earning is the big driver today. despite that, p&g, having a positive impact on the dow. 3m is your biggest threat. >> i'm michelle caruso-cabrera. here is what else is on the menu or happening this hour. ibm's board approving quarterly cash dividend of $1.40 a share and announcing a $3 billion stock buyback program. consumer confidence taking a big tumble in october, the conference board's number, its index falling to 98.6. and in the meantime, home prices jumping in august to near record levels. but we begin first with what is going on here with -- let's get to tyler mathisen -- i see what we're doing. welcome, everyone. tyler mathisen is with us from cnbc's net net summit at the new york stock exchange. we'll get to him in a bit. let's start with the outrage today over health care and your money. the average premium on the benchmark obamacare plan jumping 25%. year over year. dan mengin joyn mengin joins us. i see there are some states where they have risen 60%, 100%? >> yeah, arizona, for example, that's the big loser in this case. their rates go up 116% for the second lowest cost over plans. 27-year-old there will go from paying $196 a month to $422 a month if he didn't have any financial assistance. and then you have state like oklahoma, up 69%, a state like tennessee, up 63%, a number of states that are up double digits. >> are people cheating the system, dan? in other words, they're not signing up because they don't need to. they know if they get hurt or get sick, they can then go sign up, get the treatment they need, and then drop off, because they probably are making the economically rational decision that paying the fine for not having insurance is a better deal than paying the premium. >> it sure has raised the concern, they raised claims that people are cycling in and out of the system, waiting to get sick. they're not signing up. so they're drawing the benefits out, costing them a lot of money, not paying them premiums over the long-term. >> the core issue that brian bought up is the ultimate financial transaction you're considering, especially if you're young, is do i pay the penalty or do i pay the premium, which is much higher, and the deductibles are high, right? that's the core problem. not economically you're incentivized to do something that -- >> there is an unawareness among a lot of people, there is unawareness about the financial aid that is available, so people think it costs too much. but there is concern that even if you can't afford it with the financial subsidies available -- >> the health care.gov people point out half, or a majority of the people who apply for this health plan will get financial aid of some sort. >> 85% of customers on health care.gov get some kind of financial aid with monthly premiums, assistance with their out of pocket costs. >> thank you, dan. inside the obamacare outrage with e-health board chair ellen tausher and brian blaze. welcome to "power lunch." thanks so much. i'm reading a piece that you wrote and you say that there needs to be more private sector involvement when it comes to the affordable care act. i did a double take to make sure you were a democrat, because what we're hearing more and more from the party is that there has to be more government. you say there will be more private sector involvement, what do you mean? how would that fix this? >> well, michelle, let me just say that ehealth has been an early supporter. i would have voted for it. but i think we overcorrected from what was, you know, private insurers that left people out of the market, insurance wasn't affordable, where a pre-existing conditions and bad health really left you out to a place where the government actually, i think, took over too much of it in an unanticipated way. we need now a blend of private and public -- >> and do what? >> especially on enrollment. on enrollment, for example, ehealth, we do a tremendous amount of enrollment of all kinds of health care plans including medicare. and we bring in to the individual plans a lot younger people because they tend to use the internet, they want a good e-commerce experience like we have. >> i get why you would say that because you're the chairman of the board of this company. i understand that. but it doesn't actually get to the issue of what we're talking about -- >> it gets to the issue of the nacht t fact that -- >> you pat penaly the penalty o premium. >> this is not about paying the penalty or the premium, this is about getting access to the policies. right now the government site doesn't have a lot of young people signing up with it. and that means the risk pools have a lot of older and sicker people in it, and that's a lot of -- a big reason why the premiums are going up. so you -- >> brian, can you help us solve the issue of why is it that we are seeing these prices rise so much so that people are disincentivized to sign up for them in the first place? >> i think the reality is that obamacare significantly raised the price of insurance for relatively young and healthy people, and there, as you said in the intro, making the rational decision to forgo insurance and pay the mandate penalty instead. moreover, the law offered insurance to any applicant and not charge sicker individuals more than healthy individuals created a huge incentive for people to wait until they're sick to purchase coverage and we have seen people take advantage of that, those provisions and do just that, in significant numbers. finally, we also have seen the first three years that the law has been in effect, there has been a huge back end subsidy program that resulted in artificially low premiums. that program phases out and the premiums now have to reflect the full cost of the enrollees. >> is this going to hit the private insurance market as well? you can't comment on your own company because of earnings and quiet periods. but many people also in the workforce experienced higher co-pays, higher deductibles for their insured plans through their employer. is this going to have a follow through effect on those? are premiums and deductibles going to go up again at the end of the year? >> yeah, i think, brian, i think the key is how do we reform the obamacare and not repeal it since the republicans don't have anything to replace it. the key is to get as many people insured in a way that is sustainable and affordable for people. that includes both government plans, medicare and medicaid, and private plans. and right now you see all the private carriers fleeing the markets because they're not getting a blended pool of people where the risk is sensible to them. and so the reform really has to go to making sure that you have the private carriers getting as many people enrolled as possible, but putting them in the plans that are both affordable and sustainable. >> i guess -- >> right now we don't have that. >> i guess my question is, let me flip it then, many of us saw premiums and deductibles go up because the insurance companies argued well, we're losing money on obamacare, we got to make it up on the people that are paying. if they're fleeing the obamacare exchanges, will they then reduce their premiums and co-pays and deductibles? i'm guessing no, but i'm hoping the answer is yes. >> i don't think so. i don't see why it would. >> i don't think so either. i think the other point we have to make is most enrollees who gained coverage have