Transcripts For CNBC Squawk On The Street 20160914

Largest cash bid on record. We have both ceos joining us live in just a few moments. Our road map, return of volatility. What investors like carl icahn said how to navigate this market at yesterdays delivering alpha. Wells fargos ceo telling jim cramer he will not resign over abuse of account activations. Apples new operating system out and update getting mixed reviews. Also, tim cook out defending the new iphone 7. The stock saw a nice boost yesterday despite some big losses in most of the market. What will today bring . But first up, futures moving higher after three straight sessions of triple digit swings amid some falling oil prices, concerns about a potential fed rate hike despite tuesdays selloff apple was in fact the bright spot up 2. 4 for the best day since july. But then late yesterday at delivering alpha carl icahn offered that blunt assessment of this market environment. I think there are tremendous risks. But i think anyone thats going to tell you its going to go down tomorrow, next week, even next month or next year, its sort of guessing game. But you can look at the environment, and i think its very dangerous. In other words, youre walking on a ledge and you might make it to the end, but, hey, you fall off that ledge youre going to really see trouble. And i think that could well be. That theme, guys, whether it was carl or singer or any others, fairly consistent message from people who manage a lot of money. Yeah. The script was to say dangerous. I dont like that. Because its wrong . Its been dangerous now for four years. I like the conference a lot. A lot of macro guys making big decisions, have nothing to do with what we do for a living. Bill miller, stock picker, okay, maybe thats out of favor. When you take these markets, you say the dangerous, what does it mean . Boston scientific last night, you listen to these guys. All these Central Banks they pump up all the stocks. How about if you have innovation . How about if you do the right thing . How about if you make a deal . How about if you change your coloration . Danger, danger, danger. Go listen to bill miller, 9 long bond versus 6 short rate. Weve got a short rate thats very low. A 10year oh, my god, im shaking the 10year is at a price if i could have got that mortgage like the g. I. Bill when my father got back from world war ii. So when i hear the word danger, i think one thing, these guys must run so much money that they cant possibly own a Boston Scientific because its only like 28 billion and theyd have to own the whole company. It is dangerous to run that much money because you are then not able to be able to maneuver among stocks and have to focus on bonds. And are bonds dangerous . When they get into a negative yield, yes. And theyre saying i cant help you because i run billions, and billions, maybe i should give some back if its so dangerous. Well, it can be an opportunity for marketing purposes. And theyve been very successful at raising assets. I would draw a clear distinction between some of the people we mentioned earlier who raise a great deal of money and have succeeded in doing that and putting up okay numbers. Right. Sometimes good numbers this this tough environment, but maybe benefit from that idea that were going to protect you because we see the end of the world coming, or not really that. No, not the end of the world. But, mr. Icahn stephen king. To give him his due. Hes not marketing to anybody, carl icahn, thats all his money. Youre right. When he comes to stock picking, hes also a great stock picker. Thats what i like him for. Hes been talking that way for a while now too. But at least i can push out the, well, hes not marketing or anything else. Hes telling you from his gut how he feels. No, thats not fair to carl. Carl say dangerous but say dangerous to like netflix. Im just regarding danger as being overall theme of fright, of scare, of Central Bank Intervention that frightens all these guys. And i come back and i am a jack bogle say when you run that much money, hay, youre just the market. Well, theres a difference between saying that theyre just plain wrong, that their macro view is wrong, and saying there will be opportunities even if theyre right. A lot of markets they have to play in are dangerous. I mean, i would not own a german bond. Theyre dangerous. But what they play in, and i use the word play, is what bill miller says. He said, listen, these guys are in markets, and theyre playing markets, and if they looked at individual opportunities, and let me give you an example of the most plain vanilla in your face opportunity, i would tell you the same thing this morning, amazon. You can say hes simplifying things. Im saying the markets they are in are not necessarily indicative of what we talk about. Okay. But what about this market right now coming off a particularly a bad day . I think accentuated the decline. Youre right. May have exacerbated some fears. I feel its always interesting to listen to that point of view. And ive been hearing it for many years. I used to attend this conference down at my friend kyle bass ranch, a lot of the same things. The basic idea you cant keep adding debt to solve a debt crisis. And one day im sure it will end badly, but of course were in the here and now, and investor want returns. Yes. Its been ending badly since i got in with dow 100 jim, it doesnt mean it wont. I got to be alive long enough yes, there was a 30year bull market in bonds. I am just saying that in the long run as we know from the great advisor are dead. I think when we look at this market we are faced with a situation that is not as dangerous as many other markets that i have seen. Sure. And thats what i am faulting these guys on. I mean, 87 was really dangerous. That was a very dangerous market. In retrospect we can always say that. The Systemic Risk is not as great now. Theres like price risk. But im just trying to put the danger in perspective. When the dow can go from 12,000 to 6,600, dangerous. I mean, like when youre worried about my paycheck, am i going to deposit my paycheck, maybe i should take my money out of j. P. Morgan and put it in treasuries. Thats a moment. I did that. It was dangerous. Short term youve been saying build cash, sell into rallies. Yes, raise some cash. Are you now saying sell into anything . Sno, no, what im saying is dont like this particular market. It could be a down 7 market. Ive been overlaying december over and over again on mad money. But i think the word dangerous is like the word crash, okay . Dangerous is sell everything. I went on the today show once and said sell everything you need if you need it for the next five years, the dow was about 10,800 and it went down to 6,600, and that call i regretted, even though i was right i regretted that call because it was so visceral. But then i listened to yesterday and its like, wow, its dangerous, its dangerous, its dangerous. It is. Though we should point out those guys say thag are still actively engaged in these markets and in and out every single day. They werent necessarily talking about the equity markets. Well, thats theyre too big. They run too much money. I mean, its like the only guy who has a solution is musk. The biggest short position. I know. Biggest short position real estate. Musk is dangerous. Lets get to wells fargo this morning and the fallout over those alleged abuse of sale practices. Last night on mad money john stumpf, ceo apologized, he held himself accountable, expressed regret about any situation where a customer received a product he or she did not request. Stumpf also told jim he intends to stay on as ceo. Take a listen. Some people say you have to resign. Well, jim, i think the best thing i can do right now is lead this company. And lead this company forward. In fact, today we made actually an announcement about Product Sales goals. We never intended for Product Sales or any dynamic or any part of a Management System to be misinterpreted. No plans to exit. The journal today says they dont get it that theres no guarantee it cant happen again. Boy, i tell you, i disagree with that. I didnt like the journalists headline which said he blamed all his guys. Thats certainly not what i heard. First of all, lets start at the very beginning. He came on. He came on mad money and spoke for longer than probably give him in front of the senate, thats a little facetious, but you know what i mean. So you dont come on you know, i think its i think it shows standup that he came on and didnt dodge. I also think there were the key points in that interview versus what i heard or read is that he said the board several times, the board. So now you look at fredric fredrico pena, former department of energy head, but look at James Quigley and ceo of deloitte on the audit committee. You say if its the board its those gentlemen that will have to speak up before the september 20th hearing. You wont get a press release from them. But the board is making up decisions right now and thats different from Everything Else i read in the paper. What about the stock . 47 down from 50 not a few days back. Heading into what given the performance of our equity markets is going to be a higher rate cycle whether its next week or december. Thats a good thing. Second biggest money after bank of america. As opposed to all of the concerns that have been raised as a result of this scandal . Thats why my chapel trust owns it but also because of the cross sell. Because the cross sells been so magnificent. Now, we didnt, if you like the cross sell and you listen to the change in policy, perhaps you would be like piper jaffry yesterday saying this Retail Market could stagnate. I asked Warren Buffett, he is very important to this story, if Warren Buffett ever were to sell this stock would not be at 47. It has more than a 3 yield. Still high quality bank. I do not believe its reputation is so in tatters from this that it will stop opening accounts. That said, i think this was one of those things where the company, i believe, initially misunderstood how powerfully negative this story is. I think they looked at the amount of money that the feds, that bank of america, j. P. Morgan, citi paid to the feds and they said this is not that much and that was never the story. I think they misjudged the power of the numbers, the large scale numbers, new yorker wrote an article saying 2 million admitted fraud, which is not true by the way. It was not 2 million admitted fraud. It was 2 million identified but they couldnt be sure. But it doesnt matter. The fact is that juggernaut against wells fargo is going to plague a cloud over that stock not unlike the whale even though its not really i think as bad as the whale, the whale is j. P. Morgan, there will come a moment when john stumpf will buy stock and the world will decide and a clawback let me just say last thing the clawback, the person directly in charge, her conversation has to be clawback, period, end of story, must be clawback if people are going to stay in their positions. Adds another story for next week, thats for