 15 eastern, see the drop in yields . Pretty easy to pick out. If we open the chart up basically to the beginning of september, its important to note several things. As dom pointed out, hovering basically at threeweekplus low yields going back to 8th of september. But look at the right side of that chart and lets go up the curve to the fives. You see that the fives are still a little higher on the right side in terms of yields. Theres your curve issues with the flattening yield curve. A little less dramatic as of late. Now, lets switch gears a buiit and look overseas. If you look at the intraday of bund, everything correlated with rates, especially on sovereign side europe and u. S. You see the influence at 8 15 eastern there as well. Lets open this chart up to the third week in august, 8 22. You can see todays yields at 88. Were getting very, very close. Also, throw in the dax from the same day, 22nd of august. You can see the high correlation which makes sense. The best hedge, even at these low yields, high prices when stocks get weak still is the countrys sovereign debt market. We traded above 110. Did we hold it . No. Fresh highs going back on this chart. The third week in august of 2008. Back to you, david. Rick, well see you in a few moments for ism. Thanks a lot. When we come back, the message jeff bezos is sending about amazon. Then later, a live interview with yahoo s chairman of the board, maynard webb, right here at post nine. Itll be on squawk alley at 11 00 a. M. Eastern time. Dow is down 101 points. Charlie, the demand on this network, it is increasing by the second. Its crazy, huh . And people are relying on it more than ever. We cover more than 99 of all americans. I know, i cant imagine living without it. Its a place where people can come share knowledge and ideas. Its beautiful. Thats deep charlie. My selfie just hit a hundred likes. gasps a hundred at t is building you a better network. Big day . Ah, the usual. Moved some new cars. Hauled a bunch of steel. Kept the supermarket shelves stocked. Made sure everyone got their latest gadgets. Whats up for the next shift . Ah, nothing much. Just keeping the lights on. laugh nice. Doing the big things that move an economy. See you tomorrow, mac. See you tomorrow, sam. Just another day at norfolk southern. Ameriprise asked people a simple question in retirement, will you outlive your money . Uhhh. No, that cant happen. Thats the thing, you dont know how long it has to last. Everyone has retirement questions. So ameriprise created the exclusive. Confident retirement approach. Now you and your ameripise advisor can get the real answers you need. Well, knowing gives you confidence. Start building your confident retirement today. Amazon founder jeff bezos visiting india today and cnbc india spoke with him and asked him about alibaba. Take a listen. Were not going to be blown around by the latest wind. So well stay focused on our approach, which is to put customers first, invent, and be willing to be longterm oriented, be patient. We like to plant seeds and then some of those seeds grow into big trees, some of those seeds never sprout. You know, we have if youre going to be experimental, if youre going to invent, youre also going to have failures. Weve had plenty of failures. Well have more failures in the future. The important thing is we fwheed to continue to invest in new things and create new bold bets. Some of those will turn into very large, significant businesses like kindle did and like aws has and like india is in the process of turning into something very significant. Interesting to hear from a guy we dont hear from enough. Yeah, wish hed even taken that long with me for our documentary. But im glad he spoke to us in india. Talking about planting trees and seeds, like chauncey gardner. Politico has a piece on how the washington post, on a day where the times is cutting 100 drops, has added 100 jobs in the past few weeks. Remarkable man. No doubt. And there was his thesis, which has been his message to shareholders from the very beginning, which is, you want to be with me, im going to do a lot of stuff. Some of it youll like, some of it you wont. Some of it will be big stuff, others will go nowhere, but im not going to stop taking chances, taking risks. We obviously see a lot of bad things in the market. Speaking of which, dow is down 129. S p down almost 15. Well get stop trading with jim in just a minute. Squawk on the street will be right back. Try alka seltzer reliefchews. They work just as fast and taste better than tums smoothies assorted fruit. Mmm. Amazing. Yeah, i get that a lot. Alka seltzer heartburn reliefchews. Enjoy the relief. Take a look at the markets here. Dow down 113. Travel really getting pounded. Airlines. Boeing, ge, utx the worst performing dow components. And the rails. I want to focus for a second on a story, an excellent story, page b3 of the wall street journal. The oil firms, which have to spends a fortune on new tankers, and the railroads, which would also. Theyre saying we have to fight this government. Thats disastrous for trinity, for American Rail car, and for greenbrier. All their numbers depend on a government fiekting to have people make new rail cars. This is about fiery crashes and ending them. I have enbridge on tonight, happens to be a big pipeline company. Be careful, rails and the Oil Companies had been fighting. Theyre united to try to drag this thing out. Thats not what you want if youre a shareholder in those. Moving it around is tough either way. Meantime, what do you make of the action in the early going here . I just dont like it. Its the big internationals. The airlines have led us. The rails have led us. The companies that are in aerospace have led us. These are all in markets that are no longer vibrant. Let them come down. People are saying, jim, how can you say this . You know, were up a whole lot. Im not like its okay. Its okay to take something off the table. Its not a dangerous thing. Since when is it dangerous to try to save money . Take some profits, yeah. Dont go too far. Lets get gm numbers quick from phil. They just came out for the month of september. General motors increased sales 19. 4 . Again, 19. 