Transcripts For CNBC Squawk On The Street 20161101

Positive, europes are slightly in the red and we are watching crude and gasoline on news of the pipeline explosion yesterday in alabama. The first trading day of the month after that red october, more earnings. The election, the jobs number and the fed meeting all on tap for the markets. It is one week to go until election day. New polls and investigations are moving the markets every day, including today. Well have the latest. And a spinoff for kfc and taco bell. Yum and yum china begin trading as separate companies this morning. First up, though, a lot for investors to digest into november as we head into the first trading day of the month. A jobs report is coming on friday, the election is next week. All three major indices were in the red for october, posting their worst performance since january, although to be any worse than january would have required a lot more selling, jim. Look, theres theres just a major change underneath. What we saw were a lot of health care companies, big part of the s p, almost every single one of them was subpar. And the actual earnings, by the way, youre just not yoogd to reading releases that talk about price competition in the drugs, whether it be amgen, whether it be abv, whether it be from zimmer biomed. Well, the competition, dont worry about the competition, the need is not as bad as the supply chain management. I see Health Care Competition and then i read the banks and theres very little competition. So the banks had a great quarter. That is very, very different than what we expected, and health care had bad quarters. Health care were worse quarters than the banks. Retail wasnt so good, that mattered. Oil and gas were okay and tech was pretty good, but health care brought everything down. It is rather remarkable to sit here and think that the most defensive stocks were the worst. Thats a good point. Political risk in there. Oh, my. Were get auto sales today which will give us more granularity. We might get a break today on the sales. Ford is the worst. I had Klaus Kleinfeld on last night. Theyre having a blip on the f150, the most popular vehicle in the country. Theres a little bit of an inventory adjustment. By the way, the i am not a believer in the subprime loan problem in autos, but its three straight months, three straight months of subprime loan problems. This is my were in a bit of a funk problem. Home depot and lowes, another blip down, according to another piece of research. Were just not getting good, good data from any retailer, any restaurant chain. I cannot wait to talk to yum. Maybe something good. It wont be bad, but certainly yum will be positive when we talk to them. Not bad, thats not exactly, wow, ive got to go buy yum. Its not bad. Whats behind it . This is what i think we spent a huge amount of time talking about politics. I had brunswick on last night. What a great barometer of this country. Do you really need a 28footer, david . Ive got a 17footer boston whaler, im totally happy with it. Sales are good. But when you hear the company talk, its like why are our sales good but not for polaris. Well, people are a little down. The people are a little down. I think its the election. We get past the election, i think there will be just a kind of a sigh of relief. Thats a sigh of relief. Really . You think so . Yes, i do. No, i made that up to i dont know. That was just something i made up. Just to be provocative. Just wondering. You dont sense the funk . No, not particularly. I sense the apprehension. But if trump win, i think youre going to have a lot of questions. This is the cover of usa today. Oh, my. Is it over yet . Im doing halloween candy and what are people talking about. The kids are still saying thank you, right . But the parents, no jello shots. Its like all, geez, hows it going . Meaning like i cant wait for it to be over. Speaking of which, Long Campaign winding down, we are just one week away from election day. Our chief washington correspondent, john harwood, has been watching the electoral map and a bunch of other things this morning at hq. Hey, john. Good morning, carl. I think jim is right. I think there is going to be a national sigh, but weve got to wait a week for it, actually eight days, it will be wednesday morning. Lets take a look at where this race is coming. It is clearly narrowing in the polls. Real clear politics, that average is down to 2. 5 Percentage Points in favor of clinton. New york times average 4. 1. Huffington post, 5. 6 Percentage Points. We saw on the abc Washington Post track this morning, first track showing donald trump one point ahead of Hillary Clinton. But is that narrowing enough for donald trump to win . Take a look at the electoral map and that gives some clues. Weve got battleground states all across the country, but its still a challenging map. Remember, mitt romney carried 206 electoral votes. Donald trump has to add 64 to that. Take a look at his strongest possibilities of taking blue states. Nevada, iowa, ohio, florida, all of those are battlegrounds where donald trump is very competitive with Hillary Clinton. He could win all of them. But if he does, that is not enough to get him over 270. So whats the next tier of targets . Youve got states from colorado, wisconsin, michigan, pennsylvania, virginia excuse me, North Carolina as well as new hampshire. All of these are states where donald trump is not doing as well, where Hillary Clinton has had a lead. Shes got some advantages in those states. Theyre more diverse than the other states that he is picking up, so donald trump has got to figure out something to win there. Hes traveling to indicate that, both in wisconsin and in michigan. Then the final tier of states are states where Hillary Clinton could take away red electoral votes that romney won which steepens the hill for donald trump. Those two are arizona and North Carolina. Shes held a consistent lead in North Carolina, shes very close in arizona. So its a difficult map for donald trump. Not impossible, but difficult. Now, weve got a new story this morning in the New York Times about donald trump and taxes. He hasnt released his tax returns, but what the times reported is that he used what his accountants considered legally dubious methods to claim Tax Deductions in the 1990s. Is this going to make a big difference . I doubt of. Its of a piece with the other information weve learned about Donald Trumps taxes, which he has not made public, but people have intuitted and he talked about in the debate and said that made him smart. Interesting to our audience that monitors how people pay taxes and what means they use to avoid them. John, i see a lot of presence of trump in michigan, but theres North Carolina as well. If there is a firewall in this race right now, being a state, which is it . The firewalls that the Hillary Clinton Campaign Hopes that they have are three. Those are colorado, virginia and North Carolina. Two of them, colorado and virginia, are states that bill clinton excuse me, that barack obama carried in 2012. Donald trump needs to take one of those away. Hes had a difficult time doing that. And North Carolina, as i talked about earlier, is a state that mitt romney carried but Hillary Clinton could take those votes away. And so instead of needing 264 electoral votes to add to romneys 206, so its difficult for donald trump if he cant carry a couple of those three states. We have a week to toss this around. John, thanks. Well talk to you later this morning. Jim mentioned today is the day that yum china begins trading as an independent company. The yum brand spinoff operates more than 7300 restaurants in mainland china, listing on the big board under yumc. Well talk to greg creed and mi micky pant. They will simultaneously ring the opening bell here and in shanghai. This is a huge company. People have to recognize, a worldwide huge company. This is a move much like a lot of the moves that we see, to give you a fastgrowing company, right . No yield. Fastgrowing company with a clean balance sheelt and kind of a methodical company and you can choose. This is the kind of thing, weve talked about this endlessly on mad money. This is how you figure out who you are. What we dont talk about enough on most shows, suitability. What do you want . Do you want something younger, faster growing, which has been china. Although we have to ask about whether the Chinese Government actually likes this yum china. And then youve got something that over time can grow which i think is underrated which is this rest of world. I think taco bell is doing well. I dont know if youve been to the remallsed taco bell, its quite nice. Pizza hut is doing well. I have to plead guilty, the dark meat kfc with the mashed potatoes, done, done. Yum itself is going to be asset light. Theyre cutting g a significantly. Theyre going to be franchised up to 98 is what theyre talking about. Right. As you point out, the Growth Company being yum china, which has you know has been rather volatile. Dont you think it could surprise it could. I think theyre talking about 1. 25 million in evita. They have got to find an investor multiple. But when you look at the comps, you can argue it should be a higher multiple. 4. 5 store growth. Corvex is in there on the board and happy. This isnt necessarily what yum wanted to do or thought necessarily was the right course initially, right . They liked the combination, so its worth talking about. It will be interesting to see how it trades. Theres keith meister, of course, but beyond that, as both find their distinct investor bases. I find it fascinating because theres a school of thought which says that the rest of world may grow a little faster than china. Im reluctant to invest in the chinese side, because i think there was a time when you bought china because there was an aspirational aspect. People used to get married at kfc. The cache of the u. S. Blast food was considered to be so much higher. And dont forget, the chinese have delivery now with cell phones and people deliver all over the place. Theres a change model. I actually think that rest of world could do as well as china. Look at dominos. Now thats not the model. But dominos is the fastest grower in the world. Did you see dominos stock . Thats been a challenge for pizza hut, technologically falling behind. Its been tech, its been the app. I did dominos this weekend. I love the app so much. I have the base blap where it says its out of here. Its a nice way to order pizza. When i was shopping at the mall this weekend weve got lots of pizza places in the neighborhood. Go set a slice around the corner, fold it in half . Both of you are not new yorkers, so really just enough, all right . You probably eat are pizza with a fork and a knife. Id rather have dominos. Like our mayor. Hell never recover. When we come back, more movers to get to, including valeant. Speaking of china, well talk more about these pmis, strongest in two years. More squawk on the street in a minute. 