gained coverage through the medicaid expansion and the medicaid expansion is on a per enrollee basis. it is not just rising costs and sort of the quasi government private public exchanges, it is also medicaid expansion is much more expensive. >> what is your fix to get everybody enrolled in some sort of plan? >> i would -- i would deregulate the insurance rules and regulations as much as possible, so allow people to actually purchase products that they value at a price they can afford. obamacare loaded lots of coverage mandates and pricing restrictions on insurers and i would get rid of those. >> total free market in the insurance industry? >> i would move -- i would move in a more free market direction. fundamentally we can go in two ways. we can have more government, we can increase subsidies, try to increase the mandate penalty for people that don't purchase coverage to stabilize the marketplace or move in a different direction and try to deregulate and allow people to purchase coverage that they actually like. >> you can't just go pure free market, we're talking about people's lives here. >> why not? we're talking about people's lives. this is different. in a free market you would say i'm going to dump the people that cost me a lot of money, and only keep the people that make me a lot of money. you got to ensure the driver who crashed into seven trees as well. and everybody else has got to make up -- >> that driver pays a lot more money for his -- way more money, way more money. you're not allowed to -- right now the government doesn't allow you to do that. >> i'm proposing a freer market. and i would -- one of the big problems that obamacare tried to tackle was the problems of pre-existing conditions. people who couldn't get coverage because they had some health condition and private insurers wouldn't write them a policy. that was a problem before obamacare. i think that problem was exaggerated a bit. i would, instead of a one size fits all approach from washington to solve that problem, i would largely let states come up with their own policy solutions and let federalism in action and see if states can learn from each other and deal with the problem. >> i don't think people believe somebody at brian's age should be talking about people with pre-existing conditions like me who had cancer. that is an exaggerated situation that they couldn't get insurance. i think people know -- >> could you not get insurance? were you not able to get insurance? >> i had insurance when i -- i had insurance when i had cancer, thank god, but let's face it, all the numbers show that the people that have pre-existing conditions couldn't get it or it was too unaffordable. the question now is how do you get a middle system? >> i thought you were going to talk about something you mentioned in your piece about copper plans, like, yet another -- a little bit to brian's point, which is to free up the system a little bit more so there aren't so many mandates, so you're not selling rolls-royce plans to everybody mandated by the government. you never brought that up. >> well, i didn't have a chance. by the way, we need to extend the kinds of plans that we have to fit different marketplaces, both rural and city marketplaces, and different ages of people. i think that the number of plans were too restrictive and they became unaffordable for people. and right now people do have a work around. they can deal with the penalty if they think they're going to actually get it, which most people haven't. or they can buy insurance when they get sick. that is a big loophole we have got to close. >> thank you so much. >> thank you for having us on. >> well, this story will no doubt give a lot of fodder to one mr. donald trump on the campaign trail. john harwood is in washington with more. john? >> brian it already has. donald trump trailing by 50 to 38% in the abc tracking poll out this morning needs all the help he can get. when these obamacare price increases were announced, he's out talking about it on the trail this morning, he's put out this tweet, obamacare fail. talking about the magnitude of those obamacare price increases and that's something that certainly fires up the republican base. you can tell it is a good issue for donald trump from the fact that hillary clinton has not responded directly to it. you look at her twitter feed, you won't find it. you will find president obama having put up this tweet, emphasizing the reduction in the number of uninsured people. that is one of the successes of obamacare that he hopes will offset this news about the price increase. here is why i don't think this is likely to have much political impact. you look at the numbers from the nbc wall street journal poll from just after the law was passed in may 2010 to right now, or excuse me, to may -- march of 2015, last time we asked the question, obamacare, good idea or bad idea? it was 37%, good idea, 44% bad idea. now those numbers are virtually identical. the reason is that attitudes have been locked in on this along partisan lines and a little bit more because you have a lot of independent voters who don't care for it. but these price increases are not going to breakthrough because they don't change the fundamental contours of what the objection to obamacare is. and as it was discussed in your previous segment with the two guests, it is essentially younger, healthy people being required to buy bigger policies than they used to be satisfied with, and having to pay more money if they don't get subsi subsidies. the people who benefit are older, sicker people who now can get coverage and those young people who don't make so much that they can't afford. >> john, thank you. john harwood from d.c. a news alert in the bond market, two year notes up for auction. dom chu in the newsroom with the results. >> we saw weaker demand for the $26 billion sale of two year treasury notes. the bid to cover ratio, that's that measure of demand, came in at 2.53, that's $2.53 in bids for every bond available for purchase. the recent average has been 2.81. below average demand, also the slowest demand in three months. the yield came in at .855%, or 85 1/2 basis points. direct bidders, hedge funds, those types of people, 10% of the overall sale, 10.1%, that's far below the recent average of 15%. share taken by indirect bidders, very much below average, those numbers again coming in below average, so dealers take down the most they have, indirect bidders haven't done very much. this demand option picture could be a sign of worry or perhaps a fear of higher interest rates down the line. back over to you. >> dom chu, thank you. the earnings report we have been waiting for. apple reporting after the bell, the stock is up 20% in the past three months since its last release. what can we expect this time around? 