4 increased last month for gm. Thats a little shy of the edmonds. Com estimate of an increase of 22. 2 . Theyre estimating for the Industry Sales rate for the month of september, it should come in at 16. 4 million. Thats the gm estimate. Finally, when you look at the inventory, the days supply, end of last month it was 72 days. The end of august was 72. End of september, it rose up to 81day supply. Theres the latest from gm. Guys, baaick to you. All right. Thank you, phil. By the way, mary barra speaking to analysts today. People keep screaming for higher rates. Id like to see higher business activity. All right. Weve got spencer rascoff. Dont steal my thunder. Zillow merging. Spencer will be visiting. Im still going to run the show tonight. Im not going to turn it over to spencer. Ask him about training for the tough mudder. All right. Im going to do that. I want to take a little break. Spencers been asking to run the show. Hey, im rascoff. Look to zillow. Well see you tonight, jim. Mad money, 6 00 p. M. Isms after the break. Dont go away. Welcome back to squawk on the street. Breaking news. August Construction Spending takes a uturn into negative territory, down 0. 8. We were looking for up 0. 5 . Last month, downgraded to 1. 2. September ism, more current, the Manufacturing Index disappoints at 56. 6. Were looking for 58 and change last month. 59 unrevised prices paid move up from 28 even to 59. 5. The important things this week of employment, moved lower. Down from 58. 1. New orders at 60, a good level, but not as good as 66. 7 last week. Adp a little stronger than expected but somewhat rejected in terms of strength by treasury, which had a nice rally and curve steepening after that 8 15 eastern number. Rick santelli with a whole mixed bag of Economic Data. Meanwhile, the dow down triple digits this morning. Right now down 123 points. Lets talk about it on this first day of the Fourth Quarter. The chief Global Investment strategist with charles schwab. I mentioned the Fourth Quarter because though we ended with a gain on the s p 500 of a little more than 0. 5 last quarter, the momentum is falling. September was down. Is this a preview of what is to come toward the end of the year here . It certainly could be. Theres often talk about how long its been since we had a big pullback. Maybe were due for one. Certainly the Economic Data began to deteriorate in september. Im not even talking about u. S. Data. Im talking about the chinese data. Thats what weve been keeg off here lately. That could continue to weaken, perhaps, in the september data we get in october. Though it might begin to turn around if shipping traffic is any guide to that. So maybe we get a little relief maybe mid month in october and the slide begins to stall. We have earnings ahead. There could be some real disappointments in europe. Earnings expectations for 11 yearoveryear earnings growth. Thats hard to see in the environment weve been experiencing over there. And weve seen it with the numbers. Economic numbers in europe. Italy cutting its growth forecast. German manufacturing shrinking. What do you make of the signals were getting for september . Adp was a little stronger. Manufacturing came in light but still growing nicely. How much can we withstand the global weaknesses, whether geopolitics or economics and some of the volatility around the world . Thats a great question. The u. S. Cannot simply completely decouple on its own. Some of the issues going on around the world have reinforced u. S. Strength, like declining Interest Rates and lower energy crises. The u. S. Cant be an island. It cant continue to accelerate on its own. Some of this data, particularly the ism this morning, is showing that. We are connected to the rest of the world. Unless we see better Economic Growth in china and a stabilization in europe, thats not likely to happen. I think that stabilization in europe is still a ways away. Come on, jeff. This is a buying opportunity surely. Past performance, if we look at where weve traded on the stock market, times like these are when you should buy. This is when you profit. Thats what recent history clearly tells us. Or are you now calling a major turn in the market . You know, youre right, simon. Weve only seen modest pullbacks here. This is one thats gone on probably as long as any weve seen over the last year or two. Maybe its a buying opportunity. I think if youre looking to buy, you dont want to buy in the u. S. You may want to be buying in the emerging markets. There youve only got a ten times pricetoearnings ratio. The playbook is completely different than 1997. Sure, the dollar is going up, and weve seen japan raise the consumption tax and the fed think about hiking rates. All those were ingredients to the asian contagion. Forgive me. Youre dancing around all over the place. Let me draw you back to the central question. You said to me just now, yes, this may be a buying opportunity in this country. Youre the chief Global Investment strategist. Do you think that the market will be higher by the end of the year here . I think the market will be higher by the end of the year, but i think we may go lower before we get there. The area to buy today, simon, is in the emerging markets, not yet the u. S. Stocks. I wonder what you make of the weakness in small caps, which were now seeing go into sort of mid caps. Is that going to trickle down and start to affect the bigger stocks, or is that the place you want to be right now given concerns about higher Interest Rates . I dont think so. Smaller cap stocks have had the benefit of this rolling mna we have a weve seen. But theyre very expensive now. Youve seen the market rotate away from the more expensive areas of the market. Thats where i think youre going to find value, more overseas in the emerging markets than here in the u. S. Finally, set is the record straight. Everybodys watching the strong dollar. That was certainly the signature move of the third quarter. What does that really mean for u. S. Equities . Is it a burden because of the overseas earnings, or does it make our assets more attractive given whats happening in the rest of the world . The latter, i think. You make a good point. I think the dollar going up makes the u. S. More attractive than