sure. When we come back, ceos of bayer and monsanto on their 66 billion deal. A first on cnbc interview. Take another look at the premarket. More squawk on the street from post nine in a minute. S been crl being back so were constantly going over our data limit. Oh, well, now all of our new plans come with no data overages. Wow, no more overages . So that means. Go on. Say it. Well finally be in control. And were back. Introducing new at t plans with no data overage charges. Experience the thrill of the lexus is f sport. Because the ultimate expression of power, is control. This is the pursuit of perfection. Monsanto agreeing to be acquired by Germanys Bayer this morning for 128 a share in an allcash transaction. The deal values monsanto with 66 billion. That does include the companys debt. Werner baumann is the ceo of bayer and hugh grant is the ceo of monsanto. Mr. Baumann, let me begin with you. Of course the marketplace has known about the possibility of this deal for some time. And thats given your investors an opportunity to make their opinions known. Many have been supportive of the deal, particularly as youve sort of talked to your investor base, but there are those who say this is empire building, this is taking the company in a completely different direction. Why is monsanto the right transaction given its size for bayer to be doing and doing now . Well, thank you for the question. And the most important thing and that is what weve really been looking at is what it takes in order to serve our customers and to grow us better in the future. And the great combination of monsanto and us is doing exactly that where we can bring Better Solutions, faster to the growers so they can help contribute to feeding an ever growing world. Thats what this is all about. And you believe that is going to bring stronger growth obviously then would the previous strategy of your predecessor . Well, this is going to enable both companies to combine their innovation efforts early on in order to develop better integrated solutions for the pharmas rather than doing things conventionally. And thats where the power of this combination lies including the significant competencies we have in both organizations. And that is exactly what is going to be needed in the market Going Forward. And this is going to be a thing that is going to become more urgent as we move along into the next phase of farming. All right. Were looking at the stock prices of the two companies and yours is doing well this morning. Perhaps because you paid 128. Mr. Grant, there are those who believed you would be able to get more for monsanto, more than what i think is about 18. 5 times current year ebitda, about 16 times 2017 estimates. Why take 128 in cash . Why was that the right price . And why was that the right consideration . Why not also have gone for some stock, perhaps, to give your current shareholders an opportunity to benefit from some of the things that mr. Baumann just identified . Thanks for the question and the invitation today. So were really pleased with the deal. It took a long time. The board thoroughly evaluated the whole range of options. And this was the strongest option. Its an allcash deal. Its a 44 premium. Its 18. 5 multiple. So as we looked at the opportunity, its very strong for our shareholders. And as we look at the future to werners point, we think the combination of taking the monsanto stable biotechnology seeds and data science and combining that with chemistry we unlock future innovation growers desperately need at the moment. So its a great deal for today. And i think a real opportunity for the future. And to those, mr. Grant, who say youre selling really near the bottom of a challenging ag cycle. Yes, youre getting a multiple certainly in keeping what some of the others paid, but we thought there was a greater opportunity ahead here and youre selling too cheaply. What do you say . Yeah, i dont agree. I think its really hard to time ag cycles. Weve been through 40 years now of depressed crop prices. Tenyear low for corn, fiveyear low for wheat. When you look at a deal like this, you cant try and time these things. You have to take the longer view. And i think when you look at the technologies and the opportunity ahead, agriculture needs some of these new products. So i think this is a strong deal. I think its a good deal for our shareholders. And i think its a mistake to try and time commodity markets. Weve seen a fouryear trough. Who knows how long this is going to take to turn. Mr. Baumann, certainly there were some questions as we might expect about the Regulatory Environment and what this deal will face both here in the u. S. And the eu. You got some of those on your Conference Call with analysts earlier. And you actually said youve gotten at least an initial reachout to some regulators. I think i heard you say you had some encouraging feedback. But its early. Yes. What gives you the confidence that this is going to be able to pass the muster both in the u. S. And the eu when farmers right now are looking at the opportunities in front of them and seeing dow and dupont get together, singeta and now you two together. So this speaks to the combination of the quality we have in front of us. We have very, very little overlay, that is of course going to enable a very, very lets say constructive discussion with regulators about their concerns on where we do have these overlaps, but its substantially less than in some of the other cases where there are significant product overlaps. This whole transaction and the whole vision we see is driven by growth and innovation and not necessarily huge cost cutting. This combination is going to be driven by highly complimentary product portfolios, and based on the analysis we have done, each of our companies on our own with our antitrust council and advisors we together during the contract negotiations you can certainly see that a lot of the activity surrounding antitrust is all about the uncertainty. We developed a joint level of comfort that the antitrust disposals that might be required can be managed with a combination of our two businesses. Have you made thats what i meant. Have you made commitments to divestitures in the commitments you will undertake in order to receive antitrust approval or simply your best efforts . Well, we have made some specific inclusions in the merger agreement to also provide the monsanto board with a necessary level of comfort. We feel comfortable with it. You and his team feel comfortable with it, so we believe we have a base that is stipulated in the contract that we can jointly work against. I would just add, i think what makes this unique is a clear view of a pathway to closing this deal because the two businesses are so uniquely separate between chemistry, data science, thats the opportunity on closing this in a 12, 15month period. Mr. Grant, ive had any number of ceos ive interviewed for deals who also believe strongly they were fine on the antitrust front. But its been a tough environment both here in the u. S. And in the eu. Some unexpected things have occurred. Do you feel like youre being compensated enough . Should you not get what you want on the antitrust front, the 2 billion reverse break fee, the Company Comes out on the other side and be independent is not the easiest thing. Are you comfortable monsanto will be well positioned if it doesnt go your way . We are. But were focused my personal commitment to this, the commitment of my team is to do two things. Number one, during the the 12 to 15 months well see two springs and one harvest. So were going to focus on serving and growing customers around the world. Number two, were going to get this deal closed. And i feel confident when the analysis that weve done with what weve done with our advisors and some of our previous analysis as well that this is a clean deal. Yeah. And, mr. Baumann, if im a farmer, what do you tell me to make me feel better about you two getting together . Well, if youre a farmer, i would tell you that this combination is going to provide Better Solutions for you to pick and choose from, or to go for an enhanced offering that we bring to the table with a unique combination of biologicals, seeds, Crop Protection and analytics that will ultimately enable you as a farmer to take better decisions and to drive higher yields and with that a better farm income for you and your family. I would just add yes, mr. Grant, go ahead. I would just add one thing. The name of the game in farming around the world whether youre a big one or small one is driving efficiency. And that becomes really, really important in tough times. Farmers are starving for innovation. Right. And this through time will bring better innovation to them. And mr. Baumann, 1. 5 billion in synergies in ebitda, youre confident you can achieve that after three years, why . We have a track record of sustainable sustainablely with all the transactions weve done delivering against the cost synergy targets we have set ourselves 1. 5 billion is a tall order but we are absolutely confident we are going to reach this. And we have already started some preintegration planning. We will for sure be working very, very detailed on it and then we will also deliver, rest assured. Well, gentlemen, we certainly appreciate youre taking the time with us this morning. Werner baumann, the ceo of bayer, hugh grant, the ceo of monsanto. Carl. Thank you. Thanks so much, david. The opening bell just about four and a half minutes away. D can yy you recommend synthetic over cedar . Super food . Is that a real thing . Its a great school, but is it the right the one for her . Is this really any better than the one you got last year . If we consolidate suppliers whats the savings there . So should we go with the 467 horsepower . Or is a 423 enough . Good question. You ask a lot of good questions. I think we should move you into our new fund. Ok. Sure. But are you asking enough about how your wealth is managed . Wealth management, at charles schwab. Announcer when they test you, stand firm and move only when you hear the seatbelt click that says theyre buckled in for the drive. Never give up till they buckle up. Mary buys a little lamb. One of millions of orders on this companys servers. Accessible by thousands of suppliers and employees globally. But with Cyber Threats on the rise, marys data could be under attack. With the help of at t, and security that senses and mitigates Cyber Threats, their Critical Data is safer than ever. Giving them the agility to be open secure. Because no one knows like at t. Two minutes until the opening bell. Lets get cramers mad dash. Serepta up today very big. That is because the biggest critic of their drug for muscular dystrophy, a man by the name of ronald farkas, he has departed the fda for going to the private sector. And why this is important is that this is kind of one of those binary situations. If sarepta gets approval could go higher, if it doesnt, could go lower. This is a terrible disease. A lot of the people of the parents who had this went to the fda said the safety