Transcripts For CNBC Squawk On The Street 20141215

Twoday fed meeting begins tomorrow. Crude prices, bouncing off the new 5 1 2 year lows. Looking to come back since their worst week since 2012. Consortium led by bc led by petsmart. Latest on the continuing hostage situation in sydney, australia. Futures on the rise, so are crude prices which fell to 5 1 2 year lows stock markets seven week winning streak ended with a thud and the selloff on friday. Last week the dow fell 3. 8 . S p down 3. 5 , almost every major average, jim, every major sector, was down except utilities, barely got into the green for the week. I went over the chart this weekend and they were amazing. The number of companies, stocks rolling over here, maybe it can be reversed but i see the oil futures hanging by a thread. We go to 57, 56, s p futures will be down. Were just not in a moment right now where people are actually distinguishing between winners and losers. Utility move was part because people feel u. S. Will need more power because they are bond market equivalents and worldwide recession, except for us. You move into utilities. And i found the move to be kind of stunning, because you have a lot of utilities that had like 3 yield that were going for everything traded as if the recession is back if this country. And thats just not true. Right. What might be true in russia soon. The ruble. The ruble today at 60. People are tweeting pictures of ruble hats, ruble 60 hats. Its a real country. Yeah. Its not a lot of nuclear weapons, big army. Yeah. No. Wed feel more comfortable if it was another country. This is a dictatorship right now, its not teetering, theres no sign of any civil unrest there. No, no, i think the question becomes, does the leader do something unexpected . Perhaps something that is destabilizing, beyond whats already been done. That can be said not necessarily for leaders in other countries impacted by the enormous decrease in the price of oil, but nonetheless how destabilizing will it be if brazil has issues in terms of its fiscal reality, petrobras and bali, most important countries, they argue. They go down almost every day. Could be worse than oil and iron ore or mexico. Look whats going on with the peso. Mexicos been destroyed. Mexicos just i mean this is a Strong Economy thats based on a lot of changes, structural change that are good but people perceive it as being a giant oil company and its not. The russian thing, its part and parcel with the idea were not going to get anything from merkel. We get theyre not using their balance sheet. They want to have a balanced budget. At the same time that theyre having a pseudowar with russia, at the same time china cant sell anything into europe like it used to. Its become an import its a consumer economy. And thats why iron ore goes down. The United States fueled by low gasoline. We dont know what to do other than keep buying restaurants. Yeah. Darden earnings this week, its going to mean the feds going to have to act only this wednesday, yes or no . I think so. Theyve been looking overseas and dont want china start slowing to six. They dont want to go back to a Great Recession in europe, which seems like theyre going to. I dont know if theyll comment on the individual stress of the Oil Companies in this country because theyre not that big. But there is a lot of junk out there that is related and that junk spillovers will make it hard to get financing. Petsmart deals, maybe im too negative. Its the largest lbo of the year. Petsmart agreeing to be acquired by consortium, led by bc partners, 83 billion in cash. Coming after pushing for a sale of the pet supply retailer. Second biggest lb of of a u. S. Company by a foreign buyer ever. This was a this is not to to be too pun oriented but it was a dog. It was one of the great Growth Companies and had the category to selfand people perceived it was losing on food. Thats a big business for them. Right. They hadnt been able to figure out the omni channel. Were talking about online. Theyve been selling out of their stores, their competitor, petco, taking market shares. Yes. Petco, also a private company. There had been discussion whether the two would get together. Certainly a lot of synergies there and cost saves. That being said, 83 numbers pretty good number. Ive talked to a couple of shareholders, ive talked to them through the period, and theyre quite happy with 83. The feeling is, in many ways to figure out the omni channel strategy, perhaps it wont be better as a private company to do it in that fashion rather than buying back a lot of stock, taking on debt, staying public and figuring out as they transition at this point. So well see. By the way, get used to 8 billion being around the biggest in lbos. So nanny exits not entrants. But the funds they are raising are smaller, to a certain extent, than older funds. Perhaps much as 25 , 30 smaller. Means smaller equity check for the deal. Also lps frown on club deals. Weve talked about this many times. Three, perhaps two or three or more private equity firms were to get together to meet the big equity check that would be needed to do the gigantic deal. So youre not going to see that often. Sometimes they call them their own lps to participate. But this will be your new sort of normal, i think in terms of size for getting toward the b bigger end. Only a delltype deal when you have the owner of the company participating, and a significant owner, as that was the case there. You know, not a huge number talking about synergies here. I would point out that the last quarter was a good one. Theyre getting petsmart at a nice time. They have made a terrific acquisition on the web. I criticized them directly. When i buy dog food, you went to their site, it was almost im penetrable penetrable. They fixed it. Made a great acquisition. They were getting momentum. I understand. I think this is a good deal for everybody. Very impressive. Yeah. Likely to be the high water mark. For a year that has not been. Its been all about strategics, buying company. Private equity cant compete when there are synergies available to strategic buyer. Not to mention lack of banks participation in the leverage market because of the crackdown by the fed. A lot the spilling over to the junk market which raises questions on financing for future deals because things are frozen right now. They are. The second point on petsmart, felt that you cant ship pets by amazon. But you always live pets . Put them on a bicycle, you might have onehour delivery. It was always about ancillary products. And the food turned out to be something that they didnt see that they could just it could be taking away so easily. Bags are heavy. Yes. Cans are heavy. Unless buying for a chihuahua, look some of us are. When buying for two big mutts, its amazon. The chinese have not put american flags on their food. No. No. Dont do the chinese stuff. Media reports reporting they have been warned by sony to stop publishing information stole bin hackers who hacked the network. New york times, Hollywood Reporter say the warning came via a all right from david boies, who demanded publications avoid or tried documents stolen information. This on a day where more victims, david orussell, george clooney. Erin sorkin arguing what the media has done with the information theyre gathering from these leaks is treasonous, dishonorable. This is not the pentagon papers, jim, its not like sony was trying to mislead the public. No, but david carr has a column in the new york times, theres a blogger, able to put stuff out. You dont know whats truth, you dont know whats fiction, you dont know whats facetious. We make jokes, look at transcripts of some of the things we said i was looking at tape of david looking askance at me. Took take hours, days. Say something hyperbolic and its obviously meant to be a joke. When you read in an email, its like, wow, those guys are really horrible guys but obviously joking around, acting as if theyre talking to each other. Again, when you put something in email, think about it, its going to be on the front page of the new york times, no expectation of private city email but we always think there it is. The bigger takeaway, this probably the worst hacking of a u. S. Corporation, and i say its japanese but on u. S. Soil. Talking about u. S. Operations here, that weve ever seen. There may be more to come when the movie is movie comes out, theres an expectation theres going to be even more. But its shocking. It goes to something weve been talking about here for years now and yet theres no stopping them, it would seem, if they want to get in. Whether the North Koreans or some everybodys whomever may have been behind it. Theyre so nasty. The movie producers, executives or the hackers. Is it news to you hollywoods a tough town. I dont know. I thought there was a little i remember when goldman talking about muppets. You can play rough, sometimes, those guys out there. The hackers do say that theres more coming, a Big Christmas present is coming. Really . Weve not heard the last. Theyre just having fun with us, hackers . Having staging their rollout. I think saying with unbroken. How many warning bells do we have to go off . What if it was a bank . Weve seen it, jpmorgan. Have we gotten the full story on what happened this summer . More on sony in a bit. The latest hostage situation in sydney. Later, a live interview with Klaus Kleinfeld in a minute. This is a burrito made with chocolate, soybeans, and apricots. 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. Time for industrial production. Rick santellis in chicago. Rick . All right. Here we go, november industrial production, double expectations, up 1. 37 if we look at utilization rates, they are also significantly better than we looked at. And they leaped a handle, now at 80. 1. Granted, we normally look for revisions to maybe mean revert, not necessarily the case on utilization. Moved up from an originally released 78. 9, now 79. 3, mean us in onetenth on production, moved up to 1. 