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looks great. this is how car buying was always meant to be. this is truecar. ♪ apparently nobody wants to buy a smartwatch anymore, po posting a huge drop in sales. smartwatch sales fell more than % t 50%. we put those numbers in context, and third quarter of last year was, the watch was launched, it had a lot of hot aspects to it, everyone wanted to check it out, like michelle. tough comparison still, smartwatches not as much -- >> i love it. if it were super hot, sales would be up this quarter, right? i mean, clearly didn't take off. like phones climbed quarter after quarter. >> right. you don't need a watch yet. exactly. speaking of apple, if you haven't heard yet, the company is reporting earnings after the bell. what do you need to watch for when apple reports with us? josh lipton, christine, i'll start with you. this is the most estimatized company out there, no surprise here. in general, your survey indicates people are much more bullish than what the consensus is. >> this is a big one for us. i just checked before i came on, we have 800 estimates ahead of the report. that will probably surpass a thousand by the time they report this afternoon. a little more bullish at this point, looking for $1.71 a share, that's a nickel higher than what the street is expecting, revenues at $47.2 billion. >> there are a thousand analysts that put out estimates or -- >> we're both professional and nonprofessional. we don't just collect from the south side but bye side. >> that number indicates how much interest there is. >> yes. >> interest and typically, like, melissa pointed out, more bullish. so we're more bullish and tend to be more accurate about 79% of the time than the street. >> so when there is this higher estimate from estimatized and the street, if it doesn't beat that, is that sort of like today's whisper number? is that -- disappointment if it doesn't be that as opposed to consensus. >> sure, in many ways we see companies actually come below our estimate, but beat wall street, the stock still drops. we know just leading into the report we have seen estimates come up. the first time we saw analysts on our platform take estimates up, after the suppliers reported last quarter, so all reporting better than expected. started to see analysts take the estimates up. when iphone 7 was released and available for sale the last two weeks of the quarter, we started to see estimates come up from there as well. >> josh, to you, the tricky thing is as christine points out, the stock has run up 20% since the last report. estimates have come up on street, price targets have come up on the street, some upgrades as well. the bar is really high and yet we only really have gotten two weeks of iphone 7 sales in this quarter that they're going to report. >> yeah, certainly you look at that stock to your point, up nearly 20% in the past three months. for q4, not expecting much, the street is modeling 45 million iphone units, if that's true, that's the third straight quarter of declines. for the fiscal year, the street is looking at 211 million iphones. if that estimate is right, that would be about a 9% drop. of course, our investors have to really make a bet on the trajectory of that iphone franchise. bears are going to say, they said on our network, the best days for that product are behind it, that like all hardware, you're going to see declining prices and margins. bulls are going to make the case that the iphone 7 can return this franchise to growth. i think a big question, though, i think you'll hear it on the conference call, when people go out and buy these phones, not just are they buying iphones, but are they buying those higher margin products, the iphone 7 plus. i think it will be very interesting to talk about the competition on today's call. we know samsung, of course, suffered that really big blunder. so does tim cook see an opportunity here? if he does, did he try i to capitalize on it and ramp up production of the iphone 7 plus to meet that. >> china, another big question on that call. 99% growth in the last quarter. so, thank you, christine and josh. >> i will say, i know you'll cover it tonight, fast money, but the stock is up 21% in 90 days. i wonder if this beat is already priced in. >> the stock moves 5% in the 30 day post earnings drift. if you want to get in, get in before an earnings report and hold it. >> the next 90 minutes. >> correct. you got time. >> plenty of time. >> all right, much more to come on "power lunch." a lot of time to buy apple stock if you want. our interview with the ceo of reddit. we're getting you ready for the big game tonight. game one, the cleveland indians taking on the chicago cubs. but baseball aside, which city's stock market has been a bigger winner this year. on deck, a look at our exclusive power city index as cleveland versus chicago when "power lunch" returns. 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, we're all about educating people on options strategies. well, don't worry, i won't let this accomplishment go to my head. i'm 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. mary buys a little lamb. one of millions of orders on this company's servers. accessible by thousands of suppliers and employees globally. but with cyber threats on the rise, mary's 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. will your business be ready when growth presents itself? american express open cards can help you take on a new job, or fill a big order or expand your office and take on whatever comes next. find out how american express cards and services can help prepare you for growth at open.com. the cubs are set to go toe to toe with the indians in the world series. 176 years of world series futility between the two, no doubt a huge series. but, what about each other's city stock market. who has the bragging rights there? well, our exclusive power city indexes can tell you, they compile the returns, the 12 biggest market cap companies in each city and this year it ain't even close. cleveland rocks. the average return of the 12 biggest companies in chicago, names like mondelez, boeing, and abbott labs down. the chicago power index is up 0.7% this year, not good. but cleveland companies are on fire. no river jokes there. its power city index up 11% this year, eight of the biggest companies have seen stock gains, nordson corp., lincoln electric doing great. cleveland is one of the top cities year to date in our power city index. at least as far as stocks go, cleveland has the advantage this year. let's head down to a man who always has the advantage, tyler mathisen, if you're wondering where he's been, he's at the new york stock exchange for cnbc's first ever net net summit. what do you have coming up? >> brian, thank you very much. net net is the event that is so good you had to name it the same thing twice. one net would not suffice. it is a gathering of financial executives to talk about, among other things, the changing role of those financial executives in today's evolving global corporation. we're pleased to be joined in just a minute after the break by alex ohanian, co-founder and ceo of reddit, and it ishe is a uva dwrad. you tell your insurance company they made a mistake. the check they sent isn't enough to replace your totaled new car. the guy says they didn't make the mistake. you made the mistake. i beg your pardon? he says, you should have chosen full-car replacement. excuse me? let me be frank, he says: you picked the wrong insurance plan. 