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 . Im stressed trying to figure out this complex trade whats with the dogsized horse . So i brought in my comfort pony. Well, you could get support from thinkorswims inapp chat. So you dont need a comfort pony. So what about my motivational meerkat . Inapp chat on thinkorswim. Only at Td Ameritrade. Our mission at clover is to highest Quality Dairy products. Clover has relationships with 27 different family farms. The environment is who clover is. Without it, were nothing. Pg es been a great partner. Theyre the energy experts, were the milk guys. Pg e worked with clover on a number of Energy Efficiency projects to save energy every month. If youre part of the fabric of the community, youve got to ensure that you do things right, environment included. Learn how you can save at pge. Com save together, were building a better california. Valeant is trying to bounce back after falling 12 on monday. The drop in reaction to the report that the former ceo and Howard Schiller are the subjects of a u. S. Criminal probe. In response to that report they said the company does not respond to rumors about investigations but closed it was the subject of a probe by u. S. Attorneys and that it was fully cooperating. How do you trade this one, jim . Ten years ago, almost right about now, then u. S. Attorney Chris Christie was investigating peter dole angers who wan, the myers. It was a bad investigation. They appointed a monitor. But the point that i mention this is that the investigation of the ceo meant nothing. The ceo. And what you have to recognize is that if you want to sell valeant, it was bad very badly yesterday, do not sell it off the u. S. Attorney. You sell it off the 30 million in debt. You sell it off the fact that every single drug stock has had a line of weakness over major drugs. And do you think that their wellbutrin can stand up under pressure, do you think that their jublia. Or the one they got from salex. Remember the portfolio of drugs under mike pierson, it was lets have 50 drugs that do 50 million in sales and lets raise price because theyre all under the radar. Theres mr. Pearson. Now they have gone on with a blockbuster drug and i think you make the salient point, which is simply pricing pressure, what is that going to do to the model at valeant. By the way, they may not be looking for asset sales. Its not clear what they could sell other than bausch lomb. The irritable bowel drug. Jublia, the toe fungus drug, that lasts one month so think about how much that is. Do you think that mckesson wants that . We wellbutrin, i know the generic is not tolerated as well. I think the most important thing is that when weve seen the antitrust department go after all these things, who can buy bausch lomb . Not j j. Novartis wont be allowed to buy it. Theres no natural buyer of bausch lomb. Who wants to go up against novartis and j j. If you want to sell valeant its because of the cash flow. If you get rid of bausch lomb, youre eliminating a lot of t as well. Not to mention theyre increasing r d. The whole plan was smaller drugs, increased price, tax rate, which of course they still have extraordinarily advantageous tax rate, and dont skpend anythi spend anything on r d. Valeant still has backers. And value x still delivering they have some backers, but i just think that ive seen when a u. S. Attorney investigates a sitting ceo or a ceo whos left, it has not really mattered. So dont use that as the reason to sell. Use the fundamentals. Unless they come after the entire company. Well, thats happened, and thats usually because of a problem with an actual drug that has hurt people. Right. That they have hidden memos. You know who im thinking in those cases. Youre thinking about asbestos, you know, stuff that is well beyond what were talking about here. Speaking of drug stocks, well get to pfizer. Speaking of rising costs and lower efficacy over time, well get to pfe. Well get cramers mad dash and count down to the bell. More squawk on the street after the break. Now that fedex has helped us simplify our ecommerce, we could focus on bigger issues, like our passive aggressive environment. Were not passive aggressive. Hey, hey, hey, there are no bad suggestions here. No matter how lame they are. Well said, ann. Ive always admired how you just say whats in your head, without thinking. Very brave. Good point ted. Youre living proof that looks arent everything. Thank you. Welcome. So, fedex helped simplify our ecommerce business and this is not a passive aggressive environment. I just wanted to say, you guys are doing a great job. Whats that supposed to mean . Fedex. Helping Small Business simplify ecommerce. 32 flavors, thats baskinrobbins, but were talking about l brands. Im going to keep it brief. Last night they gave some numbers that were a tad disappointing but look at this. Victorias secret was down 2, any expect that. Look what happens. This is a mallbased store. Bath body works is very good. Look at the reaction on just a slight disappointment. Whats that mean . It means that people want to celery tail. So just be careful. There are a lot of bulls out there thinking that the worst is over. That tells me its not. Because it wasnt that bad a quarter. It was not great. A lot of people felt there was going to be a turn. But im just saying beware. Matthew boss put out a piece saying theres not going to be many winners in the mall. Please read his stuff. He is the best and hes been very right. He said be careful of these guys. I told everyone sometimes you defer to your elders. Matthew boss is the hottest there is. He said get out, he was right. All right. Well be looking at retail, well look at discovery earnings, earnings from pfizer. Well talk a lot of yum this morning. And eating a lot of yum. And taking a look at those deal stocks from yesterday, none of which did particularly well. All of that coming up when the opening bell rings a few minutes from now. My name is Valerie Decker and im a troubleman for pg e. I am a First Responder to emergencies 24 hours a day, everyday of the year. My children and my family are on my mind when im working all the time. My neighbors are here, my friends and family live here, so its important for me to respond as quickly as possible and get the power back on. Its an amazing feeling turning those lights back on. Be informed about outages in your area. Sign up for outage alerts at pge. Com outagealerts. Together, were building a better california. It begins from the the second were born. Er. Because, healthier doesnt happen all by itself. It needs to be earned every day. Using wellness to keep away illness. And believing a single life can be made better by millions of others. As a Health Services and Innovation Company optum powers modern healthcare by connecting every part of it. So while the world keeps searching for healthier were here to make healthier happen. Youre watching cnbc squawk on the street live from the Financial Capital of the world. The opening bell in about two minutes. Big morning as a twoday fed meeting begins. China pmis were a little better than expected, the boj keeps policy unchanged. Well of yum and yum china separate and ring the bell simultaneously here in new york and in shanghai. Auto sales are on the way and oil, jim. The secretary general of opec saying this deal is still on, whatever that means. I know. Whats painful about this deal, i was on halftime with steve weiss. Its the saudis interest in talking up. This is one of those things where every day they can get a higher price and make a little extra money. This war in yemen, which is totally uncovered by the media, because it is a hot war, needs to be funded. So you talk up your product and make a little extra money. It really is about talking up your product and getting more money. It hasnt stopped goldman today from saying we see lower odds of a deal and even if there is a deal, lower odds of them successfully bringing inventories down. Well, the one thing is, is we are seeing a dramatic decline in spending offshore. It is absolutely not economic. And that will lead to a depletion that will make it so the second half of 2017 there wont be enough oil being pumped, that iran and iraq better start pumping a lot more oil or youll see some lift. China is absolutely producing demanding more oil. Dont forget, i know we have a pipeline outage thats going to move up all the refiners today. Thats colonial pipe that blew up, unfortunately sad. But to get gasoline demand worldwide, theyre taking ours. We have excess because we made more refineries. So theres a lot of things in flux away from iran and iraq. Were going to watch all of that along with the s p here in a moment. At the opening bell, as we said, yum brands celebrating the spinoff of its China Division today ringing the bell here and in shanghai. Were going to talk to ceo greg creed in a few moments. Later in the show well talk to micky pant. At the nasdaq, the cto summit is kicking off today and i guess well watch yum and yumc as its now known. All these things, theres gm down there. You get the first days trading, dont take your cue from it because theres a lot of people shuffling. They have to establish shareholder bases at this point in two different places. They stem their flowback issues, shares coming back to the u. S. From china by having these core investors, primavera. I just warn people, i was going on with Klaus Kleinfeld about hes moving oar to iconic, theres alcoa and a ratio at alcoa to arconic. These are unseasoned securities. So you decide you want to place a longer term bet, thats fine. But short term we dont know whether the direction is going to be true, so to speak. It may not be true. Alcoa is up 2. 