10. Looking at october, november, production numbers firmed up following a weak manufacturing, first november number, week sense january 2013, last went negative. And, were still going to have tick data and housing data to come. But at this point, look for stocks to be rebounding and Interest Rates to follow that move up. Carl, back to you. Well see you for Home Builders sentiment in a little while. Well get cramers mad dash count down to the opening bell after trading gets under way, live interview with alcoas chief Klaus Kleinfeld. Dow futures up about 100 points. For trading never stops. E so if you get a trade idea about, say, organic food stocks, schwab can help. With a trading specialist just a tap away. Whats on your mind, lisa . Id like to talk about a trade idea. Lets hear it. [ male announcer ] see how schwab can help light a way forward. So you can make your move, wherever you are. And start working on your next big idea. And start working on your next big idea. And cialis for daily useor you. Helps you be Ready Anytime the moment is right. Cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid long term injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or any allergic reactions like rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use and a free 30tablet trial. The opening bell for this monday, a little more than ten minutes from now. Lets get to our mad dash, where do you want to start. Jnp with ace piece, you should be in twitter. They are nowhere versus some of the other guys in the business that they basically have the big runway, talking about 284 monthly active users and saying engagement is good. This is the first piece ive seen which says this stock could be, if run well, if the company run well, could join the rest. Theyre getting ad load of 1. 3 . Most companies are getting two, three times that. Theres a lot of ability to have upside, wait i look at. Theyre looking at it like a raw company, if someone comes in, starts running it better, thats my read. Youve been mildly critical of the management team. I mean in the end, its all its like the hollywood notes. I mean, you know . I feel like the things i say are like sony, except you dont have to hack them because i say them out loud. You do, you do. Theyre hash, too. This is the way when you have a company that people who watch the show, stock has gone down a lot, youre not making a lot of friends. So anyway, its not about friends. Its about making money. It is. Heres one about making money thats interesting. Opk, opko, phil frost the chairman and ceo, you may know him from some of the great. I do, i remember that name, yes. A lot of deals in his time. I have had him on mad money a number of times. I know hes for real from previous jobs. A lot of people doubting him. Today signs a deal with pfizer 295 million up front payment for long acting human growth hormone. This not a primary drug. It happens to be something that phils had. I think phil is so bankable, a lot of charity, if you go to the u, you know phils there, ive always i think hes a great guy. Bought a ton of stock here. Always said he had something. Looks like he does. Congratulations. The stocks going higher. All right. They have a lot of drugs about different kinds of cancers and detection. I know. Taken me back to last weeks deal with cubist and merck, i dont know why i thought of that. People are saying cubist isnt trading, its not where it should be than deal was etched in stone. Carved out of the merger agreement any bad decision, which they got immediately on cubism. Thats not true. There was at least six hours between when they bought it and discovered it was worth a lot less, maybe seven. Shocking. How about with can we hack into their emails . Whose. Frazier, mercks. I dont think we should do that. Stay away. Opening bell a few minutes from now. Well have a live interview with alcoas ceo Klaus Kleinfeld. Well be back on squawk on the street. Youre watching cnbcs squawk on the street, live from the Financial Capital of the world. The opening bell in a few minutes, after a rough week last week, to say the least. 700 points on the dow to the downside, biggest loss in three years. Fridays volume, down here, the biggest since halloween, as we closed offly close to lows. And tenyear well watch, biggest drop in yield in two years. Deutsche out saying its going below two. That changes banks were trying to make a stand, they need higher rates and they were rebuffed in the last day. Friday was i was going over this within where the oils could go, going back to where they were in 2008. Some of these, 2009, really the low. All of these could go. Halliburton went to 20, schlumberger went to 50. Noble, a nice article about israel, 28. Exxon went to 60. Chevron went to 64. Marathon went to 17. A piece about marathon. Oxy, substantially lower from where it is. Goldman recommends sell. Oxy at 62. Bmo, upgrading exxon. Yes. But they they had a sell on it. Well reasoned piece, saying, listen, numbers are way too high. The reason i mention this, when i go over these, few firms have cut numbers yet. You cant bottom fish until the numbers are cut. With the bmo piece the first piece that said numbers are coming down 25, 30. Horrendous piece. Bmo cuts their 2015 forecast on west texas, i think, by a third, to 67. Yeah. On friday, he said no one talks marking in oil, you meet oil hes natural gas you meet oil guys, they say its spewing, its great. Hes been asking us, whats the market for oil . And theres always a mark for oil theres no market for oil. Right now, theres no big. Hes saying marketing, opec allowed it to whatever you produce has always been able to be sold, until now. And not only that, everyones full up with gasoline. Refinery capacity added around the world. Were selling a lot of gasoline. Unless we export oil, oil can go lower. Production will come down in this country. Yes. And na boxen, youve got wells not as productive, each year you lose wells. 5 depletion. Whats interesting, why does it correct . In 2016, no major oil companys going to want to go to iran, they wont be able to pay bills, they wont go to the companies dont have money to pay bills. Why would you risk drilling there . You have a natural attrition, so you have a bottom. But its out in time, not just price. Because theres still a lot of oil coming out. Its going to be a while. Thats a predictor for 2016, not for 2015. If your airline, as long as somebody doesnt buy a gasguzzling airline, theyll make a lot of money. Congress investigating high fares. How about the fact you allowed every airline to merge. Theres no competition. Whenever you fly, its like, who else who else no. Nobody, that is it. Dayton, ohio, my daughter went to dayton, ohio, like 1,5 o 00. I said get in the car, drive all night. Getting pricier over the past few years. We want the latest on the hostage situation in sydney, australia, unfolding across the world. Now in its 15th hour, possibly indicating a new stage in this standoff. Additional police, medical personnel have been deployed to a cafe, where a gunman is holding unknown number of hostages. Five have been able to escape. The Prime Minister tony abbott says gunman is claiming political motivation, appears to want Islamic State flag in australia, a conversation with the Prime Minister. This is very, very tense situation. And its been going on for about 12, 13 hours. He does appear to be a lone wolf. Whats interesting, is a lot of the australians in solidarity with muslims, a hashtag going called ill ride with you if you wear muslim garb ill sit with you on a bus to guarantee safety. This is another within where you just say, thank heavens im not at the lindt shop, whatever. I saw up when the hostages ran out, the horror, you know, just another just a terrible situation. In the meantime, the opening bell set up here. Down at the big board, again, coming off of that rough week for the dow and the s p. Only two dow stocks up last week, home depot and utx. The worst boeing down 11 for the week. [ bell ringing ] Uscf Advisers celebrating recent listing of the stock split index fund. And over at the nasdaq, zs farm pharma. U. P. S. , ford. My Charitable Trust own temperatures people think that certain stocks have run so much, so theyre taking them off. One of the ones that i thought was most interesting, Morgan Stanley goes hold to buy. Oracle, they report, so thats either go to the game quickly, or that they feel that oracles gotten the Cloud Business to where mark herd is doing great. Its a joint ceo, not unlike when bob evans has a joint ceo. Two ceos. One plus one equals minus one. You cant have two ceos. The case of oracle given that they have worked together at the coo level, whatever the title was. They have mr. Outside, mr. Inside thing going, and that does work. Still founder chairman. Speaking of executive, weve lost the head of the anf, head of utx, now the head of bob evans, which is up almost 4 . Steve davis resigning by mutual agreement. That was something. I felt bob evans should split, after what happened with hillshire brands. Bob evans has a terrific sausage product. Had the success of tom sandel, the activist investor able to replace quite a few board member. On the activism front, a deal this morning, toma bravo along with more canadians, ontario teachers pension plan, a large private equity wing, if you will, buying river bed for 21 bucks a share in cash. River bed, you may remember, was elliott came after them, actually offered to buy the company for 18 bucks a share. The deal gets done, private transaction. Had 21 for river bed, which as you might imagine is up, rather sharply. And elliott says, largest shareholder, were happy with the outcome, im paraphrasing here, we think weve gotten immediate premium value, a quote from jesse cone, who runs a lot of the activist practice when it comes to technology. A good deal, wide area networking, competitive. Used to be a good high flyer. It kind of crashed and burned but kept their clients. Go to the website. Another good deal for everyone. Its like, wow, it would have wouldnt shock me if people said no buyers. Interesting morning, two deals, private equity transactions, obviously petsmart the largest. But river bed, up 9 , 20. 