'no. i picked the wrong insurance company.' with liberty mutual new car replacement™, we'll replace the full value of your car plus depreciation. call and if you have more than one liberty mutual policy you qualify for a multi-policy discount, saving you money on your car and home coverage. call liberty mutual for a free quote today at that's liberty stands with you™. liberty mutual insurance. hi, everybody. i'm sue herera. here is your cnbc news update this hour. a manhunt under way for a suspect accused of murdering two people and shooting two police officers. michael vance has been posting live videos to social media while on the run. he was last seen early yesterday, 30 miles from the texas border in western oklahoma. according to the florida board of elections, over half a million people cast ballots since early voting began yesterday. an additional 1.3 million have voted by mail in the key battleground states. new recommendations suggest babies should sleep in their parents' bedroom for at least the first six months. doctors with the american association of pediatrics says doing so could cut a baby's risk of sudden instant death syndrome by up to 50%. for the first time, fans of the iconic movie field of dreams can go inside the house used during filming. the first floor of the iowa farmhouse has been restored to look just as it did for the 1989 movie. tours begin a week from today. get your tickets now. that's the news update this hour. i'll send it back to you guys. melissa? >> we need clarification on the story about the baby in the bedroom, meaning not in the same bed, but in the room, in a crib. >> the only way to put them in a bed is if you use what is called a co-sleeper, which has -- >> that's why -- i heard that, i was a little bit -- >> meaning you should have the bassinet in the room, so that you can hear the baby a little bit easier than, like, over a monitor or something like that where you get sometimes that white noise in the monitor, where as if the baby is in the room with you. but they do say that if you do want to bring the baby into the bed, you have to buy one of those co-sleepers so that they have the hard sides. ask me why i know this, because i had three kids and you have two kids and there you go. >> thank you for the clarification. >> for brian. >> i'm concerned about children. >> in general, we all are. we love children. >> i love when my baby wakes up at 2:00 in the morning, da da, da da, da da. >> a check of the markets. >> that's him. >> all right, we're not seeing too much movement in the major averages, but take a look, drill down deeper, xhp having a tough day, home builder etf because of a trio of bad news out of this sector. masco, sherwin williams negative and whirlpool posting disappointing results. cnbc is hosting our first ever net net summit of the new york stock exchange. a gathering of some of the most senior financial executives from corporate america and beyond, chance to talk trends, innovation and how technology can help grow the economy. over to tyler mathisen live at the nyse today, sitting down with one of the event's many speakers, the reddit founder. >> how are you? alexis is with us. alexis ohanian. i graduated from there 40 years ago. you in 2005. i have you by a few. >> a little bit. >> let's talk about reddit, the evolution, what you've done since you've gone back there, alexis. i want to talk about the denial of service attack that crippled so many websites or humbled them. were you affected? >> yes, yeah, for 30 minutes people were having trouble either accessing reddit or just accessing it as fast as they're used to. this goes to show if you're running a website with any sort of influence or presence, on the level that reddit has, you'll be a target. we have a new vp of engineering nick call nick caldwell doing a good job diagnosing in the aftermath of it. we're trying to stay ahead. this is a cost of running the website, eighth most trafficked in the united states, you'll be a target. >> how much of your mind share of your time and your corporation's money are you having to put into security to defend against what you have either seen or anticipate being cyberattacks. >> it is a meaningful portion. admittedly reddit is a platform where we have no shortage of things to be working on. a lot of work that goes into improving mobile, desktop, mobile web, all this stuff. and security is part of it. it is factored in. a broad spectrum of things. security is an important part. especially given the amount of influence reddit has in public opinion in terms of getting people informed, we know that makes us a target. >> i want to come back to that very point in just a minute. you had an interesting sort of history with reddit as the co-founder, you then sold it to conde nast, you went away and pulled a steve jobs. you came back to run the company that you founded. why did you come back? what did you see that reddit needed to do that it wasn't doing under conde nast. you and some investors took it back. >> well, know, i'm grateful, my co-founder and ceo, steve huffman, we met each other on moving day at uva, we got a chance of a lifetime to come back to a company we sold frankly too early when we were just 23 years ole, didn't really know any bet and saw something in reddit that in spite of us being gone for half a decade and the site not changing, the company not changing for five, six years, it kept growing. and that's rare. that's rare in any industry. >> despite not changing? >> yeah. in any industry, you know, lack of inoue ratinovation is going you. in tech, it almost guarantees it is going to kill you. somehow because the content was so interesting and compelling and because we got enough things right, reddit kept growing. >> lack of innovation in tech will kill you. what have you done in way innovation since you've been back? >> we shipped more code, more product improvements to reddit than the last six years. and that's a credit to the engineers and developers at the company. we shipped native mobile apps for reddit. now on android and ios. really just built out processes that we needed to do in order to be -- >> it is very nice and very usable. like twitter, there is a lot of stuff that goes on reddit that is controversial. there are messages that can lapse over into areas that, well, freedom of speech, lots of people -- how do you feel as you look at some of the content as the publisher or distributor of content that is controversial, maybe conspiratorial, may lapse into areas that you don't really like. >> well, you know, with a platform now with a quarter of a billion monthly active udzers, there are a of discussions that happen on reddit and not all that i personally agree with. what is important for us and what we worked on hard with the last year is establishing the content policy, to say here are the rules of the road. and building out a community team and trust and safety team to enforce those rules of the road and building tools for them to make it easier to say, hey, if you're violating the guidelines, we'll put you in time out and abandon you. what is remarkable is with 250 million monthly active users, producing comments, content, all the time, only .02% gets reported by a user for being problematic. think about that. that's a lot of discussion around -- for a population bigger than brazil, online, using user names and the fast majority of it is quite reasonable. >> thank you very much for being with us. good luck to you. >> thank you very much. >> facebook in your sights. you're looking for a billion. melissa, back to you. >> thanks, ty. meg tirrell joins us now. >> a lot of pharma news today, a lot of big names reporting, starting with novartis, the stock under a little pressure as the company is facing pressure on its i