Transcripts For CNBC Squawk On The Street 20141104

Coming up in moments. Sprint shares lower in premarket trading this morning. Wider than expected loss, lowering of guidance and loss of subscribers, plus job cuts. Shares of michael kors down premarket after Holiday Quarter guidance comes in below street expectations. Alibaba reporting quarterly profit 45 cents a share in line with estimates. Shares of alibaba have risen 50 since the september ipo. As we said, we are moments away from a live interview with alibabas executive vice chairman joe tsai. We are getting used to these metrics, gross merchandise volume, annual active buyers, and general, we are going to get to the interview right now. Lets do it. Joining us first on cnbc alibabas executive vice chairman joe tsai. Very nice to have you here after this first Quarterly Report as a public company. You guys have made a great deal with mobile in your remarks. In your slide presentations. Let me start there. Its grown to represent 35. 8 of gross merchandise value. Your take rate moved up to 1. 87 on those mobile on the monetization of mobile. Is this the beginning . Are you going to see it be more than 50 of your gmv . David, thanks very much. Nice to be on the show. Our mobile tracks well. Alibaba is very much a mobile company. We are also doing very well in terms of monetization. Thats because the users coming to use our mobile apps have strong commercial intent. Its no different than when they come to the desktop. We feel very good, very confident about the users behavior on mobile. In september, theres 217 million mobile active users using the app. We feel very good about it and the trend continues to do well. As i mentioned, the mobile monetization rate is up a significant jump. Still well below that of people who use desktop to buy things on alibaba. Do you believe you can continue to move that monetization rate up perhaps . Can it get to as high as people monetize on desk stops . Last year we were less than 0. 5 and weve been slowly able to take up that take rate on mobile now to 1. 87 . Thats something we are looking at. We feel pretty confident over time, in the long run, monetization is going to be pretty much the same as desktop. The way we look at the business is that there is really not a huge difference from a user standpoint when they come to the desktop computer or mobile screen. When they come, they have very strong intent to buy something. We are generating 95 billion of gmv over the last 12 months on the mobile device. So that bodes very, very well for the future. Joe, you say clearly in your slide presentation and on the call you dont manage to a margin target. Nonetheless, a few people do point out the significant decrease in your nongap ap ebit margins. It was a significant decline. Is that something expected here or potentially additional costs that were one time in nature . One great thing about our business model, its a high margin business. That gives us the confidence to reinvest that margin into new areas for growth. What you saw in the latest quarter is exactly that. We integrated two companies u cwebb that we acquired that will bring a lot of longterm potential for us, lots of users. Several hundred million users in the case of ucweb. These are at the cusp of monetizing their business. That is one factor why the margin is coming down. We are organically making significant investments in new areas, for example, our mobile operating system, local services and digital entertainment. These are all very new areas for us. Its early days. We are very longterm committed to making investments in these areas for future growth. Jim cramer, thank you so much for coming on our show. If i can, i want to go back again and reference to what david said because the margin trend page is freaking people out. One is people feel, wait a second, do we have an amazon. I hate to put them in the same sentence because you are obviously much more profitable. Facebook said its a reset year. Twitter spends more money, doesnt know what its doing with it. I wonder if we are in a situation where you guys decided we have to grow so fast this margin will come down year after year, plus spend a lot of money because singles day is coming up. Is this the beginning of when we hear alibaba is a lot more like amazon, more like facebook and not Like Companies we think margins should go higher over time . We are not like amazon because of the fundamental business model. Amazons margin is hampered by the fact they take on inventory and have a large cost of goods sold items. Their gross item starts with a low number, somewhere in the low teens. In our case, we operate on a marketplace model where the revenue we generate coming from commissions and also Online Marketing services have inherently very high margins. In our core business, we dont see really any reason why the margin needs to decline over time. So in terms of the margin youre seeing in the latest quarter is reflected in the fact we are making investments for growth. We are going to be disciplined in these investments because you can only focus on a few areas. We strategically identified these longterm growth areas like digital entertainment, like local services and also doubling down on our investments and mobile operating system. These are all longterm strategic projects. We take a very disciplined approach to that. Few companies would have a better state of sense of the Chinese Consumer alibaba. How would you describe them right now . Lets tart with the big picture. Theres 300 million chinese con umers shopping online. Most are shopping on our platform. We just reported we have 307 million active buyers coming to our marketplace. You can segment these into city and rural consumers. We recently decided to make a big push into the lesser developed areas of china where only 9 of the population is on ecommerce. We think Growth Potential was very, very good. We think this will help us to develop a strategy where we help those that are in the villages that are farming, Small Business and small consumers and help them to grow as think acquire more economic spending power. Any prediction what you will see on gmv on singles day, a week from now . We dont give any predictions. The thing about singles day this year is we are going to be focused on globalization meaning we are bringing a lot of merchants outside of china to sell on our team platform. Well be focused on mobile because the User Behavior is rapidly shifting to buying stuff on mobile devices. So thats going to be very interesting to us. We are also going to focus on our broader ecosystem to bring in ecosystem partners that help our retailers, Software Providers that help our retailers to do their business better on to our platform to create a very, very exciting shopping day. All right. I hope to actually be there perhaps even in person to watch it. Joe tsai, very much appreciate your time. Executive vice chairman of alibaba. You going to china . We are going to see, yeah. We are trying to see if we can make that happen. Who is we . The team. I was going to say singles day. Ill go. I would love for you to join me. Why not in. You just came back from china. You going to china . I dont know. Ive got to hold down the fort. I was hoping we would get a better sense of the Chinese Consumer. Its important. He didnt say we are not going to blow away the earnings. He didnt do a facebook reset or bezos, its important to spend, spend, spend. I said stock was up 4 and we are going through the same releases. Its wow, wow, wow margin trends, we dont manage a margin target . Clearly not. Salomon pizza. By the way, those margins, 59. 4 a year ago, ebitda basis now 50. 