45. Do we want to talk about arcp, jim . We should mention it. You should. Down sharply, over 10 this morning. You may remember, what was it, a month, month and a half ago, maybe longer, i was talking often about arcp, this reit essentially. Run by a guy named nick schorsh. Two separate releesz, he stepped down as executive chairman and stepped down from the board of directors. Expected in a way. I was hearing that, shareholders expected. The second release, their ceo has stepped down, and that their president and chief operating officer stepped down, one person, lisa bieson. The president , not expected. Amazing. He was on the last Conference Call saying sheriffs in town, dont worry about a thing there you may recall accounting issues with the company that led it to be down sharply. Once they did it, it was a mistake. The second time they did something to cover up the mistake, they got rid of the person in question but raised a lot a host of other issues the way the company operates. Reports i didnt report but other news services, fbi was taking a look at it. Now they brought in Morgan Stanley to help advise on capital structure. Which is very hard to understand. Looking for a new ceo. Yeah. I mean if i went there today, anyone in charge . Yes. William stanley. They got stanley . Thats a bad email. They got stanley. No, thats facetious. This is nicks company and hes out. Hired Morgan Stanley, i dont know what other stanley theyre going to find. Hes the lead independent director. They are looking for a new ceo. Conference call, by the way, lasted five minutes, or Something Like than didnt take any questions. This was the largest reit. Yes mr. You know this is they do the red lobster. Did the red lobster deal. Wow, the real estate lover if you. Dows up 105. Lets get to bob pisani on the floor. Good morning. Weve got a nice rally going on. Dows up over 100 points and all ten sectors of the s p 500 in positive territory. That doesnt usually happen but its happening this morning. Its being led by some of the growth sectors. Energy moving back here. Put up some of the sectors here. You can see tech stocks up. Financial having a nice move to the upside. Industrial stocks doing well. Again, all ten sectors on the upside. Nothing lagging that much. Crude both up for west texas as well as bren, both moving. Thats helping energy stocks. Some of the big energy names. So chevron, exxon are helping the dow right now. And even some of the big exploration and production companies, like Anadarko Petroleum and apache also leading the way. When youve got energy leading, you know its a good day because that hasnt happened very much in a long time. You guys were talking about russia. The russian stock market is down big again today. Its down about 8 here, just as i was coming on to the floor. Weve been down 25 so far this month already in the russian stock market. Thats going to be a major issue. As you were talking about, how are they going to pay for all of their imports . Part of the problem is, oil is their biggest export out there. If you take a look, crude oil is 33 of russian exports, talking revenues. Petroleum products 21 , gas 14 . 50 of export Revenues Crude Oil and petroleum products. The big question, whats going to happen . How are they going to import all of the things they need . Huge importers of cars. Huge importers of computers. Huge importers of meat stuffs. How are they going to pay for that . Thats part of the discussion going on. A huge discussion over the weekend. Russia down 8 . Nikk nikkeis down a little bit. Abe huge win victory over the weekend. Hes in charge, his coalition in charge. Over the weekend, a big victory. Stock market there down 1. 5 . Yens stronger today. But the important thing is, more abbey nomic are coming, whether you like it not. Theyll push through new measures. December 26th, a new package of economic stimulus earns coming up here. Theres a tax reform plan being discussed thats going to be floated at the end of december. Then further discussion on that consumption tax hike that was postponed. Right now stock market over in japan down 1. 75 . All ten sectors of the s p 500 positive with the dow up 114 points. The best gain for the dow since halloween, if you ignore the carnage from last week. Rick santelli at cme zplf carl, you know, tenyear note rates 208 friday. Not only hugely significant, because its so low, but its the lowest closing yield that weve had going all the way back to about the summer of 2013. Today, rates are up at 2. 13, a lot because energys up, stocks up. We want to pay attention, because it seems as though a lot of the on and off risk, youve heard it before, is whats driving the market, energys at the epicenter of that. 30year bonds, well, if the curves flattening its the long end rallying the most or falling the least in terms of yields. No exception, settled friday, yields we havent seen since around thanksgiving of 2012 but its up from the 273, 274 area, to 277. We want to continue to watch the curve. To the extent that fiveyear, you know, that is kind the fulcrum of the curve. Difference between 5year and 30year rates around 120 basis points. The flattest since about the new Years Eve Party in 2009. Bund yields, we know they keep getting down in low 60s and they bounced a little bit. Assume 150 spread with our tenyear. And kind of gives you a good gps of the market. Doesnt stop there. Japanese jgbs after the Parliament Elections yesterday. Boy, i tell you what, you move down to 37 basis points, briefly, new alltime low yield. Dollar yen below 119, hardly any movement, which is surprising. Jim cramer, back to you. All right. Thank you. Holiday party, great to spend time with you. Great to see you in person. Alcoas thank you. Of course, thank you. Alcoas out with news arc choiring privately held tatal to expand into the aerospace business. Joining us germany, Klaus Kleinfeld, chairman and ceo of alcoa. Good to see you again. Hello, good to see you, jim. Lets understand whats happening. This is the second, not as big as first, but second acquisition in aerospace. You are making a very big bet on aerospace. How much of a typical boeing or airbus, will you be the intellectual property for because this does seem to have a lot of intellectual property, looking, say, 2016 . Well, look, jim, i mean if it hadnt been for the invention that our founding father, Charles Martin hall made 126 years ago inventing things around here, all made out of aluminum, i wouldnt be able to be here today. This is for us in the middle of our dna. The acquisition, its not the biggest one. But what this does, it completes our transformation in a way that we are adding more titanium. Ive always said we are firing on two cylinders. We are increasing multimaterial innovation lightweight powerhouse capability. The second thing, bringing our commodity business down on the cost curve and thats basically the strategy were following. Today falls exactly into that field. Klaus, are you projecting, no matter what this growth, talking about a 7 growth, im wondering if you havent lightweighted airplanes at a time when a lot of people feel that jet fuel has gone so low, maybe we can keep the old planes, we dont need to upgrade to a Klaus Kleinfeld betterrun, more nongas guzzler plane . Well, look, i mean, its very hard to predict where oil prices are going to go Going Forward. Most of those investments are done from a longerterm perspective. What you see today, i mean, the markets still growing, orders are coming in. It has characteristics of almost 9yearold, backlog now, the last commercial planes. An attractive market and we believe lightweighting is going to continue. Part of it is driven by other aspects like how certain materials fit into each other, titanium plays a good role in regards to composite planes. We are very, very certain this is a good strategy, and we will continue to enjoy wonderful growth in this business. Klaus you know the world and the worlds economy better than the vast majority of ceos, youre over in germany. I get the sense that europe is coming down again. Titanium, russian product, youre sourcing from all over the world. What is your feeling about the world right now . When you update your quarter, are you going to say that europe has taken a big step down . Well, weve had that discussion a couple of times, jim. You know that most people are starting to talk on china. I mean, last week everybody was talking about china. I actually took a look at chinese growth rates and i took a look, ten years ago, roughly economy was roughly 60 billion, and its this year most people say its around 60, 61 billion. Just have the math. 10 on 0, growth is 2 1 2 times this. U. S. , you feel the same. We all, consumers feel, its growing, very, very nicely. People are going back into the showrooms, buying stuff. Theres a lot of good innovation happening. So u. S. Is firing, starting to fire much, much more. Also in fields that have been down, like building and construction. Then you come to europing europe is not one single piece. Here in germany the latest numbers are not that bad. Also dont when you look at structural issues like in france and italy, its structural problems that have to be detected. One of the things i think most of the economists have not figured into their shortterm prognosis is the absolute, amazing impact on lower oil prices. If you think that Monetary Policy is like a shot in the arm, think about oil. Oil is double shot in the arm, the biggest Economic Growth program that you have on a shortterm basis, not figured in. I continue to see good signs there. Okay. Also, klaus, i want a sense of what alcoas going to look like, say, using 2016 numbers, how much is going to be commodity and how much is going to be refined and proprietary and keeping in mine the commodity may be worth a little more because aluminums defying every other men ral and going higher, not lower. Yeah. Ive always been very, very clear on what strategy we have. On the one hand we build out, like today with the acquisition, bill out margin materials, powerhouse capabilities. That is going very, very well. We have had times where this contributed more than 80 off the profits, roughly, 60 , 50 to 60 of the revenues. Obviously that depends how the other end of the business is doing, the commodity business. There weve come down on the cost curve. The logic to be buffered off, to mitigate risk that exist and i cant control in the commodity market. The whole idea is no matter where the aluminum price is going to be well make good money on the commodity side, right . Thats the idea you have. On the one hand growth oriented innovation driven Technical Capability in those fields like aerospace, automotive, commercial, transportation, firing nicely. On the other hand, one day the aluminum price is up, doesnt look bad, youll make more money. Even if its down, its still good money were making. By the way on the commodity side exciting things. We have just brought on aluminum refinery in saudi arabia. Refinerys now operating also. Which one of the things that is fantastic there, these are lowest cost entity on the world, not alcoa portfolio but on the planet, and thats also improving our position that we have there. We have really two nice engines that are feeding into profitability. Klaus, one quick question on autos, we ask how aluminums changing the industry. Theres some discussion today our auto recovery, initis sixth year, getting long in the tooth, numbers continue to impress. Do you think thats anywhere near being true . Well, look, if you look at the some fundamentals, the fundamentals is the average age of the car. I still think