unit and new drugs cosentix. but the election and pricing also top of mind for a lot of the ceos. both from merck and eli lilly. we'll start with merck, the news last night, the company getting approval for the inimmuno therapy drug etruda. that's driving the stock a lot today. the ceo talking about need for m&a and looking for bolts on deals. also saying they don't expect this pricing pressure that we have been seeing to lessen any anytime soon. hearing stronger words from the eli lilly ceo today, all eyes on their data in alzheimer's expected before the end of the year. but also asked on the call about proposition 61, this ballot initiative in california, folks will vote on november 8th. here's what he said about that. >> problem 61, we're fighting that tooth and nail in california. it is not only bad legislation, it is bad for your health. and we're trying to impress that on the voters. >> and, of course, in other drug news, era pharmaceuticals a downgrade after one yesterday from jpmorgan. that letter weighing on ariad. they may not be able to raise the price of the dug as much as expected. >> on merck, bmy headed 52 week low and bounced back. is there some thinking what is behind the bounceback? i presume it went down because of merck's -- >> that's right. i'm not sure what the bounceback would be about. we'll hear from bristle myers this week. great for patients. we'll see how that works later. investors in lockheed martin are having a great day. that stock is up big. if history is any guide, even better things may be in store for the defense company. seema mody here to tell us why. >> history shows us the fourth quarter is a great time for defense stocks. the s&p aerospace index and defense index outperforming the s&p 500, 100% of the time and excluding 2008, posting an average gain of nearly 8%. and with both candidates promising to pump up military spending, this trend looks like it is set to continue. defense spending as a share of total gdp is well below its 20-year average. a lot more room to grow before getting back to historically normal levels. that according to a report from credit suisse and add to that, the rise in geopolitical conflict is expected to fuel defense spending, advising clients to buy into the sector as more countries look to ramp up their military support. other geopolitical hot spots like north korea, south china sea dispute, india and pakistan, those specific events, there is no political breakthrough in site. so you look at the geopolitical head winds, you would think that national security would likely be prioritized in the coming years. >> seema, thank you. coming up, one analyst says this company could be the next big takeover target. the company and what the ceo of that company has to say about it coming up. i'm only in my 60's. i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i got a medicare supplement insurance plan. 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[ male announcer ] you'll be able to visit any doctor or hospital that accepts medicare patients. plus, there are no networks, and virtually no referrals needed. see why millions of people have already enrolled in the only medicare supplement insurance plans endorsed by aarp. don't wait. call now. over the past month, there is no stock hotter than netflix. julia boorstin just spoke with the company's ceo, reed hastings, and joins us now. >> reed hastings telling me he's confident netflix will be able to maintain growth rate and optimistic that they'll even be able to accelerate growth as netflix is embedded in more cable boxes. they dismissed concerns growing competition and here's what he said when i asked him about whether he would oppose at&t's acquisition of time warner. >> hard to tell, it is very early, didn't know anything about it. just sorting through it. for sure we want to make it so that we want to require that for at&t customers that hbo and netflix are treated the same. they're going to own hbo, we think any, you know, special treatment for hbo data would be inappropriate. i think that's pretty basic. >> is this going to be a negative for netflix in terms of more competition, at&t having more ammunition for its over the top services? >> could be a lot of -- a lot of at&t investment and in content. that could make things tougher. on the other hand, probably going to get easier for us to recruit time warner executives, which are very talented bunch. so, you know, some puts and calls. >> you've been the subject of some m & a speculation yourself. at what price would you sell netflix to apple? >> that's a question i wouldn't want to speculate on. >> what about disney? some speculation that netflix is a perfect fit for what disney is trying to do right now. >> there has, all we do is focus on how we do great shows. how we grow our business. again, that's what made us successful for the last 14i yeas as we have done no m&a, very old school that way, let's just build the greatest service on earth and again, done very well for our shareholders. >> you can find more from my interview with hastings including his perspective on competition with amazon and what his favorite shows are on cnbc.com. back over to you. >> thank you, julia boorstin. let's bring in mark mahaney. great to have you with us. i want to get to julia's point that perhaps netflix could be a ripe takeover candidate for maybe disney, whole list of people out there, apple. what do you think. >> i think it is unlikely, melissa. i think partly the biggest reason is just the size of the asset, with 56 billion market cap. very few names you can actually make that deal even possibly work, man a disney, maybe google, maybe amazon, maybe apple. i don't think you -- >> that's a long list, mark. that's a long list of potential suitors. >> you don't have a willing seller and just in terms of size, i don't think amazon has any interest in spending that kind of money. they're building up their own content library. why spend $60 billion a year. doesn't make sense. google possibly, i still think that's a stretch, just the size of the asset and you don't have a willing seller, unlike what we had with twitter. this is a different situation. i don't think a deal happens. >> i see in the notes, you think the biggest takeover target is yelp? >> yeah, i continue to think that. i've been saying this for a year, it hasn't happened. i think this is a case where there are interested strategic buyers. i think they had a bid last year. they turned it down. i think it could fit in a lot of different companies. i think pandora is an interesting take-out candidate and long-term i still think twitter is, long-term take-out candidate, not at these prices and not with some of the strategics that were discussed in the last couple of weeks. >> look at yelp or netflix, their revenues have jumped dramatically. yelp up 650% over five years, looks good. the cost of goods sold up. netflix increasing faster than revenues. at some point, doesn't that have to stop? that's not a good balance sheet recipe. >> no, no, it is not a good p and o statement recipe either. the one advantage that netflix has is this is a huge table stakes or -- if you want to try to compete with netflix, you'll be spending billions before you get a single customer on the licensing rights and you have to spend time market and dollars marketing the service. margins have to improve. the