5 . Right. Well, theres alcoa alcoa and then alcoa arconic and they are very different. Alcoa aa is the stub that is commodity, for every three shares you get one of those. It looks like its down 6, its not really down. Its the piece that you get as the spinoff, the commodity piece. Shares of discovery, those are the guys we have coming on from yum, of course, coming up shortly. We want to get to phil. Carl, do you want to sure. Jim mentioned gm is out for that. Lets get to phil. Quickly give you an update. Auto sales a little better than expected. The estimate was for a decline of 6. 3 . Remember, october of last year was a huge year, so most of the auto sales you see today will be negative relative to last year, but what you want to focus on is the sales rate. General motors is estimating that the industrys sales rate for the month of october will be 18 million vehicles. If thats true, guys, thats one of the stronger months of the year and still a very strong sales rate. Again, gm down 1. 7 , a little better than expected. Guys, back to you. Thanks so much. You hear the bells ringing for the open of yum china over there, as you can see. 2450 is right around where its trading right now. You can see it right behind us, to discovery this morning which is down a little over 3 . It wasnt u. S. That was the concern. It was international where the company did operate before the depreciation and amortization of 183 million. That was down, not good. They cited fx and some impact from brexit, but overall investors not particularly pleased with those numbers from discovery, jim, and so were watching that have some weakness. Again, not really as much because of the u. S. Where it was okay as international, but international a very important part of this company as its investors know. Interesting story in the journal about now netflix and amazon are taking on india. Netflix with a more regional content strategy. Amazon thinking we can go local and make shows for this country. But either way very difficult to do. And people are starting to recognize that amazons comments last week were much more geared toward how much to spend in india than it was about how theyre doing in the u. S. Amazon is making remarkable comeback. The people who sold it down 40 certainly have sellers remorse already. Really incredible. Do you want to hit ganett . Do we want to hit pfizer first . Its not down that much. It shouldnt be. Pfizer, the headline numbers, they did stop a drug, a cluster drug, only 500 million in 2020. You have to back out the numbers. Not that the numbers are anything to write home about but the numbers were in line and people were selling it down a dollar and they didnt read the fine printing. It was an in line quarter, it was not great, it was not bad. They also mentioned Foreign Exchange headwinds. Valuation of the venezuelan bolivar and increased the lower ending of their fiscal 16 revenue guidance to account for the closing of a deal. But nongap earnings her share, cost of goods sold. But the revenue guidance was narrowed upwards. I thought it was very smart. The people who sold this thing down simply did not bother to read the whole release. I see a lot of that. People shooting first and asking questions later when it comes to drug stocks because they have all been so bad. Pfizer was not bad, okay. It wasnt great, not bad. Not great, not bad. Ho and hum. Bad for trunk. Carl said lets hit that quickly here. Shares of the old tribune now called trunk are down, going to be down sharply. Youll see it in a moment. After gannett called the company and said were done. It appeared that they had a deal done at 18. 75 a share. Last week there were reports from bloomberg about banks not signing on and they were correct. However, it did appear gannett was in a position to replace the banks that had concerns about the financing with other banks, but the cost im told by a number of different sources was going to approach plus 600 bases points and thats a fairly high rate of interest. The gannett board seemed to have trouble with both the last two quarters at gannett in terms of softness and the rate it would need to pay in order to get the deal done. But i am told that there were banks willing to fill in for those that did not feel comfortable of taking on the load of financing the deal at 18. 75 a share. It all adds up to tronc being down. This started last spring when gannett started an unsolicited bid to buy the company and slowly but surely moved up from there. You can see Michael Ferrell would have delivered quite a premium if he would have got it done at 18. 75. They put a statement out saying it wasnt our fault, these guys just didnt come at the end of the day with the ability to finance a transaction. Again, what i am told as well is there may have been that ability to finance it, but then the gannett board said things have been not good here the last couple of quarters, do we really want to be moving into this. Others argue this is exactly what you need. You need the cinersin synergiee from a deal. Whether its time or whether its the New York Times or tronc or gannett or news corp, its not a pretty picture. 2,000 layoffs. Reuters today, 2,000 layoffs, 4 of their workforce. It has been a very difficult environment, particularly for those companies that rely on the bulk of their revenues being actual print advertising. All of them are talking digital, including tronc, which those in Artificial Intelligence and what it will be able to help with its business. Right now its not going the right way. Tronc is reporting after the close. Tronc had a kind of revolutionary approach to things, Artificial Intelligence, but in the end the dogs wont eat it. Wall street is not buying it. Its tough to prove it. In the end anything print. It just reminds me, i remember in 1999 when all these companies were trying to shift their models to dotcoms and they ended up cannibalizing their own business and thats what happened. Digital dimes, dollars, print dollars, digital dimes. Now its digital pennies and digital fractions. I still get the papers. I like to look at the papers. Right here. But i get made fun of a lot. I do too. My kids think that im i hate the environment. I use this, and this is criminal. And i read the papers. I might as well a fire starter. I should get a galaxy note 7. We need to get water bottles, all of us, water bottles. Lets get for bob pisani and see whats moving on the floor. Hi, bob. Good morning, guys. We have a mixed open, although we did have good news over in china. It was on upside. Hong kong also up. Better manufacturing numbers. The bank of japan met and stood pat so a little headwind a tailwind, excuse me, going into europe. Europe started on the upside. Right nowth mixed. We did have some of the Big Oil Companies reporting here. Bps an earnings beat but it is down. Shell had a nice rise, they posted better than expected numbers. You know, these stocks trading in europe have had a very, very good year. Bp is up 30 , royal dutch shale is up 30 . Here in the u. S. , you see these gasoline refiners this morning all up 3 or 4 . Tesaro also on the upside. Colonial pipeline has been shut down. That services the gasoline all throughout the south. Big explosion there in alabama. Not sure how long thats going to be shut down. So valero and marathon and tesaro all trading to the upside. Thats why we had Energy Leading here in the u. S. Energy is leading, banks also doing well, industrials. These are Leadership Groups that were in october. Again, those Interest Rate sensitive stocks like real estate and utilities lagging. They had a terrible time in october as we saw Interest Rates moving to the upside. Alcoa is around the corner but lets just reiterate, jim was just speaking about this, the old alcoa, aa, trading essentially the upstream operations. Bauxite and aluminum products. The new alcoa, arconic, aerospace and automotive, also to the upside. Yum china also trading right around the corner here and the important thing is new boards, new businesses and yum china doing very well at the moment. Guys, back to you. Bob, thank you very much. Lets get to rick. Good morning. Ive been running around. The last couple of days maybe starting friday we had a lot of inputs, whether it was what the fbi was doing regarding emails or the fact that markets had pretty decent moves, but they started to reverse. Rates started to come down. They did it a little bit yesterday too. Its changed again back to the upside. As you turn back up trying to get close to the 190 area, maybe a may 1st start of tens gives you a better picture. This is key. Bank of japan, our central bank, all of a sudden everything is back hot, guns hot. Look at boone since may 1st. Look at whats going on with the french oat. Slightly over 50 base points. Look at italy hovering a bit above 170. Thats the highest yield on a closing basis since early february of this year. Lets look at guilds. On gilts. Theyll escape velocity on that 623 comp to brexit at some point. But jgbs, bank of japan, no more information. It looks like theyre all running out of runway a bit and maybe a little whiff of inflation in europe. And you see the jgbs really havent gone anywhere quick. Wheres that steep yield curve . Finally, the aforementioned slight rise in inflation rates, while it is giving the euro a boost, as you see on the yur eu versus the dollar, pushing it down half a cent even though rates are higher. Back to you. Yum brands officially spinning off its China Division today. The new company will trade under the ticker yumc. Joining us now is the ceo of yum brands, greg creed. Greg, nice to see you. Nice to be here. Thanks, guys. I want to talk first about yum china, which is the fastgrowing company. Theres a debate right now. Right. In the old days i remember yum china and we first started talking about it a long time ago and this was the Fastest Growing Restaurant Business in the