profile was fine, please give us something compassionately. I think this is a sign the fda is going to give them something. I think its very good for the parents, of course for the sufferers. Medical products and biotech, House Oversight going to tackle epipen next week. Saw that. There are some stories out this morning and yesterday about mylans executive comp and how it compares to almost everyone except fregeneron. Yeah. Regeneron to create tremendous wealth, but more importantly remember you only have to have one injection in the eye per month versus every week with his mack lar degeneration drug. Remarkable. I think when you get off the desk you hear mylan, hear teva, valeant, yesterday we had a story defense of valeant by bill miller. Then again the stock is down gigantically. These are companies regarded as right on r d and very aggressive on pricing. Those are the ones the industry is like how could you do this to us. Theyre the ones that the heat should be on. Lets get to the opening bell here. And the s p at the bottom of your screen. At the big board this morning, Elizabeth Arden celebrating its acquisition by revlon over at the nasdaq Financial Engines independent Investment Advisor celebrating its 20th anniversary. Got some things going on in retail today, jim. Hermez abandons guidance. Regard to european, again, unfortunately this is theyll cite terrorism which is actually very much plays a role there. But hong kong, hong kong is bad. The readthrough on hong kong, wealthy people, we got the same comment by the way from mes est lauder. And hong kong is not good anymore and thats by the way important for apple too because hong kong had been a great market and then it cooled. It was mentioned actually in the Conference Call. But anyone who if you sell a product that is very expensive, remember, if youre from the peoples republic, you cant go and buy one of these 30 million mansions. They dont allow that there. They have no like, you know, further lane. And they dont have that stuff in the hamptons. They dont have 432 park avenue. No, but they do have rish mono, thats the way to show wealth. Coach this is going to be the lowest level since february. That note, that Morgan Stanley note underweight. Basically saying that the turn is not for real now. The one that has the for real one is kate spade. I mean, kate spade is back. I dont know, this coach story i just said to my team from mad money, we got to look into this because the lack of sustainability to turn was one of those notes where you said, boy, i got to get out of town. My daughter has a retrograde coach bag she bought on ebay. Really cool. They got to get back to being cool. Didnt stop citi from upping macys. How do you like that . Saying theres catalyst ahead. Of course theyre closing 100 stores, so i think the real catalyst is for tjx. My trust owns it because that merchandise usually ends up out of tjx, but this one said that the quarter could be a catalyst. Did talk about a 4 yield. If you look at the cash flows that yield safe, now youre probably thinking, david, thats a 2 for 1 split from last years delivering alpha, but no, it was 71 on delivering alpha, that was not a 2 for 1 split, that was a decline. Thank you for clearing that up. Its not a two for one. I appreciate that. Its got derisked. I do believe the inventories are lean around the country. Speaking of inventories, you know, we keep forgetting that back to School Season was good according to pvh. David, you talked about monsanto and bayer. I did. Monsanto will not want to go against bayer wants being the same creating new seats but pvh almost has an antitrust issue on shirts and ties. They have so much of the market. Dont forget they have Tommy Hilfiger and calvin klein. No one has a better look at macys than pvh. I like this call. I think its a good call. Better than last years delivering alpha call. Well see how yesterdays delivering alpha call dangerous. We got to put high voltage signs up. Yes. This is called the third rail delivering third rail. I mean, you ever see the third rail . We spent a lot of time on it yesterday, jim chenos coming out talking about tesla. Corporate governance weve also focused on here in that solarcity deal. But beyond that, jim, we had some pointed questions for him and he came back, stock is up today. But it is favorite of the hedge fund community. Solarcity has had theres been a big downturn in that solar business since this deal was even announced. Thats obviously not what he was talking about. Hes talking about how the company is worthless. Right. Hes talking about the fact that theyre going to need excessive access to the Capital Markets for a long period of time given what he believes now theyre taking on in solarcity. The shareholder vote hasnt occurred yet. Didnt you love this moment you asked him, well they have access to capital, he says they have access to capital until they dont and thats often been the story of these companies that are challenged. One day theres no access to capital and people say, wow. Jay leno says they make a lot of cars at tesla, but theres no access to capital. Thats the concern. Youve pointed out many times when it comes to tesla theres such a builtin group of believers, i dont know how much they add up to when it comes to jim stewart. I keep going back to jim stewarts comment on our show, the great New York Times columnist. Tesla shareholders like tesla stock. And it sounded oxymoronic, but its true. Theres this core group of people like jay leno, like morgan freeman. Yes. Morgan freeman, is he necessarily a stock picker . No, hes more important than that. Hes a thought lied eader. The reason thats important is because people keep buying teslas. My daughter wants a tesla. I said reach benchmarks and she wont reach the benchmark in time so i dont have to follow through with it. Speaking of amazon, bill miller had thoughts on its potential next few years. Dallas morning news has a piece on how theyre opening 21 popup Electronic Stores for the holida holidays. Only did six last year. So youre going to see more retail space with the amazon name on it. Amazon should be careful of walmart because i think jet. Com i think they come to play. Interesting. That would be very interesting if they really were able to mount a competitive challenge. Walmarts the only other company with unlimited capital but its actual money, because the board likes yeah, and the Shareholder Base given the waltons own the company that is willing to say invest for the future, were not worried about quarter to quarter performance which is a great benefit at amazon because mr. Bezos has a Shareholder Base willing to let him do that. What did i think about the discussion of chenos, amazon versus what the cash flow might be for alibaba . I thought also about tesla. Yeah. Amazon didnt really need access to the debt markets although there was a kerfuffle some time back with a Lehman Brothers analyst who came out and talked about amazon and bezos felt i forget when it was, but its when he made himself available to us. Suddenly he was on squawk box all the time because he knew he had to have access to the km Capital Markets. Then he disappeared. Apple shares are up again. Well, theres the inventories. The sprint and tmobile news about iphone 7 activation. I think youll find as tmobile and as sprint goes so will verizon and att. That the readthrough should be extended. Remember he came on mad money and said the 7 is going to be huge. We had people figuring he was talking his book because he has a lot of customers, but my understanding is the situation those two Bigger Companies had a very similar readthrough. Its tough to get this phone. The snap judgment critics may not have been as right as the new layer of critics. Theres not a lot of these phones. Tim cook was on Good Morning America this morning with robin roberts. Said the 7 is the best phone weve ever created. Take a listen to this. Wireless is the future. And so when you decide on what the future is, you want to get there as soon as you can. Now, why is that important for the consumer . Well, that plug, that jack, takes up a lot of space in the phone. And theres a lot of more important things we can provide for the consumer than that jack. We can provide a larger battery. The stereo speakers i mentioned, those are also enabled because the jack is not there anymore. Well, that was pretty thats a good spot to be able to a better camera in the smaller phone also. Right. By the way, i dont know about you guys but all the apps that i have downloaded, i have the 5, which makes me what a triceratops . I need a bigger phone. I need more processing power. I need faster processing power. I want more battery life. By the way, i also dont want a samsung. Right. For obvious reasons. Yes. The post dauman era has begun at viacom and the stock is up initially 2. 5 , today. They have a new nonexecutive chairman at the company, mr. May as i pointed out some time back. Of course dauman stepped down as ceo tom dooley filling that role for the rest of this month but competing for the top job. Going to have to do a little reporting on that one see what we can find out. But i wanted to note the stock having a nice day in contrast to the rest of the media not doing much. Im not sure what the news is beyond that. Well, there are a lot of people obviously who feel now that theres someone there that this is just less of a cbs story. I dont think you can kill it. Its Abraham Lincoln and vampire, doesnt ever go away. Finally, speaking of media, see this new twitter app for apple tv. The amazon streaming service. In time for their first nfl game. The thursday night football that wrecks everybody if youre a fantasy wrecks everybodys friday. Thats why i dont watch the end. But, yeah, thats going to be a big deal. Adam bane tweeting about it. That is adam. I figure he does his own tweets. Yes, he does. But, yeah. They need to be affiliated with the nfl. And the nfl is still generating numbers that are rather extraordinary. Did you hear 425 is a big game. Really . The eagles play the steelers two weeks from now 425, could be the game that determines exactly how great they really are. Definitely hitching their wagon to the league, theres no question about that. Yes. And you want to do that because its just thursday night the players will tell you thats a terrible game because theyre tired. But america sees two tired teams against each other, they dont care. Youre tired, youre tired, put two tired teams together and you get a good game. Maybe. Well, not really good. The scoring is so low on thursday because its like, man, im tired, how about you . Are you tired . In the huddle they talk about being tired. The front line, man, im sleeping. Yeah. They talk about it. Theyre exhausted. With all that the dow is up 25 points. Awfully mild compared to the last three sessions. Lets get to bob pisani. Bob. Good morning, carl. Much lower volatility in the last hour last 12 hours really since the market closed yesterday. Lower volatility in bonds. Lower volatility in stocks. Lower volatility in the dollar. Oil was behaving. We did have a smaller than expected build in u. S. Crude stockpiles reported overnight, but in the last couple hours oil has drifted lower. So theres your one little weak spot. Take a look at the sectors and see energy is the laggard here to the downside. But not by much. Banks have turned positive. Tech has turned positive as well. Interest rate sensitive sector which is have had a tough time in the last few days like reits there and utilities are flat to either side of positive or negative. Lets call that mixed. Europe is generally positive, but you heard about whats going on in the luxury space with richemont, which by the way makes cartier, the watches there, the jewelry there, they issued a profit warning, hermes abandoning the 8. 