good thing that came out of the netflix print is north american content margins improved materially and this is the first time in a while, they're starting to show leverage against the biggest cost item, yelp has a similar problem with growth margins. it is wonderful to be a social media company when you get your users paying for all your content. >> the interesting thing about the yelp story, the notion that it is a takeover target became possible in september when it was the end of the dual class share structure. what price will it be taken out? >> that was an unusual event. we see too many of these, i say that is a stock picker, somebody trying to take the investor side who likes dual class stock structures. when you saw the shift in yelp, it made it more possible for somebody to come in and bid for the asset and if they have to mick a hostile bid for the asset. the price which it would be bought, who knows, i would assume 30% premium. there is a few things they have to prove out, though, one thing that potential investors look for, take out buyers, can they build out the transactions capability of the yelp network. wi can you show you're leading people to take-outs to lining up directly with plumbers in the area, not just advertising but show transactions revenue. >> mark, thank you. >> thank you, melissa. up next, an exclusive interview with the ceo of schwab. we'll ask about the election impact on your money. what the td ameritrade, scott trade deal means for them as well. is it a professor who never stops being a student? is it a caregiver determined to take care of her own? or is it a lifetime of work that blazes the path to your passions? your personal success takes a financial partner who values it as much as you do. learn more at tiaa.org top investment advisers in america all gathered in one place this week. san diego, for the annual schwab impact conference, big event with big guests including your next one. joining us is walt bettinger, ceo of the charles schwab company. thank you for joining us. before we get to your initiatives and the overall market, i want to talk about the td ameritrade, scott trade, big deal a couple of days ago in your space. do you feel that schwab now will also have to make a deal? >> i don't really think so, brian. but before i respond, let me first say that we're going to miss roger ryany in our industry. roger is one of the founders in this industry, 35 years ago, one of the true gentlemen of our business. i'll miss spending time with roger. so when i think about the td ameritrade deal, it probably made sense for them to do this transaction and it does not make sense for us. their business is so much more transactional oriented than ours, there is a commoditization going on in pricing of transactions, the way you combat commoditization is often with scale. i understand why it made sense for them, but it doesn't make sense for us. we don't really think that's where the puck is going. so it is something that we looked at, but ultimately decided to take a pass. >> are you saying there is a -- you don't feel any pricing pressure whatsoever, that when a competitor comes out with a trade that is lower that you're not going to respond? you alluded to pricing pressure on your most recent conference call. >> no, actually, what i'm saying is that we expect pricing in the transactional area to continue to compress. and if we get an improving economy and slightly higher interest rates, you'll see that accelerate. but what we're saying is that we have diversified our business models such that we have a fairly modest amount of our revenue still tied to transactions. so it will acquire a firm that is still 40% or so transactional revenue is completely off strategy for schwab. >> you know, we want to wish mr. ryany, i know he's got a big time battle going on with cancer now, the best wishes to him and his family right now, i hope he kicks its butt and does well, send that out to mr. ryany and his family. back to the business now. i know last year when i was at your conference, i'll be there tomorrow, a lot of concern about robo advisers. some of the advisers, the humans that are there are saying what does this mean for them? what does it mean for the financial adviser industry long-term? is there -- does the human still matter? >> well, let's first clarify the fantasy that robo advisers were somehow going to take a dominant position within the industry. we have not believed that from day one and i think it is very clear now that the original robo advisers are struggling under a b to c model. many of them have converted to b to b or either have been acquired or possibly in the market today. but what is important about the move toward digital advice is you're seeing additional commoditization. so you got commoditization in transactions, you now with the movement to indexing see increasing commoditization of asset management. and what digital advice does is it begins to xh s ts to commodi ale case. >> sounds like a tough business. how do you differentiate yourself? my dad was so excited when commissions were unregulated, didn't have to pay a broker a lot of money for advice he didn't want to get and long time charles schwab customer. so differentiated back then. the world you describe right now, how do you be different? >> i think what we have tried to do at schwab beginning about 15 years ago was to move toward more of a relationship model, a model where we can provide advisory services, where we can support independent advisers who provide advisory services. it is very difficult to commodityize trust. trust is based on putting the interests of the client at the forefront. transactions, asset management, asset allocation, we're well down the path there. i don't see it happening when it comes to sitting one to one and building a trust-based relationship with another individual. >> got it. >> thanks, walt. good to have you. >> coming up -- >> thanks so much. appreciate -- >> we're hitting the good -- satellite bad there, folks. we're hitting the good and bad and downright ugly on the huge earnings day. don't move. just like that, a moment turns romantic. so why pause to take a pill? and when you're having fun why stop to find a bathroom? with cialis for daily use, you don't have to plan around either. it's the only daily tablet approved to treat erectile dysfunction so you can be ready anytime the moment is right. plus cialis treats the frustrating 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 long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. why pause the moment? ask your doctor about cialis for daily use. and for a $200 savings card, go to cialis.com ask your doctor about cialis for daily use. now that fedex has helped us we could focus on bigger issues, like our passive aggressive environment. we're not passive aggressive. hey, hey, hey, there are no bad suggestions here... no matter how lame they are. well said, ann. i've always admired how you just say what's in your head, without thinking. very brave. good point ted. you're living proof that looks aren't everything. thank you. welcome. so, fedex helped simplify our e-commerce business and this is not a passive aggressive environment. i just wanted to say, you guys are doing a great job. what's that supposed to mean? fedex. helping small business simplify e-commerce. the good, the bad and the downright