the rest of the world as a destination for capital. We generally dont compete much on price, so its not a huge negative for u. S. Exports. And it does help keep Energy Prices down in the u. S. As well. So in general and it has been a persistent rally. Jeff, always good to get your insight. The chief Global Investment strategist with charles schwab. Its evening time in hong kong. Huge crowds of prodemocracy protesters have taken to the streets again today. In fact, marking Chinas National Day effectively in an unprecedented manner. Cnbcs susan lee is live in hong kong with the latest. Susan, over to you. Reporter yeah, simon, you know, one of the main motivations behind this massive protest here in hong kong is for hong kongers to show the world and beijing that theyre willing to rally and fight for their freedoms. In the process, maybe garner some Global Support to help pressure beijing for democracy here in hong kong. Not that necessarily beijing has shown in the past that theyre willing to yield to this international pressure. I want to show you the latest element out here at the protest, at this main protest site. If you can just pan over to my left. Being projected on to the wall, one of the main government buildings here, are these global messages of support for this protest movement. Really, theyve been coming from all over the world. From the u. S. , from canada, from taiwan, from europe as well. And managing the message has been a key element of this occupy movement. I want to show you whats been on social media. If youve seen the Yellow Ribbon on facebook or on twitter, thats been representative of whats taking place here in hong kong. Also, its been dubbed the umbrella revolution as well because umbrellas were basically a defense that protesters use in the wee mornings of monday when they were being lobbed at with tear gas and pepper spray. Also, umbrellas have been what theyve been sleeping under since it is really hot here in hong kong. The afternoon sun gets a little sweltering. But also, its been somehow getting through the beijing sensors. We know that beijing, of course, has a lot of tight sensors on social media. Recently weve seen some posts of even the chinese president , xi jinping, holding up an umbrella as well. Theyve been taken down pretty quickly. Shows you that the fight here on the streets is also being taken to the Digital World as well. Im going to send it back to you in new york, carl. Susan, thank you so much for that. Susan lee in hong kong. From hong kong to ebola, the first ebola case in the u. S. Was confirmed by the cdc on tuesday. The patient was diagnosed and is being treated at a hospital in dallas. Meg is live in dallas with that story. Reporter good morning. Were here in dallas at the hospital where the patient is the currently in treatment in isolation. Getting details last night from tom friedman, the director of the cdc, just about how this patient arrived in the United States. He was traveling from liberia, left that country on the 19th, arrived here on the 20th. Didnt start showing symptoms for four or five days. Thats important because ebola doesnt spread unless a patient is showing symptoms. For example, fever. The patient was not showing a fever before he got on the plane. The cdc is stressing that is not a concern, that had the disease would have spread on the plane. The patient was admitted on the 28th here in dallas. Of course, tested positive for ebola. We are getting some updates just from the monitoring of his contacts here in dallas. Texas state Health Officials say no other suspected ebola cases are present at this time. Dallas county health and Human Services telling us 12 to 18 people are currently being monitored, all of them connected to this patient, either family members or medical staff. None have been brought to the hospital, weve learn, and none are being quarantined or isolated at this time. They are being monitored in conjunction with the cdc. Were waiting for more details with an expected News Conference expected to happen later where the governor is expected to attend. Again, cdc is really stressing that because this patient wasnt showing symptoms when he got on the plane, they are confident they know how to contain this. Back to you guys. All right. Thanks very much. Well continue to check in with you as we get new developments. Meantime, steve wynn is speaking out to our own jane wells, last night making comments on inversions. Jane wells live in l. A. With all the details. What did he tell you . Well, most of wynn resorts profits, as you know, come from china. Steve wynn spends a lot of his time in macao. He said its the most la say fair environment on the planet right now. Quote, the Regulatory Burden in china is infin success mall compared to the crap we get in america, unquote. So why not follow other American Companies, relocate overseas, do an inversion, even though the Administration Seeks to punish those who do . The administration likes to punish everybody. Thats part of the political mentality at the moment in america. Punish people. Punish people if they dont do what theyre told. I have no plans on inverting. How come . Were an american company. Our revenue is asian, but were an american company. Were american people. And proud to be so. As for china, wynn is not concerned about protests in hong kong getting out of hand and impacting his business. He believes the Central Government is willing to compromise to a point as long as it has so some say in the candidates to run hong kong and the candidates, quote, have some kind of mature, rational attitude toward the fact that it belongs to china. Next hour, steve wynn is not betting on internet gambling. And hell tell you why. Back to you. Okay. Thank you very much for that. Lets check on where we are with wynn resorts. In negative territory, as it turns out. New smoking rules coming to macao. Looks like most will not be permitted to allow smoking. You may still get it in the very important vip areas where theyre often playing for much larger sums of money. Wynn is one of the top losers at the open. Did also want to check on what are stunning losses for highly speculative stocks that we pointed out many times. Namely, the common of