5. Thats a big drop. That is a big drop. Thats not what you want to see. They are mobile. We talk about it so often, facebook and the huge transition they made. Mobile was not much of its business not that long ago represents 36 of what goods are sold are sold on mobile. Their market cap at 250 billion is above walmarts. Right. Ive got to say talking to a few people the last couple of days, there were people when this thing went public, i can justify 100, 25 multiple on what my number is, none of them own the stock any longer. You put the facebook mobile on you get to 120. I read these nonincome margin figures and ebitda and i say, okay. Thats not what i was looking for. I think what happens is im not the only one saying thats not what im looking for. Newer people will say i cant get trapped in another amazon even though its outrageous to link the to, given how profitable one is. I said last night, the growth guys are going to love it if they do the number. They did earnings per sharing was just okay. 39 growth. I think when the smoke clears theyll say this is okay versus amazon versus facebook versus yahoo versus tweetless. I meant profitless. Im viewing twitter as more of a university. I saw that model. Youre tweetless, not in seattle. No, im not going to stop. That is kind of what i do in life. You dont stop. A sam cook story change is going to come. Youre unstoppable. I was going to write back and say, i thought you would say he was born by a river in a little town. No, but they are having a good time. Change is going to come or a little chain gang action. Dont know much about profit. Dont know much about how to make money, but i do know that i make you give me free context. There you go. Change will come. The face of the company that facebook bought for 2 billion is part of the social networks bet on Virtual Reality. A live interview with the ceo of oculus. Take another look at futures. Well get to a lot more when the wall street journal report returns. The world has gottenreturns. Y in the premarket. Expecting a wider than expected loss in the Third Quarter adding it lost 272,000 wireless contract subscribers. Announcing plans to cut 2,000 jobs as the pain gets not uniformly felt. That release posted 20 cut in the ebitda guidance. My two favorite words are marce marce marce marce marce marce marcelo. I said a transformational journey. I want to know to where . So do shareholders. As the stock is down. Those say they kitchen sinked the quarter, because they threw everything in there. August was the worst month. Theyve come up with various plans. The worry is actually then they are guiding next year up not as much as you would have thought off the down this year. They are getting some traction on customers. Youve got to remember when you get your subtends moving the right way it whacks your ebitda because the marketing expense, network expense. Apple expense, right. Then took huge cost cuts. 1. 5 billion is more than people anticipated. Its a high multiple stocks with a lot of leverage and getting hurt. There is a tmobile out you should sell tmobile from bank of america. I thought these two ought to think about merging. You saw john legeres tweets yesterday making fun of the competition. I hope he comes on. Maybe sits over there if spencer will let him and find out whether he likes the tmobile sell. Your point is a good one though. That is the deal soft bank which controls sprint wanted to do. Its a very different landscape as they try to claw back. Must be a typo. It was not a typo. 72. A lot of nottypos here. Kors was not a typo. Well get cramers mad dash, countdown to the opening bell and the premarket as the dow industrials, the utilities and the transports once again try to set a record together. Its only happened 25 times, if you can believe that. Almost happened yesterday. Each , but there are no branches . 24 7 its just im a little reluctant to try new things. Whats wrong with trying new things . Feel that in your muscles . Yeah. I do. Try a new way to bank, where no branches equals great rates. You can bring back from a trip around the world. But you cant always bring back customer data. Because many customers dont like it when their data moves around. Can i go now . If youre going to do business globally, you need a cloud that can keep your data where it needs to be. Today, theres a new way to work and its made with ibm. Its in this spirit that ingu u. S. Is becoming a new kind of company. One that helps you think differently about whats ahead, and whats possible when you get things organized. Ing u. S. Is now voya. Changing the way you think of retirement. Im spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast . Go to ziprecruiter. Com and post your job to over 30 of the webs leading job boards with a single click; then simply select the best candidates from one easy to review list. You put up one post and the next day you have all these candidates. Makes my job a lot easier. [ female announcer ] over 100,000 businesses have already used zip recruiter and now you can use zip recruiter for free at a special site for tv viewers; go to ziprecruiter. Com offer2. At a special site for tv viewers; so ally bank really has no hidden fethats right. Accounts . Its just that im worried about you know hidden things. Ok, whys that . No hidden fees, from the bank where no branches equals great rates. Dash. I watched herbalife move up into earnings and then . What was that . Ive been saying if you want to destroy a company, you know what . Companies are fragile. They can be destroyed. The numbers today for herbalife, United States business declined 4 . New members down 17 after five straight earnings weve seen two consecutive huge misses from herbalife. That is bad. They have a lot of negative leverage here. Venezuelas bad. This was very bad in the u. S. We have to acknowledge the fact the impact of the nonstop 24 hour herbalife is a scam ackman call is having an impact. Its almost two years since he first came up with the idea, right . It was december 12. He hasnt gone out of business yet. No. You are going to see a reduction. Be aware the stock is down for good reasons. Down stocks and down earnings. Kors also. When you read the release and you think kors will be screaming today, but no, kors had a very big decline in u. S. Same store sales. Looking for a high teens and they came in at 10. On the Conference Call which we were listening into with one ear, the company cites more significant reduction in mall traction. Howard schultz, starbucks, friday, this reduction in mall traffic is playing havoc with the companies that thought, if you build it, they come. There is a real reduction. Michael kors is not an omni channel place. Comp guidance to high teens. This is not what you want to hear and the stock has to go lower. That overall trend of fewer people visiting malls is a significant one. Weve been talking about it for a couple of years and it continues. It does. Other than costco which is not a mall story. We are talking indoor malls. Where your kids would say hey, dad, i need 50, i want to go to the mall. Now its dad, give me a 50 amazon card. Thats what it is, id like an itunes card. You can use your mobile device. Our conversation with joe tsai earlier. Congratulations on that interview. I dont think he spoke to anybody. I dont know about that. Its their first quarter. They want to communicate. They are a Chinese Company with a huge u. S. Investor base. Weve got more to watch this morning including priceline shares. You are watching cnbc squawk on the street. Euro zone kugt their forecast to 0. 5 this year and 0. 8 next year. All the earnings and Companies Cutting guidance, herbalife, discovery, priceline, time, cvs. Priceline, europe they said results in europe were mixed. Historically, priceline guided conservatively. The quarter itself was nothing that i expected. There is the opening bell. At the big board, Fidelity Investments celebrating the recent listing of three etfs and on the nasdaq, web summit europes technology event. Nasdaq with an 11 gain this year so far. They are closing in on 10 . Today will be a wakeup call for some of the nasdaq stocks. Im looking at the number of companies that have done well versus badly this morning. I just dont like the looks of this. There are a lot more companies, it would seem. Alibaba was fine but market capwise thats better than these others combined. I will mention discovery, for example. We can take a look at shares. The company lowered guidance. It wasnt a huge reduction, but revenue guidance lowered between 6. 