that theres quite a bit of pentup demand. And i believe the more we see the economy recovering, the more people are going to go back in the showroom and see the new models rolling out, new models like the f150 and others coming to showrooms and people will say this is exciting, lets go for it, independent of where Oil Prices Going to, independent of what else is going on. 0 so thats what i would see happening here. Well, klaus, trif to have you on from germany. I look forward to seeing you. Well interview klaus tonight for mad money chairman and see of alcoa. Thank you for coming on squawk on the street. My pleasure, jim. Somebody writes in, Klaus Kleinfeld killing it on cnbc. Killing it . Kkk, you dont want that. No, brilliant discussion covering a lot of ground. I think that one of the things that people have to recognize, alcoa aluminum, these metals are all awful, and then you look at aluminum and its done quite well. It was in a bear mark during when Many Minerals were in the bull market. Two tailwinds, aerospace and price of aluminum. Youll talk honey well as well later tonight. Roger mcnamee on tech inv t investing after the volatile week on squawk at 11 00. Tak this morning. Looking for some stability here but we might have crossed back into the red. Jackie deangelis at the nymex. Thats right. Major piece of news impacting oil prices, head of opec out over the weekend talking about production levels, saying that there was consensus among ministers when they did not cut production, perhaps setting the stage also for the march opec meeting. So everybodys watching that closely. But that sent brent crude down to fresh fiveyear lows, just about 60. We are rebounding now, 62. 23. On this side of the atlantic, having a tough time staying positive, 57. 45 where he are now. Do want to talk about gasoline, National Average for gas, according to aaa, 2. 54 close to that 2. 50 mark. Back to you. Jackie deangelis. Coming up, dick weil on luring bill gross into the field. An exclusive with bill gross, the managers First Television interview since leaving pimco. Brian sullivan 2 00 p. M. Eastern time. Dows up 86. 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. You just have to win 70 of your points at net. And keep unforced errors under 10 . On the ibm cloud, the us open analyzes 41 million data points from 8 years of competition to uncover key insights. Data can help show you how to win, no matter what business youre in. Today theres a new way to work. And its made with ibm. Im just looking over the company bills. Up . Is that what we pay for internet . Yup. Dsl is about 90 bucks a month. Thats funny, for that price with comcast business, i think you get like 50 megabits. Wow thats fast. Personally, i prefer a slow internet. There is something about the sweet meditative glow of a loading website. Dont listen to the naysayer. Switch to comcast Business Today and get 50 megabits per second for 89. 95. Comcast business. Built for business. Where kate ronlers has more on the movers. The nasdaq in the green, up over a half percent. Kick it off with keurig green mountain, moving vermontbased operation to switzerland. This will position it as a, quote, global beverage player. The stock down 1 . Petsmart earlier, were keeping an eye on that for you here. Pet supplies retailer agreed to be bought for 8. 25 billion or 83 a share, led by bc partners, and the stock up over 4. 5 . River bed technologies agreed to be acquired by tovo bravo, took up near 9 . Nasdaq announcing rebalancing of the nasdaq 100 december 22nd. American airlines, Electronic Arts will rejoin the index. News on home Builder Sentiment at the top of the hour. Dont go away. For trading never stops. So if you get a trade idea about, say, organic food stocks, schwab can help. With a trading specialist just a tap away. Whats on your mind, lisa . Id like to talk about a trade idea. Lets hear it. [ male announcer ] see how schwab can help light a way forward. So you can make your move, wherever you are. And start working on your next big idea. And start working on your next big idea. Which means its timeson for the volkswagen signthendrive event. For practically just your signature, you could drive home for the holidays in a germanengineered volkswagen. Like the sporty, advanced new jetta. And the 2015 motor trend car of the year allnew golf. If youre wishing for a new volkswagen this season. Just about all you need is a finely tuned. Pen. Get zero due at signing, zero down, zero deposit, and zero first months payment on select new volkswagen models. Good morning, welcome back to squawk on the street im Carl Quintanilla with simon hobbs, david faber at new york stock exchange. Sara eisen is off today. Stock opens up triple digits 112 point, but losing some steam quickly. Up 79 points. Natural oil, comments from the head of opec, uae saying theyre going change their minds on production because oil goes to 60 or 40. West texas, once again, in the red. Lets get to the road map. Stocks bouncing back but off their highs thanks to corporate deals and a surge in u. S. Manufacturing. Plus, crunch time for insurers. Todays the deadline for obamacare enrollment april look at numbers so far. Well have an exclusive interview with the coo of james miscapital which houses bill gross. Diana olick. Breaking news on Home Builders sentiment. Sentiment down one point in december but remains firmly in positive territory, after a 4point jump in number. The monthly index fell to 57. Anything above 50 is considered positive. Right back to where we were last december after going negative for the first half of the year. Of the hmi 3 componentsing kurn sales condition fell one point to 61. Future sales expectations down one point to 65. Potential buyer Traffic Holding steady at 45, the only one mired in negative territory. Now the mantra appears to be were better than we were at the start of the year. The chief eist calls it a slow march back to normal. Starts are below normal, even as builder confidence improves dramatically. Two travel in tandem. It was puzzling why huh home sales were flat. Called home buyers skittish. On a threemonth running average, builder confidence in the west rose one point. In south, fell two. Back to you guys. Thank you for that. U. S. Markets, of course, rebounding after last weeks selloff. Oil sliding to fresh 5 1 2 years. Lets bring in wells fargo adviser and rbcs chief economy strategist. Good to see both of you. Let me bring you on some of the comments out of opec over the weekend. Why so stubborn . Why so stubborn on production and seemingly not too worried about oil going to a number like 40 . These are gulf states. Uae came out with a statement we can survive at 40. If you look at uae, kuwait, theyre in a good financial position, large sovereign funds, small populations, even saudi arabia substantial reserves. Thats why they said, why do we need to cut . That said, we get into q1, if prices go towards 40 mark, i do think going to be substantial pressure within opec to potentially pull barrels off the market. Regardless of the statements, i dont think were done with having an opec cut some time in 2015. Yeah. Samir, i guess tolerance for pain does not include equities, because you look at Dubai Exchange over the weekend and today, again, its just red across the board. Do you see that changing anytime soon . You know, some of those markets were the best performing last year, everybody looking at frontier markets, right, which as a group tend to be focused on oil producingi. What youre seeing is the reverse. As long as oil stays down, countries wont rebound anytime soon. Can you explain something about the oil market to me, because i dont get it the more i think about it. The price of oil in the country has fallen about 40 over the last three months, even if i look at estimates that came out from the iea on friday, the excess supply next year is only 2. 2 to the market. I know. I cant think of another world market the price has to correct by 40 to remove a 2. 2 mismatch. Now either supply and demand is totally priced in elastic or it leads to me to the conclusion the price of oil was supported in some way by something that we dont understand that the saudis have decided to shatter on Financial Markets. No, i think youre absolutely right. Look at the physical market, we were talking about having 1 million barrel supply overhang and 92 million market. We had libyan productions fall back over the weekend, 500,000 barrels and yet we dont see a significant uptick today. A bit of an uptick in price but i dont think the physical market is nearly as loose as we are in term of oil prices. Physical market could tighten up substantially in q1 2015 was could be in a low price environment because sentiment remains so negative. But im sorry, i dont understand why the price has to fall so aggressively on such a small change in volume to rebalance the market. Why is this happening . What is the nature of the oil market that it is unlike any other market, or with the price, as i say, artificially held high by someone on Financial Markets in some form . In i think it was a number of factors. We have a situation last year, 3. 5 Million Barrels in unplanned outages. Some of the production came back on last summer. We had 1 million barrel swing from lika nigeria, weak demand numbers and a strong dollar. Do i think were at a point where the physical market is getting tighter and not seeing it reflected in prices . Absolutely. Well get to a situation where were going to get sentiment catching up with the physical market and we should be looking for potentially demand uptick with prices at this level. We should be looking for potential other outages in key supply countries. I think we could get into the second half of 2015 and get a rebound in prices, because the market, think is going to get tighter over the course of the year. Samir, im not sure how much you cover the energy plays but xco, down 8 , suspending dividend, a nice 9. 6 yield, citing low oil prices and the board believing bettor reinvest in the business than pay the dividend. How much of a bleed do you expect over the next few weeks and months . This is just the beginning, it would seem. Weve been neutral in the Energy Sector for a while because models suggested Energy Prices were high, especially earlier in the year above 100. So we would continue to treat the Energy Companies with caution, because you will see a lot of these numbers come down, whether its estimates, whether production, revalue cap x. We treat the Energy Sector with kid gloves, because you get better opportunity to the space. The events of the week, oil prices notwithstanding. What do you think theyll do at meeting . Important for many in an indication how theyll behave next year t. Because oil is down, do you price for the fact we lost 3. 