ugly. three big consumer names are making big moves today. and apple getting ready to report. how is the iphone 7 faring? is it helping to stop the revenue slide? this brings on a whole new meaning to beer run. cool video as the second hour of "power lunch" begins right now. i'm melissa lee. let's get a check on the markets. two hours until the closing bell. stocks posting some modest losses right now. see across the board, fractional percentage to the downside. consumer staples, utilities, best performing s&p sectors today. materials, consumer discretionary biggest lagers. >> a judge approving volkswagen's $10 billion diesel vehicle byback plan. more on that story straight ahead. italian bank woes continue. now the bank, one of the world's oldest banks, slashing 2600 jobs and selling off units. all part of an effort to get a support plan for a rescue plan. and a new poll by gallop showing that americans respect for local police jumping to its highest level since 1967. brian, to the three big movers i mentioned this hour. first, to the good, procter & gamble, consumer products giant up 4%. the bad, whirlpool, appliancemake, down 12% after missing estimates. full year profit forecast also below estimates. ugly day for under armour, the stock dropping 13%. the company posting the slowest quarterly sales growth in six years. let's start with the good. procter & gamble joining us is jonathan feeney, senior analyst, you have an equal rate rating and price target of 80 bucks. at 87. does this earnings report make you change your mind about the stock? more enthusiastic about it? >> well, one quarter doesn't a trend make, it was certainly an impressive quarter. our concern has been that they have been balancing that -- balance is the key word, balancing their business more towards profit than volume. this quarter, they're able to buy volume with discounts, but still make their profit targets. we'll see if they can keep that up. >> that explains why organic sales were up 3% and better than people expected. a quarter ago, there were a lot of complaints, not just you, people said, wow, you can get more growth from a kimberly clark, they have done so much r&d at procter & gamble and not getting returns on it like they used to. has any of that changed as a result? this is simply they have chosen to go after volume by cutting prices? >> well, couple of things. it is their easiest comparison of the year. 4% volume decline, that steps up to 2% in second quarter comparison, coming up, so year ago was easy. i also think, you know, the new ceo david taylor changed some of their focus and i think a better job of striking that balance than had been going on before. i give them a little bit of credit here. i don't think the fundamental paradigm has changed. it is tough in developing markets. it is going to remain so. i expect results more in line with expectations. >> what do you like better in the sector? >> i like colgate palmolive, little more expensive valuation. this is the time when investors with valuation so compressed, supposed to reach for best quality assets that will there be with the superior growth, when we get a better foreign currency environment. the past five years has been anything but normal for these global growth businesses. when this gets more normal, the companies with the best growth structural businesses that will outperform. >> thank you for joining us. >> thank you. >> brian. >> whirlpool having a bad day, both the top and bottom lines missed estimates, joining us now is bob, analyst at rbc capital markets. you have liked the stock. it is still up year to date. very difficult date today. does this change your thesis and/or recommendation? >> brian, we really liked whirlpool, we think the execution is great. had a misfire and hit an air pocket in the third quarter. stocks up big today. below $150, fantastic entry point for investors, both 12 month and 36 month horizon. we love seeing great companies on sale. if you own it and it is lower, double down and get it more. >> why do you call it an air pocket? why so confident this is just maybe a one-quarter phenomena? >> choppy demand ahead of the election, hit north america a little bit, issues with brexit, modest fallout. is the trend line in tact. is the consumer in the u.s.? is european actions for them working out? yes. u.s. is great, going to be really great in 17, high conviction call on the r and r model driven by our faith in the consumer. we think they're doing the right thing in europe. head winds with brexit, fx, these are surmountable issues. you march to 20 to $22 a share by 2018. pricing $150 now. great entry point from our perspective for value investors. >> you mentioned the election here, forget about brexit, let's talk domestically. are you hearing, seeing, channel checks, any indication that mom and pop are saying, you know, marge, we need a new dry, let's not buy one because of the election. are people freezing up? >> we have seen a big hit to large ticket items and retail. undeniable soft patch. we think it is a third quarter phenomenon. we feel good going into 4q, might be a little muted. the setup for 2017, which is where we're focused on now it very encouraging. so when we see the very good companies like whirlpool selling at a discount, it is time to take a fresh look. >> bob, still bullish on whirlpool, a pleasure. thank you. finally, it is a downright ugly day for under armour after the company said growth is slowing in north america. let's bring in susan anderson, retail analyst. great to have you with us. still an outperform rating on the stock. nobody can sneeze at revenue growth of up 22%. but the issue here is that under armour's price at what was a 40 pe and this is the smallest revenue growth rate that we have seen since 2010. how do we know we're not getting to a point where people are questioning what under armour is putting up and what they're paying for considering they have taken down their guidance versus consensus for a number of metrics. >> yes, so, i think the big issue is the profitability takedown they did. it went from 800 million, which they expected in fiscal 2018, to now probably just under 600 million. that said, the reason it is coming down they're investing to continue to grow. they did talk about, you know, low 20% top line growth up to 2018 to get to 7.5 billion and top line revenue. that said, we do think it is going to be greater than that. they have been conservative with top line in the past and so i do think it could end up being mid to high 20% growth, particularly given the fact that they are so undertraded in the international markets, only low single digit penetration and this compares to, you know, 10 to 15% penetration for nike and most of international markets. so huge opportunity there, also in footwear, midsingle digit penetration and huge revenue for nike. this will be the two growth areas. >> what sort of multiple should we pay for -- you're saying we should pay a $38, $39 price to earnings ratio over something that might be cheaper look a nike. is that the message that i'm getting? >> yeah, if you look at the pe multiple, so trading at 42 times now, nike about 19 times, but if you look at a peg ratio, so pe to growth ratio, it is actually very equal to nike. about 2.6 times, so because under armour's growth is so much greater and nike's is lower and coming down too, you