Transcripts For CNBC Squawk On The Street 20161028

With earnings from oil majors amazon, alphabet futures are a little bit positive. Europe a slight loss at the moment. Tenyear close to fivemonth highs we got yesterday. Road map begins with amazon shares falling after that miss. Big spending abroad cutting into bottom line, one bright spot is aws. Googles parent alphabet sees profits rise in mobile and video advertising. Shares poised to open a bit higher this morning. And ge in talks with baker hughes on potential partnership. Baker hughes rising on that news. But first up, amazon falling on quarterly miss amid higher cost increased spending on warehouses, Digital Content and other areas. Holiday guidance also weighing on the stock. Amazon web services up 55 in q3, but were deep in the investment cycle here. Theyve opened 23 warehouses since july. Only three in the first half. Well, i think people have to recognize theyll look at amazons run and theyll say why didnt i participate in amazons run. What kept me from doing that . And the answer is that periodically you have a Conference Call like they had last night where they just drop bomb after bomb after bomb. Basically whatever you thought they were going to say theyre just not saying. The last two quarters were these, you know, really dont have to spend, its working fabulous. And then of course theyre doing content, which everyone is fearful of. They should go watchman high castle. Not everybody can do narcos 2, but its rather amazing to me that everyones stunned that periodically they do this and then sell and you end up missing the big picture. I think this is on monday a buy. Not today, because whoever is selling down 40 isnt going to finish selling. But this is whats happened time and again. You get surprises, oh, and thats how you buy a stock. Even more so of course years ago when there was real questions about its ability to sustain profits where it can now do that. In part it can just keep running aws at 55 revenue growth, incredible margins and not worry about profitability. But youre getting notes like this one from Morgan Stanley this morning, jim, where planting the seeds through the harvest. The idea being that theyre i know it sounds like chauncey gardner, from being there, but you know, important to remember top line fundamentals are strong, prime subs are 60 million and basically theyre just spending more to garner more later. There have been very few situations where stocks down 40 in premarket and every Single Research piece is a defense. So you think whos selling. The answer is someone maybe you want to ring the register, someone didnt read the Conference Call or doesnt know the way they think. But this is what happens. And on monday it opens down again, whatever. But this is how amazon works. And i think people have to recognize this is a private company with a stock where you have a Conference Call where they dont really i dont want to say theyre not transparent. They tell you. But it isnt like they sit there and explain why we have to do this. Well, they arent that transparent. We still dont know how many prime members there are. Other companies you would imagine would tell you the number instead of guesses. I was getting strike back season four and somehow ordered two of them and said its going to come tomorrow and now its sunday. This is realtime. Im telling you. But the fact is that how could i order something at 8 00 and expect it to come saturday in the morning . The answer is they have to spend. Thats what they have to do. Is there a line though . When you start leasing 40 planes because you want to manage your own destiny in the peak volume period, when do you worry about cap x . Well, i think that they i think its a total Addressable Market issue and people think its a 5 trillion total adjustable market. Yesterday we had that ipo that didnt work and alibaba came in and said who wants to be in that business, remember they offloaded that business. I think bezos says i want to be in it because i cannot have prime customers be let down. Yeah. Its an experience. I dont know the grocery thing im not as crazy about. By the way, for the last 20 years every time hes invested more its seemed to have worked out. Thank you. Thats my point, which you freak out, but what he is saying hes one of those guys whos an allocator capital. Hes basically saying, wow, this opportunitys so great lets throw some money at it. We know how to throw money at it. He also talks about striking out ten times for every home run he hits, right . Yes. That those strikeouts in the end are worthwhile. Well, all i know is everybody whos bet against him has been wrong. Periodically its true. Hes offering prime members a chance to get you take advantage of prime in the next 24 hours it will come right to your house. Ceaseless drive toward World Domination knows no end. How many times have you guys actually done it . Done what . Where it says if you like such and such, if you like ian ker shaw hitlers biography, you want to buy the biography right now being done by whatever. I dont know, youll want the price of peace, the Machine Learning of amazon is so powerful. You hear all these guys talk about Machine Learning. Theyre still using screwdrivers. Dont forget all the different areas they are now in. Of course we mentioned eight of u. S. But alexa is an important product. Have you talked to her . No, i have a friend who talks to her, he sounds different when he speaks to her than he does other people. Polite. I got an ek cho as a gift ju this week. I have no idea how it works, you have one . I programmed for street. Com, i address alexa kind of the way i address the wife. How are you doing . Thats nice. But no dogs, so dogs come out. You come home and the is that a nice how ya doin . Ive heard a nice how ya doing . Sgl thats when im chiefing you. Yeah. Ive not seen that jim cramer. I think thats how you address the wife to be honest. No, usually pretty cordial, unless its a bad day. Wheres the mezcal . Lets get to alphabet this morning, the parent of google rising on higher than expected quarterly profit revenue and clicks growth aided by increased use of the Companys Services on mobile. Alphabet also announcing that 7 billion stock buyback. Gross ad revenue up 21. Year on year exforex. There was an article in the wall street journal today, google controls 95 of the mobile search market. I mean wheres the Justice Department . Just kidding. Dont want travel trust owns it. But this is a remarkable quarter. Ruth porat expressing tremendous discipline. Theres a line here from the ceo. Our mobile Properties Like search, youtube, maps and google play are where people turn when they are actively interested in something. In other words, this is the place you go, the point of buying is alphabet. These are companies that have figured out what you want ahead of time. They are again artificial they dont talk Artificial Intelligence. The companies that dont have Artificial Intelligence are the ones that talk about it. That may be true. The ones who have it, they would never talk about it. What google has we dont know. Some deep mind and some of the things they have going on we learned more would probably be pretty scary. These are manhattan projects. The other guys who talk about artificial they dont have the manhattan project. Theyre going to fuse deep mind a. I. With the robots theyve got. These other guys, a. I. , its still alan iverson with them. Right. Number three. These guys do not have to talk to you about Artificial Intelligence because they obviously are incredibly artificially intelligent. These are the guys by the way, just so david knows, hes going to be replaced by google. Im fighting not to be replaced by amazon. Sorry mr. Facebook, but we are not we will not exist. We are going to be a huge waste of time. Well be done, but luckily most of wall street will be replaced by all of them too. Do you think amazon like if you like titleist youll probably love dicks stores. Thats a better suggested for you . Right, suggested for you. If you act now you have three hours and five minutes it will come to your house tomorrow. But jim, the stock is only up 1. 7 this morning. That being google, alphabet. But the stock had run it had run although its not had a particularly good year. Were still talking 22 plus growth. Why is this thing not get a multiple . I think that thats a great question. Okay. I think people still feel that in the end this is a smaller market, thats its an advertising market, that it is vulnerable, which i dont think its all that vulnerable. Well, also marketing expense, they didnt give exact guides, but its going up especially now that pixels here. Yeah, thats absolutely true. And we also we continue to wait for some moon shot that is that hits. Good. They spent all that money on fiber and you read in the paper theyre not expanding fiber. But in the Conference Call they defend fiber. Theyve stopped. Thats been a while now they stopped pushing on fiber. Really expensive to do that. Theres a sense theres still some profit center. I think youtube is becoming a profit center. I think people feel like its an innovation factor and they dont want to pay for an innovation factor. They own 95 of the mobile search market. 95 of a market thats growing. Its an advertised base market. The advertisers pay less for that thats my point. But at some point that may but if youre Randall Stephenson and youre looking at what google is, youre not as jealous as you are of say amazon. Or facebook. Or facebook. Or just try. You know when you get off the desk, why does amazon get away with what they do. We have to have earnings per share. Oh, walmart had that frustration for many, many years. Right. Walmart not flailing. I think walmart doing a lot of right things now. I think that the question of why google sells at a market multiple is one of the most intriguing questions. And i think a lot of that is because they cant maintain at this level the old growth whereas you get this accelerated revenue from a facebook that was rather facebook had accelerated revenue growth. Yeah, it was lets get to gdp quickly before the break here. As we said earlier 2. 