fannie and freddie and the preferred of both of those. Huge gses. Theyre in conservatorship as they have been since 2008. But you may recall there were a number of significant lawsuits challenging a socalled third amendment that took place a number of years ago that allowed the government to sweep all of the profits from these gses into the u. S. Treasury. In a really stunning, stunning reversal for the hedge funds behind those lawsuits, the judge last night threw out all of their claims without even a hearing. Threw out all of their claims saying the plaintiffs true gripe is with the language of the statute that enabled the fhfa to take unprecedented steps to salvage the largest players for the Mortgage Finance industry for their looming collapse triggered a systemic panic. He says, i get why you might be frustrated, but the fact is the housing and economic recovery act under which congress acted is something that i am going to say, hey, you got a problem with it, you got a problem with congress. And therefore, it was congress after all that part of the legal could effectively do whatever they needed to stabilize and if necessary liquidate the gses. Well see if there are appeals and under what grounds they appeal. But the judge was supposed to be a very favorable judge for this case. Youre seeing that reaction in the preferred and common given that there had been a hope you would have enormous profitins coming back to these companies. All right. When we come back this morning, pepsis next big bet is this can right here. Well have an exclusive look and taste test of the new pepsi t e true soda. Before the break, a check on the markets. The dow now down 150 points. S p, 1956 as we begin to test some Technical Levels here. Well be right back. Being a keen observer of the world has gotten you far, but what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. Know that chasing performance and fewer choices in retirement. Know that proper allocation could help increase returns so you can enjoy that second home sooner. Know the right Financial Planning can help you save for college and retirement. Know where you stand with pnc total insight. A new investing and Banking Experience with personalized guidance and online tools. Visit a branch, call or go online today. Welcome back to squawk on the street. September auto sales from toyota, a decrease of 2. 5 . Again, a decrease of 2. 5 last month for toyota. Thats well below what the edmonds. Com estimate was. East monda they were calling for an increase of 6. 7 . At this point, we have had a mixed bag. Youve had some improvements from chrysler, from ford, better than expected nissan. Then you also have gm and toyota falling a little short of estimates. Again, the end of the day, were looking for a sales rate, probably about 16. 4 million. Back to you. Well continue to check in and get that final tally at the end of the day. Thanks, phil. Pepsi is rolling out a new drink. Its called pepsi true. You actually will not see this on the shelves because its launching exclusively on amazon. Com in the middle of october. Certainly a cautious and measured way to launch a new pepsi. This is the first time pepsis launching a new cola under its brand in a few years, since next. It is a whole new approach because it has stevia and real sugar. Its using real sugar to balance out what is often a bitter taste and aftertaste of stevia. This is the first steviabased drink in the United States from pepsi. Its taken three years to develop. It true has 30 less sugar than a regular pepsi. It has no artificial sweeteners and no high fructose corn syrup, both of which are not in favor from consumers right now. Just to mention the big competitor, cocacola is out with coke life. Its also taking a very measured approach here to the launch. Only being released at the fresh markets in Southern States right now after some debuts in the u. K. And argentina. Also has stevia in it. The problem here, overarching problem for the industry, is soda sales have been in decline for the last nine years. People are increasingly worried about health. Theyre worried about obesity. Studies have been increasingly linking these problems to sugary drinks and also diets are now falling faster than the overall carbon ated drinks category. So beverage giants are trying to keep up. Theyre trying to release new drinks with alternative sweeteners like stevia. Back in 2004, splenda was the alternative. Both coke and pepsi launched c2 and pepsi edge. They didnt go anywhere. Now theyre trying it out with stevia. It has to appeal to consumers. It has to taste sweet, be natural, be low calorie. This can is green. You get the really true, allnatural sense. It also says 60 calories a can. Which is 30 less overall sugar. Depends what your comparison is. If my comparison is water or vitamin water. This is not an alternative to water. Its an alternative to, say, diet pepsis or regular pepsis. Diet pepsi has no calories. Correct. But people are increasingly fed up with aspartame and some of the artificial sweeteners. Did you see this study that came out in nature, that actually the artificial sweeteners may increase your blood sugar level. Its research from israel. Because of what it does to the gut. Thats a game changer for this category. They need to get people buying this and off the artificial. Which is why theyre experimenting heavily. What is stevia . It comes from a shrub. You ever seen breaking bad . I have. Stevia played a big role in the finale. Its used in all sorts of foods. It comes from this plant in south america. They use the leaves, the extract. It was approved by the fda several years ago. The beverage makers have had trouble finding the right mix. Producers say we have to taste it. Ive already had some. Was it nice . I could totally get used to it. I didnt get one. I dont know why. You can have mine. Thats all right. Ill take the unopened one. Im not a diet drinker. You have to have it cold. Warm soda is generally not great. Tastes like soda. Does it taste artificial . Yes. It tastes like artificial sweetener . I dont drink soda at all. Tastes like soda. Anyway, first time youll see it. Pepsi true. Do you want to mention coke . Sure. Revised equity plan. Thank you for being this up. Theyre not doing anything with the terms in terms of who gets it and how much they get. They are shifting away from the dilution problem and issuing less Stock Options to appease some of their shareholders. Did Warren Buffett like it . They did talk to him. Well see. Coming up, Take Two Interactive expecting a big Holiday Season with grand theft auto five. The ceo will be joining us for an exclusive here on squawk on the street. Anything worth pursuing requires precision and attention to detail. It takes knowledge, hard work and a plan. At baird, we approach your Wealth Management strategy that same way. As an Employee Owned firm we have the freedom and resources to create customized financial plans built to last, from generation to generation. Well listen. Well talk. Well plan. Baird. I have 40,ney do you have in your pocket right now . 