8 on the dow last week or the fact that the economys generating a third of a million jobs a month . You know probably worried about Inflation Expectations theyve come down quite a bit, so thats on the one hand something that might keep them on the considerable time language, but you know, as you mentioned, payroll number so strong, theyre torn here. But theyve been on the stay the course mentality and theyve prepared the markets for taking that language out. So, you know, this would be a good time from the standpoint of the marks being prepared for it. Industrial production was another nice november number, ill tell you than well see what the next few minutes bring. Samir, thanks for your time. Good to talk to you both. Thank you. We also want to keep you up to date with the latest hostage situation unfolding in sydney, australia. Mandy drury back at hq with details. I imagine you know this terrain quite well, street by street. Absolutely. I even worked in martin place for cnbc some years ago. Its a pedestrian area, sort of think about a financial district that is completely closed off to cars, its got a lot of pedestrians walking around. Its the area where youve got the reserve bank of australia, central bank in australia, many commercial banks, New South Wales parliamentary building up the road, three blocks away, asx, Australia Stock Exchange and a popular Tourist Destination within walking distance, the sydney opera house. Talking about a location that would grab a lot of attention, this would be the one. Lindt cafe, very popular with tourists. 9 45 on a monday morning leading up to christmas, imagine, simon, there would have been a lot of people around. When a guy with a gun walks into a cafe, it really certainly does grab national and International Headlines, as were seeing right now. Okay. Mandy, well come back to you during the course of the morning, keeping us abreast of whats happening. Live pictures. Details were learning about who he is. Apparently known to police, its an iranian refugee, hes a selfstyled spiritual healer, goes by sheikh as well. Hes known to police because not just of his extremist views but hes had a violent past, including sexual assault. And hes even done things such as sending hate letters to families of eight australian soldiers who were killed in afghanistan, so therefore a protest again australias involvement in the afghanistan conflict because, as youre well aware and the uks been in a similar situation with certain conflicts, that the u. S. Has been involved in, australias a staunch ally of the United States. Weve been involved in many conflicts, going back to like korea, vietnam, and now were also involved in various campaigns against isis. So we have been on heightened alert for terrorrelated activity. Mandy drury with the latest on sydney. Up next, todays deadline day for obamacare, enrollment. Things have gone smoothly. Could the good news actually be bad news . Well have details on that. Later, importantly, exclusive interview with the ceo of janis capital, find out where he stands the market, pluses how he won over bill gross from pimco. Squawk on the street will be right back. Welcome back to the street. River bed technology, i. T. Computing and computer Networking Company is being brought out by thoma bravo and the ontario teachers pension plan for 3. 6 billion, or 21 a share in cash. You may recall, company Elliott Management had been agitating for some kind of change, including possible sale. So again, simon, those shares up 9 , to below, just below 21 per share. Thank you very much for that. Meantime, big day for obamacare, enrollment starts today. Bertha coombs is live. Were at oscar insurance, an insurance startup, in their second year, dealing with enrollment. Expecting a very long, very busy day here. Coming into the weekend, theyve seen a steady increase, 20 increase today. Of course, today is the deadline for people who want to renew their insurance or sign up for insurance starting on january 1st. They have been very proactive, reaching out to people who need to renew, go in, check to make sure their income and levels are still the same, coming into this weekend on healthcare. Gov, things were working well but only seen nationally 2 million come in to get enrollment for january 1st. About half of them were reenrolling, that means a lot think, perhaps they can reenroll automatically. But that could cause problems. Part of the issues, things have been quiet, no big headlines about healthcare. Gov, nonetheless, insurance officials say, coming into this weekend, they did start seeing a large number of callers inquiring on the phones. Were hearing quite a lot of volume over the weekend and i think the plans are feeling very encouraged about what theyre hearing from their beneficiaries, being able to get through and having the support from the plans that they need. So the feeling is that the website is working well, but theyre really out there stressing that people should come back in and not just auto renew, to make sure that especially if theyre getting subsidies theyre on the right plan. Guys, well have much more throughout the day, as we count down to tonights deadline. Back to you. Its an important story. When we come back, today is expected to be the biggest mailing day of the year for the u. S. Postal service. Fedex says it may be their biggest day ever, nine days to christmas. Will their strategies to cope work . Well break down the data. E one. And cialis for daily use helps you be Ready Anytime the moment is right. Cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid long term injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or any allergic reactions like rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use and a free 30tablet trial. Youre down with crestor. Yes when diet and exercise arent enough, adding crestor lowers bad cholesterol up to 55 . Crestor is not for people with liver disease, or women who are nursing, pregnant, or may become pregnant. Tell your doctor all medicines you take. Call your doctor if you have muscle pain or weakness, feel unusually tired, have loss of appetite, upper belly pain, dark urine, or yellowing of skin or eyes. These could be signs of serious side effects. Im down with crestor make your move. Ask your doctor about crestor. We take you live to sydney, beginning to see live ammunition and very heavy armed police activity. Well take you there live with this feed. Earlier in the hour we told you about some of the hostages who had been able to flee the situation, sydney siege on martin place. We are getting word, obviously visual confirmation, additional hostages are being carried to safety by Emergency Personnel. Mandy drury, native of the area, worked there a long time. Can you set up exactly what we are looking at right now . Yes, absolutely. What youre looking at is martin place, that is right in the central financial district of sydney. It is just outside the lindt cafe, where for over 15 hours now weve had hostages, you know, number of hostages has been varied but some reports said yesterday up to 15, now thinking more like 20. Hole up for all of that time with one lone gunman. As we can see there, police apparently stormed what theyre calling the sydney siege cafe. We know, confirmed, six hostages able to be released. We dont know whether they were released by the gunman or escaped because the police were keeping the information quiet. But indeed, if what were seeing here is correct, im hoping that maybe were seeing some relief on that front. Again, well have to wait and see. But if the police have stormed the cafe, well have to hope that everybody is safe inside. Just to give you a bit of background here, as i said, this weekend, about 15 hours ago, 9 45 a. M. On monday morning in sydney, and the guy who has been named by police as that lone gunman, an iranian refugee, he is currently on bail for a number of violent offenses including sexual assault. More importantly, carl, is the fact that hes known to police for his very extreme views. He has a website, for example, on that website there are very graphic images of children that the website says were killed by u. S. And Australian Air strikes. The u. S. And australia have been hand in hand in many conflicts in the middle east, various other parts of the world and the sheikh, has he styles himself, as a cliring as he claims on his website, has been vehicle until his protest against australias involvement. We should point out, we did cutaway from the shot as it became clear some of the victims were receiving cpr. Were not sure we need that live now. But its not the first time that australia has had to deal with a wave of socalled jihadist violence. Yes. Absolutely right. So only a few months ago, back in september, actually, carl, the National Terrorism public alert was raised to high in australia because there was an imminent threat that iran dom member of public would be beheaded, and i believe that the lindt cafe has been identified as a location that the beheading could take place. Thank goodness the threat was thwarted but days after that a teenager in melbourne was shot dead after attacking two antiterrorism officers with a knife. So weve been on this alert for a few months now. But i think, you know, theres been some awareness in australia there could be some retaliation for australia support over u. S. Campaign against jihadists and radical members of the muslim, like isis or al qaeda. And so when this happened, i think in australia, we were shocked because were not used to terror on our home soil. But it certainly wasnt necessarily out of the blue, and our own Prime Minister tony abbott said that this was politically motivated. And he also warned us in september that Something Like this might happen. So were getting some word, daily mail, australia, paramedics are running into the lindt cafe, which may or may not lead to a new chapter in this episode, but very hard, obviously, we have little detail on specifics. Right. I was going to mention, to recap the specifics of what was going on, these are people that clearly media savvy. Correct me if im wrong, channel 7, 24hour news opposition, opposite them so they could train a camera and rotating hostages, two hours at a time with hands against the windows. Rotating the hostages. Channel 7 reporters, tweeting, i was watching this all the way, you know, through the evening, tweeting exactly what was going on, blow by