world. Then it had some supply issues and also had lets just say headline risk. Where is it right now in terms of those issues being behind them and the growth acceleration . I think all issues are behind us. I think the big story is growth, whether its urbanization in china, whether its the infrastructure, being about infrastructure, its railroads, its airports, its train stations and malls. Theres 1250 malls going to open. All of those are opportunities for us to build new restaurants and grow our fight print in china. We think theres unlimited Growth Potential in china. But have the others caught up . Right now you have a cell phone my cell phone, i can order so many different restaurants and they can deliver now. In the old days, you guys were the only game in town. You can order and get it delivered in china as you can the rest of the world. Relevant brands with technology, thats what were doing, making sure were on the cutting edge. How much is china about competing against fellow u. S. Rivals and local rivals, local merchants, right . Its very the vendor base is disparate. We have 4 restaurants per million in china. So its far from saturated. We are so far from being saturated its not even funny. As all this infrastructure happens, all that will lead to growth. You know what im interested in, is there any chance, because you know im a big fan in regular yum, is there any chance that regular yum is about to have a ramp of growth that none of us see in rest of world because taco bell is doing so well . I think right now looking at our Third Quarter, we had a great quarter for taco bell and kfc. They look even better now that our competitors have posted their numbers. Honestly, we believe we can grow 7 for all three brands across the world because were still in emerging markets and still get the growth from china. When you first talked about the split i happen to love my remodeled taco bell. You know that chipotle is having a little struggle. This remodeled taco bell is on fire. It is. And the ad campaign is good. Yeah. Is there any chance that samestore sales could exceed china for a couple of quarters here . I think theres a chance. Taco bell has momentum and we havent even begun to scratch the international business. Were only in 22 countries with 300 restaurants. With kfc were in 23 countries with 16,000 restaurants. But the key is to pursue the assetlike model so these would all be franchisees in any countries where youre opening stores. Even after the china spin, well have about 3300 restaurants and sell down to less than 1,000. That will produce about 2 billion in aftertax proceeds which were going to return all that to shareholders. Its funny, because theres another company that has pursued that model, burger king and the like. Consolidation in your industry, do you think about it at all as a possibility . I mean it just occurs that now that yum is a smaller and more contained company. Dont just focus on growth. We focus on growing all three brands. Whether its taco bell, kfc, pizza put, whether its in the u. S. Or outside, we have tremendous potential growth. How does pizza hut catch up with dominos . I would say two years ago, kfc u. S. Everyone said was down and out for the count. If we can do it to kfc which was in a lot worse situation, we can definitely turn around pizza hut. Is it a recipe story or an app story. Theres an asset story, a Technology Story and make it easier for the customer story. Its going to take some time and were not promising dominos like numbers next quarter but i believe we can get there in the time frame. You and i talk a lot. Natural organic, has it peaked as a concept . Because your numbers indicate that Natural Organic does matter, but taste is king. Taste and value and convenience always matter. Now, do people want to have healthier choices . Yes. Do you have to have choices . Yes. Do you have to be more transparent . Yes. Do you have to make progress . Yes. But its all about taste, value and convenience. But the numbers for you and for easterbrook are better for everyone else. Thats true. On our menus, theres probably 2 of our menu makes it across all our brands, very small. How would you characterize the environment in terms of the consumer and also on the wage side, given me know that minimum wages have been going up across the country . Id say the consumers, theyre in a waitandsee situation. Next week theres a lot to see what happens. I dont think even what happens next week, whichever way it turns out, i dont think the customer will come out and open up their pockets. Why not . I just think people are cautious right now. I dont think its just the election. So i think people but you know what, great brands that are truly differentiated that offer a distinct point of difference like we demonstrated in q3, they can be successful. Im not about using the macros to help or to hinder, im saying build really dynamic distinctive relative brands and you will be successful in any market. Is food deflation a story that lasts into the middle of next year . Everyone is saying we think it will last through the end of 17, and weve already got high wages in seattle. Our business in seattle is as strong as it is anywhere else in the country. Our advantage is weve got a lot of markets where we have higher markets. In australia, its 21 minimum wage. We know how to act, how to put our p l together in a high wage market. We can bring that knowhow to the u. S. As obviously wages move up. What happened at pizza hut versus dominos . Patty doyle comes in and says, okay, our pizza tastes like cardboard. You know what, i admit it. And they do that great we did sample, we had actually people taste it and they said the corrugated tastes better and completely reinvented things. They go allin technology. Those were smart moves. I dont feel like youre aztec logically inclined. Weve got a lot of red roofs. They have to go away. Our pizza hut franchisees have committed 1. 5 billion to get out of the red roofs. The second thing is we have to obviously catch up on technology, exactly, and we will do that as quickly as we can. Weve got to get to a single pos system and obviously that is part of the game plan. The doritos taco. Yes. Were you there when that was created . Yeah. I ran taco bell, yeah. Where does that level of innovation come from, because it has other guys heads spinning. Everything is driven out of insights. We drive everything out of Consumer Insights and the second thing is a partnership. So our partnership with pepsico which i think is a world class partnership. If you dont start with insights, you dont have a big idea, i can assure you. I am concerned that there were manufactured issues in china. I never felt that what was wrong with china and your food chain was any different from anybody else, but there was bad publicity that was blown out of proportion. How do we know that wont happen again . I think people in china think yum china is now a Chinese Company not an american company. I think that will help. If people think its a Chinese Company and not a u. S. Company, i think youll see less volatility and less involvement on outside forces on our china forces. While weve derisked our business by spinning off china, i think china has derisked boy what china will see as a Chinese Company. When we come back, well get stock trading. Dow starts in a muted range, down two. Dont go away. Top for cramer and stop trading. The truck story is a bad story and coummins today was a bad number. But Klaus Kleinfeld told me this would be bad. Cummins, huge sales over in china. But it was a miss, it was a miss and it was a miss. So be careful. The truck business is a bad one. Anybody in the manufacturing of it, caterpillar has some of that too, but i was disappointed. What can i say, this is the Industrial Renaissance is not happening when it comes to this particular part of the world. What are you going to tackle tonight . You know, i dont know whether you guys were as blown away by greg as i was, but we decided to have him on. We listened to him and we want to talk about the notion of knowing what you like and peter lynch, the greatest investor of my life, income versus growth. Do you want to own something that you love the taste of, that has a good income, which is going to be kfc, taco bell you never tire of talking about pizza hut and taco bell. No, i dont. Dominos has been the biggest hit. I brought the cardboard out, i ate it, candidly it was better. Tomato sauce on it. It was better. I did a taste test. I was blindsided. It had a crispier taste, the corrugated. I like it crispy. And the crust was better, as a matter of fact. Whatever. Fiveyear chart. Dont forget theres also special dividends in there. Lets see if pizza hut can do it. I am the new taco bell david, the resign is so gorgeous. You will just be struck. Better than the wendys redesign that you and i like to go to. Jim, well see you tonight. Mad money 6 00 p. M. Eastern time. When we come back, yum china now trading as an independent company and well talk with the ceo of that firm live from shanghai. Dow down one point. Dont go away. New bikes arent selling guys. What are we gonna do . How about we pump more into promotions . Nah. What else . What if we hire more sales reps . Nah. What else . What if we digitize the whole supply chain . So people can customize their bike before they buy it. That worked better than expected. Ill dial it back. Yeah, dial it back. Just a little. Live business, powered by sap. When you run live, you run simple. Good morning, welcome back to squawk on the street. A busy, busy day. We have been talking a lot of yum and yum china but also a twoday fed meeting begins, the election is a week from today. Oil managing to behave itself as goldman sees a lower chance of a deal Holding Together and Economic Data crossing the tape. Rick santelli has manufacturing numbers now. How do they look, rick . First of all, Construction Spending for september is a huge miss. Missed by ninetenths. Its down 0. 4. Last month only down minus five. Now lets go for the beat on the big number. October read, expecting 51. 7. We end up with 51. 9. So thats not too had ba. Lets go through the internals, shall we . Prices paid, 54. 