21. Could something that small make an impact on something as big as your retirement . I dont think so. Well if you start putting that towards your retirement every week and let it grow over time, for twenty to thirty years, that retirement challenge might not seem so big after all. In a we believe outshining the competition tomorrow quires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Mr. Daniels. Mr. Daniels. Look at this. Whats this . Clicks are off the charts. Yeah. Yoshi, were back. Yes, sir more shipping more shipping [ beeping ] [ beeping ] goodnight. Goodnight. For those kept awake by pain the night is anything but good. Introducing new aleve pm. The first one with a sleep aid. Plus the 12 hour strength of aleve for pain relief that can last until the am. Now you can have a good night and a. Good morning new aleve pm. For a better am. Breaking news. Mary barra, the ceo of general motors, updating investors of the company. Phil lebeau, what did she say . Well, what we have is basically guidance from mary barra about general motors, essentially reaffirms guidance. Lets focus on the three big regions for gm. Thats north america, china, and europe. First of all in north america, theyre expecting margins of 10 in 2016, roughly in line with what everybody was expecting. In china, 9 to 10 net income margins. Europe will be profitable by 2016. Then the new announcement today is that they are targeting post2020, so early next decade, Profit Margins of 9 to 10 . She expects gm to be the most valued automaker out there. What does that mean . Heres her explanation for most valued. Leading returns from an industry perspective, but it also then quickly relates to the customer. We want to be earn our customers for life, provide an exceptional ownership experience, and really be the car company or the Vehicle Company or transportation Solution Company of customers well into the future. Quickly take a look at shares of general motors. Like all of the auto stocks, they have been under a fair amount of pressure over the last several weeks. Now you see the stock trading at under 32 a share. Well off of where it was earlier this year when it was up close to 40 a share. Back to you. All right, phil. Thank you so much. Dow is down 139. Lets check in with Rick Santelli and get the santelli exchange. Hey, rick. Good morning, carl. Id like to welcome our wednesday guest, chip dickson. Thanks for taking the time this morning. Rick, good to be here. Thank you. Well, listen, youre my credit guy. Give me a summation of whats going on with respect to consumer credit. Hit the highlights, which seems to be autos and housing, of course. Yeah, rick, well, were looking at not just sales but the student loan side. Thats one of the things we have to focus on. One of the trends weve seen is a shift in the mix of household credit. So Student Loans are about 10 of household credit, and it weighs mostly on those under 45 years or 40 years old. I think they over 750 billion to 850 billion. The government is trying to help them reduce the cost of that, get out from underneath it. Theyre taking modest steps. Right now the cost to the government has gone up 20 billion. The delinquencies have more than doubled since the First Quarter of 2003. The student debt has quadrupled in that people. People are buying more autos. The auto fleet is old. There are some good deals. Mortgage debt, though, is declining. In the last quarter, we saw absolute household mortgages decline. I think thats going to continue. Household formation is low. Our work suggests that were about 2 1 2 million below where we should be in household formations. Part of the thing is we dont see a lot of demand. We see a challenging environment for consumer credit. We dont think it really lifts until you see incomes lift along with jobs. Well, chip, let me stop you there. Im not amazed by any stretch that the mortgage side is dropping off. Theres a whole lot more to mortgages than just the notion of where Interest Rates are. Is it because theyre stretched the new houses and auto, is it because theyre stretched on autos . Is it because theyre stretched in other areas of the credit scenario . Well, so lets start on the student loan front. Thats constraining the younger people from buying houses. Right now in aggregate, Student Loans equal 9 of personal disposable income, which is the peak for auto loans and above where credit cards and home equity went. So i think part of it is just people cant afford the houses with the debt they have. And other people are still digging out from underneath and income trends are bad. If you look at the 2013 survey of consumer finance, almost every age group is showing their Median Income go down. So theres not as much chip, we have about 25 seconds left. Listen, i think the trends in this country, whether good or bad, are definitely on the socialist side. I think the government underr e underwriting and giving basically vent windows to students that took on the responsibility to pay back these loans, your thoughts on that endeavor. Have we moved to the type of Society France would be jealous about and the taxpayers on the hook for everything, especially this ramp up in Student Loans, which might cost taxpayers up to 20 billion, is that correct . Well, the cbo says it costs an additional 20 billion right now. If we cant get the economy going, theres going to be another remedy, i suppose. Student loans now exceed 1. 