9 is the strongest pace in two years. Big part of this was a 10 surge in exports. And then inventories after five quarters is a drag, finally turned around. You know, on this week you had boeing, United Technologies the week before, we are doing some great precision exporting. By the way, the boeing call was really interesting because, you know, a lot of the politicians are not happy about the iranian tie. Iran is like the biggest you nod knowingly. Are you nodding knowingly . Im nodding knowingly. Its real business for boeing. Real business for boeing. And the dollar apparently not enough of a discouragement for companies to get goods out of the country. No, true. And of course boeing you have to buy in dollars, thats how special they are. But i would have thought the strong dollar would have hurt more. Look, could the fed use that number to raise . Yeah, they could raise. Not this month . No. Nobody nothing this month. They dont want to influence the political situation. Although the markets feds funds futures didnt move that much on the gdp number. No, im saying the weight of the evidence look, these bank stocks are not going up every day. There could be a blood bath if they dont raise bank stocks. I mean, bank stocks did you see what was i mean, lets just talk about something that was amazing yesterday. Almost as amazing as the cubs and the indians. Wells fargo was up. Dont say that too often. Can you imagine . The stock was updated. Did you tell Elizabeth Warren . She doesnt watch the show. I dont have to worry. J. P. Morgan near 72. Watch out. Think about that. Thats rate hike, rate hike, rate hike. I know watch the show so all i can say is congratulations, jamie. Good work. He watches the show. When we come back more of the movers including buzz around ge and baker hughes. Also ceo of expedia travel website posting that earnings beat. Another look at the premarket. Thanks to ryan detrick, this is historically the most bullish day of the year. Oh, come on, today . With average return of 0. 55 since 1950. 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Then be sure to vote yes on proposition 55. Prop 55 doesnt raise taxes on anyone. Instead, it simply maintains the current tax rate on the wealthiest californians to prevent education cuts that would hurt our kids. No wonder prop 55 is endorsed by the california pta, teachers and educators. Because all of us want to help our children thrive. Its time to vote yes on proposition 55. General electric says its in discussions with baker hughes on potential partnerships but adds an outright purchase of the company is not among the options on the table. Thats in response to the journals story that ge was in talks to acquire bhi. Of course the two companies have a long history. David, what do we make of all this . And what does that statement actually mean from ge . You know, i wish i could give you some more sense. The reporting i have on this doesnt get me anywhere, unfortunately. It is interesting to note that the journal comes out first with the story saying theyre going to buy it and then with a story that says theyre in partnership. But that could mean any number of things. We certainly can sit here and speculate. I wish i could give you more. Will it be the possibility, jim, that ge were to go the route of spinning off a lot of oil and gas assets in what might end up being a reverse Morris Trust Transaction if they can be valued at a higher level than all of bhi therefore tax free. You know, ge has shown a willingness to move things off, to try to create value however it can. But i have no idea, unfortunately, i dont have much to adhere other than what weve heard from ge saying were not going to buy them. Were just talking about partnerships. Well, if this is they offload their assets right here, that is just classic buy high, sell low. And be very disappointing. That wouldnt be the first time that ges been criticized for not perhaps timing the market as well as it might have in terms of an asset sale or a purchase. Yeah, i think thats right. I want to be diplomatic about this, but you want to be buying baker hughes, not selling assets to baker hughes. I mean, were in q1 of a turn here. Chevron says were in q2, just finished q2 there had been the sense of the baker hughes after the failed halliburton deal armed with 3. 5 million they took away from that deal, they would be looking for more opportunity and questions to whether theyd be able to run effectively as an independent company. All i know is if you were on the baker hughes Conference Call and halliburton Conference Call, business has turned rather dra matd i matdmatically. These companies have troughed. Unbelievably Good Companies filled with American Ingenuity and tremendous buys. The last thing you want to do right now is offload now, ge has a lot of deep sea, sub sea, thats a bad business because you need 80 oil. But for baker hughes its interesting, and halliburton you need 30 oil, 40. They provide tremendous, tremendous value right here. So you dont want to be a seller. You just dont. It would just be you look back and you really regret it. Do you think that the exit from financial has proven to be whats resulted as greater focus . This would not bring even greater focus than that. I just keep thinking about the wrong days of presentations about why they wanted to be in oil when oil was at 95 and 100 and now when oil gets to a level where you can finally be a buyer, look at all these really Smart Companies in america that bought permian assets and their stocks have just taken off. Right. And its the same thing in oil, oil service. I mean, go if you go listen to that halliburton call, you will sense that that company is on the cusp of a major earnings ramp. Although conceivably if you were to pursue an rmt, a reverse Mortgage Trust and we have no idea but something along those lines, you would be creating value in the future of your shareholder base, just outside of ge. True. But im saying be a buyer, not a seller. Right. This is the turn. Right. Like when youre in q1 of a turn after the single worst decline in history, q1 and you decide to go . And you bought at the high . Thats just look, theyre going to disagree with me, but i dont play for dinner. Im telling you i wouldnt do that. It would be a bad mistake. Right. I talk to almost every ceo Major Oil Company of the american ones, this is good moment to be in that business. This is great moment to be in that business. And when they bought it was a bad moment to be in that business. Right. Bad moment. Im responding to somebody whos ticking me off. Im talking here. I know. Im listening to you and responding. You can talk directly to the camera if youd like. I could. Are you attacking benioff . Im not attacking benioff, but i can if you like. Its all personal. Well get cramers mad dash and take one more look at the premarket as weve made it to the end of the week, last week s p up 0. 38, this week its down 0. 38. Back in a minute. We love knowing whats happening. So the nest cam Security Camera looks after things and alerts your phone if somethings up. Hey, need a glass . No matter what it is. Hey, dad. Were drowning in information. Where, in all of this, is the stuff that matters . The stakes are so high, your finances, your future. How do you solve this . You dont. You partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. Morgan stanley. All right. We got a mad dash for a friday. Always like to say those words. You range far and wide for your mad dash. Sometimes i know exactly what youre talking about and i understand the story, and other times im like mckesson, why . This may be one of the hard downs ive ever heard. I love a Company Comes out at the very beginning of the kmpx call, not being facetious and say weve got to talk about the fact lower profit contribution, these are companies remember they buy drugs, they try to save everybody money in the system. Yeah. David, youll see Cardinal Health down a lot, too, its i love this citi piece. Its piercing to be playing less nice, there is a guide down for 2017. They take 17 down very big, increasing competition is a big surprise to people potentially 550 million miss. All right. Increasing competition. Can we get a little more meat on that bone . Well, you know, they need branded Price Inflation to go up. Yeah. Basically they need to be able to justify their existence about why so their margin has gone down as a result of not as much drug price increase . Yes. Thats tough given the environment. I know. Theres no reason to refute mckesson management according to citi. Look, ive got to tell you, david, this is an industry where people are always trying to take customers, theres real competition in this group. But there is i read this and i was like you got to be kidding me. I thought business was good. Now, business i think that this might be overreaction, but thats a guide down. That is really bad. Cardinal a competitor coming in. Theres real price competition. Weve forgotten what price competition really looks like, guys are slashing things in order to take share. Mckessons slashing things in order to take share. I wish i had more of a reason other than the fact theyre in a dog fight. All right. Its in a total dog fight. Well be watching that name closer when we get to that opening bell just a few minutes from now. Also update you on oracles plan or not plan to buy netsuite why that stocks down. Well talk about that, jim. Better end. Some other earnings we missed, more m a, a lot more coming back right after this on squawk on the street. Month here. You should have quit while you were ahead. 32 years at this place and ive got 9 days left before retirement. Look jim, weve been planning for this for a long time. And well keep evolving things. So dont worry. Knowing whats on your mind and acting accordingly. Multiplied by 13,000 Financial Advisors. Its a big deal. And its how edward jones makes sense of investing. Youre watching cnbc squawk on the street live from the Financial Capital of the world, opening bell in about a minute. A lot of news we havent gotten to yet. Oil majors have reported, we went over amazon, google, gdp annualized at a twoyear high. Downward guidance, you did mckesson, havent done bud yet. Yeah, boy, its funny because the rial is so strong but ive got to understand more of their pricing. That business is a good business. I would not get rid of that. If constellation comes down off that id be a buyer. I should have talked more about ameri source burden, cbs too. So a lot to get to on this friday morning. Lets get the opening bell and the s p at the bottom of your screen. At the big board it is golf Equipment Company acushnet celebrating its ipo. Well talk with the ceo. At the nasdaq celebrating ipo blackline, Cloud Based Software for finance and accounting. Well talk to that ceo later this morning in squawk alley. You want to do exxon chevron . I mean, exxon people looking year over year saying theyre not doing that well, cap x big, chevron made a lot more money than people thought. Chevron just i dont want to say one is better run than the other. These are very long term fabulously run companies, frankly. And i have to hand it to exxon. I was always critical of them they werent spending more money when things were better, but they take a 50year view. And you should take a 50year view on their stock. Right. Theyre just a very well run company. But they didnt buy any of these great assets in america when things were down because its so hard for them to move the needle. And chevron does a lot of stuff in the gulf and done quite well and really hit pay dirt. I