35 billion for the full year that will end with december 31st. That was a bit lower. Down by about 163 million. They also lowered their operating income before depreciation and amortization by about 100 million. Stock is getting hit. They had issues there, whether its ratings. This stock has already suffered a lot this year, discovery. Europe is the common thread. Look what priceline is saying, not ebola, but europe. Gross bookings up 28 but blaming weakness in europe for a lot of softness. Its stressful this morning. Red robin gourmet, does that count as a company that did better . Ill give it to you. Thats just the extent, using that as a template that there is not a lot to write home. Bloomintoday . Bloomin, red robin. Regeneron, not what i wanted. There is a guide down. There you go. Makes up for discovery down 9 , sprint down. What is herbalife . Herbalife down almost 15 . According to the times profile on ackman, this is about the price which bill begins to turn a profit on hlm. When you saw suntrust, there are guys who like this. I think the support is going to be evaporated here. You need to see better numbers. Wasnt just venezuela, you know . That was a big part of it. Venezuela, theres like 200 million they are never going to get back. If you look at clorox pulled out of venezuela. There are other companies that hang on betting that chavez would somehow, things would get better. Things have gotten worse. Venezuela is a great economy that these Companies Keep hoping comes back. Has got a lot of oil. Argentina, when they banned proctor. What is that . Can we talk oil . That is the other story today. We watched it move well below 80. A lot of these names have been getting beat up. We talked about san bridge down. There are 34 states that do better. 16 states are oilrelated. So this is a lowering of the tax on the consumer. Red robin. What happens . Is there a push in there . 33 do better. The growth states. Whats the one . Good point. The problem with oil, okay, is that ive always felt the employment growth in this country was skewed toward the Oil Companies and all the different jobs that are done to get oil out of the ground. They are still going to pump it. You buy the transports and sell the oils. Cso does upgrade conoco and chevron to buy from underperform. Timing is everything. Maybe this is the moment. I dont know. Remember exxon and chevron were tricks on friday. They went up and they really got hammered yesterday. I just dont like these stocks. Some are these companies are very small, they are not going to be able to agist in this environment. If i can back to media stocks in general are getting beat up today. We watched a lot of them climb. Time warner is down. Fox down, cbs reporting. All down on discovery, i assume. On the scatter market, no question it slowed. No question advertisers holding their wallets closer. Thats not what facebook is saying or google is saying. The money is going toward the web. We all have to accept that, including the people at cbs. The web is getting, i weep thke thinking major Consumer Products. The web is taking the money and going nuts with with it. Publicist didnt know how to handle the web with. Now if you want to tell your story, you want to tell your story. Following you around, all these devices and will sell you stuff when youre hungry, thirsty, tired, whatever it might be. The programming on youtube alone in a month is equal to 60 years worth of the network production. This is free programming. Csi costs money to make. Criminal porn is an expensive show. You know whats also free . Tweets. Tweets are free. Like the university of Phoenix Online . Tweets are free. How come you cant make a fortune when every single guy, when im watching espn and they all have a little blue bird. Isnt that an advertisement for twitter . Shouldnt you be able to coin money if youre the ceo of twitter . Just asking. Putting it out there. Close to a three handle. Though narrowly averting it this morning. There are opportunities there. I said my peace on twitter. You will reiterate it. Im certain of that. Just the way i am. Im terrible guy to go against. I dont stop. No better friend. One of the greatest contributors to success is being relentless. I met jerry rice today. Came to my office on the street. I was thinking, he would be a good ceo of twitter, san francisco, great ethic. By the way, ronny lott is out there also. Joe montana. Then ive got offense defense. Steve young could run twitter. First division loss at home in i dont know how many years. Richard sherman is a natural of twitter to be the ceo of twitter when hes done. You can watch a lot on your mobile device. Speaking of mobile, numbers of alibaba. The monetization up to 1. 87 . A big jump up. We asked executive vice chairman joe tsai earlier on squawk on the street. We feel very good about, very confident about the users behavior on mobile. They are using it more frequently. Theres 217 million mobile active users that are using the app. We feel very good about it and the trend continues to do well. If they hadnt written this one line, the stock would go to 110. This is a great quarter. I am not going to back down. Its a great quarter. Stocks flat. I also know when you hear margin, you immediately think amazon. Pattern recognition. Yes. All you would look at Revenue Growth is unbelievable. Its accelerated Revenue Growth. Its arg, arg, the pirate. George said arf. He didnt. Quarterly gmv up 49 . Mobile active users is huge. I wouldnt be surprised if margins come back up. I think growth guys will not say goodbye to alibaba. This is to the facebook where they said reset, were spending. Google, we are spending like fortunes to get the best brains. No. Their margins are still something most companies would kill for, alibaba. Yes, thank you. Including twitter. Hes already back to it. What was the time i had . How long did it take . I took a break. Transports and utilities. Waiting to see if industrials follow suit. Mixed market today. I want to point out the big story which is oil. West texas is in the 70s. Overnight my email was fill of stories about a possible Iranian Nuclear deal. This is their biggest fear that oil from iran and gas would come into europe, this is the saudis biggest fear thats out there. Thats a major story. If you take a look at oil service names, its very clear we havent heard about talks of big production cuts, its obvious the streets expecting Service Contracts to stumble and fall down. They are going to say wait a minute, i want a 20 , 30 reduction in the prices of your rates. If you dont give it to me, well cut back 2015. They are not cutting production this week. They are going to come down. These guys are under a lot of pressure. The street adjusted stock prices to reflect that particular fact. Two great darlings of the momentum traders of the world are having a tough time. Michael kors and priceline. Momentum traders want 20 , 30 , 40 Revenue Growth. When it stumbles, it gets ugly. Thats whats happening today with those two stocks. Look at whats going on with michael kors here. Retailers would kill for these numbers. North america samestore sales up 10. 8 . Europe up 41 . Its not good enough because last year north america was up 18 . Momentum guys say slowing growth, that is the death knell of any momentum trader. Full year guidance was brought down. 1 billion Share Repurchase program they announced . Nobody cares. Nobody brought it up to me. That is a major problem. Priceline has the same problem. Another former darling of the big momentum players here. They rapidly growing companies. Suddenly growing less rapidly. 60 sales in europe. Everybody should understand that. They are not getting a break for that. Q3 bookings is the key story for them. Those are fabulous numbers. Here is the problem. They had 32 growth in the prior quarter. This is exactly the problem michael kors had. Momentum guys say uhoh, thats why the stock is selling off today. You want to see the effects of a stronger dollar and weaker asian growth has on a company . Look what happens to estee lauder. They are moved by courtesy movements, down 4 . They talked about geopolitical tensions, concerns about the strength of the dollar and weakness in hong kong. Stock is trading down. Finally, didnt get a lot of play, but hilton had a big secondary today. 90 million shares. This is blackrock lightening up on their investment. None of the money is going to the company here. 90 million shares. There are almost a billion shares outstanding. 