1 trillion. Thats a big nut to deal with. It is. Chip, thank you. It really raises the question that we continue to push many of our issues forward through time. Politicians take no responsibility. Viewers, listeners, november is coming. You know what to do. Thanks, chip. Thank you, rick. Lets go back to the gang behind the desk. All right. Sounds good, rick. Thanks a lot. Breaking news on crude oil. Lets get to bertha coombs. Hey, carl. Were watching wti bounce back sharply here. The latest inventory numbers from the government just out show a bigger than expected actually, a surprising draw of 1. 4 Million Barrels of crude. Also, a draw, a decline that is, of 1. 8 Million Barrels of gasoline. The street had actually been looking for half that in terms of a decline in gasoline. So we are bouncing back to 92. After yesterdays price, a number of traders here and analysts are saying these rallies could be short lived. Theres a lot of resistance here to the upside, especially with the concern that we may be seeing a glut in oil with the bounceback in production in libya, with opec for now not cutting its production numbers and not really scheduling anything ahead of that scheduled meeting in vienna for november 27th. Back to you. Thank you very much, bertha. Ahead on the show, the man behind a successful stock. Taketwo interactive is up nearly 33 already this year. Now the companys hugely successful grand theft auto 5 is coming to playstation 4 and xbox one. Well talk to the taketwo ceo in an exclusive interview and see what he has in store for investors and customers this Holiday Season. Today could be the day. The day we give you hope. Relief. A cure. Today, we believe every life deserves worldclass care. As one of the top four hospitals in the nation, over 100,000 people from around the world come to Cleveland Clinic for care each year. And were ready for you with a Second Opinion or a sameday appointment today today today and everyday. Call today, for an appointment today. Taketwo interactive stock has been riding high ahead of this holiday release season. Finally on tuesday, fans of nba 2k will get their hands on the 16th generation of that franchise. Then the biggest of them all, grand theft auto 5 hits the shelves. For now, playstation 4 and xbox one on november 18th. Joining us now in a cnbc exclusive is taketwo interact i have interactives ceo. I see the nba 2k has some new technology that enables users to put their own faces on the characters. You can actually be in the game yourself. And this is a reflection of our desire to make consumers know its all about you. Its really all about you. You can now play the game inside the game. How do you get an image of yourself into the program . You scan it with a camera. Its quite easy to do. Wow. I mean, the comps for you as you go through this season are quite harsh. Grand theft auto 5 came out this time theres a year. What was it, 1 billion in three days . Most successful entertainment release ever. As you put it now on to playstation 4, xbox one, how do the hardware sales push that forward . Its a great question. Were seeing wonderful uptake of next gen hardware. That obviously benefits us and our games because they are the highestrated games in the business. Also benefit hardware sales. Usually were not that active in the Holiday Season. Five releases in the Holiday Season is huge for us. We think we can help drive hardware. Hardware obviously will help drive our sales. When you say, look, i know there are 5 million xbox ones sold, 10 million playstation 4s, can you put figures on what you expect . Must be fairly obvious. Analysts talk a lot about ratios. Its not how we look at it. We look at delighting consumers. We wonder how many and hope a lot will show up to buy. A ratio is more retrospective in analysis than it is prospective. You know what the analysts really want is more consistent earnings. Grand theft auto comes out every four, five, six years. Its very lumpy. Can you tell us before we move on how youre trying to stabilize that revenue stream using virtual currency, online platforms. Where are you trying to take the company . Theres no doubt that in 2007 we were the kind of company you described. We had a stated strategy of delivering profitability year in, year out. More often than not, weve been able to do it. How . Because every year since 07, weve launched a new massive franchise. Today we have ten titles that have each sold over 5 million units. This year were bringing out a lot of hits. Where are you on Digital Sales versus the traditional game sales when you have a release like this . Digital distribution tends to run between 25 and 30 of our business, and its for sure growing. The truth is that we want to be where the consumer is. The bulk of our business is still physical goods because thats what the consumer wants to buy. Our job is to delight consumers. Were not religious on the topic. You think microsoft should spin off xbox . You know, i think that theyve done a great job largely. When they first got into the business, there have been some ups and downs. Their price reduction i think will help a lot. This Holiday Season, its early in the game. Lets see how they do. How do you see the holidays shaping up in general . It looks really good. The truth is weve seen more excitement around the uptake of new hardware. Remember, we have no dog in this hunt. We provide our titles wherever consumers are. That said, we have seen a lot of traction. Youve had a delay, right . These games are getting harder to develop. Actually, this time around theyre not harder to develop. Last time around they were. Of course, its not easy to create the highest quality products in the business. We have been gratified that the technology this time around for this generation has been pretty seamless for us. The question of whether youre going to be taken over because your market cap is 2 billion. Theres so much talent there. The other players have so much money and so much Free Cash Flow. You have a unique position because you worked across the media industry. Bmg for music. You were chief operating officer at fox films, 21st century fox. I think you even originally green lighted dirty dancing. That was my first picture. You have a good memory. You can see how things fit together and evolve like nobody else. When you sit there and consider acquisitions, you consider who to partner with, what goes through your head . Does interactive make it more difficult or less . It makes it much easier because were the only Growth Business in entertainment. We, the industry, not just taketwo. We have the wind at our backs. Youve seen that because our revenue grew from 700 million net revenue in 2007 to 2. 