think chevron is a very well run company, both are well run companies. In the end where the money went to was pioneer, sierx, apache, companies that really have done a lot in this country. Dont typically come back to something we talked about in the mad dash, but id like to do that now. Mckessons loss you mentioned quickly, people may have missed it amerisource burden loss, cvs, which owns care mart, take a look at all these names, maybe well have a board for you at some point, mck, and Cardinal Health, cah, all getting crushed. Everyone was so wrong. Mckesson was so abject when they say, listen, weve got to talk about whats happening here. They go over like generally speaking we anticipate pockets of increased competitive activity as part of normal business. What weve began to see is activity broader than expectations, more aggressive and across several areas of the u. S. Pharmaceutical business. Its very rare you have management as candid as they are basically saying, listen, these guys were really going into a dog fight. Typically they start up as, hey, business is good, but no, this was like a very competitive atmosphere. We got to figure out whether politics played a role. Did the Drug Companies not raise price as much as they would. And therefore they didnt benefit as much. Or in fact while they hold the drug they own it and then they buy ahead and then they can sell. Yes, buy ahead. I dont know, but it is worth pointing out even though you just discussed on mad dash, jim, the market cap loss thats taking place in the sector is pretty dramatic this morning. And i think that the analysts were shocked. Its rare you find a group of analysts who happen to be quite good in this sector just as Deutsche Bank says dropping the hammer. This has been a place like the device stocks earlier this week, people were hiding in device stocks and they were hiding in these stocks in order to be able to stay away from the cross hairs of Bernie Sanders and politics. Well, nope, nothing in the drug and pharmaceutical has been unscathed during this election. Nothing. Wow. Well, speaking of analysts being off on their estimates, hanes brands is number one gainer as their commentary was a lot better than expected. Sales guidance toward the top end of the range. And they have missed a couple times. This is good. Apparels been hit or miss. Matthew boss with j. P. Morgan out today saying lulu is going to be good. Its wrong, lulu may not be this quarter, but its a big runway, says some great things about foot locker, which i love because of the dog fight among under armour, nike and adidas. But boy, a number of cut for abercrombie makes me think you got to get out of that. If youre in that one, just go. Just go. Under armour for the week five days down 19 . I was looking at planks paper losses something in the range of 200 million. Looks like the ravens arent going to be bought by him. I will say this about plank, he is trying to do what amazon does. Remember, his multiple is 48 times earnings, hes trying to get back to the 25 you know 22 , he wants to spend more. Its his company. And he is taking a longer term view. And you know what, he could be right but i think a lot of people just say i cant take this pain. And remember, mark parker from nike is not sitting back saying im going to let him carve up my business the way oracle felt they let salesforce cover up their business. Yeah. Thats a segue. Thank you for that. You mentioned oracle of course it is in the news this morning because of netsuite. This is a story i followed some time back. People may recall when we were talking about the fact it did not appear oracle was in a position to get the vote of the unaffiliated shareholders it would need to be able to complete its acquisition of netsuite 109 a share. In fact, they then extended the tender offer to next friday, november 4th, when they were not able to. Remember t. Rowe price came out and said were not interested in 109. A number of shareholders had also indicated given their work that the multiple enterprise value over revenue that they were buying netsuite at was far below what they thought was a was warranted in a takeover situation. And today, guys, the special committee of the board of oracle received a letter from t. Rowe saying 133. Thats what we want. 133. And oracle reiterated its current price of 109 represents its best and final offer. So netsuite shares are down again. They are trading well below 109. Why . Well, you need roughly 20. 4 million shares of the 40. 8 million total unaffiliated shares to vote in favor. T. Rowe alone is 14. 5 million shares, so its not hard to get to that 20 level. And therefore many people believe 109 not going to carry the day next friday. Okay. So explain this to me. So Larry Ellison owns a huge chunk. Yes. Looked like this was a very good thing for oracle to get this because it moves down to the small and medium size business cloud. So theyre just going to lose this opportunity to yes. The good news is it doesnt appear netsuites in a position to sell to anybody else. Right. Benioff is not you havent said anything bad about him today. No, i havent. But he would he cant buy it. Right. Salesforce would be you would think, hey, maybe salesforce would want that business, but theyre not going to buy it. Right. Still some questions about some of the other shareholders, 14. 5 million shares is a large percentage of the 20 that they need, 20. 4, but not all of it if every other unaffiliated shareholder were to go along youd get a 109 deal which doesnt look bat at 91. 42 on netsuite, but of course when it was trading closer to that a lot of their shareholders were saying, you know, go through the names and they were far higher. So you didnt think it was arms length . Just thought they were getting it on the cheap, oracle instead of raising. T. Rowe wants 133. Yeah, but thats not realistic. No. Up on a good quarter you can say, listen, hershey might get to where mondelez was willing to pay, that could happen. Hershey numbers were very good. They were very good. But netsuite theyre just not going to do that. Is action in hershey today an argument they can do this on their own . Yeah. Thats a great question. I think maybe so. Hersheys a really good company. I totally understood why they felt that they could get to that price themselves. Theyre not time warner, which told you that they could get to a price and then they got there. Thats true. Thats very few companies are as good as the Great American still, could have been probably gotten 120 out of mondelez sgloo right. Im saying hershey can get there. A great brand. Funny, netsuite, hershey, twitter, all these companies, will they, could they, would they, tough fork in the road. Mckesson down 41, gee. Twitter, i still think if they get the trolls under control, which they are saying believe me they can and that doesnt result in 100 million Monthly Average users going away who are using many pseudonyms to bomb us, but if they can get that done and the stock still falls back to 14 and there could be a process that isnt noisy where we all dont know about it, i think that that company could be bought. I got to ask you what you think of them killing vine. Vine, the sixsecond social platform. I think that was a good thing. Really . I think that says is were not going to do things and support things that are not going to give us a payoff. I actually looked at it as, yeah, come on. Like groupon last night, they sold a Company Called br eed br crumb. I like groupon, its not too early to buy groupon, a third of it is cash. But they sold something that was pretty good, but it wasnt core mission. Vine turned out to be not core mission. I like that. I liked a lot of what i heard from twitter yesterday. And ive been critical because i felt they were doing reckless spending. I didnt think they were doing i thought that twitter was basically saying, look, well try to do it ourselves. And we think we can do it ourselves. But if they cant the stock goes back to 14, game on for people who might want to buy. Yeah, there it goes. We wont mention benioff again. No. It could be alphabet, it could be your friends at disney. You never know. Before we get to bob pisani, guys, shares of amgen are also down pretty sharply this morning, again, talking about price increases or lack thereof and the impact thats having whether its mckesson, no more enbrel price hikes, they did increase 14 year over year, 10 quarter to quarter, but dont expect increase net price in 17. Look at amgens stock, its down almost 10 . This is what the politicians did. They made it very, very dangerous to raise price. This is about that is having an impact as you might expect it would on biogen, gilead, celgene had a great day yesterday, its down a bit, all the other Drug Companies, merck is down 2 . Merck had such a good quarter. Its really you know, another one. Lily down over 2 , so amgen having an impact on the group, not to mention this news from mckesson which has accelerated loss to over quarter of its market value. Yeah, i got to do more work any time a stock down that much, pretty good company. But i think these guys cant wait for that election. I wonder how valeants doing. Im sure valeants kicking butt. Oh, yeah. Taking no prisoners over there . Yeah. Look at these declines. These are companies you know, for years these were the companies that you just heard people buy, like united health, buy, mckesson, what are you doing in health care, got to stay away from drugs, going to buy cardinal, and then cvs and goes buy care mark so you like cvs more. And next thing you know in one day, in one day they take away mckesson thats breathtaking. It really is. That is im not going to call overreaction i got a feeling when i tune into mad money tonight im going to learn more about what went on today. I said told everybody full court press. We may not be able to get this done tonight, thats how i got to you know, theres not enough hours in the day to try to get in the minds of all these institutional sellers. This is a dramatic change of pace. And theres money going away from that group literally today into tech. Literally today into oil. Literally today that money is fleeing from that area that even apple is up. Remember apple when they had that do not resuscitate sign on the door . Did you like the touch bar you saw yesterday . Im going tomorrow. Im going to try it out. I also want to get the new i want to get i think that the ipad the wife has the ipad pro when shes away. Yes. And i just ordered strikeback season four from amazon, but they cant be delivered until sunday, so what good is that . So ill go and ill own my new ipad pro i intend to buy tomorrow, thank you, tim, tim watches the show, i will get all my streaming. There. My weekend is done. Im so happy to hear that. Will you join me at the mall for shopping trip, david . Well bring a camera, well bring a crew. Okay. Sure. Would you do that for me . Yeah, lets plan a month ahead, but ill be there. Tomorrow, well go. Well go to elle brands. He doesnt get it. Well take a camera and show on monday. Dont go to abercrombie because nobody else is. Oh, that was cold. Chevron is leading the dow this morning. Lets get over to bob pisani. Hey, bob. Good morning, guys. Mixed market here as we wait for titleist to open. Acushn acushnet. Look at sectors, tech okay, materials okay, energy lagging here, real problem with pharma. I think this is regulatory issue surrounding the election overall. You mentioned exxon and chevron, take a look they did beat under earnings revenues were light, still losing money in north america. We know that and whats going on there. I think the key point here is theyre slowly turning things around. Look at exxons earnings for the year. We bottomed in the Second Quarter at 41 cents. Better now in 63 cents. Were probably going to do 72, maybe 75 cents in Fourth Quarter, 91 in q1. Theres certain assumptions here, but the point is theyre doing better. Things are slowly bottoming in the Second Quarter. If you look at exxon it bottomed in the First Quarter just ahead of the earnings trough and has slowly been improving since then. So i think thats the key point here. As for the earnings situation were halfway through, and the news has been really good. Were going to end the earnings recession. Were up 2. 