5. So thats the highest read only since july, the very high read on prices paid for the year was 63. 5 in may. New orders at 52. 1. Keep in mind just in august we were under 50, so thats not too bad. And maybe the biggest in front of tomorrows employment and fridays big employment report, 52. 9 on the ism employment index. Why is that key . Because it was under 50 as well, so it moves from 49. 7, slight contraction to 52. 9. Just about three points in expansion. How are the markets reacting . Well, we gained four or five points and the dow preoccupied with Central Bank Activity and the tenyear note yield hovering at 188, a couple of basis points below 190. Resistance at 192 and 198. Carl, back to you. Rick, thanks for that. Meanwhile, we are a week away from election day. John harwood is back at hq watching the latest from the campaign trail. Good morning again, john. Tick tock on the clock, 6 days, 13 hours, 58 minutes, 11 seconds until election day and weve got a close tightening race. Weve got a race that has come down where Hillary Clinton is now in the real clear politics ample down to 2. 5 percentage point lead. It had been more than six before. 4. 1 in the New York Times, 5. 6 in huffington post. Now lets look at the electoral map. Donald trump needs to take mitt romneys 206 and add to that to get to 270. Here are our battleground states all around the country. Now here are Donald Trumps top prospects. Take a look at this next chart. Were going to show you iowa, ohio, florida, nevada. All of those are very good prospects for donald trump to pick up electoral votes, but if he carries all of them, hes still only at 265. Hes got to win someplace else. What are the other targets . Take a look at this next map. Weve got several states here in which Hillary Clinton has held a lead. Colorado, michigan, wisconsin, pennsylvania, virginia and new hampshire. She has maintained a working margin there, makes it difficult for him to break through. And then finally shes got some chances to break through. Take a look at this last map. Arizona and North Carolina are states that mitt romney carried but that donald trump faces a fight to hold on to. So if she carries either one of those, his hill gets steeper. Take a look at the senate, democrats are down, republicans have 54seat majority. Democrats need at least 4 seats in order to get a senate majority. Here are all the battlegrounds, all across the country. Now lets look at the reverse dynamic from the president ial race. Strong pickup opportunities for democrats in both illinois, mark kirk is vulnerable, wisconsin, ron johnson is vulnerable. But then theres a set where its a much more difficult fight for democrats. All of these are close, florida, missouri, indiana, North Carolina, pennsylvania and new hampshire. And then finally there is one state, nevada, where harry reid, the Senate Democratic leader is retiring, where republicans have a chance to take a seat. Again, mirror image of donald trump. If republicans carry this, the democrats hill gets steeper. Finally take a look at the house of representatives. Democrats need 30 seats to take the gavel away from paul ryan, give it to nancy pelosi. The problem is there are only about three dozen seats that are in play that are vulnerable republican seats. They would have to run the table. As donald trump gets closer in the polls guys, that gets more and more difficult. Currently forecasters say theyre not going to carry more than 20. We will see in one week. John, thank you very much for that. For more analysis this morning, lets bring in former Obama Campaign press secretary and senior advisor, ben lebolt, also cnbc contributor sara fagan. Guys, good morning to you both. Good morning. Sara, i just want to make some sense of these polls. This abc tracking poll that gives trump a onepoint lead, the first since may, is that enough evidence for you that the comey news is in fact having an impact . Yeah, the comey news is in fact having an impact, but what you see when you look at the numbers more closely is that Hillary Clintons number has remained pretty stable. Its actually Donald Trumps numbers that have gone up. And where hes getting his increased percentage is from the gary johnson voters, from the thirdparty voters who are reluctant republicans who werent comfortable with trump but now because of this news on friday are taking a second look at trump. Hes getting a little bit of a boost from that. So the lesson being, what, theyre not willing to waste a protest vote on johnson . The lesson being there is now deeper concern with hillary and, you know, perhaps so much so that theyre willing to vote for donald trump, whom theyre uncomfortable with. But Hillary Clinton is in the lead here and shes at least three points up and probably four or five points up. I dont believe that anything in the Electoral College has fundamentally changed. John just gave a great analysis of it. Its still a very uphill battle for donald trump to win this election. Ben, from an electoral vote standpoint, where would or should democrats be worried . Well, i think whats amazing is what a strong hand we have going into election day. Hillary clinton has solid leads in states like virginia and colorado, where trump should be particularly competitive, would be in a normal election year, but with donald trump as the nominee, hes not. You see the Clinton Campaign campaigning in stretch states like arizona, which republicans have carried comfortably in the past. The map is a little bit different this year. Iowa is going to be a challenge. Some of the states with older and whiter populations that look a little bit less like the majority of america does today will be challenging for democrats. But i think theres no doubt that democrats are on offense and the Trump Campaign is making some silly mistakes like campaigning in states like new mexico where Hillary Clinton is really going to walk away with this. As a democrat, ben, you know, weve drawn parallels to brexit throughout this election campaign, some of the parallels in the themes, for instance. But now youre starting to see the polls move toward donald trump. He even is ahead in some of them. I mean theres a lot of deja vu here when it comes to the brexit vote and the betting odds overwhelmingly favor Hillary Clinton winning, just like the betting odds favored britain staying in the eu and thats why the market was caught completely off guard. Do you see that analogy . Do you think that we should be paying closer attention to it . Well, i dont think that analogy is i saw actually a cnbc story yesterday saying postbrexit the uk looks more like an emerging economy, which the United States might if donald trump might and he unwound all the economic relationships that we have around the world. I think there is a key difference here, which is that donald trump has attacked and alienated many of the skpit a s constituencies that he would need to win the election. The electorate has gotten more diverse each cycle and to call mexicans rapists, to consistently attack women on the campaign trail, i dont think hes gaining support from the constituencies that he needs to win 270 electoral votes. What i was getting at actually, and maybe sara you can address this, the fact that Hillary Clinton still has 75 odds in the betting market. Now, his odds have gone up a little bit, but it seems like theres a divergence between the odds and the markets, which are remaining resilient and whats happening in the polls, thats all. Yeah, i think thats right. We dont see any real change in these betting markets or in the market as a whole in terms of peoples expectations about the outcome of the election. This race has been very consistent over the course of a year. It has been from tied to Hillary Clinton plus seven. Donald trump has never held a lead in this race. And so i believe going into election day, he would actually have to be up two or three points to win the election. And so and the reason for that is because the Clinton Campaign has much better machine machinery. They have a more organized ground game because she has been the expected leader of the party for many years. Trump came in after a very divisive primary and just isnt set up properly for a national election. And so i think that this is still very much an uphill battle and the markets and the betting markets and the Political Class still see her as the victor. Ben, i wonder, saras point about the ground game gap, isnt that offset at least somewhat by the Enthusiasm Gap on the republican side . Well, take a look at the early vote. I mean more than 20 Million People have voted so far and those numbers look very strong for the Clinton Campaign, which means that on election day, they can focus on the sporadic supporters rather than the core supporters in making sure they get every last voter thats leaning their way to the polls. The Trump Campaign simply doesnt have that level of organization. Its already showing up in the early vote. Polls are one thing, but who actually shows up to vote is an entirely different one. Ben and sara, good to see you guys, thanks so much. Thank you. Thank you. Our other top story, yum brands officially spinning off its China Business. Eunice has what some of the challenges may be for the new company. About a thousand yum china employees are celebrating here in shanghai after micky pant, the ceo, along with his Management Team officially rang the bell for the nyse along with the nyses president , tom farley. They were celebrating the spinoff as well as the new york listing because after the spinoff, the company now has hundreds of millions of dollars of cash on hand as well as no debt. And that financially stronger position could really help the company move much more aggressively into this market. The company does have a lot of challenges. In the Third Quarter the samestore sales dropped by 1 . Its really huge main challenge is the fact that yum just isnt psoas pragsal anymore when it comes to Chinese Consumers. The company has done a terrific job into getting into every single corner of the company. In fact they have been credited for bringing american fast food and the concept of american fast food to many Chinese Consumers. However, people