blow. The wonders of modern media, because channel 7 looks out on to the area, on martin place, so you know we could be kept up to date. But youre absolutely right, hostages rotated every two hours and some were holding up that flag, i believe the flag has writing saying theres no god but alamo hammed the messenger of allah. Ongoing pictures outside the lindt cafe in martin place in sydney. You obviously have Emergency Personnel on board. But at this stage okay, loud explosion heard at cafe site, then gunfire. As far as were aware, section people have been able to leave the building. I dont know whether youre hearing anything further in term of other people who might have been able to escape the cafe . The latest were seeing on some news wires i reiterate some at least six have been able to actually escape. As the news reports came in getting well into the night there, mandy, this did appear to be what you call a lone wolf situation. Right. Single gunman was identified in the standoff and who made arc coring to reports, various demand like Islamic State flag, like a meeting with Prime Minister abbott. It does appear in the last 20 minutes the police have been able to execute some additional element of their strategy in dealing with this. Thats right. In fact, several Media Outlets throughout these 15, 16 hours, carl, have been reporting that they were contacted by hostages inside the cafe, parting claims and demands by the gunman, include possible presence of explosives in the building and city of sydney. But the police had been asking the media, do not publish demands because you can imagine its a delicate situation, a lot of lives are hanging in the balance. They were negotiating directly with the gunman, they knew because of past offenses, so they didnt want the Media Publishing demands and having the nation, you know, weigh in on this while they were in that situation of trying to obviously completely diffuse the situation and get everybody out safely. Meantime, of course, as we keep our eye on that event, halfway around the world and the markets weve lost all of the gains of the dow at this hour. We opened up, as you know, 112 points, comps now in the red. S p hanging on to a twopoint gain. Whether or not its related, always difficult to find correlation and causation. Mandy, help us with the figures here. Yes. I think the original estimate 15 hostages. Six according to the report that carl was referencing may have gone out recently. Are we looking for the remainder to be inside or did some escape earlier . Thats a good question. Ive got the same information as you, six of the hostages have managed to escape. Again, we are not 100 sure whether they escaped off their own or released by the gunman, because the police are keeping very, very tight lipped on certain piece of information. But as i said yesterday, we really were very much in the dark and there were report up to 50, 50, hostages inside the lindt cafe and then down to 20. If six released, looking to 14 more people inside the cafe but the numbers are in the dark at this stage. Whats also interesting, as australians try to fight socalled muslim bigotry today with this hashtag, this hashtag, illridewithyou, forming solidarity with muslims, if youre on a bus, meet me here, this is what i look leak, i will make sure you are safe as you make your way around town. Muslim leaders are in australia have been out there, theyve been urging calm with the national, Australia National imams council, condemning this as a criminal act, and they made that statement with the grand mufti of australia, an interfaith prayer meeting at one of sydneys grand mosques, so the Muslim Community in australia are condemning this as well. You know, australias home to tens of thousands of muslims, of people from muslim countries who settled in australia and were known for being multicultural and peaceful country. When someone comes out in the nam of their faith and commits such acts, you know, generally, you do see immediate condemnation from the islam powers that be in australia. A live shot of the socalled sydney siege where we have seen hostages who appear to be hostages prout out brought out. This got started 10, 15 minutes ago, there are reports of shots fired. A piece of tape from a few moments ago. [ gunfire ] mandy. Yes. You know this town better than us, but by any standard appears to sound like a massive amount of ammunition. A massive amount of ammunition. You have police responders, Emergency Personnel and paramilitary operators surrounding the cafe. The whole area, carl, shut down and blocked off. Normally you know leading up to christmas, people everywhere. This would be this is a heavy tourist time. But all of the areas around martin place and the block surrounding were shut down very rapidly. People working in the area, good friend of mine, was in one of the commercial banks opposite the lindt cafe and said immediately there were they were in complete lockdown and as soon as deemed safe everyone was sent home to make sure theres absolutely no danger of any passersby involved in this. But this is something that is really rocking australia. I was going to say, but not not without some warning, mandy, we should remember back in september, canberra raised the threat level from medium to high, which meant an attack considered likely. Shortly after the police thwarted an attempt to kidnap somebody at random on the streets of sydney and behead them. Thats right. That didnt take place. Correct me if im wrong, i believe the Australian Government believes they have 160 Australian Nationals working with some of those terrorist groups in the middle east, out there fighting and learning. Thats right. Perhaps britain might have 500. This is an ongoing problem. It is. Of nationals turning against the people that they were born and brought up with. Referring to the raising of the National Terror alert back to high in september, simon, one of the things noted was the risk of attacks by homegrown militants. Australian grown militants returning from fighting in the middle east with extremist vis may turn against the public. Youre right, going back to september, what happened, also that month there was a spokesman for isis who was urging supporters in western nations and that naturally includes australia, to attack civilians or Australian Military personnel at home. So after september a National Conscience consciousness this is something that could potentially happen. Again, we havent had a serious Security Threat in australia since 1978. So you can have all of the warnings that you want, but until it happens i dont think it gets into the national psyche. Last thing that happened in 1978 was a bombing in sydney at the hilton hotel that killed two people. But thats decades ago, simon. So even though the National Terror alert has been raised, i havent heard anything from my friends and family back in australia about being fearful about going outside. Now, i think its actually hit home that this is something that can happen. Yes. And just thinking about as a business channel, mandy, everything weve been talking about over the past couple of weeks, in some form or fashion, have been hitting the australian economy in various ways as well. Yes. Of course anything related to Natural Resources or mining, its amazing the number of fires that the Prime Minister has had to deal with in a short period of time. Oh, absolutely. Yes. And in fact, this was a day, the day this happened, was going to be the day that Australian Government announced brutal spending cuts, you know, with our commodityrelated and dependent economy, you know, naturally the export side of our economy is hit by whats going on. Australian dollar itself knocked down to fouryear lows. In fact, i believe that when the news of the sydney siege first came out, it did have a negative impact on the australian dollar, which has been battered and bruised from its commodity exposure. I think thinking that maybe earlier next year the australian avi will have to pump in extra stimulus with rate cuts. It comes at a vulnerable time. A live shot of sydney where the latest updates suggest that after five hostages ran out a major explosion was herd, followed by gunfire, a piece of tape we played for you a few moments ago, ambulances moving into the scene, stretchers with paramedics, heavily armed police and four stretchers seen carrying hostages a few moment ago. Theres a bomb Disposal Unit on site. We have seen some houstons being taken out on stretchers. Injuries they may have sustained, if any, at this point are unknown. Were looking for some confirmation on various reports that this may have the situation may be changing materially. We just dont know. Yes, we really dont know at this stage. Were obviously looking at a picture where nothing much has changed since we started training our cameras on the live shot there in sydney. Were still praying for the safe release of the remaining hostages who are inside. Im sure theyre exhausted. Thank goodness, i had to say, when you think about places that people could be holed up, at least its a cafe, at least theyll have food and water. Sounds like a meager thing, but its no meager thing, exhaustion, both psychological and physical, something that hostages and hostage taker has to deal with. I was listening to a terrorist expert earlier on, who was saying that sometimes you know you end up with a situation where hostage taker just fall as sleep from sheer exhaustion and this is going on to 16 hours the siege has been taking place at that length cafe in martin place. Where it is now just about 2 34 in the morning, after this has been happening, as you point out, for some 16 hours. Yes. Im not sure if were going to the phone right now or not. Carl, i have some just added information. Apparently a bomb Disposal Unit is into the site and a few of the injured hostages have been taken out of the site. We saw that earlier, taken out on stretchers. You can see that on the screen. You can see that theyve got one of these unmanned machines that would go in and tackle things. In the background. Thats clearly in the offer. The other thing we should mention, of course, there were a lot 0 of reports earlier, not least perhaps bombs around the city of sydney, which the police then said effectively, they have the situation contained. A lot of reports about whether the hostage taker demanded to speak with the Prime Minister, i mean, this is your nation is not used to dealing with this in fairness, is it . Its not run of the mill stuff for your security forces, we should note, i think as well. Its not arent of the milk but i