5 billion this last year. Weve guided to about 1. 4 this year. Thats despite not having a new release of grand theft auto. In next release is grand theft auto 5. So weve managed to see some smoothing. In terms of how we look at mna, unlike some people we like it to be accretive. Immediately accretive. So the bulk of our growth has come from organic growth. We have done some selective acquisitions. Were blessed to have almost 1 billion in cash. In terms of someone buying us, were here for the shareholders. Were a public company. We like being independent. We think we have a wonderful future. Good to see you. Thank you for your time. Nobody puts strauss in the corner. When we come back, vivint solar making its debut. The ceo will join us with the dow down now 166. Not an auspicious start to q4. Dad,thank you mom for said this oftprotecting my future. You. Thank you for being my hero and my dad. Military families are uniquely thankful for many things, the legacy of usaa Auto Insurance could be one of them. If youre a current or former military member or their family, get an Auto Insurance quote and see why 92 of our members plan to stay for life. Big day . Ah, the usual. Moved some new cars. Hauled a bunch of steel. Kept the supermarket shelves stocked. Made sure everyone got their latest gadgets. Whats up for the next shift . Ah, nothing much. Just keeping the lights on. laugh nice. Doing the big things that move an economy. See you tomorrow, mac. See you tomorrow, sam. Just another day at norfolk southern. Whenwork with equity experts who work with regional experts who work with Portfolio Management experts thats when expertise happens. Mfs. Because there is no expertise without collaboration. Shaping up to be an ugly day for the s p 500. Down threequarters of a percent. Specifically, the airlines and transports. Kate rodgers back at hq with more on that sector. The airlines falling some 4 on fears of the first diagnosed case of ebola in the u. S. A man flying from liberia to dallas has contracted the ebola virus. Although, no major carriers have routes to liberia, the news has sparked a drop in the market. Now shares of Airline Stocks delta, american, southwest, and jetblue all down around 4 . Back to you. Thanks so much. Meantime, vivint solar debuting on the big board today. The company was once backed by blackstone. Shares priced at 16. That was the low end of the range. Obviously a very tough tape today. Joining us for a first on cnbc interview, greg butterfield, the ceo of vivint solar. Greg, congratulations. Good to see you. Thank you. Good morning. Its great to be here. Conservative pricing never hurt anybody. You always want to price for longterm success. We look at this as a beginning of a new chapter for us. So we thought it would make sense to price it for longer term perspective. Blackstone still going to own a big piece. Whats the status of their ownership over time . Cant speak for blackstone, but theyve been a great parter and have helped us grow and build this thing. Because of blackstone and their financial backing, its helped us get to the point where we are today. Are you a Mormon Company . I think you were founded by mormons. The doortodoor selling is absolutely key. Its why blackstone liked you. I think half the work force used to be mohr man evangelists. Is that the case . No, were not owned by the mormon church. I mean, that is the character, the nature of the company, correct . So one of our unique things is we have a doortodoor canvassing sales reps. A lot of our sales reps out in the field have had experience going out and knocking door to door for the church. They spend usually two years on a mission. So thats extremely helpful. They go door to door and try to provide value propositions that meet our customers needs. Your big competitor is solar city, backed by elon musk. The stock has jumped more than 70 so far this year. Is that one of the reasons you decided to go public . I wonder how that Competitive Landscape is shaping up. Solar city is an excellent company. A lot of times people would say they think were competitors. Reality is this is a 1 market penetrated space. Were friends, not foes. We have a lot of common areas where we work together. The business model, as i understand it, is that you basically finance the building of the structures on peoples houses through big financial institutions, and then you sell them the electricity or the power at rates lower than they would otherwise achieve. So its kind of a nobrainer for them, which is why it works door to door. How susceptible are you, therefore, to the subsidies, federal, state subsidies and to the price of solar panels, which is still very depressed, but longer term that could turn around, could it not . Were actually buying panels directly from the chinese right now with the tariff already imposed and dont see a price increase. Were building a company thats not reliant upon government subsidies. As the government subsidies have a stepdown in 2017 from 30 to 10 , wed anticipate our cost structure would also decrease to offset the loss in the subsidies. But right now its a great opportunity. So how does that happen . Do the panels get cheaper, or do the staff get paid less . There are several aspects of the business that well be able to cut costs out. Right now were doing about one install per day. We have some doing two installs. Were going to gain efficiencies with process, with people, with instrumentation. So theres several areas where well continue to grow. Losing money right now. When do you see the Company Becoming Free Cash Flow positive . Around the end of 2017. Once again, this is a capital intensive business. Thats