980 is the exact number on that deal. Dow jones industrial average down 20 points. Back to you. Lets get to the bond pits. Rick santelli at the cnb in chicago. Good morning, carl. We are moving up towards the higher end of the range, but as we came into our time zone we saw yields slip a bit, culminating 8 30 eastern when we hit the 230 mark on a wider than expected trade deficit, which the reason the market reacted like that is because its going to shave a couple of tenths gdp. Open the chart up to october 1st, you can see on the high yields yesterday and as we inch back up now because of the firm equity markets, we see we are hovering at the highest yields since early october. Booms. A little disengagement going on there. Twoday boon chart is we are trading below yesterdays low yield. Open the chart up to the spread relationship between r10s, hovering around 234, around 80 basis points, now 151 basis points on that october 1st chart. You can clearly see that has been widening. Then it anywheroed and is now moving back towards areas we havent seen. Pay attention to this because its your relative yield trade. Foreign exchange. If we look at two day of the dollar yen. Something big happened in the wee hours of the morning, we touched a 114 handle. December 2007 is the last time we were flirting with the 114 versus the dollar. Lets go all the way back to august 2012. Thats last time the euro versus the dollar was at these levels keeping that dollar index very firm. Back to you. Rick santelli. We want to bring your attention to a worthy cause near and dear to the cnbc family tomorrow night the lulu and leo fund p will host the charity buzz action. Jim cramer will be the aucti auctioneer. Youll meet cramer. Visit the mad money set. Matt lauer and the team of today. Helping children and families foster creativity through the arts. Check out the auction and enter your bid at charitybuzz. Com lulu leo. Its going to be a fabulous event. Virtual reality could be entering your living room earlier than expected. Oculus the Company Facebook acquired earlier said a consumer version of its headsets are months away. The ceo will join us in a moment. Alibabas early investors weigh in on earnings. For tapping into a wealth of experience. For access to one of the top Wealth Management firms in the country. For a team of Financial Professionals who provide customized solutions. For all of your Wealth Management and retirement goals, discover how pnc Wealth Management can help you achieve. Visit pnc. Com wealthsolutions to find out more. No question about that. But your erectile dysfunction that could be a question of blood flow. Cialis tadalafil for daily use helps you be Ready Anytime the moments right. You can be more confident in your ability to be ready. And the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. 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Utilities, ive never seen anything like this. Gasoline and fuel. This is the principle cost of almost every Large Company and restaurants are flying because well have more money. Its good that gasoline goes down. Theres 317 million americans that benefit. Thats the last i look. Not as many people switched to alibaba in the last year, there are still a lot of people. They benefit. What about the worry speaking of nonfarm payrolls, production slows down, job growth slows in north dakota. That is the worry. Remember, you are producing oil at a 1986 level. Did you see prius sales down double digits . Yes. Gas tax stays the same, consumer gets a big cut. I am not backing away its positive. I dont want to own exxon and chevron, but i want to pump gas and get my gas pumped there versus the last time i filled. You are not buying a tesla any more . Tesla . Thats not about savings. Im buying a light weighted aluminum truck. You ought to get one. We can go and have a drag race. Can we do figure 8s . And wheelies. Well get stop trading with jim. You, my friend are a master of diversification. Who would have thought three cheese lasagna would go with chocolate cake and ceviche . The same guy who thought that small caps and bond funds would go with a merging markets. Its a masterpiece. Thanks. Clearly you are type e. You made it phil. Welcome home. Now whats our strategy with the fondue . Diversifying your portfolio . E trade gives you the tools and resources to get it right. Are you type e . Theres confidence. Then theres trusting your vehicle maintenance to ford service confidence. Our expertise, technology, and high quality parts means your peace of mind. Its no wonder last year we sold over three million tires. And during the big tire event, get up to 140 in mailin rebates on four select tires. Just take a closer look. It works how you want to work. With a Fidelity Investment professional. Or managing your investments on your own. Helping you find new ways to plan for retirement. And save on taxes where you can. So you can invest in the life that you want today. Tap into the full power of your fidelity greenline. Call or come in today for a free oneonone review. Lets get to cramer and stop trading. When you get off this despot, merging with office max, it becomes the despot. This is something to cheer for. Office depot can go higher. Staples merge with them it would be king. Thats probably not going to happen. They tried back in 96. Now everybody competes. There was barely an amazon back then. This is terrific news. These two Companies Getting together is just a great story. Dont forget s p 12 benefits from oil higher. I would say 12 , what is it 83 . We did that calculation . 16 states benefit. Minus 50. Dont get carried away. Oil does bring down the economy. Its good to pump less. Good to watch mad money as well. What is on tonight . Tim tinken steel. How are they doing . Its great gasoline is down. 317 million americans should be happy today. Yes. See you tonight 6 00 p. M. Eastern time. Lets get to simon. Good morning to you. We are going to look at what may be the great new Consumer Electronics category. Well look at the oil price slide, the 1970s oil shock going into reversal on a different scale. Well dig deep into alibaba. How much further than the stock go . Well talk to a shareholder and analyst in the wake of david fabers interview. What kind of chef comes up with this . A chef working with ibm watson, on the cloud. Ingredients are just data. Watson turns big data into new ideas. And not just for food. Watson is working with doctors and bankers to help transform their industries. Today theres a new way to work. And its made with ibm. An Unprecedented Program arting busithat partners businesses with universities across the state. For better access to talent, cutting edge research, and state of the art facilities. And you pay no taxes for ten years. From biotech in brooklyn, to next gen energy in binghamton, to manufacturing in buffalo. Startupny has new businesses popping up across the state. See how startupny can help your business grow at startup. Ny. Gov its in this spirit that ingu u. S. Is becoming a new kind of company. One that helps you think differently about whats ahead, and whats possible when you get things organized. Ing u. S. Is now voya. Changing the way you think of retirement. Welcome back to squawk on the street. September factory orders hitting the wires, down 0. 6 . Matching expectations exactly. Last month a subtle revision, minus 10. 1 to only minus 10 . Since that is a Third Quarter number like this mornings trade deficit number, it is going to pull a bit away from gdp originally released last week at 3. 5 . Sara eisen, its all yours. Thanks very much. Right on target what analysts were expecting. Lets check on the markets after that data. We are seeing a mixed session here. Up about seven points at this hour. S p nasdaq negative. Not big market swings weve been seeing toward the end of october. Oil a big story. Energy shares under pressure. Nymex crude down 2. 5 . It was lower in the session. Brent crude 82. 43. That will be a big focus for markets throughout the trading day today. Thanks. Shares of alibaba higher this morning. Company reporting a better than expected 54 jump in Third Quarter revenue thanks to continued growth and Online Shopping transactions, increased ad revenue. Those are part of the mix at alibaba which is the dominant provider of ecommerce in china. We spoke with executive vice chairman joe tsai on the big driver of traffic, the move to mobile. Last year we were at less than 0. 5 and weve been slowly been able to take up that take rate on mobile now to 1. 78 1. 87 . Thats something that we are looking at. We feel pretty confident over time in the long run monetization is going to be pretty much the same as desktop. The way we look at the business, there is really not a huge difference from a user standpoint when they come to the desktop computer or when they come to a mobile screen. When they come, they have very strong intent to buy something. We are generating 95 billion gmv over the last 12 months on the mobile device. That bodes very, very well for the future. As he said, that has been growing sharply. You may wonder why is it less in terms of take rate . We are talking about revenues of alibaba as gross merchandise value sold. Typically people on a mobile device may not be as eager to buy a highpriced item. They may want to look at it more closely on their desktop. That is converging at this point, the experience is. One concern perhaps for investors in alibaba is Gross Margins or particularly nongaap ebitda margins. 