should also say, that you know, our personnel, military personnel, paramilitary personnel have all been trained to deal with this kind of thing, should it arise. But youre absolutely right. We havent had this kind of situation on home soil. But we have, at the same time, been supportive of various conflicts the u. S. Has spearheaded around the world. And so you know, i have i have faith that we have excellent personnel on ground who are equipped to deal with this. Also excellent negotiators who have been internationally trained as well. So hopefully weve got the best people on the job. If youre wondering about the gunman, nbc news is reporting that hes known as sheikh cleric, as known on his website, according to reuters. Hes iranian born. Among some of writing that hes had in the past, a letter dated in october to the Muslim Community there on his website he wrote, quote, this pen is my gun and these words are my bullets. I fight by these weapons against oppression to promote peace. Hes not an unknown quantity to Law Enforcement in australia, correct . Thats right. Absolutely. Currently on bail for a number of violent offenses including sexual assault. He is well known to police. And again, just to repeat what i said earlier, for those who might be tuning in, hes known for sending offensive and hate letters to families of australian soldiers who have served overseas. I think eight australian soldiers killed in afghanistan. He sent those families letters protesting against their involvement in those conflicts, such as afghanistan, and even on his website hes got very graphic images of children who have been killed, allegedly, i should say the website says killed by u. S. And Australian Air sites. This is a man who is definitely not holding back with regards to his extremist views. Mandy, dont go too far. I want to bring in a former nypd commissioner, howard safer, ran from 19962000. Can you walk us through what Law Enforcement is going through in sydney . Well, what theyre doing is theyre assessing the danger to the hostages and volatility of the hostage taker because at some point they have to make a decision on whether or not the lives of the hostages are in imminent dang somewhere whether or not aggressive action has to be taken to mitigate the situation. What generally defines that balance, that equation that you mentioned . For instance, looking at this live shot of someone clearly in the bomb Disposal Unit. What is the clue . What is the sign that it is time to move in with the more aggressive stance . Well, it varies from situation to situation, but clearly, communication is cut with the hostage taker where the information that hes providing and yet eem sure they have hostage hostage negotiators and beho beho behavioral people on the scene, whether this individual is about to commit a violent act. You know, theres no solid metrics. Its subjective, but its something that the Incident Commander on the scene is going to have to make a decision and at some point. Of course the whole idea is to try to talk this guy out and make him believe that you are going to somehow accommodate what he wants done. And you have to get to that point where you need to make a decision that life safety is most important thing and forgive me, i didnt mean to interrupt. What role does time take here . Were in the 16th hour of the siege. I mean, can the tactic be to just keep going and let them tire or did that work against you as time goes on . You have to be patient, time is a friend. As long as hes not taking aggressive action, as long as you can keep talking to the individual and keep negotiating with him, patience is important. But again, each situation is different, you have to assess when you believe theres nothing more to do but mitigate the situation. Is it your guess, commissioner, i know theres no way to know for sure, that there is, in fact, a bomb involved . Would you bring out the Disposal Unit if there werent one . You bring it out when you have any indication its possible. You dont want to be caught in a situation where it turns out theres impact and youre not prepared. Even if its simply the claim of the gunman himself . Absolutely. I have to imagine that Sydney Police have been drilling on this for years now. Im sure they have. The Sydney Police have confident, the Australian National police are very confident and they know exactly what theyre doing. But again, each situation is its own and the outcomes are never guaranteed. The Deputy Police commissioner in sydney is declining to comment on reports on channel 10 that the man actually demanded to speak to the australian Prime Minister, mr. Abbott. In that situation, those sorts of demands, can they ever be fulfilled if you think there is going to be a loss of life, or is it a nonstarter right from the beginning . Its a hard question to answer. And of course, there are lots of information that im sure the authorities have that theyre not releasing as they should not. We are getting word from australian media in fact the siege is over, whether that means the gunman is down or in custody, we dont know yet. But after 16 hours, 2 42 in the morning sydney time, word from australia that this situation has changed and is over. Mandy, i have to imagine that brings a sigh of relief to you and everyone you know in that part of the world. Absolutely. This is a huge sigh of relief. Until we know full details, yes, im watching here the live feed from 7 news and, simon, the camera you were referring to that overlooks the length cafe. Theyre saying the shootout ended at lindt cafe standoff and a number of injuries reported. We saw a number of people pulled out and on stretchers, so we know that. But until we know the full details how it ended and everybodys safe inside, i dont think anyones going to be breaking out the champagne just yet. Here we go. Watching some live pictures of Emergency Personnel pulling out more people on stretchers. Yeah. This is tape right here that were looking at from a few moments ago. Oh, it was a few moments ago, okay. Family of hostages gathering in streets according to 7 news, which is opposite the cafe. You can only imagine how the families of those hostages are feeling right now. Commissioner, are you still with us . I am. When we get generally in these kind of situations to this point in the story, when that when we hear reports that the siege is over, how much does your caution drop . How much are police prepared for some unexpected wrinkle, some unexpected development, even after you think perhaps things are quote unquote safe . You do not stand down until you know that the perpetrators are in custody or have been taken out or you have the ability to sweep the entire area to make sure that everything is safe. Just because an individual is no longer a threat done mean theres going to be other potential dangers. In general, have you been up to speed with the kinds of threats that australian Law Enforcement have been fielding over the past couple of years . Is there a way to characterize them compared to what other either local or statewide Police Departments have had to deal with since 9 11 . I know the australians have a very good antiterror training program. I know they have great internal cap abilities and im sure they handled this exactly the way it should have been handled. And what about other parts of the community, commissioner . We should note that australias Muslim Community itself issued a joint statement of more than 20 organizations from within their ranks condemning whats going on. How do you now police the streets given that emotions could be running very high and the hostage taker was clearly a muslim, that may be a factor in how people relate to each other within the next few hours. I think that is clear that this is either a disturbed individual or a zealot who certainly didnt represent the Muslim Community in australia or anywhere else. And thats the message that has to be conveyed. Clearly, well have to wait for further word. Again, the latest from police, the situation in sydney is over although no specifics on what exactly that means. We continue to see this bomb Disposal Unit personnel on the sidewalks, not far from the lindt cafe. Carl . Yes, mandy. You said a moment ago the police are saying the sydney hostage situation is over. Apparently the New South Wales, say where sydney is, the police have confirmed the hostage situation is over. But im also here watching the live feed of 7 news, thats right opposite the cafe. And they are saying that there is a report of two dead and three gravely injured. We have also heard that there was a shot fired inside the cafe before the police stormed in. Again, this is a developing situation. And there is no word yet on the fate of the hostage taker, according to 7 news. We will keep on bringing you updates as soon as they become available. Its a very fluid situation now. The reports so far, two dead and three that are gravery injured. Coming from local immediate yap obviously the feed is something we want to be cautious with as we see some victims being brought out on stretchers. As mandy tells you the latest, we have no clarity as to how this is over but in the words of police and local media, it has in fact come to an end. Commissioner, can i just double back on a piece of information that mandy just gave us, there may have been a shot fired from within the cafe before the police moved in. You were mentioning that you have to be assured when negotiating that the hostage taker is not going to harm anybody. Is there absolutely zero tolerance, or is it a more complicated assessment strategy as you ten to get maybe 15 people through a crisis like this . Each situation is different and it is complex. You just have to make the assessment minute by minute, second by second. By the way, we are getting new tweet from local police there, in their words, im quoting theyre tweet from two minutes ago, sydney siege is over, more details to follow. And i believe we have a bit of tape to show you from the local media, 7, here it is. I dont know if its if its gunfire. I dont know if its some sort of small explosive device. Now that is certainly gunfire. Theyre throwing something. The police are throwing something . They are. Theyre throwing something into the doorway. Weve just soon another hostage brought out. Just unbelievably dramatic video from a part of town, mandy, im guessing, is used to nothing like this. Absolutely. Used to nothing like this. But at the same time, you know, there has been some heightened alert, just to remain viewer whose might be tuning in for the first time, the National Terror alert