6 in earnings, thats the best quarter since the Fourth Quarter of 2014. The revenues are better. Q4 guidance is not terrible with a couple of exceptions. So why is the market so crummy . Were down 1. 6 on the s p, for the month, you know, this is the worst month since january. What is ailing the market overall . Ill tell you what the issues are here. Earnings are improving, but a number of industrials have been warning about slower global growth. Thats weighing on the market, i think. Oil not above 50. Remember the narrative, 50 to 60 is the new trading range going into 2017. If its 40 to 50, we have a problem. And weve had that problem in the past. The elections worries hitting pharmaceuticals, theyre down all throughout the month. So is biotech, i think on concerns about regulation issues. And then of course youve got that looming rate hike out there, the impact weve seen on reits and telecom. There are a number of issues weighing on the markets. Lets turn to ipos because we have a couple around me here. A lot of people yesterday on the disappointment of zto express, were asking is the ipo market in trouble. I think its not. I think zto had issues around difficulty pricing a chinese name and around issues around the chinese economy. Well keep an eye on that. Thats trading to the upside as you can see today. But look whats going on on the nasdaq. Blackline, this is a cloud based platform for accounting and finance. Price talk was 13 to 15, they priced at 17. It will open in about 45 minutes. Ill keep an eye on that. No disappointment there. Wifi company on nasdaq today, 16 is the high end of the price talk, no problems there. Right now keep an eye on that open 45 minutes. I dont think so. I think these are very Company Specific issues here. As for our ipo today, acushnet, well, 17 and the price talk was 21 to 24. So thats a bit below expectations. And here you see this is the first indications just came up a second ago, 16 to 17, so this is early indication might price below the numbers. Of course were dealing with golf here, another very specific company, specific issue. And of course we all known about the decline generally in golf playing and golf attendance. I think that may be playing into the overall situation here. So well keep an eye on this 16 to 17 right now. Right now the dow up 60 points. Carl, back to you. Bob, thank you very much. Bob pisani. Lets get to the bond pits. Busy morning in macro. Rick santelli at the cme. Good morning, carl. Indeed busy. And on an Annualized Base everybody is talking about how this is the best since 2014, that 5 Third Quarter, yes, but what we should have learned over the last four or five years is you cant look at it that way. Many times a quarter or two quarters a year make up for the weaker quarters because it really is about looking at the average over time even though these are annualized numbers for gdp. Weve kind of been there, done that. And actually the market is one basis point lower exactly the same, one basis point lower on the long end, about the same on the short end as right before the release of the data. So lets look at a one and twoday of twoyear. Oneday looked like gave it all up. Twoday puts in more perspective. When it comes to tens were at 174 last week, were at 185. Look at a oneday, you can see what its done. But the oneweek really gives you the picture. And also remember the before the number and almost after the number we touched 89 basis points 1. 89, thats significant. Now, what did the bund and gilt do . Remember we can make it about gdp, better earnings, but we all share one thing when it comes to international sovereigns, were all linked at the hip, look at what the high yield was in bunds. No surprise at 8 30 eastern it touched beforehand 22 right on the number it touched 20, it settled last week goose egg unchanged. Lets look at gilts. Gilts touched 1. 31, thats amazing. They eased back a bit. But we want to watch these markets, especially the spreads between them. And finally the dollar index. You know, if you look at oneweek chart, no great surprise. But there is actually great surprise, especially when you think that a tenyear closed at 2. 27, virtually the high of the year in the first day of the year. Okay. Now so were not anywhere really near unchanged yet, but thats after significant Double Bottom established in july at 1. 35. Just like in 2012. But heres the key, look at the dollar index yeartodate, notice when we started. 98. 63. You see where were at now . A little higher than that. Virtually for five sessions in a row we are now holding unchanged on the year for the dollar index. That is significant. Carl, back to you. All right, rick, thank you very much. Rick santelli. It is about golf and the cloud on this ipo friday. Were waiting for acushnet, home for titleist to open at the big board. Same for blackline at the nasdaq. Were going to talk to the ceos of both companies. Dows up 51. Chevron the top dow stock, exxon almost the worst dow stock. Back in a minute. Okay, so whats our latest data say . Our customer is a 21yearold female. Heavily into basketball. Wait. Data just changed. Now shes into disc sports. Ah, no shes not. Since when . Since now. Shes into tai chi. She found disc sports too stressful. Hold on. Let me ask you this. Whats she gonna like six months from now . Who do we have on aerial karate . Steve. Steve. Steve. And alexis. Uh, no. Just steve. Just steve. Just steve. Live business, powered by sap. When you run live, you run simple. Take a look at shares of expedia this morning. Up almost 4. 5 . Were going to talk more about the travel provider later on this morning. In the meantime dows up 42 points. And we will get stop trading with jim after a break. Cdw brought i. T. Orchestration to printing, dramatically increasing print security with enterprise printers by hp. Which is great, unless youre a corporate spy. Unsecured printing makes your network vulnerable. Enterprise printers by hp help prevent costly Security Breaches that can compromise your network and reputation. So im stuck spying the Old Fashioned way. Hey. Im not spying. Secure printing by hp. I. T. Orchestration by cdw. Keeping the power lines clear,my job to protect public safety, while also protecting the environment. The Natural World is a beautiful thing, the work that we do helps us protect it. Public education is definitely a big part of our job, to teach our customers about the best type of trees to plant around the power lines. We want to keep the power on for our customers. We want to keep our community safe. This is our community, this is where we live. We need to make sure that we have a beautiful place for our children to live. Together, were building a better california. Time for cramer and stop trading. Mastercard 21 Profit Growth extraordinary best of the group, stock is soaring as it should be. I got to tell you, the money flowing out of these Drug Companies into things like mastercard really impressive. Its a oneway flow out of drugs into tech and into financials and full financials like mastercard. Fantastic quarter. Amazing that kind of growth with that big a company. I am stunned by the mckesson. This is what this is saying, this is a tectonic shift that the drugstores do not need the middlemen. This is what theyre saying. Youre going to cut out the middlemen, you dont need them, the economics dont work for them. Insulin maker saying theres a price war, abvi say they cant maintain the price brought about by congressional pressure. Thats where im going. Im going to spend a lot of time tonight actually the rest of the day on this because this is just i cant just spend all my time figuring out my fantasy lineup, david. I know thats what you think during may have to suspend my midday shopping trip because my wifes birthday next week. Glad to hear youre going to spend time on it. Thats good. Its about time you buckled down. And the employees who have no choice. Whats on mad tonight . Well, our game plan im ripping everything up. When you see Something Like mckesson look, i obviously do chevron and exxon, but a company thats disrupting the entire world of the hyperconverged antiemc. Got it. Having fewer boxes in your closet and simplivity is doing a great job at it. I got to tell you, people se selling these stocks, they must think its the end ever for mckesson. Like the typewriter company. Worst day for mckesson on pace at least in 17 years. Really . Yeah. Devastating. Well see you tonight, jim, mad money 6 00 p. M. When we come back, golf equipment maker whose brands include titleist, acushnet ceo on with us. Dow up 34. Its been over 100 years since the first stock index was created, as a benchmark for average. Yet a lot of people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Why invest in average . Whyour boss . Ork for . Yourself . Your family . Our Financial Advisors are free to realize a plan to fit your familys unique needs. Well listen. Well talk. Well plan. Baird. Good friday morning. Welcome back to squawk on the street. Im Carl Quintanilla with sara eisen and david faber at the new york stock exchange. Gdp at 2. 9, but exit of health care names going into tech and financials as jim just said. We have oils, ipos on the tape and now economic data. Lets get to Rick Santelli for that. Rick. You know, its funny, carl, because sentiment always seems to affect the market in a logical fashion. You see rates ticking down a little bit . See the dollar index ticking down a bit . Its because michigan on october final read is a bit of a disappointment. Our mid read was 87. 