50. 5 down from 59. 5 a year ago. We asked mr. Tsai. Its a very high margin business. That gives us the luxury and confidence to reinvest that margin into new areas for growth. What you saw in the latest quarter is exactly that. We integrated two companyies u cwebb that we acquired that will bring longterm potential for us. Lots of users, several hundred million users in the case of ucweb. These are at the cusp, at the beginning of monetizing their business. Thats one factor why the margin is coming down. We are organically making significant investments in new areas, for example, our mobile operating system, local services and digital entertainment. These are all very new areas for us. Its kind of early days, but we are longterm committed to making investments in these areas for future growth. 49 increase year over year in gross merchandise value. That did seem to meet at least what investors were hoping for. They dont seem particularly perturbed by those margin declines. 90 billion of business. Extraordinary figures. Lets talk about alibaba. Margins, mobile. Singles day a week away. Going to be the largest single day on the planet of selling things. I thought it was interesting to hear the strength of the Chinese Consumer. You asked him about it, right . I did. I dont feel like we got a great answer there. He said it was strong. They have 80 Online Retail sales in china . U. S. Investors dont have a good handle on whats going on with the macropicture in china with the growth slowing in the low 7 level. Its an important question. I feel as though the answer wasnt necessarily giving us a great read on the temperature of the Chinese Consumer, but they can do that. Perhaps a future interview. Lets get analysis. Lets bring in Raymond James analyst. And morgan creek ceo. Aaron what would you pick out as being most important to your clients . I think joe hit the right points. Mobile monetization was up to 1. 87 in the quarter. That was significantly above our estimate of 1. 4 . That is significantly versus year over year, as well. We feel at mobile gmv was up 260 and mobile revenues up over 1,000 . You are seeing the mobile shift. That is driving the results 54 year over year Revenue Growth. Clearly, they are outperforming there. David picks out the point about margins. Are you concerned there . Not too concerned. We were largely expecting about 100 basis points in the quarter. We were expecting margins to be down for the reasons joe cited in terms of increased investments such as ucweb as well as digital content. That was largely expected in our model. Markets, extraordinary performance on alibaba seven weeks after the ipo. What did you think about what you heard today . They came in above expectations. We are excited about the future of alibaba. I think what you hear in every report about alibaba when you hear jack ma talk about alibaba, the enthusiasm about their Growth Prospects. These guys are the dominant franchise player in china. I think they are going to become the first global ecommerce player. I think the Growth Prospects are really good. Did you learn anything about their longterm m a strategy . A lot of investors are focused on this, where theyll grow, where theyll pick up companies, especially as it relates to entertainment and perhaps movies . Nothing too new. We heard they are increasing looking at investments. Do they try to become the netflix of china . There is talk they have been talking to studio executives. That is clear on the online side. They are going to become more of a Media Company Going Forward as opposed to just ecommerce. That will be the key Going Forward here. I want to pick up the point you made. Chinese emers company. You think theyll be one of the first global. That scares me. If i was holding the stock that would scare me. How are they going to get there . How are they going to penetrate the United States . At what cost will they become global . How do you see the challenge potentially to amazon . Yeah. I think whats amazing about this company is their ability to scale. So they decided to create a Money Market Fund to go with their alipay system. In ten months they raised 80 billion. Became the Third Largest money market account in the world. Im sitting in boston today near fidelity. Took them 60 years to become number one. Their ability to scale. I understand their ability to scale within china is huge. If they are going to become a global ecommerce player, in this country, how do they achieve that and at what cost . That was the vision you laid out for usnd youre the guy holding the stock. No, no. Two things on that. Their model i think is superior to some of the other models here. You mentioned amazon which takes physical custody of the product. Nice thing about alibaba, they dont actually do that. They facilitate transactions so they can have higher margins so they can grow at the expenses, as joe said, investing in new businesses. The second thing, i think theyll make a big acquisition. I said last week i thought they would acquire yahoo. That is still in the cards. Its a great fit. I think that would be a great platform for them to grow Going Forward. Mark, its david. You come back to this yahoo acquisition. I dont think thats going to happen. Why in the world do you keep mentioning that . We talked about it offline, but why do you keep coming back to that . You bring up a good point. A number of things would have to be clear in terms of hurdles. I think its a very logical deal. It makes very good sense for alibaba. It makes great sense for yahoo and yahoo shareholders. It makes really good sense for yahoo shareholders. They would realize a big savings in the tax burden. It is a high hurdle, but global, m a transactions are rising. The wh group taking over Smithfield Foods in north carolina, where i live. We think big chinese merger could be allowed. You owned the stock three years. Interesting idea. Guys, thank you very much. When we come back, oculus, the Company Behind the muchhyped oculus rift says its close to producing a version of that product. 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. Welcome back to squawk on the street. Regeneron posted weaker than expected Quarterly Results and cut the top end of its full year forecast for its blockbuster drug eyelea. Shares down over 4 . Virtual reality for consumers could be months, not years away. Thats what the ceo said on stage in ireland today. He joins us from there. Good to see you, welcome. Hi, thanks a lot. This notion that a product, a consumer launch is not years away but months away, how close are we really . What would that rollout look like . Is it going to be a global rollout . Is the product what needs to be done to finalize that product . Well, again, i think we like to set expectation. Its really important to understand where we are coming from. When we say months, well have with partner samsung, the rollout very soon. Samsung announced they are going to market with that in the next month or two. Well have the oculus rift as a product in the near future. Months not years, many months. This is something we are targeting to roll out incrementally. Weve been rolling it out as developer kits. It will go into another form where consumers can start using it, experiencing it, but not the broad consumers just yet. Youve told rivals not to poison the well, not to bring out products sooner than ready to poison peoples views of the potential in the market. What did you mean by that . Virtual reality has been plagued and a little bit of the elephant in the room by this challenge of disorientation or making it a comfortable experience. So what weve pushed on with the other companies out there that are charging into this new industry and helping to really build this with us is make sure you take the time to get it right. Make sure you take the time to eliminate some of those early challenges around motion sickness that have really held this back. We feel like we are really close to get this right. We are showing the prototype where people are using it for long periods of time and not expressing any form of