5 sales target. Richemont expecting 45 lower operating profit than a year ago, that was a lot bigger than people expecting to see down about 4 there. I thought the call on macys was very interesting. And not just because the stocks dropped about 50 in the last year, but citi upgrading that on the ample Free Cash Flow. But the dividend yield, i think it was important for them to emphasize that because most analysts do not emphasize the dividend yield and i find that a little bit amazing because these companies, many of them act offer very attractive dividend yields. This has worked for the oil companies. Why wouldnt it work for some of the retail store companies . So you have macys offering a 4. 3 or 4. 4 dividend yield if you round it up. But look at other ones, kohls with a 4. 7 dividend yield, gap 4 , l brands, 3. 3, coach, 3. 7. Nobody ever brings this up, but they have made attempts to attract dividend interest or dividend hungry investors out there. Take a look at how theyre doing here. Macys on the upside, not Much Movement from some of the other stocks. Remember, macys was a 70 stock just about a year ago, maybe june 2015 or so. So its essentially cut in half at this point. Speaking of the search for yield, if you think the search for yield is over, you see whats going on with the ipo market. Were finally getting some that are coming. Ill show you in the next week or so whats happening, but we had one move forward, actually. Noble midstream, comes out of noble, a pipeline company, oil and natural gas. 12. 5 million shares, it was supposed to price tomorrow night. Now, they tried in december to price. They werent able to. They had a 6. 2 dividend yield. They suddenly announced theyre coming and changed the dividend yield to 7. 5 . What happened . The thing sells out. They actually closed the book early, which is a very good sign and announced suddenly were going to price this thing tonight. I wouldnt be surprised if this prices right at the top end of the market 21 or so. Which goes to show you this was the first mlp in a year, more than a year, that if you price it with the right dividend yield for dividend hungry investors, you get interest. The thing closed early. Ill keep an eye on that, talk about that first thing tomorrow morning. Ipo market i said this before, but actually we are getting some numbers, some names coming out tomorrow night bank of nt, the biggest bank in bermuda, going to price right down here, lot of interest in that. Everbridge also pricing as well. Next week valvoline out, alf beauty, which is a Beauty Company sells cosmetics and the trade desk which is a tech platform an ad platform for tech buyers will also be pricing. A number of names in the next few days. See how the market is doing overall, right now dow up 18 points. Carl, back to you. Thanks so much, bob. Lets get to the bond pits this morning. Rick santelli at the cme in chicago. Hey, rick. Hi, carl. You know, when counterintuitive moves reign supreme, its very confusing to investors, and it ought to be. Its because policy is hard to control when youre trying to control outcomes. Ill give you an example. When we look up at the board, we see yields have moved rather dramatically. This is to the upside at a time where certain Central Banks have pushed rates negative to keep rates low, played with currencies to keep rates low. But the dollar versus the yen we see it didnt work out well as they had negative rates, their currency was going up. So is it with the long end especially. If you look at the short end first though, everything comparing back to brexit, look at twoyear note rates. Now, were not at the highs but were hovering at the high zone. Heres where it gets interesting. Lets look at the u. S. 10 and look at all these maturities under the context of off their most recent extreme low how much have they moved higher . For the u. S. Its about 35 basis points from around the 135 level as we hover at 170. If you look at bund yields, about 22 basis points from roughly about minus 18. For the japanese side of the equation, the jgbs, 28 basis points. From about minus 29 to hovering around 0. But the winner, the winner is the gilt. If you look at the uk 10year, its 40 basis points off their low yields. And if you look at the pound dollar while this is going on, a bit counterintuitive because now the pound has turned down. That Double Bottom that traders other way. On the dollar index by looking at that chart it would be hard to assess how much rates have moved in the shortterm. All this is going on when Central Banks are doing their darnedest to go the other way. What does that make traders . Nervous. Carl, back to you. Rick, thank you very much. Welcome back. When we come back, some tech watchers weighing in on the apple watch series 2. Were going to bring you the latest reviews. And then also ahead, a special treat for us, Baseball Hall of famer cal ripken jr. On the business of the game. Dow up 19 points. Were back after a break. Anything worth pursuing hard work and a plan. At baird, we approach your Wealth Management strategy the same way to create a Financial Plan built to last from generation to generation. Well listen. Well talk. Well plan. Baird. Man, im glaaflac c pays cash. Isnt Major Medical enough . No whos gonna help cover the holes in their plans . Aflac like rising copays and deductibles. Aflac or help pay the mortgage . Or child care . Aflaaac and everyday expenses . Aflac learn about one day pay at aflac. Com boat blurlbrlblrlbr whmade plastics that tmake them lighter . Rs the lubricants that improved fuel economy. Even technology to make engines more efficient. What company does all this . Exxonmobil, thats who. Were working on all these things to make cars better and use less fuel. Helping you save money and reduce emissions. And you thought we just made the gas. Energy lives here. The reviews of the new apple watch are out, and the reviews are mixed. The wall street journal jo anna stern writes you dont need an apple watch. Calling it the first real apple watch. Think of apples new ecosystem like a body, the earpods are the mouth and apple watch is the hand. And lauren good says gps sensor makes the watch a serious fitness tracker. Says its what the first should have been, a great fitness smart watch. Ive been thinking about upgrading just because i was fitbit, my family is a fitbit family and i feel this is something i feel i would care about. Water resistance very important for me because when i go away, im careful not to even put it on. I go away to the islands say i dont want to do that. But the main thing i want is wireless charge and do not have that yet. Because i dont like having to carry that other charger with me. When the first one came out, we were all sitting here talking about how it would be a high fashion accessory, put the swiss out of business. Clearly a uturn from that strategy, right . Yeah. And, you know, the price point is so much above it, fitbit doesnt answer the phone, whatever. But i do think that its much more sport and that nike is being emphasized, also that nikes involved. But, no, the fashion review is not as important as being able to see whos on the phone and not taking the call. Which when im with apple executives seems to be can take it in the pool now. Its fully waterproof, which is good. Ive wrecked i wrecked a brig brightling in a trip i took to barbad barbados. It was like time stopped. It was the most fun i had. No, i broke it. Time had stopped. Youve been a faithful you have been faithful to that thing. Yeah, look who just called me. Forget about it. Well get stop trading with jim in a moment. Dow now down 12. S p virtually unchanged for the week. Theres no one road out there. No one surface. No one speed. No one way of driving on each and every road. But there is one car that can conquer them all. The mercedesbenz cclass. Five driving modes let you customize the steering, shift points, and suspension to fit the mood youre in. And the road youre on. The 2016 cclass. Lease the c300 for 369 a month at your local mercedesbenz dealer. Time for cramer and stop trading. I have a critical piece here by Morgan Stanley, underweight on post construction evaluation freeport mcmoran. Yesterday on delivering alpha we had Robert Bishop talk. I was trying to get him to recommend freeport and he said no. The Balance Sheets still bad but the Morgan Stanley says you need 275 for copper right now 243 for copper, unless copper goes up dramatically, they just dont like it. This is a carl icahn name by the way. He is. Large shareholder, board seats as well. Right. Remember, thats a good example if its dangerous you would not own this stock, but he picks stocks in a backdrop thats dangerous. I want to point that out thats good. How about herbalife . How is that doing . I dont know. I havent looked. Why dont we look at that . When we get back on tv oh, shoot maybe the ticker wont even be a ticker one day if carl has his way. Only going to buy 50 of the stock and up 1. 90. Whats on mad tonight . Weve got Toll Brothers. I want to ask if theyre going to have apple home kit homes built in. I find Toll Brothers to be incredibly transparent. I love them and i cannot wait to speak to doug. Jim, well see you tonight. Absolutely. A big week for mad money 6 00 p. M. Eastern time. Thank you. When we come back, apple did rally during that selloff yesterday, as you know, leading the s p again today. Were going to explore whats ahead for the stock and then Baseball Hall of famer cal ripken jr. On the business of baseball. Were back in a minute. 