9, we were expecting a final read to pop slightly over 88. We end up with 87. 2. So less than the preliminary, not a strong number. And this of course is giving us a little bit of buying in treasuries. But do keep in mind its been a 10 to 12 basis point pop in tenyear rates this week. So if it eases back a bit, that seems to be the pattern. You know, a couple of steps forward, one step back when it comes to rising rates and whether you can equate it to data or fundamentals or whats going on with earnings, thats your call. But many are equating it with the movements of other sovereigns across the globe and well continue to monitor that. Carl, sara, back to you. All right, rick, thank you very much. We will watch that tenyear yield. Onto amazon and alphabet, both in focus at the top of the agenda on the back of earnings. Amazon missing estimates because of increased investments leading to a slump, while alphabet on the other hand provided reason for cheer on continued ad growth. You see those stocks moving in opposite directions. Joining us to talk strategy now on both eric sher dan, internet analyst at ubs and youssef. Amazon first, i like how guggenheim put it in a note today, take the lumps, buy the dips. It feels like the sell Side Community is sort of in agreement that theyre not too worried about rising costs, this is part of amazons playbook and buying on some of this weakness. Do you agree . Yeah, we agree. I would point out two things. One, with amazon you always have to look at the top line. And the top line yesterday was very much in line with expectations. And in fact if anything this morning raised our top line expectation for the Fourth Quarter in 2017. Second, the bottom line is always been, you know, kind of where the fluctuation happens. In fact, if you look at q4 guidance, its literally zero to a billion, that gives you an idea how much it can fluctuate. Ultimately i think the explanation for why they missed is very, very real. And i think its accurate. Theyre spending a lot of money on online video to try to catch up with netflix. Theyve opened a Record Number of distribution facilities in the Third Quarter. And last but not least, remember, went to india and committed 3 billion over the next year or two, and thats hitting the numbers. So i think to a certain degree the sell side and buy side didnt account for that properly. But we really look at the top line and the top line was very strong. And that would all bode well for the long term story, eric. I guess the question for investors is at what point is it too much spending . Is there any area that amazon is overspending . And is that an investor risk . Based on our conversations overnight, i think investors are pretty under control, that these are the investments they want amazon making for the medium term, there isnt anything that seems so far out of the norm that would cause concern amongst investors. Therefore youre seeing a dip in the stock today, but against how well the stock has performed over the last six months and year to date i think its a pause. I think its a pause as you get this uptick. But we dont think its a long Term Investment cycle that would change the profit narrative over 2017 to 2020, just more something we have to digest q4 probably into the first half of next year. You guys are both buyers of the stock, but youssef i think you have the highest price target on the street. Are you still at 1,000 a share . And why did amazon forecast lower holiday numbers . And will that interfere with your price target . Yeah, so we are still at 1,000. As i said earlier, if anything weve actually took our estimates for the Fourth Quarter by a little bit few hundred million and our estimates for 2017 by almost a billion. Now, grant it weve lowered our eps, but i think its more of a top line story. Look, i think theyre going into the Fourth Quarter in a great, great, great fashion because theyve just opened 18 distribution facilities to bring their distribution closer to the end user, expedite shipping. So, you know, we think while ecommerce is growing somewhere in the 14 , 15 , amazon is growing at 30 . So, you know, we think theyre going q4 very strongly. Eric, lets move onto google. Clearly investors pleased with alphabet numbers across number of metrics, mobile, youtube and video spending, clearly this company is winning with ads and what was tough comps. Theyve managed to beat that as well. How do you look at the valuation now for alphabet stock . And who do you compare it to . Is it the competition with facebook on ads . Is it with amazon on a. I. . Or microsoft on enterprise . How are you thinking through that valuation . Well, i think the Valuation First and foremost were just looking at it on pricetoearnings. I think alphabet throws off a tremendous amount of free cash flow, we now got this second year ahead of us the team at alphabet returning capital to shareholders with a 7 billion buyback. I think that helps people feel better about the valuation. At the end of the day its a garb stock. I think youre paying a reasonable p e multiple mid teens, 25 at the core advertising business that we look at in this past quarter, 26 in the core fx neutral over the last four quarters so i think its relatively cheap against that growth rate when you look at the relative p e multiple against a lot of other choices you have in the market and now getting shareholder returns on top of that. Youssef, do you agree . Is alphabet cheap here . Im not going to disagree. I think everything that was said is right on. You have a Company Growing again just like amazon, substantially faster than its market even though it dominates its market. Theyve gone into display advertising where before youtube they were a player and now second largest and grown around 30 . Look at it excash trading in line basically with the s p 500 yet growing 20 plus with 50 ebitda margin, your not going to get that kind of cheap multiple of 16 times on any, you know, comparable company. We will see what facebook discloses next week when it reports. Gentlemen, thank you for talking tech today, eric and youssef. Thank you. Thank you. Plenty of questions for the Clinton Foundation after this new leaked email from wikileaks. Question is how big of an impact will that have on the election . Our eamon javers is in washington with the latest. Good morning, eamon. Good morning, carl. Thanks to these wikileaks emails were now learning a lot more information about just how intertwined bill clintons efforts were in his post presidency to raise money for his charitable foundation, but also to raise money for himself in terms of all of those speaking fees. We got this email from doug band, who was a close clinton aide, calling it bill clinton inc. All of that now resonating on the campaign trail. Heres what donald trump had to say last night out on the campaign trail. Wikileaks, more information, but it pertains to what they knew and it makes all of them theyre already liars, but it confirms it for the 75th time. Hillary clinton put the office of secretary of state up for sale. And if she got the chance, shed put the oval office up for sale also. Now, politically in these last few days before the national election, carl, the question is going to be whether or not these revelations are too little too late for the Trump Campaign or whether they can find a way to exploit what we now know about bill clinton, Hillary Clinton and Chelsea Clintons fund raising activities, all the corporate connections, all the big money that came through there and turn that into votes in november. Thats going to be a tricky sale that a lot of political analysts will tell you this election is pretty well baked in. That is the American Public has a pretty hard sense of who donald trump is and who Hillary Clinton is. And a lot of those judgments arent going to change in these coming days, but the challenge for the Trump Campaign is to see if they can exploit it and make the most of it. I was going to say, eamon, this morning in the wall street journal, two opeds addressing the same topic, one of them here from freeman, conflict of interest is the clinton business model. Look how successful mrs. Clinton was in monetizing secretary of state. Why would any voter of any party want to see how much revenue she can squeeze from the oval office . Sounds a lot like what donald trump just said. Yeah, absolutely. And theres this really telling email from doug band thats been released by wikileaks in which he complains remember, hes the bill clinton staffer whos at the heart of this. Hes doing fund raising for the charity. Hes also booking some of bill clintons personal speeches. And he complains that hes been forced to sign a conflict of interest document, but bill clinton himself has not been forced to sign such a document. Doug band implying there that bill clinton is part and parcel of a conflict of interest that hes not having to recuse himself from because of the very nature who he is even though the staff did have to do that. Well see if they respond to that today with bill clinton in pennsylvania and hillary in iowa. Eamon, thanks so much. You bet. When we come back, expedia shares in the green even though earnings did miss. Were going to dig through those numbers with the ceo straight ahead. Plus, were waiting on the ipo of acushnet, the Company Behind a bunch of Sporting Good brands that you probably know including titleist, when they start trading at the nyse well bring that opening trade including interview with the ceo in a minute. And can you explain to me why 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. We need to be ready for my names Scott Strenfel and r im a meteorologist at pg e. We make sure that our crews as well as our customers are prepared to how weather may impact their energy. So every single day were monitoring the weather, and when storm events arise our forecast get crews out ahead of the storm to minimize any outages. During storm season we want our customers to be ready and stay safe. Learn how you can be prepared at pge. Com beprepared. Together, were building a better california. We cant go back to the years of devastating cuts to public education. So vote yes on prop 55. Prop 55 prevents 4 billion in new education cuts, without raising taxes on anyone, and with strict accountability. Budget forecasts show if we dont pass prop 55 big cuts that hurt our kids are coming, and california will suffer budget deficits all over again. So vote yes on 55. Because it helps our children thrive. Getting an opening trade on acushnet at nyse. Ticker symbol golf basically in line with that opening trade, which was 17. 19. 