discomfort, which we think is a positive step. We think that is where consumer noods to start. Make sure you take the time to deliver a comfortable experience. Of course, viewers will know you are owned by facebook. They paid 200 million to acquire you. Does it have a Strong Social Media Connection or part of facebooks drive into Consumer Electronics separately funded by other sources, if you like, as you see google driving into Consumer Products funded from search . This is the oculus drive. We are partnered with facebook. Early on its still going to be all about gaming and graphics and what oculus is focused on from the very beginning. Long term, one of the things we really saw for the vision and future of Virtual Reality was that communications, facetoface communications would play a big role. The idea you could have a pair of vr sunglasses and everybody you know, everybody in the world could be inside soon as you put on those glasses. You could see them as if they were in front of you and talk to them that. Was very exciting to us. We looked at this partnership with facebook as a way over the next five to ten years realize that vision on the communications side as well as gaming side which is what our strong focus has been. Google invested in magic leap, one of your competitors. I know you are working with hollywood and the studios, nasa and the space program. How should we think of Virtual Reality . Is it like an operating system . Yeah. This is a new industry. Its a new media. Much like you can think of the pc or the mobile device and the internet. This is an entire new media. I think youll see an entire stack of things be built whether its new chip sets for vr in the future, new cpus up to new oss. 3d engines to power it. If you compare to previous generations on mobile and pc. Vr is 3d. Its completely three dimensional. You have a new User Experience which is all based on 3d graphics environment, largely the gaming environment. Its very exciting to see what this next generation of vr will bring. Its very early yet. We tried to set the expectation this is just the beginning where we are trying to make that first version work and not make you want to take it off. As we move forward, ill see a whole new set of technologies, Companies Get into it. Google, i hope. Microsoft, other companies will charge in together. We really believe will be one of the product leaders for a long time to come. We are excited to see what other companies do, as well. Finally, whats it like working for facebook . How has it changed your business or the way you operate . So far its been about seven months. We are just getting integrated. One of the big things weve done is supercharge recruiting and ramped from about 50 people earlier this year to well over 200 now. These are some of the best and brightest in the industry, top talent. We relocated. We are starting to talk about now we relocated our headquarters from burbank, california, up to menlo park on the facebook campus to get closer with our partner facebook. Its been great to work with mark and the leadership team. There is a lot we can learn from how to manage the growth of the company to a much larger product company. Certainly an exciting acquisition for them. Brendan, please come back, brendan iribe. I think its very exciting. The question is how much it will cost. Nobody mentioned apple. Apple must have one of those in the pipeline, its the great new product category. We showed you the stock of michael kors, up next well talk about it. The company with a disappointing holiday sales forecast. Hi, are we still on for tomorrow . Tomorrow. Quick look at the weather. Nice day, beautiful tomorrow. Tomorrow is full of promise. We can come back tomorrrow. And we promise to keep it that way. Driven to preserve the environment, csx moves a ton of freight nearly 450 miles on one gallon of fuel. What a day. Cant wait til tomorrow. Its in this spirit that ingu u. S. Is becoming a new kind of company. Ing u. S. Is now voya. Changing the way you think of retirement. Introducing a pm pain reliever that dares to work all the way until the am. New aleve pm the only one with a sleep aid. Plus the 12 hour strength of aleve. 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. Michael kors reporting results that beat expectations this morning. However shares are lower, down more than 9 as the luxury retailer offered a some what disappointing outlook for the quarter. Maybe you can help us understand this. The stock is down more than 9 . If you listen to the earnings call, all analysts are congratulating analysts on a solid quarter. What do you make of it . This is deju vu. This happened three quarters in a row where the companys put up a relatively strong quarter. 40 top and bottom line growth is solid. Investors are finding things to nitpick at. U. S. Comp came in only 10. 8 . Six months ago they were comping over 20 . I think its a lot of fear for the u. S. Trajectory of the businesses going in the wrong direction. Thats why you see the stock moving where its moving. U. S. Comps have been decelerating. Could they turn negative or get into Single Digits . When you start to see the multiple contract on this stock, used to trade 30 times earnings, now more like 15, 16 times earnings, thats the fear. Coach has been the canary in the coal mine in terms of what happened to these redhot fashion accessory brands over time. Coach went from lowdouble digit positive comps to negative comps in four quarters. Its not outside the realm of possibility that could happen. The idea some of these fastgrowing retailers overexpanded and the brands are overexposed. Do you see that happening with michael kors the same way it did with coach . I think the thing that keeps us sidelined is when you draw comparisons and conclusions to coach several years ago. There are several similarities. They are not exactly the same company for a lot of reasons. They are similar enough to keep the multiple under wraps until people gain better visibility. The thing that is concerning to investors of kors is their operating margins were 30 . Those are coming down, too. Not to mention the 41 samestore sales growth in europe. That was impressive. Does that hold up and continue to balance out the weaker u. S. . I think so. I think there is a lot of white space in europe for the kors brand. Taking price points up. Kors hasnt raised prices in years. They created white space and are killing the category for that demographic. Im not worried about europe for them. Its 18 , 19 of sales. U. S. Is 80 . Im trying to get an upshot here and gauge your tone. You sound neutral. I know youre neutral. Would you be a buyer today on this weakness . We are sidelined. If im going to play the handbag space we have a buy on kate spade. That is a much younger brand. Its got a lot more opportunity to take margins higher and take market share higher. Thats the way i want to play the space. Thank you for helping us make sense of this quarter. Stock getting hammered right now. An even bigger loser today is priceline at the bottom of the s p 500. In many sense the opposite of kors. The bulk of their business is in europe. Once they met expectations on the quarter and revenue climbed 25 and people thought they would get 25 revenue climb next quarter, they dialed that back saying sales will rise between 11 to 18 , partly because of macroeconomic head winds. More importantly the euros fall as you price back into dollars pushes that growth down. You already had a 7 fall in the euro. Some people call it down 25 if you believe in parity over the next year. Straight ahead, oil getting crushed again. Crude and brent hitting new lows after saudi arabia cuts u. S. Prices. Twhat do i do . You need to catch the 4 10 huh . The Equipment Tracking system will get you to the loading dock. There should be a truck leaving now. I got it. Now jump off the bridge. What . In 3. 2. 1. Are you kidding me . Go. Right on time. Right now, over 20,000 trains are running reliably. We call that predictable. Thrillingly predictable. 