here just dont dream of eating at a kfc, so thats one big challenge. Now, another big challenge for the company is the fact that the restaurant seen here is incredibly competitive. Yum isnt only competing with western brands like mcdonalds or starbucks but also with Chinese Brands that have come up and taken that american fast food chain model and made it their own. They have really been able to send cheap chinese cuisine as well as western cuisine and done very well. Finally, yum will also have to contend with this plethora of food delivery apps. Yum with kfc and pizza hut had really dominated food delivery for a long time, for years, but now because of all these food delivery apps, pretty much anyone with a kitchen and a mobile phone can have food delivered to someone else. And thats been redefining the way Chinese People understand fast food. What is yum doing about this . In order to reach out to the up and coming consumer, they have decided to invest some of that money, the proceeds, to renovating a pizza hut to make it much more upscale. Theyre also going to be taking a page from starbucks book and moving more into highend coffee, special drinks like lattes and cappuccinos which are seen as very aspirational here and finally theyre going to do what they do best really which is localizing their menu. In fact they have come up with a couple of thing in the last year, a fried calamari is one is japanese curry. Eunice, thank you. Eunice yoon reporting from shangh shanghai. Stay with us, we will speak with the ceo of yum china, micky pant, who is also there, with the stock up almost 2 here in the early action. When we come back, obamacare open enrollment kicking off this. Premium increases and insurer exits. Well break it down. Take another look at where stocks are trading at this hour. Again, its been hard to break out of this midteen range, at least in the First Horizon or t first hour or two of trading. Well be back, including our interview of yum china ceo micky pant. Dont go away. This is my retirement. Retiring retired tires. And i never get tired of it. Are you entirely prepared to retire . Plan your never tiring retiring retired tires retirement with e trade. Im in vests and as a vested investor in vests i invest with e trade, where investors can investigate and invest in vests. Or not in vests. Sign up at etrade. Com and get up to six hundred dollars. Want a great way to help our children thrive . 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. Its time to vote yes hes the drug company big shot who raised the price of a lifesaving pill by five thousand percent. Said he wished hed raised it more. Prop sixtyone targets drug company pricegouging to save lives. The drug price relief act will save californians nearly a billion dollars a year. Join the California Nurses Association and aarp and vote yes on sixtyone. The drug giants wont like it. And hell hate it. Open enrollment for obamacare kicking off today. Big challenges from rises in premiums to insurers dropping out. Bertha has that story. Even as insurers are contending with what theyre going to do this year, theyre really looking beyond to 2018 and the next congress and the next administration. They say really whats needed to make this market work is literally an act of congress. The three things that they want are, one, to tweak the law so that they can price a little bit higher for people who are older and sicker, offer plans that are a little skinnier for people who are healthier, widen the subsidies for people who are buying these plans, extend tax credits to people in the middle class who dont get subsidies and extend the Risk Adjustment Program that helps insurers offset the big losses on sicker patients. This is what they really need. If they do make losses, they would like to have some type of cushion to absorb those losses. And the republicans have waged a lot of opposition against that cushion. Now, if theres mixed government, they need congress and the republicans to come along. If theres a sweep and you have a republican president and a republican congress, the pressure then is to repeal and replace obamacare. Doug holt aiken, who used to advise the Mccain Campaign on health care said then the pressure is on to make sure theres a smooth transition. You dont want to shut it down and try to start something from whole cloth. We saw that even with an implementation period, healthcare. Gov was hardly a smooth start. And with this campaign up in the air, a lot of folks in the Health Care Industry are wondering just how this will go, guys. We will see what the enrollment numbers look like. Bertha, thank you. Meantime, one person is dead and five others are injured after a colonial gas pipeline exploded in helena, alabama. Gabe gutierrez is there and joins us with the latest. Gabe, whats the scene there . Reporter good morning. Several roads are blocked off here as authorities have managed to contain this fire. However, theyre still waiting for it to burn itself out. But analysts like aaa expect prices at the pump across a lodge swa large swath of the country to go up after alabamas second pipeline disruption in two months. This started around 3 00 yesterday local time when the cloel janua Colonial Pipeline said it had a crew of nine people working on digging up an area around it and an excavator hit that pipeline. That ignited the fuel inside sending a massive fire ball into the air. Several nearby homes were evacuated. One person as you mentioned, sara, was killed, five others were hurt. This morning theyre still working on the area, trying to really investigate this even further. And analysts suspect that since this is the second major pipeline disruption, just a few weeks ago line one had a major leak just a few miles from here, and that sent prices soaring across a large swath of the country. There was also gas shortages as well. Now, overnight gasoline futures rose significantly in overnight trading. Again, analysts are thinking that thats going to increase prices at the pump in the coming weeks. This line remains shut down and its unclear when it might reopen. The biggest jump in almost eight years for gasoline in new york. Thank you, Gabe Gutierrez in alabama. When we return, yum is spinning off its China Business this morning. Started trading just a few moments ago. Its up about 3 here. Well sit down with the ceo of yum china, micky pant, in shanghai next. Much more ahead on squawk on the street with the dow down 14 points. Stay with us. 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. Hthis bad boy is a mobile trading desk so that i can take my Trading Platform wherever i go. You know that thinkorswim seamlessly syncs across all your devices, right . Oh, so my custom studies will go with me . Anywhere you want to go the markets hot sync your platform on any device with thinkorswim. Only at Td Ameritrade yum brands spinning off its China Business, now called yum a. Shares are up 3 . Joining us now is the ceo of that company, yum china, micky pant. Welcome to you. Greg creed was just sheer talking to the guys. He said there is unlimited Growth Potential in china. Youve already got 7,000 stores there. Talk us through your plan of how youre going to achieve that growth. Well, weve got 7,000 stores and yum has been in china next year for 30 years. So its been a lot of experience in this market. The way we look at it at the moment is that weve got about five stores for every million of population and thats under penetrated. In our view we can triple the number of stores. We think well have more yum brand stores in china than we have in the United States, so we can get 20,000 restaurants here. So it hasnt been a straight shot, theres been some bumps along the way. Last quarter in fact samestore sales for china were negative. Analysts were looking for 4 growth and there are reports that you have been losing market share along the way. Can you describe how youre going to tackle some of those challenges . Well, you know, like i said weve been around for 30 years and had challenges many times on that journey. If you look at every fiveyear snapshot the company just keeps growing. Last quarter we reported samestore sales at minus 1. Prior to that for four straight quarters, kfc actually ran positive comps. For the first three quarters this year theyre running plus 4 on samestore sales. So there have been bumps but we see the opportunities as being far out weighing the risks of being in china. What about the food safety scandal that you handled a few years ago. How hard has it been to build back the trust locally . I think thats now behind us. You know, we did have a food safety issue. As you know from multiple experiences around the world, it does take a while to get out of that. Two years later we feel were in a much stronger position and actually doing a lot better. So we continually do research on our customers and check with them, what they think. In virtually every attribute weve recovered to the prefood safety issue. Sir, technology plays an Important Role here for a number of fast food restaurants. Im curious as to what your thoughts are when it comes to technology in china, what you may be able to implement and what your expectations are in terms of leveraging technology to obviously increase sales. Well, you know, im frankly quite astonished at the rate of adoption of new technologies in china. To give you one example, until a couple of years ago we only accepted cash in our stores, we did not accept credit cards, the culture was not developed. Well, in just one year some 20 of our sales are now going through cashless payment, which is directly on cell phones, through providers like reach out and alipei. I believe that china sat fastest adopter when it comes to digital. The speed with which they navigate their cell phones. Anyone who can type in mandarin on a small screen can do almost anything. I see the behavior of consumers here, the way they locate stores, the way they locate deals. They can book tables and order in advance so they can pick up food. Overall thats growing very rapidly. In kfc alone now we have a Loyalty Program with more than 50 million members. We believe thats one of the largest in our industry