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However many cheese puffs may fly. Youre the driver. The one in control. Stand firm. Just wait. [click] and move only when you hear the click that says theyre buckled in for the drive. Never give up till they buckle up. Good wednesday morning, welcome back to squawk on the street. Im Carl Quintanilla and sarah eisen with david faber at the new york stock exchange. Shift of the volatility of the past few days. The dow basically unchanged, s p almost perfectly unchanged for the week at least, but crude remains troublesome below 45 and inventories in half an hour. Our road map for the hour begins with that huge deal this morning. Bayer acquiring monsanto a 66 billion deal. The largest cash bid on record. We spoke with both ceos. Stock bouncing back a bit this morning from the selloff yesterday. Should investors remain cautious ahead of the fed next week . And uber launching its Autonomous Cars Pilot Program in pittsburgh. Well take a look behind the wheel there as Ride Sharing Services take a big step forward into selfdriving cars. As sarah said its been official as we told you it would be a few times of course, and the price coming in sort of right where it was not that long ago. Went up 50 cents a share 128 a share, all cash is what bayers going to pay to acquire monsanto in a huge deal that is bringing together of course Crop Protection and seeds and a number of other businesses as well. Germanys bayer would take control of monsanto if and when the deal is completed theyre looking for that to occur at the end of next year. And of course it is a long antitrust slog that has some concerned perhaps, and one reason why you do see monsanto stock price trading so far below the 128 a share it is agreed to be acquired at, i did ask hugh grant, monsantos ceo, why 128 was the right price given the company many say is at the bottom of an ag cycle and that there might have been perhaps an opportunity, at least some would have said, to get an even higher multiple. Heres what he had to say. Were really pleased with the deal. It took a long time. The board thoroughly evaluated the whole range of options. And this was the strongest option. Its an allcash deal. Its a 44 premium. 18. 5 multiple. So as we looked at the opportuni opportunity. Good deal for shareholders. Bayer will tell you were really only paying 16. 5 times next year because that of course is going to go higher. The 44 premium thats over the price of monsanto and happened prior to any discussion at all of the possibility that it conceivably could be sold. Remember it wasnt that long ago monsantoi monsanto itself was looking to acquire scinjenta. Kim china buying and this raises the question what will antitrust regulators think, what will the farmer who buy the products both in Crop Protection and seeds think about all this consolidation . And will either in the u. S. Or the eu or both regulators say wait a second, this is simply one step too far . Heres what werner baumann, the ceo of bayer, had to say about that. Based on the analysis we have done each of our companies on our own, with our antitrust council and advisors we together during the contract negotiations you can certainly see that a lot of the activity surrounding antitrust is all about the certainty we develop a joint level of comfort that the antitrust disposals that might be required can be managed with a combination of our two businesses. And he did go onto say in our interview that they are going to be obligated, it would seem, we havent seen a merger agreement yet. Under the merger agreement at least to divest certain businesses to receive antitrust approval. Well get more details on that. There is a 2 billion reverse break fee, namely that would be paid from bayer to monsanto should the deal not receive antitrust approval and the two companies have to remain independent. Thats the key question here, of course. But it is an enormous deal. Bayer is borrowing at those extraordinarily low rates. Yes. Issuing bonds in part to do that. Also some rights offerings theyve done as well of equity to raise the money for that enormous cash portion. I mean, its 57 billion cash. Becomes a little more expensive if they have to put the money out. It does, or will ecb be buying bonds as they did, funny world we live in. They have to buy a lot of bonds. They do. Thats the program. The other interesting fact here is the backdrop. You alluded to the fact theres been a lot of consolidation, david. I would suggest its low global gdp for several years, low currency swings and these are international businesses, weve seen that hit dupont and the crop prices are down. Revenues, as you say, sarah, the top line we talk so often about, you can present bottom lines that being earnings that are better as a result of share buybacks and so many other things. But to get it going theyre looking for those kinds of synergies theyre talking about here in bringing these two businesses together. Providing innovation and they say 1. 5 billion in synergies, not from cost but sales after three years. Top three deals so far this year involve a foreign buyer of a u. S. Company, bayer, enbridge, shire. Interestingly everythings coming on sale here selling to other countries. Especially given a dollar that, all right, it hasnt been as strong, i guess, this year. As it was last. But its still historically kind of strong. Yeah. Suggests that u. S. Assets im thinking back to tim geithner speaking yesterday at deliver alpha, u. S. Assets are still relatively attractive in the global world, u. S. Is still relative bright spot in the Global Economy and corporations are considered that way. Speaking more about the markets as stocks bouncing back a bit dow up 33 points from the selloff yesterday. Investors still cautious ahead of the fed next week, of course, for more on the markets lets bring in bill smeed, joins us here at post nine along with david kelly chief global strategist at j. P. Morgan funds. Good morning, guys. Good morning. Good morning. David, we got the fed uncertainty, weve got the worries about this global unwind of the bond market. Weve got median incomes leading all of the major papers today. How do you digest all those cross currents . Well, i think the key thing is that theres a fair amount of uncertainty both about the Federal Reserve and about the election in the u. S. And i think that uncertainty is keeping people on the sidelines, its added a little to volatility. But if you look towards the end of the year, obviously the election will deal with the uncertainty about u. S. Policy. And i dont expect much in the way of policy changes. And as for Interest Rates, they are low and theyre going to be rising. And that is still where we are. I think if anything investors should get ahead of this dissipation of uncertainty, get invested right now. Because when uncertainty goes down, equity markets ought to go up. You think dissipation of uncertainty, bill . Yeah, a more important statistic today Mortgage Applications were up 4. 2 , you reported that earlier, on firsttime home buyers, not refis. Hes absolutely right. The carpeten tnters and plumber the place to be and market is infatuated with Software Engineers and Computer Science people. So the beauty of this is theres a lot of fiveyear certainty that were in a 30 to 40yearold baby boom. And everything that goes with that. And theres very little certainty about whats going to go on in the next three to six months. So you pay a price right now as we have for having the longer vision. But like david says, you get that optimistic trade in place and then let time be your ally. David, on this conversation we were just having about the relative attractiveness of u. S. Assets, whether its the companies that carl just mentioned getting bought by overseas corporations or u. S. Stocks and bonds relative to the rest of the world, thats certainly been a theme. Does it continue here if the fed is ready to make a move . And with so much election uncertainty in the next few weeks. Well, i think it continues to be a theme certainly with regard to given very low Interest Rates in europe and japan, Global Investors are looking for yield anywhere they can find it. I think that is causing money to flow towards the United States. I think they also have economic problems in europe and japan. But with regard to the buying up of u. S. Companies, i mean, another way of looking at it is the u. S. Corporate tax code is so unfriendly to many businesses and so complicated that i think a lot of Global Corporations would like to operate outside of the United States. So i think it is a call to action to make our tax code more favorable so that we have more ownership of corporations being located in the United States. I think thats a mistake were making here by not really attacking that issue. Bill. Were a bit in the bill miller camp. The 30year Mortgage Rate is set off of 10year treasuries. Isnt it interesting out of the last few weeks youve had this very subtle quiet move and then all of a sudden you pop up and firsttime home buyers are upping their applications. So the fed does not set Interest Rates in the United States anymore. Millennials will set Interest Rates. If they borrow the money to buy houses and cars, the price of money will rise dramatically. And people will have to completely rearrange their investment thesis because capital will get demanded. Weve spent the last seven or eight years where kmcapital wast demanded. It all slopped into the common stock and bond market, and the reversal of that trade is going to mean who is making a lot of money on main street, does that translate into common stocks, you know, in the market. And thats a big change. Thats a huge change. To that point then the headlines in a lot of newspapers this morning is about annual income being up for the first time in a long time, 5. 2 . Exactly. Is that something that figures into your Investment Outlook though . No. Its just simply this. The best odds on the board are betting on a dramatically stronger economy driven by the maturation of 86 Million People between 21 and 40. Thats a fiveyear thing thats pretty simple. Theyll be five years older and five years more babies, more houses, better economy from the things that used to make the economy good. But dont have all these old people start taking money out of their 401 k s . No, people live in their houses way longer and todays 70yearold is dramatically more healthy than 30 years ago. Look at chart of mobility today, longterm mobility, its shocking. David, some people want to look at that census data yesterday and argue that it means the consumers going to surprise us, maybe not this year, maybe next year. Is that too simplistic . Well, the consumer has been surprising us. If you look at real consumer spending, its grown faster than the economy for seven straight quarters, i think this is the middle of the eighth quarter. Consumer spending is growing quietly but strongly. I dont think the u. S. Economy is going to boom because frankly were out of available workers. I think the u. S. Economy will, you know, use up whats left in terms of slack, but its healthy enough and i think it is time for the Federal Reserve to take us off this diet of monetary potato chips and candy and allow main street to get back into the game. Because i completely agree that what we need to do is foster actual investment spending in things that make us more productive rather than simply Financial Investment on the back of low Interest Rates. Youve been saying that for a while. Well see what happens. I have. Next week. David, bill, thank you guys, appreciate it much. Monetary potato chips is a new one, we heard candy and morphine. Lobster on the iwatch. And now potato chips. Speaking of monetary potato chips, a huge day at the delivering alpha conference and a lot of talk about central