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. Everybody here is glued to the price of oil. Currently at a threeyear low after saudi arabias decision to alter oil prices sold to u. S. Buyers. What can we expect for oil Going Forward . Reed hastings of global hunter securities, a division of Seaport Global securities. First of all, explain what you think saudi arabia is doing lowering oil prices in the u. S. And raising prices in other parts of the world . What do they want . It sounds like its the Light Crude Oil glut is continuing to displace movements in prices. It started with production of light crude in 2011, displaced in nigeria and now spreading into the deeper part of opecs core in the persian gulf. Saudi arabias price cut suggests they are fighting for market share in the domestic gasoline market in the United States. As those prices continue to be very unstable, this is an unstable situation and thats bad for how things will be hedged and for expectations for prices in contracts over the next six to nine months. That means saudi arabia would then put pressure on the persian gulf consistency to get closer and closer towards cutting production, fighting within opec. If the prices are not going to be stable enough to stir up more consumption of saudi oil to gasoline in the u. S. Market which is a 19 million barrel per day gasoline consumption market, we are getting closer towards cuts. We are now seeing Brent Crude Oil at the lowest price in four years, nearly 82 a barrel. How low are we talking about for these prices to go given what you just said about what saudi arabia is trying to do and the discord in opec . Then the scenario suggests that as brent crude prices and there is a connection back to the euro, which needs to be given some respect. As those Brent Crude Oil prices start to break down into the upper 70s handle, 78 to 79 per barrel, then we see price cuts coming. Ill make a comment about the longterm correlation between strong euro and prent crude oil pricing seems to be significant. If the bank of japan entered into this unexpected new stimulus to weaken the yen, to strengthen the dollar to then use the dollar stronger to force the euro lower, then that suggests that the ecb will have a very difficult time monetizing debt over there and cannot do further stimulus. There is a problem globally. The shale operators are having a difficult time. Is it in the minds eye of the saudi to get shale production hit in this country . Are they trying to undermine that as arrival and supply source or are they simply, as you inferred and they have indicated, they just want the volume . They are not interested in shale, just want the volume and want refiners to pick them now to offload and earn immediate cash to pay the bills back home . Yeah. I think that i a very important question. There seems to be a struggle out there about how much the world wants of Unconventional Oil production. By those prices coming lower, and then you connect that back to the credit problems associated back with russia. Nothing like the scale of it over here. There seems to be perhaps an effort to push out some of the unconventional drillers that are doing things on a more speculative margin, so to speak of unconventional drilling. That perhaps is something that is going on, yes. Is there a financial story in the Energy Market we are not talking about right now . Thinking of the swings weve seen seeing at the close yesterday, Oil Prices Falling out of bed out of nowhere. Saudi headlines hit this morning they swung 2, 3. Is there some algorithm, trade . Why the fast money trades in and out the price of oil begin whats happening . I would suspect, i dont think there is a big collaborative speculative thing going on. Its possible once you start to get too Much Movement in a liquid commodity like crude oil, it can then be used by big institutional trading desks, perhaps. This is speculative in this conversation, that it starts to get connected back to Forex Trading and how you use that to trade in and out of other commodities once one core commodity moves up, it opens up Trading Opportunities and that can destabilize the core primary commodity, in this case crude oil, and that means prices would drift much lower in a disorderly way near term. The dollar was strong in 2012 and oil prices were at 100. Its not a science, but thanks for introducing that concept. Good to see you. You remember the dow sold off yesterday. This is like the 70s oil shock going into reverse. Its clearly good for the transports, good for the industrials, good for utilities. My question is why does the market not continue to rise . We had a tremendous rebound since october. The initial reaction to the drop in oil prices in september was this was the result of a much weaker Global Economy. Then all of a sudden there was a recognition that the Global Economy isnt all that weak and that Lower Oil Prices are exactly as bullish for all these industries as you just said. I think weve seen a pretty good response to low oil prices. People are a little in shock. They want to see how much lower it can go, but i think its bullish for the overall margaret. How long can it stay low is the other question . This is prices are going to fall. Thats going to give the fed, which with is desperate not to raise Interest Rates more reason prices will not rise as rapidly, which will give the fed all the reason they need to keep rates lower longer. You remember we were talking about peak oil in 2008. Now we need to talk about trough oil. No one knows how long or how low it might be going in the current environment. For now, i think, it also does have a very Significant Impact on Central Bank Policies around the world. You are an equity strategist. What is the strategy . How does it change . Really, it doesnt change a whole lot. We expected somewhat weaker oil prices. I dont think oil personally myself and based on our work are going to go that much lower. I think ed brings up a good point a lot of industries benefited. You can also look at this as a twoedge sword. It is a sign that Global Economic activity people are wary of that. I think we are going to see better performance globally over the next 12 months, stabilization. Well see 2. 8 gdp next year in the u. S. Versus probably 2. 1 this year. Oil prices are going to be higher next year. Its going to be because Economic Activity is better. The markets going to like that. I think well be higher at the end of this year and set new records next year, as well. What happens to the oil majors . What happens to some of these frack sand stocks which are getting hammered today . At what point does it become a buying opportunity or with so much uncertainty, if youre shying away, do you stay out . For us, energy looks like an even weight sector. Normally you would see the drillers, exploration and production. They would be the first to look attractive in our work Going Forward, and they just dont. I dont think you want to overweight energy. I dont really think its much of a buying opportunity yet. We do think the markets going to do well. If you dont have enough energy in your portfolio, you need to buy energy while these prices are down. You want to bring it up to even weight. You dont want to lean heavily towards energy because i just dont think well see the demand, the inflation, the tight supplies that you might need to really be leaning heavily towards energy. Stock market is going to do fine. Energy will rebound a little bit. I wouldnt get too crazy with buying a lot of Energy Stocks in here. We havent talked about bonds. With your bond vigilante term you coined in the 80s. This 2. 32 , this consistently low rates in treasury. Or is this going to continue into 2015 . Earlier this year, in may i made a list of nine reasons why the bond yields are going down instead of up as widely expected. My favorite of all those nine reasons was just look at the german bond yield. Its now currently under 1 . Over in japan, the tenyear bond yield is under 50 basis points. I think its a global bond market. The bond vigilantes have been coasting here. They havent had to do anything because the Central Banks kept Interest Rates near zero. Thats brought bond yields down. I wouldnt dismiss the possibility u. S. Bond yields which look attractive relative to other bond yields around the world could come down more. The plot gets thicker. Thank you for your time. Thanks, guys. When we come back, your money, your vote. Theres confidence. Then theres trusting your vehicle maintenance to ford service confidence. Our expertise, technology, and high quality parts means your peace of mind. Its no wonder last year we sold over three million tires. And during the big tire event, get up to 140 in mailin rebates on four select tires. So right now if you get the 15 gig plan, well double the data and make it 30 gigs for the same price. 