3 million shares in footwear, equipment, obviously the titleist brand. Were going to talk more about this with the ceo in just a few moments. Well, expedia reported earnings after the bell yesterday, the Online Travel company Beat Estimates on revenue as well as seeing 21 increase in bookings year over year. Joining us now in a cnbc exclusive is the ceo of expedia, dara khosrowshahi, thank you for joining us as always. First time for me pronouncing that last name. You passed. Speaking to a couple investors this morning, they were focused on Third Quarter organic room night growth which came in at 11 , but which you indicated accelerated or at least is accelerating now to as much as 14 , i think you said on the call. Can you sort of explain what youre seeing there and what the trends are as we are in now Fourth Quarter . Well, the trends are definitely getting stronger. They got stronger throughout q3s a you went into september. And the october trends that were looking at are looking quite encouraging. The hotels. Com, expedia brands, especially those teams are executing well. And the brands are really resonating with consumers, so more and more consumers are coming on to the site. When they do that the rest takes care of itself. So were pretty happy as far as the volume build into q4 and that was strong indication we gave to investors. And you attribute that to overall growth in travel or specifically to some of the things youre doing . Because i would assume youre doing in the same things in the Third Quarter. We certainly were in the first half of the year. But in the first half of the year we had a lot of effort into finishing the integration of certain brands that we brought into the family such as orbitz. So the second half of the year has been very focused very much focused on product innovation. And we think the Product Innovations on hotels. Com and expedia are really speaking to our consumers, which is responsible for the acceleration that were seeing in the room night growth into the back half of the year. A lot of analysts this morning, dara, are writing about home away and some of the better results youre seeing there. I know youve got big plans youre really starting to incorporate i think into the Fourth Quarter. Talk about what youre going to do with home away to try to compete here bigger with airbnb. Well, home away obviously is addressing the enormous alternative accommodations field thats growing really quickly. Consumers want the product. And what were doing with home away is making investments in both marketing and especially the product. To move it from a listings business to a transactional business. And thats where Consumers Want to go. They want to be able to go and see what homes are available in an orlando market, get live availability, be able to look at pictures of the homes reviews and to book on an instant basis. So were building out all that infrastructure behind home away. And certainly were seeing it in consumer behaviors in that online bookings on home away are up over 200 on a year on year basis, thats helping our revenue and Profit Growth as well. Whats also exciting about home away for homeowners and Property Managers is that these properties especially the instant bookable ones are going to start showing up on an expedia, hotels. Com, orbitz as well. So the distribution that the homeowners get is really going to expand. And i think thats good news for everybody. Dara, as you may know, i try and follow liberty fairly closely. They have significant stake in expedia. I believe theyre planning on spinning it out in some fashion. I dont think its a tracker. You know, a, bring us uptodate on where that stands, and b, what will it mean if there are two ways to buy expedia out there . That wouldnt seem to necessarily be a good thing for you. Well, i think it will be a good thing for investors. It certainly has been historically. We dont have the latest on the liberty spinoff. Its part of their plans as far as their tax planning, et cetera, they are very Strong Capital allocators and tax planners, so i cant update you on that. But we think if we keep executing on our base business and we can also offer these incredible Growth Opportunities such as home away and trivago, whether theres one way, two ways or three ways of buying a stock, we think there will be plenty of people to buy it because theyve done very well historically. Yeah, they have. Although would it occur to you just to buy it in instead of allowing it to trade . You know, were much more focused on the business right now. And well worry about that when the spin happens. And then well decide what we do as we always have on the Capital Allocation front. Hey, dara, with a little over a week to go before this election, i did notice that you are one of many ceos that came out publicly supporting Hillary Clinton. For those voters and citizens who might wonder why would a ceo not back a fellow person from the Business World whos talking about lowering the Corporate Tax rate, bringing money back from overseas and 4, 5, even 6 growth, what would you tell them . Well, that fellow youre talking about believes in a closed world. Were a travel company. Were very passionate about the product we market. And travel is about open borders. And its about an open world. You know, theres a famous saying that travel is fatal to prejudice, bigotry and narrow mind mindedness. And we believe in our product. And as a result, you know, im not one to express my personal views much, but i think in this case one candidate is clearly, clearly better and represents the spirit of our company. May not represent all of our employees, but certainly represents the leadership of the company. Well, dara, we appreciate you joining us as you often do. Thank you. Thank you. Dara khosrowshahi, ceo of expedia. When we come back, acushnet now open for trade. Ticker symbol is golf. See the first trades here at the nyse. Were going to talk with the ceo with the dow pairing its gains now up 15. Dont go away. I got it, dad. Ow we love to keep them safe. So we made the Nest Protect Smoke and Carbon Monoxide alarm. It speaks up and can alert your phone if theres a problem. Or let you know if everything is just fine. Because, ya know, we worry. Mobility is very important to me. Thats why i use e trade mobile. Its on all my mobile devices, so it suits my mobile lifestyle. And it keeps my investments fully mobile. Even when im on the move. Sign up at etrade. Com and get up to six hundred dollars. Hey nicole. Hey i just wanted to thank your support team for walking me through my First Options trade. We only do it for everyone gary. Well, i feel pretty smart. Well, were all about educating people on options strategies. Well, dont worry, i wont let this accomplishment go to my head. Im still the same old gary. Wait, you forgot your french dictionary. Oh, mucho gracias. Get help on options trading with thinkorswim, only at td ameritrade. Acushnet holdings going public at the nyse this morning, right now trading up about a percent. 17. 19 after opening at 17. The company best known for golf brands like titleist and foot joy. Joining us at post nine acushnet ceo wally joins us. Its great to be here. Thank you. Its an exciting day for members of the acushnet family. People might not know the acushnet name, but they note the titleist name. Yep. Which is a quarter of the business alone . Thats right. The name of the Company Comes from dialect means number one ball in golf. No, im only kidding. What it really means is peaceful setting that refers to the Acushnet River or the banks upon which the company was founded. It gives us a chance to talk about golf as a phenomenon right now. We know rounds played started to decline in the middle about 2006, but its up since the beginning of last year, right . Yeah, we think the industrys stabilizing. Since the sub prime its been in an era of correction. And we think thats good. Thats a harbinger of positive fundamentals Going Forward. Does nikes exit from equipment open up a lane for you . You know, we think theres plenty of opportunity. You know, weve got leading positions in all of our product categories around the world. Obviously its one less competitor. The industry was overbuilt for a period of time, so were not surprised. And we think Going Forward theres going to be continued correction, whether its at retail, whether its with manufacturers or the number of golf courses. Although it does raise some questions about the business, right . Nike getting out of golf equipment, adidas looking to selloff tailor made and some of its equipment. Under armour has been focused on apparel and shoes. It doesnt paint a picture of a growing business to be in golf clubs. It doesnt, but those there lesser competition is good. For your business . For our business. And why are you optimistic that this improvement in the number of rounds played is sustainable with younger people not as eager to play, right . Thats a good question. But our sticking target audience is the dedicated serious golfer. Go back to the origins of the company, that was our primary target audience. We think thats the high quality consumer in the space. And for us as a result were really focused on that front and thats why were positive about the future. Companys not going to get any proceeds from today, correct . No, its all private equity redemption resulting five years ago from the breakup of brands of which we were a part of. Right. Long term debt, capital lease obligations have come down over the years, but some say its still relatively high. Is that going to change . Yeah, but we have a strong cash flow conversion capability. Again, you got to remember were in a seasonal business where sometimes working capital numbers spike either as a result of building inventory or having high level of receivables. But long term were looking in the very short term future will be 2x. Finally, hows your game . Well, well soon find out next week. After the road show . After this 13day gauntlet of its good. Thanks for asking. Congratulations to you. Well priced. Wally uihelin, thank you. Thank you, everybody. Up next, keeping an eye on stocks, theyre rising. Dow up 38 points s p 500 flattish to positive. Better than expected read on gdp this morning up 2. 9 in the Third Quarter. Will todays number have any impact on the race for the white house . Well take a closer look when squawk on the street comes right back. A moment turns romantic, why pause to take a pill . Or stop to find a bathroom . Cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. 