bankers. Our kate kelly joins us now with some of the highlights. A lot to digest, kate. There really was, sarah. But if there were few quick themes i had to point out, certainly an acknowledgment of the low growth environment and the fact that Central Banks like the zero Interest Rate policies are largely out of cards, maybe not compared to europe but in general. And the feeling that its very hard, frankly, to generate alpha in this environment. Lets listen to just a few of the highlights and then we can talk about it. Ever declining rates have not created a sustainable accelerating optic in growth. Putting too much emphasis on the Business Cycle and not enough on the long term bet cycle. We need to fix the tax system, close loopholes. Negative Interest Rates pose a huge headwind for institutions that have to meet longterm liability commitments. The idea that you should raise rates to replenish the arsenal and slow the economy, thats a weird argument to make. Its not true that the major governments are completely out of ammunition. So when jamie dimon says to raise Interest Rates, you think thats wrong . Thats right. I think that thats wrong. You know, paul singer of elliot management, theyve had a pretty good year so far up a little over 6 as i recall through the end of july. Hes super negative about the macro outlook. And, you know, had a number of pithy lines. One of my favorites though was i think were in the middle of a close to 40year experiment in how leveraged a system can be and in how many ways. And of course he went onto say you should sell any sort of g7 longterm government bonds. They are not a safe haven. Anyone who thinks that is out of their minds. He also thinks gold is underrepresented in peoples portfolios. I should add bill miller also had a 10year treasury short, wanted to pair that with an s p 500 long, he joked that his son told him that trade idea was boring and obvious. Maybe it is, but obviously to repeat myself, its something that these guys yesterday felt very strongly about. Ray dalio talking about what a difficult environment it is to operate in. One of my favorite lines from him was that hes trying simply to say stay six days ahead of the markets or even six months would be great, but thats about as far as they can go. And then finally, and we should talk about this, but a lot of concern and skepticism about the political environment, the quote unquote extremism were seeing in political rhetoric right now. Couple of people directly said they were a little concerned about the idea of a trump presidency. Tony resler on my panel saying trump would certainly add volatility, guys, to the market. So a lot to unpack there. Sort of depressing, which we were all remarking that this sort of group think that Central Bank Policy has run out of efficacy and that safe haven bonds are no longer safe. Im just wondering, kate, versus other years whether that group think was more negative. Because of course last year there were some doomsday calls and yet market had an okay year so far. I would say, sarah, good question by the way. It was both more negative and more macro. You got the sense people really are concerned about the world, whether its monetary policy, whether its fiscal policy or the lack thereof, whether its politics. I remember in past years hearing much more in the way of hard and fast investment ideas. And a few people pressed yesterday basically said i dont have any good ones right now to pass on. I wish i did. One person on my panel talked about that, hes sort of a debt relative value trader who looks to do two situations at the same time in arbitrage, some imbalances. But even paul singer said, you know, we do situational investing. And its hard to kind of share that with the public. So a lot of mixed messages, but a general pessimism. Certainly an educational day for all of us, kate. Thanks for recapping it. Our kate kelly in new york. When we come back, the reviews are in for the latest apple watch. Is it something you need or something you want . Were going to break it down. Shares of apple by the way trading up again today fivemonth high adding about half of the dows gains, which is up 45 points. Were back in a minute. Hey gary, what are you doing . Oh hey john, im connecting our brains so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at td ameritrade. [phone buzzing] some things are simply impossible to ignore. The strikingly designed lexus nx turbo and hybrid. The suv that dares to go beyond utility. This is the pursuit of perfection. [ clock titime. ] you only have so much. Thats why we want to make sure you wont have to wait on hold. And you wont have to guess when well turn up. Because after all we should fit into your life. Not the other way around. Reviews of the new apple watch are out, but the new model is getting mixed scores. Most major reviewers including those from the journal and usaed to ca lamenting its bigger si. And have a look at apple shares. Theyre up another 3 today more than 8 so far this week hitting a fivemonth high. Here to weigh in on what to do with the stock here, abai lamba and timothy aquary, gentlemen, good morning. Good morning. As we search through the reviews, i wonder how correlated the reviews are to the actual demand given what happened with iphone 7 and the remarks we got from tmobile and sprint yesterday. Im not sure apple watch will be the big news here, but its just expectations for iphone were low and tmobile and sprint data came in much stronger. As we go from now to year end the focus will be on iphone sales, iphone 7 uptick and the data points are probably going to be much better than expected. Expectations are very low. Yeah, tim, before we move on to the expectations and the numbers for the iphone, just on the watch here, the wall street journal still not a need, finally a want. The apple nike collaboration on the sports watch, what do we know about it . Do we know anything about the revenue share or the financial terms of this deal and what it may mean for both companies . You know, we dont know the specifics on the deal. Its difficult to say whether apples paying nike or, you know, nikes paying apple. I dont think nikes paying apple. I think that they have more to gain from this. I think, you know, this watch this is the first real watch. So this is the first product with gps that has a real use case. I think the product is fine. If you sort of look at the wear blg category and look at people who use wearables to exercise, you see apple has about a 20 share of the market. Nike has a 30 plus share of that market. So i think if apple can take some of that share that, you know, nike currently has, i think that can actually move the needle. But of course the story really is iphone of course. So abay, lets talk about the iphone, now its kind of a guessing game since apples breaking with tradition and not telling us the preorders. What do you make of what we heard from sprint and tmobile . What do your calculations suggest . And what does it mean for second half earnings estimates . Yeah, you know, its definitely a bit disappointing that apples not going to disclose those numbers. When we look at tmobile and sprint data, it definitely shows strong uptick strong initial uptick of the phones. And at this point were expecting 44 Million Units for this quarter. And we think they can get there and up probably within the guidance range. For the next quarter a lot will depend on the sell to and continuation of the sell to. We think the note 7 problems couldnt have come at a better time for apple. I think at this point apple has a chance to gain some more share because of the problems were seeing in that ecosystem. And the data points can get it to show some growth over the 75 Million Units we had last year in the december quarter. Its just amazing how the sentiment really shifts around this stock, tim. And i think youre a good reflection of this. You got some grief when you downgraded back in july. That turned out to be a good call. And you recently upgraded it i think on expectations, was it of this iphone 7 . And if so, what are you expecting in terms of the numbers . Yeah, look, to me the story iphone 7 is fine. Its a fine product. I think the galaxy issues certainly are a tailwind. But the issue now is going to shift to the install base. Right now you have 210 Million Units that are more than two years old. The upgrade rate within that part of the base very high. And if the streets expectations on the 7 are right, im not saying that they are right or they arent right, but if they are right, youre going to have 275 Million Units one year from today that are more than two years old. So the setup here really is, you know, every Single Person i talk to they all say, hey, thats great, talk to me in late october, november once they guide q4. Everyones still worried about calendar q4. Once we get through that i think the stock is really up, up, up from there. This install base issue and super cycle next year really is the story. Yeah. The upgrade cycle. Thank you both for joining us, abay with a 120 target on apple and tim with the 125 target on the stock. When we come back, this morning a war of words between jim chanos and alibabas at yesterdays delivering alpha. Stocks close to session highs here up some 70 points. 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A war of words between jim chanos and alibabas joe si yesterday. Heres what mr. Chanos said why hes still short the chinese ecommerce giant. Its the chinese model. You never see everything. And yet what you do see is the cash going out the door, not coming in the door. And accelerating going out the door relative to the size even though the business is growing. And thats concerning. Mr. Chanos of course an expert at watching the movement of cash and Free Cash Flow in particular. Later on yesterday jim cramer and i spoke with alibabas executive vice chairman jose tsai. The problem is he doesnt seem to try to understand the business and try to appreciate the power of the Digital Economy in china. And you can lay a lot of claims, a lot of accusations on our business, the bottom line is on the Logistics Business we made full disclosure on the profits, loss, revenues, assets, liabilities of the business. So investors can do their own math, whether youre consolidated or not consolidated. Of course that being a key consideration. Mr. Tsai did go onto also say alibaba does not want to consolidate or own outright its delivery business, which would mean adding some 2 million employees to its roles of course viewing the company as a Technology Company as he does. Whether there is Free Cash Flow or not, the back and forth mr. Tsai of course citing all the stock the company has bought back. Mr. Chanos countering, well, they borrowed the money to do a lot of those buybacks. So no doubt this debate will continue. Right now alibaba certainly winning it in the stock market. The stock up 25 this year. Fascinating that it again like in so many chanos trades revolves around understanding the Chinese Market better than others, right . Hard to do. It is