30 gigs . Wow thats a lot. You dont have to do that for me. Oh, thats ok. No, seriously, i wouldnt want you to get in trouble. Its the same plan for everyone. Families. Businesses. Whoever. Riiiiight. yelling no celebrity treatment here yelling there really isnt any celebrity treatment. Just a normal guy, getting a great deal. Were just saying it loudly for some reason. Now get 30 gigs of data to share with family or your business. For a limited time, starting at 160 dollars a month. 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. So i can reach ally bank 24 7, but there are24 7branches . Its just im a little reluctant to try new things. Whats wrong with trying new things . Feel that in your muscles . Yeah. I do. Try a new way to bank, where no branches equals great rates. Take a look at the Energy Sector getting whacked today as Oil Prices Fall again. Energy has taken a hit as Oil Prices Hit fresh fouryear lows. Big Oil Companies are all moving lower. Youve got the notable ones, exxonmobil, chevron, conocophillips, Hess Corporation moving to the down side. Ironically enough, analysts upgraded both conocophillips and chevron to a buy from prior outperform. The fall in oil prices is good news for the airlines overall. If you look at united, continental, american, delta, southwest, they are all moving higher on the session. Energy, that sector, the worst performing sector and a good percentage point worse than the second worse one which is consumer discretionary. Thank you. Americans casting their votes as the midterm elections are finally here. Most polls indicating republicans are likely to wrest control of the senate from the democrats. Lets get more from john harwood. Morning, carl. All those political ads, all that spending is coming to an end today. Voters are going to the polls across the country. Its only a few states that will decide the outcome. Lets look at the current state of the senate. 55seat majority for democrats. Harry reids the leader. Mitch mcconnell leads a caucus of 45. When you look at whats going to happen after tonight we start with the certainty, the near certainty of a different lineup which is 46 republicans, 45 democrats. Those are the seats either not on the ballot or locked down which leaves nine undecided. When you look how current polls stand in those nine races, republicans have a clear upper hand, which yields if the polls hold, a 52seat republican majority. 48 democrats that. Would give the gavel to mitch mcconnell. It has democrats only winning north carolina, New Hampshire and kansas, where the independent leads. None of those things are certain. If a republican sweep, it could go bigger for the republicans. The likelihood we have to wait weeks or months for a final outcome . There will be a period of time. In fact, where the nation could be pregnant with a republican senate, but hasnt delivered yet. Thats because you have two republicanleaning states georgia and louisiana, which could go to runoffs. The louisiana runoff would occur in december. The georgia runoff in january. So depending on whether the republicans have a cushion in other races tonight before those two results counted, we could be on the verge of that republican majority, but not really show it until those runoffs take place. How about if we do get a split between the executive and legislative branch . Everyone wants to talk about potential deals on taxes, surveillance, on trade. Any of those likely, in your view . Very few. You could see trade deals get done. Those are more likely with a republican senate. President obama wants deals with europe and asia. You could see something on infrastructure. You could see republicans pushing the president to finally approve the keystone pipeline. When you talk about things that are bigger and more complex than that, immigration, for example, or energy, the Carbon Emissions that the president is pushing, both of those are things the president s likely to move on through executive order. The question is could a Republican Congress stop him . John harwood back at hq. Well see what happened tonight and the days to come. Thanks. Still ahead, Walt Mossberg joins us to answer the question what are apple merchants afraid of . train horn vo wherever our trains go, the economy comes to life. Norfolk southern. One line, infinite possibilities. For tapping into a wealth of experience. For access to one of the top Wealth Management firms in the country. For a team of Financial Professionals who provide customized solutions. For all of your Wealth Management and retirement goals, discover how pnc Wealth Management can help you achieve. Visit pnc. Com wealthsolutions to find out more. Lets get to the cme group, rick santelli. Good morning carl. Well japan has withbeen in the big time. Japans news moving the markets big time. And mr. Japan right here. Trey, welcome. Thanks for having me. I look at the charts u. Up 2. 75 on the nikkei. Coincidentally the dollar yen is at the weakest levels. This is what failure looks like. As their currency falls off the end of the table we are realizing something. That they do not have buyers for their debt. How many times do we get told by some people who come on this show that an increase in Government Spending generating economic growth. Well it generates the growth why isnt japan growing . They are 230 debt to gdp. They are trying to same lame old structure of increase Government Spending and spend on infrastructure and everything will work out. It is not working. The japanese economy is the same as in 1991. This Government Debt plan just isnt working and guess what, look at what the bank of japan said when it increased its qe on friday. This makes me absolutely sick. Energy. Energy. They said that one of the reasons they increased qe was because they were worried they couldnt reach their inflation targets because crude oil prices are working down. Two question, why are lower Energy Prices bad for the japanese citizens . Second, an increase in money supply and weakening yen to try to generate inflation . That is the equivalent of me going to the hospital getting chemotherapy hoping i get cancer. That is the main tenant of central banking circa 2014. Look to europe. They want higher prices and more inflation. And the way they are going to try to get sit to generate more qe. But here is the problem. They have proton pro growth policies. Can you really test to generate inflation if you have a non pro growth agenda. Produce a product that the world wants. And the byproduct is better pricing. Wages go up. Pricing go up. Etc. It doesnt come from increase in money supply. This story in japan, like i said we are witnessing failure. Its only just begun. In order to monetize all the debts of the government the japanese have to take their money supply and multiply it 20 x what it is now. Stay short yen. It is going to get worse. Final few second, having said that if i want to look for lower yen prices what where is the next big Technical Area . 120, then accelerate to 135. And it only gets worst. Chances in the next month and a half to two months. 65 . You are the man. Mr. Japan. Thanks for having me. Thanks very much for that lively discussion. Next up ecb on thursday. Now over to jon fortt with a look at whats coming up next here on squawk alley. Well Walt Mossberg has choice thoughts for merchants who are not accepting apple pay. Also the creator behind zingas first hit game. And finally intels make it wearable challenge winner will join us coming up. Is just three days away from jobs friday. Meaning another opportunity for you to nail the number. Tweet us your predictions for the october payroll number and you will win. And if you win you will receive a prize marking a milestone for our network. Cnbc 25. A hat autographed by the squawk on the street steam because of course cnbc is 25 years old this year. You have until one minute before the friday release to submit your predictions. Inevitably there are rules. Those are they. Im signing it right now. And then you can sign it simon. The estimate is 203 thousand jobs to be added during the month. Need to see it stay there to see the continued improvement in the economy. Thanks guys. Good morning it is midnight at alibaba headquarters in china. 11 00 a. M. Here in wall street. Squawk alley is live. Welcome to squawk alley. One of al baibabas first backe. Jon fortt, kayla here at post nine. And the big story is alibaba. Shares in the green after the quarterly profit was inline. Revenues did exceed consensus. As tot