anywhere in the world and just the beginning. This happened in the last one year. So i think the influence of technology is huge in all sectors of our business. We see that as big going forward. It also helps that weve got very good partners here. Sorry to cut you off. I was saying ad financial and primavera have invested in our company. Can you talk a little bit about the Chinese Consumer . Weve gotten some mixed reads on the economy. P g said theyre just moving online instead of in stores. Nike continues to see doubledigit growth. What are you seeing . Are they being affected by the broader economic slowdown there . Well, you know, i think that the consumer is alive and well. One company i have a lot of respect for is starbucks. They felt i think 500 restaurants over the last year or so. When i see people walking to a starbucks and buying a cup of latte or cappuccino for 5, i know there is a vibrant business here. Even pizza hut, which is a relatively more expensive concept compared to fast food, in 2015 when the economy was reportedly very difficult, we grou our system sales by 10 . So we believe theres business to be had. We found, by the way, in the 2008 recession when i was working on the International Side of the business, that fast food actually does fine in an economically difficult situation because people downtrade from fancy restaurants to the more affordable concepts. I cant really comment on the overall chinese gdp or those numbers, but the way we look at it the opportunities for building new stores as well as building samestore sales in our business are vital. That having been said, the Delivery Business is growing rapidly so its doubledigit growth for us and about 10 of our overall sales is now coming through home delivery. So there is definitely that impact, just like in any other sector of retail. Micky, donald trump has said that if he is elected president , he would name china a currency manipulator and threatened to impose tariffs on chinese goods. A lot of tough talk on trade with china. If he does win the election one week from now, would that be harmful to your business . Well, well have to see what actually happens. You know, talk is one thing, but china is such an important trading partner that well have to see what the actual policy implications of what he says are, assuming, of course, that hes elected. But, you know, weve ridden many, many changes of administration on both sides of the world, in the United States as well as in china in the past. So there may be bumps along the road, but overall we see china and the u. S. As having too important a partnership for anyone to take lightly or make significant changes to without a major disruption. So its good for both countries to keep talking and keep going. Well see what happens. Thank you for joining us. Sorry about that long delay out of shanghai. Micky pant is the ceo of yum china, with the shares up still over 3 . When we come back this morning, it is day one of the fed meeting, the final meeting ahead of the election. Has the time come to raise rates . Well talk to former reserve governor Robert Heller. Stocks are still down 23 on the dow. More squawk on the street after a short break. Co were bo. Co were bo. Because, healthier doesnt happen all by itself. It needs to be earned every day. Using wellness to keep away illness. And believing a single life can be made better by millions of others. As a Health Services and Innovation Company optum powers modern healthcare by connecting every part of it. So while the world keeps searching for healthier were here to make healthier happen. Ooimt Courtney Reagan and heres your cnbc news update at this hour. Six people are dead after a school bus and commuter bus crashed in southwest baltimore earlier this morning. There were also significant injuries. According to the police, there were no children on the school bus. No immediate word on what caused the crash. Folks in parts of the southeastern u. S. Could be faced with another gasoline shortage, this after a track hoe that was removing dirt in northern alabama struck a pipeline causing an explosion that killed one worker and injured five others. Bill cosby arriving at court where his lawyers are expected to argue that prosecutors are reaching back to the casting couch era to round up women accusers to build a Sexual Assault case. Prosecutors are going to ask the judge to let 13 more women testify at the june trial. Pope francis arrived to celebrate mass at a soccer stadium on the second day of his trip to sweden. His visit coincides with the 500th anniversary of the protestant reformation. Sara, back on over to you. Courtney, thank you. Cnbcs fed survey is out with what to expect from the market and the economy the rest of the year and throughout 2017. Our Steve Liesman joins us with those results. Sara, thanks. Before getting to the stock market and growth outlook, i want to look at the threats that hang over the u. S. Economy, according to our respondents in the cnbc fed survey. It begins where its begun for a while with the threat of Global Economic weakness. That is judged as the biggest threat to the u. S. Recovery and thats up 2 points. But coming along pretty strongly here is tax and regulatory policies, up 11 points in our survey compared to the prior one in september. Rising Interest Rates hits the board from 0, because of the expectation that rates will rise, and finally over here, the outcome of the u. S. President ial election, that was never big, but its come down quite a bit to zero so theyre not scared of this election quite as much as they were, even though they do believe its negative for the economic outlook. Take a look at the outlook for the market. Sideways is the new up and down. Were looking for 2242 in 2017 and 2174. What that tells you is a lot of the gains are built in already that are coming this year and not a whole lot expected to come next year. Moving on to the outlook for Interest Rates, over my Left Shoulder here, 225 is the expectation for 17, 191. That has come up with the recent rise in Interest Rates. Finally, one more chart. Remember, we started this year, 2016, expecting 2. 4 growth. Thats come down to 1. 81. 2017 outlook has held up, but its come down a bit to over 2 . The overall findings of our surveys, 100 expect that the Federal Reserve will stand pat at its meeting tomorrow. 69 expect it to be listed in the statement, some form it may pan out a little bit, say the fed statement will signal a december hike. Well get that statement tomorrow. 86 say the hike is on for christmas, sara. Pretty much jives with what were seeing in the bond market. Steve, thank you. Steve liesman. For more on the fed meeting, the economy, market volatility, with just one week until the election, lets bring in jim paulson, chief investment strategist and economist at Wells Capital management and pa paul. Jim, here on the election, 538 has Hillary Clinton with 70 betting odds of winning this election but 25 is not insignificant. Is that priced in anywhere in this market . You know, i think really what the market is most concerned about regarding the election is less who gets the helm of the white house than it is if anyone can get tripower, and that still looks fairly good that that wont happen. If it doesnt, then i think theres going to continue to be what weve had in the last six years, sara, a lot of gridlock and blustery talk but little done, which is probably a good outcome for markets because it just means that adam smith will make most of the decisions. As long as that stays the case, the markets will stay pretty comfortable with this, whichever of the president ial candidates wins. Joe, i know you dont want to talk too much about the election. Is it having an impact on the economy, the uncertainty factor . At the margin. I started the year thinking growth would be closer to 1 than 2 so i was different than consensus and thought the fed would, though, hike and be in december. However actually in that type of environment, the economy is sort of weak to begin with and people are probably using the election to some extent as an excuse not to invest in capital and undertake expansion plans. At the margin, it is a factor. To continue on a point jim was making, next year if theres gridlock, the likelihood of growth accelerating from a mid1 type of trend to me is quite low, sara. What businesses want is some idea that the parties are working together. Divided government and a pun wkt growth world is a lot different than a divided government in a 3 growth world. Youre talking about 1 growth world . 1 , 1. 5 . Thats lower than consensus. Well, consensus has been wrong for a while now on this. Look, well be entering the ninth year of the business cycle. Economies dont accelerate from trend in the ninth year of a cycle. So i think youre crazy to assume that growth is going to be over 2 in any meaningful way. Jim, do you agree with that . How does that fact stocks and bonds . I would just lean in a little bit against that, joe. Much of the rest of the world is not really in the ninth year of the cycle. They have essentially, much of it has been rerecessed or virtually so. I think what were seeing for the first time after the first synchronized policy approach in the entire recovery, where everyone is pushing up, were seeing the first synchronized bounce in growth abroad. So although the United States may stay about the same, i think were going to have china back bouncing. I think weve got the uk doing better, the eurozone doing better. With oil prices recovering, i think youll see the oilbased recoveries like canada do a little bit better. Overall growth in the United States may get a little boost just from the rest of the world from the first time also bouncing with them. I think the stock market, sara, is going to respond favorably to the end of the election. Theyre going to get comfortable with the fed normalizing rates, and i think theyre going to react very well to the return of earnings momentum and sales momentum that were starting to see right now. That is a rosy forecast, joe. You cant deny the fact that the rest of the world could improve. If the rest of the world is better than what i have inferred in my forecast, absolutely