hard to do. And mr. Tsai did say a number of times during our interview, not just about mr. Chanos, you know one of the key things they need to address given their u. S. Shareholder base is we dont use the product. We use facebook, we use amazon, but we dont use alibaba. And so they want people to try and understand it better. Of course the best way would be to actually go to china and use it, but no many people are going to do that. Its also reflective when you talk about the Macro Economy says dont look quarterly, look long term. Its going to be very noisy because for a lot of u. S. Investors thats a proxy and take it out when you get a weak number. Exactly. Coming up on the show, baseball legend cal ripken jr. On his success off the field right now. Plus, if you live in pittsburgh, your uber might arrive to pick you up without a driver. Well take a look behind the wheel. Much more ahead on squawk on the street with the dow up 69 points, stay with us. Mapping the oceans. Where we explore. Protecting biodiversity. Everywhere we work. Defeating malaria. Improving energy efficiency. Developing more clean burning natural gas. My job . My job at exxonmobil . Turning algae into biofuels. Reducing Energy Poverty in the developing world. Making cars go further with less. Fueling the Global Economy. And you thought we just made the gas. Energy lives here. I we worked with pg eof to save energy because wenie. Wanted to help the school. They would put these signs on the door to let the teacher know you didnt cut off the light. The teachers, they would call us the energy patrol. So they would be like, here they come, turn off your lights those three young ladies were teaching the whole school about energy efficiency. We actually saved 50,000. And thats just one school, two semesters, three girls. Together, were building a better california. Good morning everyone. Im sue herera. Heres your cnbc update this hour. German chancellor ak la merkel says she will introduce guidelines regarding a full veil ban in some Public Places such as the courtroom. In a speech today she said full veiling used by some muslim women is a major obstacle to integration. More than 117,000 households have been cut off from electricity in southern taiwan as super typhoon bore down on the island with heavy rains and wind speeds of 104 miles per hour. It is the strongest typhoon to hit that country more than 40 years. Amazon fire tv and Microsofts Xbox 1 will allow users to watch the best of twitter, including live streams of 10 nfl thursday night football games. The apps are free. And the governor of the bank of england taking a rather unorthodox approach to proving the durability of the countrys new fivepound plastic note, which entered into circulation today. Take a look at that. Hes dipping it into a stew at a london street market. I dont know what kind of stew, but apparently it held up okay. Thats the news update this hour. Now over to Jackie Deangelis with the latest eia inventory report. Good morning, jackie. Good morning to you, sue. Thank you, the eia out with weekly inventory record, drawdown of crude inventories little more than half a billion barrels last week and we had a build in gasoline of a little bit more than half a million barrels. Bit of a mixed report, but you can see losses in crude oil are paring this morning. Traders were looking for a build this week after we saw that 14 million barrel drawdown last week. So were balancing out a little bit in the marketplace here getting closer to that 45 a barrel mark. But traders it witelling me we going to gravitate to that level until we see the next catalyst. You can tell from this number last week was an anomaly. Back to you. Thank you so much. Volatility as you know the past several sessions is back, stocks rallying this morning though dows up almost 90 points after the selloff yesterday. Session highs. Ubs director of floor operations art cashin joins us once again onset. Art, good morning to you. Good morning. Got that draw just now on crude. Apples helping. But you think its about Something Else as well. I think it was primarily about the yield on the 10year. During your conference you had people like bill miller saying he thought it was the perfect short. Away from that you had jamie dimon talking about the fed should raise, mohammad elerian said it should raise, this morning were back below 7 and thats a sigh of relief. As we heard from Jackie Deangelis, improved picture in the crude inventory, may put a bid under crude and that will be a further help for the bulls here. Right. So now nearterm support . Nearterm support remains down around 2115. 2115 to 2120. You held up there yesterday on several occasions. So i would look for that on any further weakness. And we get much above 2140 we might get the bulls back in the game a little bit. The fed should raise, the fed should raise rk you mention jamie dimon saying it and yet at delivering alpha yesterday we heard so much gloom on the economy. For instance Steve Schwartzman of blackstone, ceo there talking about what kind of growth environment were in in the u. S. Listen. Weve got inhibiters on the growth of the economy, this kind of huge regulatory repression thats going on. Sort of like one foot on the brake, one foot on the gas with a very slow rate of growth at 2 . And thats in a world where we probably have close to 1 immigration between legal and illegal. So were growing net immigration probably the same as europe, which is not heroic. So were barely growing. Even though hes talking about big picture type issues like immigration and regulation, what would happen if the Federal Reserve does increase rates in this environment . Well, i think it would be not only the wrong call, it could potentially be a disaster. I think the markets are not prepared for it. You can see that by the likelihood that its still priced down in the 20s, 20 chance. So if they came in and did it, it would surprise the markets and i think have a very, very negative effect. I dont think theyre going to do it. Look at congress. Were back to fighting over whether were going to get the money to run the government. I mean, this is definitely the wrong time to make any moves. We have had im thinking guggenheim yesterday saying brainard was a preemptive dissent against a hike next week. Shes entitled to her opinion she sounded solidly on the same course shes been. The markets as i say are not predicting it. Almost never in the history have they raised rates when the market had not had at least a 70 chance that they were going to do it. So you see a disaster if they actually move in september . Yeah, i think so. A week. I think it would destabilize markets greatly. Were about to get a move up in libor. The money markets are going to change in the middle of october. Theres a lot of destabilizing things out there including the election. So they should wait at least until december and maybe not even then. One last bid on whats leading all the papers today, that income data from yesterday. Did that move you at all . Not really. You know, it was nice to see. It may change a couple of political speeches. But as sarah pointed out with schwarzman, doesnt explain broken out. Art, thank you. When we come back, baseballs alltime ironman, cal ripken jr. , talk about his success on and off the field. Stay with us, youre watching squawk on the street. Not one but two traders making the case to buy apple stock right now. Find out how high they think it can go at tradingnation. Cnbc. Com. More squawk on the street coming up. Its not just a car. Its your daily retreat. Go ahead, spoil yourself. The es and es hybrid. This is the pursuit of perfection. A calmer day in the bond market as the dow rises 70 points. Lets get out to the cme group, Rick Santelli with the santelli exchange, good morning, rick. Good morning, sarah. Maybe only calm because its pausing. And to that end id like to discuss all these issues with our guest today. David, thanks for taking the time. Hello, rick. Oh, there you are. Sorry about that, david, im having ear problems. All right, quickly, with zero Interest Rate policy, with negative Interest Rate policy, as you just heard sarah just say smart people saying you cant raise rates we dont have enough growth. Its as if theres no cost benefit analysis done on anything. Policy that is keeping the economy from growing, keeping rates maybe artificially depressed, manipulating currencies, it is not a zero sum game, meaning there is no damage done. Theres a lot of damage being done, pensions are one of them. Whether its kentucky, illinois, why dont you explain exactly how much damage is being done to states and cities that have to pay so much of their tax base to past retirees and assumptions theyre going to make 7 when 7 seems pretty aggressive. Certainly, rick. So as you point out, if the fed wants to go ahead and encourage investment on an equity basis, obviously theyre going to have to lower rates. Which theyve done for a prolonged period of time. Unfortunately, for investors that rely on fixed income returns like pensions, that has been a no return environment for a long period of time. Pension funds in the United States public pensions, particularly states like new jersey, illinois and others, kentucky, are over 60 underfunded on their pensions. Thats multiple billions of dollars. There are healthy assumptions that those states have made, very optimistic assumptions about rates of return Going Forward and expectancy of life for people. And unfortunately those rates of return are way off base at this point. Many are projecting rates of return between 7 and 9 , and we see fixed income returns even on the highest yielding bonds, not even coming close. So obviously when it comes to Investment Grade where the bulk of the money is going to be in treasuries and so forth, those pensions are going to continue to be underfunded. And one last point, obviously theres going to be a turning point that is going to occur where rates are going to start to move upward at a substantial clip. And those Pension Funds that are going to be Holding Investments at that point that have coupons that are quite low are obviously going to be affected to the detriment when that turn does occur. Let me get this straight, david. Let me get this straight. Yields arent high enough to create an investment landscape to make the types of returns to fund the pensions . And while doing so, theyre forced to hold paper that is under pressure right now as rates are moving up . It seems as though its a double whammy. Is that about the size of it . Thats exactly the size of it. And im going to add one more element that makes it even worse, which is there is no restructuring regime. There is no legal regime in the United States to allow these states to restructure their finances including their pension obligations. So at some point, im not saying its soon, this is a very slow moving train wreck. But at some time soon we are going to hit a point where these pension obligations need to be restructured. We have no mechanics for that. And unfortunately our legislators do