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, or adempas for pulmonary hypertension, 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 longterm 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 symptoms of an allergic reaction, stop taking cialis and get medical help right away. Ask your doctor about cialis and a 200 savings card. Im melissa lee. Heres your cnbc news update at this hour. Locals are pouring into the streets of iraqi village happy to be liberated from isis by Iraqi Kurdish forces, part of a massive ongoing operation to drive militants from the nearby city of mosul which theyve held for two years. Italian Prime Minister setting aside 43 million to help the hilltop town get back on its feet after this weeks earthquake. The town pledging to rebuild under the slogan, the future doesnt collapse. The president of the philippines famously told president obama to go to hell is vowing never to do it again. President duterte its flu season again. Time to go out of your way to get a shot, right . Not if you live in delaware. Hundreds are getting vaccinated for free without even getting out of their cars. Delawares governor was first in line at the new drivethrough clinic in dover. Thats your cnbc news update for this hour. Carl, back to you. Melissa, thanks so much. U. S. Economic growth a bit better than expected this morning. Gdp up 2. 9 in the Third Quarter, thats the biggest gain in a koum couple of years. Steve liesman with a closer look. Weve been waiting for this rebound one quarter after another going back several quarters, it never came, well, it finally came. After a series of disappointments waiting for the rebound for the 1. 5 we get a good number here 2. 9 though flattered by things may not be expected to repeat in coming quarters. 2. 9 s the growth and thats a good change from the Second Quarter which came in at 1. 4 . Core pce inflation followed by the fed at 1. 7. And the employment cost index, results of wages and salaries going up and benefits going up, 0. 6 . Lets look at the details here, Consumer Spending up 2. 1 , a little lower than prior quarter. Business investment finally clocking in a couple quarters in a row of positives. Housing down though 6. 2 . Rebound in starts, that should be expected to turn around though in the current quarter. And the exports numbers, what everybodys talking about, big gain in exports adding a percentage point to gdp. That could come solely from an accounting that has to do with huge gains in soybean exports, folks. I said that right, soybean exports. Government up 0. 5 . Now, taking a look at inventories and exports added to growth like i said together for the First Time Since the Third Quarter of 2014. Chris rupkey says, it is certainly Strong Enough for the fed to come to the markets with a rate hike in december. Theyre not talking a whole lot about a november hike. I want to show you one thing, guys. We in our tracking our cnbc rapid update we were at 3, it came in at 2. 9 and theres the atlanta fed at 2. 1. We dont always win this good, but this was a big win for rapid update, which as you know takes together all of the tracking estimates on the street and averages them together with the idea that nobody has a perfect model, so we use the wisdom. Big win for rapid update. I think we ended up real close there, carl. Congratulations, steve. Thank you, Steve Liesman. Meanwhile, the Trump Campaign pouncing on the gdp numbers saying an america can do better similar to what trumps running mate mike pence told squawk this mornin morning. Take a listen. First you have to level with the American People. I mean, 1 economy is just not good enough. And the American People know it. And Donald Trumps got a plan very different from Hillary Clintons plan. I mean, Hillary Clinton wants to raise taxes by 1 trillion. Donald trump wants to do in part what weve done in indiana, but most especially what Ronald Reagan did in the 1980s, that is cut taxes across the board for working families, Small Businesses and family farms, do away with death taxes, lower the Corporate Tax rate in this country to 15 . Just 11 days left in the campaign, both trump and clinton making their closing arguments on the economy. Take a listen to that. At the core of my contract is my economic plan. That plan can be summarized in three very beautiful words, especially for the people in this area and this room, jobs, jobs, jobs. Weve proposed a very big jobs program because i dont want anybody willing to work in this country not to have a good job with a rising income to support themselves and their families. Joining us this morning Trump Campaign senior Economic Advisor steve caulk and Clinton Campaign and former advisor bernstein. Good morning gentlemen. Welcome to you both. Good morning. Good morning. When it comes to jobs as element of debate here, what is the fact the fourweek average on claims is at a 16year low . Well, i think the most important thing to realize is that number is really somewhat artificially padded. When you look at the fact that real gdp as released today is only 1. 4 , when you look at the fact that over 70,000 companies have left this country in the last number of years and that were at the lowest growth rate post war, its tough to get excited. No one wants to get more excited than me about rising rates and a bettering economy than i do as a banker, but the simple fact of the matter is unless we adopt these now policies proposed by mr. Trump, just like governor pence mentioned and his success in indiana of lowering taxes, renegotiating trade, rolling back regulation and unleashing american energy, theres no real plan by the other side to actually create the jobs and create the growth in the economy that we heard about on that little clip from mrs. Clinton a moment ago. Jared, this gdp number, we say its the best in two years, but since 09 its still the weakest expansion since 49. Look, everybody has the right to their own opinion, but not to their own facts. I dont know where steve comes off with 1. 4 . Thats the Second Quarters growth rate. We just heard Steve Liesman point out that this quarters growth rate is 2. 9 . So catch up to the Third Quarter. Also on jobs, employment grew 190,000 jobs per month in the Third Quarter supporting the consumer growth that we saw. Now, lets connect a couple of segments from this morning. We just heard Steve Liesman, a hard solid numbers guy telling us that the fed may well raise in december. Thats not because its a terrible economy out there. Thats because they think they have to top the rates because theyre concerned growth is accelerating and the job market is tightening up and cause an inflationary problem. Now, i happen to think it would be a mistake to tap the brakes, but this completely flies in the face of trying to debunk the Unemployment Insurance claim numbers, the job numbers, forgetting that the gdp was up 2. 9 in the Third Quarter. It is not a perfect economy by a far long shot. Youre right. We have work to do. But at least lets try to keep it real on the numbers. Well, let steve, i would just add in the fact that wages are rising, that the poverty rate is back to prerecession levels, that the s p 500 is up more than 200 since the 2009 lows, which you can debate whether thats economic fundamentally driven. Clearly its not all rosy, but the fundamentals are much, much better. Why are you capitalizing on some of the more painful spots on the economy . Sure. Look, at the end of the day im a math guy. And to answer jareds question directly, the 1. 4 is the number for real gdp, that was released today. So you have to actually read the entire report. You have to understand the report. And weve had these type of arguments, again make policy, the simple fact of the matter is read the report. So 2. 9 is wrong . Are you saying 2. 9 is wrong . 1. 4 real gdp. Read the report in its entirety. No, its 2. 9 real. Somebody help me out here. No, no, thats the growth over last quarter. Look, i understand youre not a math guy. Thats okay. But at the end of the day what we need to understand is that most of the numbers have been artificially pumped up. If you give free gas and free money, youre going to support an artificially steve, your problem with the annualized element of the number . Oh, no, not at all. I understand that completely. But i also am the main street guy. I dont live in the ivory tower of washington, d. C. This is not about mainstream ivory towers. This is about what i understand is what we really need to understand is i want the economy to be better. This is not an economic or voting issue for me. I want things to continue to grow. Guys, stop, stop steve, stop, steve, stop. Dont tell me to stop. This is the truth. Steve, markets listen to our station. Markets listen to our station. So you cant say that a 2. 9 print was a 1. 4 print. Now, if you want to talk about year over year, thats 1. 5 . Gdp, real gdp. Youre looking at different measures. Youre stripping out inflation. Right. I think you can look at both numbers. I also think were in kind of a economy, jared, where the numbers can tell different stories based on whether you think this economy is booming or no, the economy is not booming. The economy is not booming. There are political arguments in all of these numbers. You can say consumption at 2 isnt as good as it was in the previous quarters as well. Absolutely. The economy is not booming. And the underlying trend growth rate is a lot closer to 2 than the 2. 9 print real gdp growth over the quarter annualized that we got today. But i just want to say this is a reality number, its in the books, its the advanced measure, its going to be revised, but its 2. 9 real annualized for the Third Quarter. One of you is looking at nominal and one is looking at real. Lets clear that up. I have one last question we cant continue to plod along and think were going to address the ticking time bomb of entitlements, for example. If we dont get this economy back north of the 3. 