why were here at markets today, to get access to the markets so we can continue. Worry long term, we talk about energy costs coming down every day. Does that eventually take a bite out of demand for solar in general . Right now were saving customers 15 to 30 on their utility rate thats generated by fossil fuels. If you look historically in the seven states where were at, the average utility increase is 6 . Given the fact rates have continued to rise nationally 4 , we think theres a huge opportunity to provide clean power at a lower price and give consumers the flexibility to choose who they buy their electricity from. And you have the Balance Sheet to take you through 2017 with the money raised today, or will you need to come back to the Capital Markets . Is we believe this capital will take us through 2017 with the current growth rates. If you talk to the bankers, its significant. In three years, we become the second largest residential solar company. Weve accomplished what the other solars have taken ten years to accomplish. We have a Bright Future in front of us and look forward to growing and building and providing more power. Great having you down here, greg. Thank you. Have a great day. Still ahead on the program, the fcc voting to end the blackout rule for professional sports. One of the fcc commissioners will join us live and exclusive, next. Know that chasing performance can mean lower returns and fewer choices in retirement. Know that proper allocation could help increase returns so you can enjoy that second home sooner. Know the right Financial Planning can help you save for college and retirement. Know where you stand with pnc total insight. A new investing and Banking Experience with personalized guidance and online tools. Visit a branch, call or go online today. I think members of the the put and the fcc came to the realization that this 40yearold rule wasnt serving the public interest. It was serving the private interest of team owners. Thats frankly not the business of the government. What prevents the nfl from moving to real pay tv . Do you think you say that would be like cutting off your nose despite your face. Thats what ive said. Although the argument has been made that some of the games might migrate to pay tv. I dont think that would be a good idea. For a couple of reasons. Most immediately, the nfl has longterm contracts with the Television Broadcasters that extend until 2022. But secondly, if they did move to pay tv, they would essentially be limiting the reach of what is a pretty unique product. I would argue that the fact that the nfl is on over the air broadcasting is whats allowed it to dominate the sports marketplace today. So part of the nfls idea here or goal with the lockout is to get people to actually come to the game. I wonder, is that fair given the fact that ticket prices i wonde the fact ticket prices have skie skyrocketed. That is a great point. And i heard from a lot of people across the country. Including one man who said i love the Buffalo Bills but i have a disability, i served in vietnam the games are too hard to get to and for any reasons like that. The cost of the games, disability, family obligations. A lot of people just cant make it there. I think the sec should be vindicating their interesting in see it is games on the air as opposed to keeping them in the dark. Considering this petition involving the use of the names redskins in washington. What is the status of that. The sec chairman will take a look at that petition and consider what to do with it. For my own part as a supporter of the First Amendment i dont think the government should ban the use from the air waves but well see what the Agency Proposes in the near future. Just to come back on the block out rule they could still have it. It just wont have anything to do with you. If they decide they want to black it out thats fair game still. It would have to be up to the tvs to distribute the product. By my hope that everyone realize that a fan friendly approach is good for everybody not just the fans but in the teams in terms of revenue long term. The report thats doing the round that you are behind the scenes now looking at the possibility of basically making a lot of the big networks make their content and their live content available to some of those new incumbents, netflix or whatever. Which really would break apart the model we have at the moment. Can you tell us the status of that discussion and the to which behind the scenes it is gaining attraction. Sec leadership has announced it will consider whether to take that action. Thus far i personally have not seen a proposal on the table so im not sure what the fcc might to do. And we havent of course seen comments from the interested members of the public. So speaking personally im going to reserve judgment. But that is one of the issues we are going to be tackling and especially as the video marketplace develops, it is very dynamic as you know. My own general preference is not to impose some of the more heavily handed video regulations designed for incumbent competitors in the past. Any sense they want this way because they sensed had league or competitors were vulnerable. I didnt hear that. By the and large the people were really just concerned about the core issue at stake in the blackout rule and wanting to see their teams on sundays. And that is ultimately the preference that drove us, the five commissioners to repeal the rule once and for all. They are cheering in buffalo. Indeeds. Thanks for your time. Still ahead, amazon ceo speaking out about competition and the future of his company. Hear what he has to say coming up. Did someone say burn . Try alka seltzer reliefchews. They work just as fast and taste better than tums smoothies assorted fruit. Mmm. Amazing. Yeah, i get that a lot. Alka seltzer heartburn reliefchews. Enjoy the relief. But what if you could see more of what you wanted to know . 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Here in new york. And squawk alley is live. And welcome to squawk alley. Starting with the markets this morning. Not a good start to q 4 or the month of october. Dow is down 138. Not quite the lows. We got down to 1955 on the s p. But certainly bei