not act until the absolute last moment of crisis. David, thank you very much. That is not very good news, but what many think there is no or little risk to keeping policies in place that dont seem to be correcting what theyre supposed to correct, these seem to be the areas of collateral damage. Thank you for your time. Sarah, back to you. All right, thank you, Rick Santelli. Now lets send it over to our Sharon Epperson sitting down with a very special guest. Sharon, take it away. Reporter sarah, cal ripken jr. Is baseballs ironman. In his iconic career he played 2,632 consecutive games. He played for 21 seasons with the Baltimore Orioles and joins me now here in baltimore at the annual conference for the Financial Planning association. Cal, thanks so much for being here. Its my pleasure. Thanks for having me. You are still in the game. You are ceo and founder of ripken baseball. You have a Minor League Team not too far away from here, a great stadium that they play in, very involved in youth sports as well. How have you been able to make that transition from baseball to business . And what traits are really key for a ballplayer to bring to being an entrepreneur . Well, i wish there was one or two easy things i could tell you or the viewers of your program, but the fact of the matter is a lot of the principles that you built your athletic career around applies in business as well. I mean, you do have to assemble a really good team. The People Matter the most. Its what comes. And then you have to create a culture that is like minded and you have to be hands on. You just cant have a successful career and say, okay, im going to start this and give it to somebody else and let them do it. You have to be right in the middle of it. So the hard work, the preparation, all the structure that baseball gave me and the discipline to do it on an everyday basis, that applies to business too. Ripken baseball is in three states with young people. You have tennessee, South Carolina and here in the baltimore area. We have three models that work. Three models. Three kids models for tournament experiences. Once a weekend model, ones a week long model and one is a hybrid, myrtle beach and aberdeen and woere looking for opportunities to duplicate or scale those models in other parts of the country. We built the model that works and now we have to find a place to do it again. Millions of parents including my spouse spend a lot of money on their kids and sports activities. A recent study out said parents may spend on average 100 to 500 a month per child on sports. Are they overdoing it financially . Or just pushing their kids too much . Well, being in the business of that, i dont want to say that theyre overdoing it, but i think sometimes the fever to say, okay, i got to have my kid playing more baseball so they can become a professional baseball player. You want to keep that in perspective. You want to say theyre enjoying it, theyre experiencing it. Some of the complexes we have, they go on a baseball vacation and take the rest of their siblings and then you have a family vacation. So if you want to support your child in activities they want to do, its okay to do that. But i wouldnt layer on the expectations that im making a professional baseball player or professional lacrosse or Soccer Player by putting them in all these tournaments. But we have experimental tournaments welcome to you, we have camps we can help teach you baseball, but the parent still has to keep the balance that says because my 8yearold or 9yearold or 10yearold is only 8, 9 and 10, i cant make them a professional right now. All right, sarah. Cal, its sarah eisen in new york. Good to see you. Thanks for coming on. Hi, sarah. How are you . Im very good. And im wondering if you can give us a stock pick on an industry that you know well and that i cover adidas, nike, under armour. I know you used to wear adidas cleats in the 80s, broke some records in the 90s with nike, and now doing business with under armour. Whats your goto . Well, the latest and greatest is under armour. Were partnering with them. Its interesting, im not a player anymore or an endorser per se of wearing the product, but we have kids businesses that under armour wants to get in front of the kids. Its a Great Partnership to have. And under armour is the new, the exciting, its all the stuff that all our kids want to wear. And its all i wear as well. So i would have to say under armour. You know, youre involved with other brands as well, whether its oppenheimer where youre a spokesperson, and you have your brand that youre building, that youve built well with your ripken baseball. How do you differentiate between making sure that your brand stays solid and also work with these other brands . Well, its careful choice, careful picking. Companies are going to carefully pick you so you dont hurt their image, what theyre trying to portray, but i kind of reverse it and think, wait a minute what about the company . If something happens in their company, thats a negative reflection on me. So over the years ive chosen my relationships pretty carefully. I remember i had a chance to do a jockey underwear ad when i was 22, and i chose not to do that and did a milk ad over top of it because i felt more comfortable doing milk ads, not doing underwear ads. So, its who you are and how you choose thats important. And by the collection of those choices, thats your brand. All right. Thank you very much. Cal ripken jr. Here with us at the Financial Planning Association Annual conference in baltimore. Well be here for a couple of days. Thanks so much. Sara, back to you. Great stuff, sharon. Thank you for bringing us that interview. When we come back, the race to establish Autonomous Cars taking a huge step forward. Well take you behind the wheels of ubers new selfdriving car, next. Much more ahead on squawk on the street with the dow up 55 points. Stay with us. Shut up and drive americans are buying more and more of everything online. And so many businesses rely on the United States Postal Service to get it there. Because when you ship with us, your business becomes our business. Thats why we make more ecommerce deliveries to homes than anyone else in the country. The United States Postal Service. Priority you experience the thrill of the lexus is f sport. Because the ultimate expression of power, is control. This is the pursuit of perfection. Uber launching its Pilot Program of selfdriving cars in pittsburgh. Our phil lebeau joins us with more and an inside look. Were all curious about this one, phil. Sara, you know, ive done a lot of selfdriving car stories and ive been in a lot of models that are autonomous drive, and some are more intuitive than others. I put the uber one at one of the more intuitive ones that ive had a chance to be behind the wheel of. Heres what it was like in pittsburgh earlier this week as uber was giving us a taste of its selfdriving car program that its beginning in that city. Its operating a handful of these vehicles, giving free rides to customers who have said, sure, ill go for a ride. By the way, there is a driver and an uber engineer in the front seat, just in case they need to take control of the vehicle. Also monitoring how it does. And because the program is based in pittsburgh, the head of the uber selfdriving program, selfdriving car program, believes this is a unique place to get insight into how these vehicles operate. Pittsburgh is one of the toughest places to drive, and this is a great place for us to stress test our vehicles. And if you can drive in pittsburgh, you can probably drive, you know, in most places in the u. S. All right, so, lets bring you up to speed on all of the Different Companies that are working towards selfdriving rideshare operations. Youve got uber in pittsburgh, the Chinese Company baidu is doing the same thing. Youve got gm with its investment in lyft working on this. And then ford has said it plans to have selfdriving vehicles, either for carshare or rideshare operation ready to go by 2021. And speaking of ford, it is holding its investor day today. Interesting comments from mark fields this week about how much of the market will be in selfdriving cars. Guys, he thinks by 2025, 5 of the auto market here in north america will be selfdriving, fully autonomous vehicles. 5 . That be about 5850,000, 900,000 vehicles by that time. It just keeps moving sooner and sooner. And you just showed us, companies plowing ahead. I wonder about the Regulatory Framework or any. Can they just go on the snrood is there any state, local or federal rules about this yet . There is a number of them that need to be worked out. They need to come up with a uniform set, sara, and thats one of the challenges that will be holding back the actual deployment of these vehicles on a fulltime basis, without test engineers in the front seats. Phil, real quick what was the car . What is uber using as the car, actually . What brand is the audible . Right now modified ford fusions you see with the radar on the roof and cameras, and they also have involvie xe90s, those crossovers. Theyll also be out on the street over the next couple of weeks. Phil, thank you. Bring it on. Im ready for the era of selfdriving cars. By the way, the mayor of pittsburgh will be on at 11 00 a. M. Eastern time to talk about pittsburghs Pilot Program with selfdriving cars from uber. And that is coming up on squawk alley. Lets find out what else is and send it over to jon fortt. Hello. Good morning, jon. Good morning, sara. Well, pandoras had a rough couple trading days, but interesting days as far as deals theyre making with music labels. We have the founder and ceo Tim Westerman coming up. Plus, apple is up. What is up with the new iphone 7s . Well dig into them, going on sale this week. And a top former google executive now working on medical. Well check in with him and a lot more coming up in squawk alley. Remember here at ally, nothing stops us from doing right by our customers. Whos with me . Im in. Im in. Im in. Im in. One, two, wait, wait. Wait wheres tina . Doing the hand thing . Yep we are all in for our customers. Ally. Do it right. We are all in for our customers. This car is traveling over 200 miles per hour. To win, every millisecond matters. Both on the track and thousands of miles away. With the help of at t, Red Bull Racing can share critical information about every inch of the car from virtually anywhere. Brakes are getting warm. Confirmed, daniel you need to cool your brakes. Understood, brake bias back 2 clicks. Giving them the agility to have speed precision. Because no one knows like at t. Narrator kubo est place come on, this way. E. Narrator . Is in the forest. Kubo wow. Narrator so grab your loved ones monkey dont even. Narrator and explore a world of possibilities. Kubo its beautiful. Narrator visit discovertheforest. Org to find the closest forest or park to you. Jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive good morning. It is 8 00 a. M. At uber headquarters out west. Its 11 00 a. M. On wall street. And squawk alley is live. All my friends know the