5 growth rate and eventually a 4 , we will never not only create the 25 million jobs that mr. Trump has said can be created from this, we will suffer immensely as the ticking time bomb of entitlements approaches. So the only way to overcome that is to grow business, to grow the economy. And you cant do that hoping and dreaming. You have to put real plans into effect. Okay. So thats last word here, jared. Okay. Thats definitely a great point. I think the problem that steve has there is that all the economists whove looked at mr. Trumps plan find that its probably recessionary in no small part because he wants to deport 7 Million People from the labor market. I dont think anybody listening to the sound of my voice thinks that thats a progrowth idea. Gentlemen no, but what we do want to do is make sure americans are employed skb the best way to do that is to lower taxes, renegotiate trade, roll back bad regulation those are fine talking points, but if you steve, jared, that was good. It was good for awhile. Those are fine talking points. Deport 7 million youre not going to help the growth rate. And they work. Time to wrap up this segment. Steve calk and jared bernstein, guys, thank you so much. Thank you. Thank you so much for having me. Watching shares of mckesson, a brutal day for that stock. Shares down more than 20 , 22 at this hour. On track for its worst day in 17 years. Bertha coombs at the nymex to tell us what is behind this plunge. Good morning, bertha. Good morning. You know, these were the guys, mckesson and the other drug wholesalers, theyre the ones who have come under a bit of pressure of late as people look at high drug prices and they look at the middlemen. But it seems as though the middlemen are coming under pressure now in terms of pricing. And thats the issue that mckesson raised in its Second Quarter. Part of the reason they missed, they say, is because of extreme pricing pressure. They say theyre not seeing as much branded drug inflation as they had marketed for. So that means their margins arent going to be as strong. But the issue they say and the issue that has spooked the market and the entire sector today is the prospect that there may be a pricing war underway. Mckessons ceo on the call said, you know, when a competitor significantly undercuts our existing pricing, we are compelled to respond. And although we cannot be absolutely assured that recent price concessions are going to address the recent height in competitiveness, we believe our responses have been appropriate. Take a look at their competitors, Cardinal Health which reports on monday, ameri source bergen also down. Yeah, thanks, bertha. Its david. You can also as cvs to that. Of course cvs we know as a big drugstore pharmacy company, but they own care mark and that stock is also down over 4 . And then in the drug world itself you got amgen saying were probably not going to raise the price for enbrel next year, even though they raised it 14 year over year, its a key drug for them. Youve got nova nordisk, interesting day in terms of trying to assess the impacts politics have had on drug pricing and where were going from here as you look at the loss of market cap very significant as bertha said and ameriso amerisorcebergen. Health care is worst performing sector and for the year, still negative yeartodate on all of these concerns. When we come back, Legal Marijuana is on the ballot in california next month and has support from big names including investor sean parker and the Lieutenant Governor. Well look at what legal pot could mean for the state and the nation when we come right back with the dow up 62 points. 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Morgan stanley super bowl Jeremy Seagal scaling back his target on the s p 500. What has him so nervous . Find out on tradingnation. Cnbc. Com. More squawk on the street coming up. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Marijuana front and center in the election. Turns out nine states are voting on the issue including california. That means our own jane wells is covering it from los angeles today. Shes got more this is Recreational Use marijuana, correct . Absolutely, sara, yes. This for example is currently medical, but that could change. Its trees, its the branded marijuana coming out from hip hop artist the game. And it will be sold here at the reserve in orange county, which is a fivestar dispensary. As you said nine states considering legalizing pot in one form or another, california has one in eight americans living here and its where most of the countrys pot is grown. Beautiful resin. Oh, yeah. It smells like fruit loops. Yeah, i smell it. 20 years after the golden state was the first to legalize medical marijuana, voters here will decide whether to legalize recreational pot with prop 64. Analysts say it could generate 1 billion a year in state taxes. Some of that money going to communities impacted by the war on drugs. The war on drugs exploded the u. S. Prison population d disproportionately locking away black and latinos. This video by jayz calling the war on drugs a failure has a fan in california Lieutenant Governor who helped craft prop 64. Big business already moving in positioning ilts. For example, look at this. Microsoft has helped fund a seedtosale tracking company, scotts miracle grow specializing with a indoor brand called black magic. And facebook fame sean parker given over 7 million to promote prop 64. In Silicon Valley of course has been always about disruption. Silicon valley is about theres a libertarian energy in the valley, and folks are about social justice and freedom. This is a game changer. I mean, in the emerald triangle, we estimate 9 billion to 13 billion a year cannabis is produced. Do you use . Nope, never have. Its interesting no one believes that and i actually lose credibility. Public opinion polls show prop 64 passing by a 2to1 margin, but most growers up in humboldt plan to vote no. Their story right now on cnbc. Com. Guys, the Second Generation growers up there are more open to legalization. The originals, not so much. Interesting. Jane, theres been a lot of innovation in the product itself, right . I mean theres a lot of edibles now, too, its not just smoking it, is it . Oh, theres all kinds of stuff. In fact, edibles and vaping are the Fastest Growing most popular products, but prop 64 is going to ease in edibles very slowly here because theyve taken people by surprise. Edibles are not like smoking and they have to be rolled out very carefully and people need to be educated about them. Did you just find out about edibles . No, i didnt find out. I have a lot of friends who enjoy the edibles. So i was just curious. Whats wrong with that, jane . Theres nothing wrong with being curious. If its legal, enjoy. Go for it. Responsibly. There you go. Said like the good mother that she is. Jane wells. Good to see her. Lets send it over now to jon fortt whos got a look at whats coming up on squawk alley at the top of the hour. David, i know youre also curious whats coming up on squawk alley, weve got the ceo of amd here, shes going to be at post nine fresh off of getting some graphics chips into the new bags announced yesterday. Also were going to dig into amazon and alphabet earnings. Those stocks going in a kocoupl different directions. And caught up with Shaquille Oneil going into perhaps a new career as well as reflecting on new investments. All that and more coming up on squawk alley. Jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive the dow is up about 66 points. Lets get over to the cme group, Rick Santelli with the santelli exchange, digesting the nominal and real gdp numbers. I enjoyed that segment. Welcome to my special guest, douglas, thanks for taking the time today. Of course. What i was going to bring up with sara is, you know, there was a time ive been around the markets since the Carter Administration where you kick every number. But it seems though after the credit crisis everything goes back to various strategists, so every number doesnt get kicked the way i would kick it. Kicked around with how it impacts politics pip hate that. Lets strip that away. 2. 9 looked pretty good. Over the last seven years weve had several quarters higher. This goes back two years. Lets do it right, take four quarters in a row and average them out including this 2. 9, you get 1. 5. The last eight quarters, 1. 86. The last 12 quarters, 2. 25. You see where im going. Sure. The number is better than a kick in the gut but it wont change the real issue. Is this sustainable or just a number that gives you a little light in the First Quarter, Second Quarter, usually makes it up the second or Third Quarters. I think you read this right. This thing is goosed by some inventories that a 10 growth in exports is not sustainable. Year over year, 1. 9. Sales to domestic purchasers, its 1. 6. Were in the 2 economy, and thats the longterm outlook. And thats not very good. I mean, you know, i think its like 2 milk. You can live on it but you cant bake anything rich with it, get much prosperity out of a 2 economy. Exactly, oneoffs. Thats what i said with the gang this morning. When you look at stocks with this theres always something they pull out tf the closet. But at some point reality has to dawn. Im with you there. Lets change topics. You have quite a background. Cbo director, but you were also an economic adviser for mccain, so you can speak to this. Everybody likes effort. Okay . I dont mind infrastructure when i can see it. But in the day and age we live in its all about trust. I have three phrases, okay. My first considering shovel ready last time i heard this is it rigging or actually digging, is it slush or serious, is it truth in spending. Are we really talking about the infrastructure thats good for the economy or is this just another political ploy to take money, commingle it all together, and do what the heck they want with it . Im worried about this. I mean, youre hearing both sides talk about how great infrastructure is and im with you, we need highquality infrastructure. But theres some pretty elastic definitions of infrastructure out there. When you Start Talking about health care and prekindergarten education as infrastructure, im nervous. I think thats going to be a problem. Im also worried that, you know, its being oversold. It will happen fast, it will have huge impacts in the economy. I dont think either is a true. It takes a long time to do good infrastructure. While it can help the economy, it doesnt pay for itself like paul krugman has said or the trump guys are now saying. Lets get sensible about it, spend the money well, but in the silly season of an election, its hard to get people to focus on that. All right. Final 20 second, doug, youve watched the mafshgt markets, the political issues going into election day. Any final thoughts from an economic standpoint regarding either candidate that we can hang our hat on . Honestly, i think this is a very disappointing election from that perspective. I dont think either candidate has an Economic Policy platform thats going to address the fundamental issue you raised at the outset, which is what is the longterm sustainable rate of growth in the united states, can we move it north of 2 , thats what we mean and thats not whats in the platforms p. Doug, thank you for your opinions, taking the time today. Sara, back to you. Expect a lot more cherrypicking of the data between now and election. Rick santelli, thank you. Chevron and ge are leading the dow higher and that does it for us on squawk on the street. Much more ahead on the tech earnings next. D also feel bette. I am helping hospitals personalize treatments using billions of data points. 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Get up to 5,000 customer cash on select 2016 models. See your lexus dealer. Good morning. It is 8 00 a. M. On the west coast and 11 00 a. M. At the nyse face. Squawk alley is live. Welcome to a squawk alley. Joining thus morning in San Francisco rbs Capital Markets lead internet market analyst mark mahaney and kate mitchell. Good morning, guys. Our top story will be shares of amazon under heavy selling pressure, they posted a major earnings miss. Third quarter numbers 52 cents, well below 78. Wall street was expecting. Amazon says opening new warehouses, slashing stripping times caused costs to soar in