jim is right. I look at it as the following. Here we are, an economy in nominal terms, the simplest way to look at growth is under 3 . You take the consumer out, its close to zero. Not a lot of demand, theres not a lot of pricing power. We have no ability on the monetary side to respond to it because rates are already near record lows, arguably low rates are hurting. The fiscal side is peraralyzed part because as jim said were going to likely have divided government next year. Unless Global Growth is a lot better, you hit any pothole, youre in trouble, youve in a recession. Does your gdp forecast go down even more, assuming, say, four hikes next year . Carl, theyre not going to go four times. Stan fisher had that totally wrong. No, theyre not going four times. Ive got a couple hikes in, but look, that takes you to 1 ish. I dont know if they get much above 1 in the cycle, the funds rate. Rick santelli has been point this out a lot, jim, the fact that what weve seen is stocks have remained pretty resilient but bond yields have really ticked up here in the month of october. In the last, i dont know, eight years post recession, you saw stocks and bonds rallying together. Can stocks rally if they dont have the support of lower bond yields . Is that going to be the new paradigm . I think they can. The fed normalizing policy, sara, to me thats going to be a confidence booster. I think thats one of the stimulants we still have left in the United States is if we boost confidence, i think the capability to boost Capital Spending is there if you boost corporate confidence. And the capability to drive better housing is there if the millennials start to form households, which is starting to happen. The capability to borrow and lend money is there with repaired Balance Sheets if we just have the confidence to do it. And i think were going to see more of that next year with a broader, maybe not faster, but a broader recovery showing life from more parts of the world, and on top of that, i think nominal growth for the first time, actually increases in Commodity Prices and core inflation and wages and nominal activity. I think thats going to help confidence that we are moving away from the abyss, if you will, that weve always been worried about, the stall speed of economic growth. Weve got to leave it there, its a good debate and im sure well have you both on very soon. As we go to break, take a look at shares of tronc this morning really getting crushed, although after the early low after gannett says its ending talks to acquire the publishing company. And its day one of the fomc. Well hear from former reserve governor Robert Heller and a lot more when squawk on the street continues. Is happening before our eyes. Shift in Human History sixty to seventy Million People are moving to cities every year. At pgim we help investors see the implications of long term megatrends like the prime time of urban expansion, pinpointing opportunities to capture alpha in real estate, infrastructure and emerging markets. Partner with pgim the Global Investment management businesses of prudential. Could garbage be the key indicator to understanding where the stock market is going . Were not kidding. Find out why at tradingnation. Cnbc. Com. More squawk on the street coming up. Welcome back to squawk on the street. Stocks are struggling to make gains while energy is standing out as the leading s p 500 sector. This as gasoline prices surge after a colonial gas pipeline exploded in helena, alabama. Among the names lifting Energy Higher include valero, tesoro, chevron and murphy oil. The sector still up about 13 year to date. Sara. All right, seema, thank you. Lets send it over to the aforementioned Rick Santelli in chicago with the Santelli Exchange as always. Hi, rick. Hi, and good morning, sara. Good morning, bob heller. Thanks for taking the time, the first day of a twoday fed meeting. Good morning. All right, bob, in your notes, nine is your big number. Maybe you can tell viewers and listeners why nine is important to you, sir. Well, rick, there are now nine people sitting on the fomc table. There are 17 members. That means that these nine who are in favor of higher rates, and we know that because they are president s of Federal Reserve banks whose boards of directors have asked for increases in the discount rate. So youre talking about the discount rate. So nine are for rate increases. Absolutely. But the discount rate is the discount rate is close, they will argue the same in the fomc meeting for the fed funds rate. Now, every time you and i talk about the discount rate, and i think its important to mention, i get many emails about what happens with the issue and the relationship with interest on reserves. Can you go into that briefly . Well, interest on reserves, i think, is a big mistake that the Federal Reserve is making. If you pay the banks to hold reserves at the Federal Reserve banks, you know, then they will hold reserves there. What you want banks to do is you want the banks to lend that money out. Bob, let me interrupt you, bob. Do they really want to lend isnt one of the linchpins now of overnight financing is these repurchase arrangements that are dependent in many ways on that liquidty staying on their balance sheet, is it not . Well, we always get ourselves in these little fixes, you know. Thats what i call a minsky moment, where stability creates its own uncertainty and creates its own instability because the markets have reacted and now you think thats a new normal and as soon as you move away from that, again, you may have increased volatility. So paying Interest Rates on reserves, i think, is not the right thing for the fed markets have reacted. The lowest gauge reading of all of them. You make an argument its something to watch. Ive been watching the uk, the euro, based on europe. Central banking activities around the globe seem to be seeding some. Your thoughts . I fully agree with you, rick. Inflation is creeping up around the world. You see it everywhere, especially in an area, like San Francisco area. Housing prices and rents are going through the roof. Cost of living is increasing. People cant afford to live in the city anymore. So theres increased inflationary pressures are building up all over the place and you see that in the statistics. Our last read on gdp was 2. 9, best quarter in exactly two years, going into the Third Quarter in 2014. However, i brought up sustainability. If you go back to 2011, we had a lot of quarters that had a lot of horsepower. Even a couple backtoback. It drifted back into the average, version of 1. 75 to 2 . Whats your thoughts on the last gdp and the fed to raise rates at some point this year . The fed keeps saying that theyre data driven. Now they have the data let them drive the decision. So 2. 9 is not a bad number the way the situation were in right now. So, they should act on it. I dont understand. Why do we even have a meeting of the Federal Reserve board or committee when theres you know, when you say, okay, theres an election coming up. We cant do anything. May as well cancel it and save the agony. You know what . Boy, you represent everything i hear by all my sources. But theyre damned either way. If they were to actually say, listen, we have an election. Were going to postpone the meeting, everybody would say, ahh, theyre political. That naive relationship. Everything is political. Bob heller, thank you sarah, back to you. See what we get out of that statement tomorrow. Rick, thanks. When we return, its been a bumpy road for hedge funds. The latest performance numbers for october analysis straight ahead. 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. 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. Hedge funds are starting to release numbers for the month of october. A quick snapshot now of how things are looking, kate kelly joins us. Thank you, david. The hedge fund may have tapered off temporary this last month. Third points offshore fund fell slightly. Meanwhile David Einhorns Green Light Capital now up 5. 7 for the year. That means both are beating the s s p. Both familiar with einhorns book says it appears he benefited from the long and short side of it. Chemours and, of course, time warner had a great october as did chemours. He had critical boreds for elan musk, from tesla. No word from dan loche. At the same time as all this, bill ackman remains under pressure. Down 3 for the month, 21 for the year last check, october 25th. To the extent that a reported Justice Department investigation of possible fraud at valeant affects that company further. That, of course, being one of his larger holdings, sar and davi david. Not a good day for them yesterday, for sure. We keep talking about their inability to over perform s p for years the broad majority of hedge funds but they still get paid, dont they . They do. Ackman just released a Fee Structure that has no bearing on a year like this. You can get a break on the fees if he has under 5 returns. 30 if its greater than that. Its not addressing the main issue. Leave it there. Thank you kate kelly. Thank you. That does it for us here on squawk on the street. With the dow down 20 , pfizer is the big loser. One, two, wait, wait. Wait wheres tina . Doing the hand thing . Yep we are all in for our customers. Ally. Do it right. So we know how to cover almost we aalmoanything. Hing,customers. Even a rodent ridealong. [dad] alright, buddy, dont forget anything [kid] i wont, dad. [captain rod] happy Tuesday Morning captain rod here. Its pretty hairy out on the interstate. Traffic is literally crawling, but there is some movement on the eastside overpass. Getting word of another collision. [burke] it happened. December 14th, 2015. And we covered it. Talk to farmers. We know a thing or two because weve seen a thing or two. We are farmers. Bumpadum, bumbumbumbum so what else is new . Humm. Shes doing good. She needs more care though. She wants to stay in her house. I dont know even where to start with that. First, lets take a look at your Financial Plan and see what we can do. Ok, so weve got. Well listen. Well talk. Well plan. Baird. Good morning. It is 10 00 am in chicago, 11 00 am on wall street and squawk alley is live