was raised to high back in september. And the Prime Minister said that we needed to be aware that this kind of thing could happen. There was an imnen threat to behead a random member of public. It was thwarted. The length cafe named for a location of the beheading of the public member to take place. So why is that . What is it about this cafe or this part of town that would make his statement more profo d profound . It is an area of high pedestrian traffic. Think Something Like times square or better analogy is the rockefeller plaza, its a pedestrian area, closed off to all cars. And in this area where pedestrians can walk and sit and play you have so many very important governmental and commercial buildings. You have the reserve bank of australia. You have New South Wales Parliament Building at top of martin place. You have the asx, Australia Stock Exchange down the road. If you go to choose a location that will extreme visibility and gone are the attention not just nationally but International Headlines this would be the place to do it. Its international. Its tiffany, rolex, kpng. Its where the tourists respect this is when the tourists pour in to enjoy the b australian summer. People out shopping, going about their business. There was also, you know, reports that the sydney opra house was evacuated because there was apparently a package found. Its fine. People are let back in later on in the afternoon on monday. But at the same time, you know, this is an area where youve got so many people, australians and International Tourists alike, all converging in one place and the tourists trail goes past the link cafe as well. Ive been in one of those tourists chocolateers that passes by the cafe and i understand that i dont know whether this is confirmed, but i think there was even an indian i. T. Professional among the hostages according to indias Parliamentary Affairs minister. The makeup of the other hostages were unclear on. My guess would be that there could have been a number of International Tourists amongst them. You have to imagine as you said, mandy, given the time of year, the location, high density, to the only of local residents but tourists. Yes. All about getting visibility, exposing your message to traffic. That was all part apparently of the gunmans plan. Yes. Absolutely. He was someone who made his extremist views very clear with his website. He was someone who was already out there in terms of being very clear about how he felt about australias involvement if various conflicts in areas such as afghanistan and iraq and obviously the Current Campaign against isis. Australia has been shoulder to shoulder helping the United States in those campaigns and this guy, the gunman, ha haron, a clerical spiritually, iranian born refugee is very clear about australias support of the u. S. For those who arent familiar with the demographics of australia, how would you characterize the size or the visibility of the Muslim Community in sydney . Its huge. Its absolutely huge. You have out in certain western suburbs whole suburbs which are largely arabic speaking of, you know, countries just, you know, lebanon and syria. Many of them refugees. I started out my career working for a small Radio Station, 2 middle east, doing english news reporting. But this was no small Radio Station. It was a large Radio Station and a lot of the people who worked there, had been professionals back in their home countries like lebanon and had fled, you know, during wars in their home countries. To come to australia, because australia is a place that is peaceful, multicultural, opens arms to people of all faiths, of all colors and creeds, so again, for this kind of event to happen on australian soil is a wakeup call. Can i point out this is also the case in europe in the uk, germany and france, where you have very dense Muslim Populations in parts of the uk, it would be normal to sees most people actually wearing burqas and its something that the french authorities, british authorities, have struggled with to try to integrate these societies, police them, and not have to the point you were making earlier, mandy, people promoting hatred within those communities in contrast to what the underlying feeling might be in the first place. Yes. These are individual radicals. This is by no means the general feelings among the Muslim Population in australia. The Muslim Leaders in australia immediately urged calm when this siege became known to the public and immediately came out and condemned it, called it a criminal act. Unequivocal criminal act. Held a prayer media at one of the grand mosques in sydney. A lot of outcry from the australian Muslim Population over this. This is by no manner of means representative of the general feeling amongst that population in australia. If youre just joining us this morning about five minutes here until 11 00 a. M. Eastern time, almost 3 00 in the morning sydney time, after 16 hours, police in sydney saying the sydney siege is over. More details to follow. We are getting reports of two dead, three injured, although channel 7, mandy, saying they cannot confirm, in fact, two people have died at this stage. We dont know the fate of the gunman and whether or not if it is true, whether or not one of those is gottenman. Im watching the breaking news here, carl and simon, from 7 news, the local outlet, saying that the two, the reports were that the two that died, were of cardiac arrest. Oh. Okay. Were getting more news. 7 news is reporting that the gunman shot one of the hostages. This would gel with some of the earlier reports we were getting. Unconfirmed, guys, that there was a shot fired inside the cafe before the police stormed in. So once again, 7 news is saying there are reports that the gunman shot one of the hostages. Okay. And with that, that does add one more details to this horrific story. The reports the bomb Disposal Unit is inside the cafe. Which i its hard to read into these situations, mandy, but you to imagine at this point, with the gunman either down or detained or in some fashion, bringing this episode to as close, clearly worried enough about the perimeter or the interior of that cafe, that the bomb Disposal Unit is clearly at work. Joining us on the phone former fbi assistance director chris sweker. Thank you for joining us this morning. Sure. I assume youve been watching this situation. Can you explain sort of where we are at this stage in the eyes of Law Enforcement . Sure. Yeah. What you saw was fairly extraordinary. Its not often you see a hostage rescue assault like what you saw on television, and these lone wolfs are essentially ticking bombs just waiting for their fuse to get lit and in this case, probably happened over the internet. What theyre doing now is rendering safe any bombs that might be in there and doing a sweep, a very methodical sweep, for other bombs. The process, the render safe process, is very detailed and it will take a little bit of time. And then theyll process the scene as a crime scene. We were just talking with howard a moment ago from former commissioner of the nypd and we were discussing the moment at which Law Enforcement knows that it is worth trying to move in, even with hostages still clearly in custody. When does that moment happen and i wonder, because this sheikh was a known quantity to Law Enforcement there, how much information did that feed in terms of their actions . Well, first theres a big difference between a barricaded subject and a hostage situation and you can wait out a barricaded subject for weeks. Theres no need to go in. When there are hostages youre doing a constant analysis of what the mindset is and what the current mindset is of the hostage taker and in this case, they, obviously, got some intelligence which gave them caused them enough concern to go ahead and assault and try to do the hostage rescue which is always a last resort. Out of 100 cases how many times who you move in and try to rescue hostages actively . You dont do it until you know something is imminent. I would say maybe five out of 100. Wow. So it is something clear i dont mean to make light of it, this is something Law Enforcement takes very seriously . They will wait until they just almost absolutely know that these hostages are going to come to harm and that sounds like they got some intelligence from some that escaped and based on what they knew about him they did the full 360 analysis and decided they had to go. Is it zero tolerance if they fire a shot at a hostage, do you immediately do in or is it more complex you have 14 others to get through . I mean is it immediate . Is it zero tolerance . Well, its in that situation, its usually zero tolerance. They have been working a plan since the second this hostage situation developed. They probably worked out several scenarios and they were on standby and ready to go at a seconds notice. And as you said, when if a shot is fired if they know something has happened to a hostage theyre probably going to go. Chris, you know, this is happening, just a few days after the Senate Select Committee Report on cia actions. Were looking at this situation live in sydney. Does this tell us anything right now about the state of in this case jihadist violence in australia, in the u. S. , in the middle east, in europe . Does this move the global narrative at all . Well, i dont think theres any question it has moved, moved that dial. It just gives them another excuse for this, for radicals to take violent actions. Its not like they lacked any at least in their minds any rationales already, but this ones gives themes just yet another, so theres every goodp are to be on high alert everywhere in the west and anywhere there is a target. Is that the pont, the targets are getting softer and softer. This isnt a parliament or military installation, this isnt a transport system. This is a cafe in downtown sydney. I mean, its hard to imagine a softer target, is it . No. I mean theres a randomness to this lone wolf dynamic which is very disturbing and its, as weve all discussed, a huge challenge for those in the intelligence field and Law Enforcement. This is sort of the terrorism paradigm Going Forward and theres no place really thats off limits. You know, the Sydney Police a couple months ago said that they had prevented a random attempt to grab somebody off the streets in sydney and behead them. Im wondering if you can give us insight as to how many of these lone wolf events are actually stopped and thwarted by authorities around the world every week or every month . I mean is this common . It just doesnt often come to fruition . I would there are many that are