look at the same amount. i would rather own under armour for the next several years and after that the opportunity to improve the bottom line with better profitability. >> all right, susan, thanks a lot for joining us, appreciate it. >> thanks. and take a look at the chart there, under armour shares, worst day since 2008. kevin plank is on "the halftime report" tomorrow. you will not want to miss that. i'm sure there are plenty of questions to be asking of mr. plank. to julia boorstin with a news alert. at&t ceo randall stevenson announcing pricing for the directv now over the top streaming service saying it will cost $35 a month for 100 plus premium channels and that includes mobile streaming costs, which implies that you won't have to pay any additional date k a fees. this includes channels from fox, nbc universal and time warner. saying this is targeted cord cutters and calls it a, quote, game changer. back over to you. >> if i don't have a cord, i'm at home and don't want cable, what do i do? how do i sign up? how do i get this so i can watch this on my tv? >> stevenson recently announced this will be launching at the end of november. we knew this was in the works for a while. working to get all of the different media companies on board. but they have now announced pricing $35 a month, launching at the end of next month, and once you pay that monthly fee, you can stream to all of your mobile devices or if you have an inters internet connected tv, all of that content. >> it was interesting, you're talking to reed hastings, talking about the bid, as long as there no preference for at&t customers, isn't this also the same by not charging any adiscussion additional usage charges, isn't that giving -- >> that's a good question. i'm not sure, woo el hae'll hav see -- >> you won't have to pay all the extra fees for usage. >> what if you're not an at&t customer? what if i'm a verizon customer and on my iphone, i start subscribing. they could still subsidize the data fees. i'm paying them a monthly fee for the content. so i'll have to look into that and i'll get you an ans brother it launches. they want to make it easy to stream this video content. >> is it going to be like an apple tv? >> you don't need a cable box, you don't need to subscribe to cable, just need to have internet access, wi-fi or broadba broadband. >> how do you get it on your tv. i got my tv. >> here's the thing, the reason why this resonates with me, the reason why julia's story makes so much sense from a business standpoint is directv has a framework in place for this. i'm speaking of as a football fan, they have something called the direct ticket, you can watch all the football games. a couple of years back, they put a mobile platform for the direct ticket on there. you can go to your ipad, click on an app and you have a user name and password and you can stream all of the games straight to your phone or your app. >> i got a 70 inch flat panel right now, i go to the cnbc app or the hello music app or whatever, i can watch internet on my 70 inch flat panel or i need to run it on my computer or ipad and ire plair play it to t which is not the same thing. >> not quite the same thing. there is an app in place that you can put in a roku, apple tv, smart tv platform. >> okay. that's what i'm asking. got it. >> and i would fly if i had wings. maybe i couldn't because the weight would bring me down but i'm wondering if it will be on -- >> here's what i would say -- i would say this. i would love to get your take on this. when you had the directv direct ticket package, you could get it on to your ipad, your iphone or whatever, but you had to prove that you are not able to have a satellite dish accessible to you to get that direct ticket package. this seems like the logical step to open that up to everybody who wants to have any kind of streaming. >> this is for everyone. and to answer michelle's question, this is about the rise of internet connected television. if you're going to buy a new big flat screen tv, it is going to have the capability to connect to the internet. once it does, easy to get this kind of content on it. when i interviewed reed hastings yesterday, he said they're riding the wave of people being able to access streaming video on their big television sets and that's what this service is about as well. $35 a month, seems like a pretty good deal. >> for 100 channels. >> you get my point, though. still watching it either on an ipad or computer, or you had the app on your roku or apple tv or amazon fire or chrome cast, that's my point. people want to watch stuff on the big tv -- >> apps in it already. i can go to apps on my tv. >> you can go to a button and says smart -- >> netflix, a couple of others. download the cnbc app, america, if you haven't already. you can watch "power lunch." you get my point. an apple tv. we got to move on. there we go. hacking america, how big of a threat is russia and china to your cybersecurity? you really need to hear the next story. apple, getting ready to report a couple of hours, how is the iphone 7 doing? will it be enough to stop the revenue slide. what you need to know ahead of the big numbers tonight coming up. ♪ we love knowing what's happening. so the nest cam security camera looks after things and alerts your phone if something's up. hey, need a glass? no matter what it is. hey, dad. ♪ will your business be ready when growth presents itself? american express open cards can help you take on a new job, or fill a big order or expand your office and take on whatever comes next. find out how american express cards and services can help prepare you for growth at open.com. this is the new comfort food. join the california nursess it fpassociation in voting yes ond express prop 61. rs. . es and it starts with foster farms simply raised chicken. california grown with no antibiotics ever. let's get comfortable with our food again. welcome back to "power lunch." i'm tyler mathisen live from cnbc's net net summit. cybersecurity, of course, a big topic around the globe today. and the country. and here at the event. joining us now adam siegel, the chair in emerging technologies, author of the new book "the hacked world how nations fight trade, maneuver and manipulate in the digital age." welcome. good to have you with us. we spend a lot of time in the media and the company focused on the inbound threats of hackers, state sponsored, china, russia, wherever they come from, or nonstate sponsored. i blot got to believe we're not virgins here. we're fighting our own skirmishes and wars too. >> the u.s. is active in this space. we have two publicly acknowledged instances. we have the attack on stucks net, the malware designed to destroy iran's centrifuges set back its nuclear program. we have secretary ash carter saying we have been attacking isis through cybermeans. the chinese, the russians often say we're not going to name names. there are people attacking us. >> so we can assume that we're doing stuff too. >> yeah, i don't think there is any doubt the u.s. is a power in this space. >> compare what we know about the threats from outside and our capabilities here in the u.s. are we better than the bad guys. >> i think we are -- nobody is good at defense. we can tell that cross the board, right? nobody can keep the attacker out. i think on the offensive side, we're very, very good. i think what we have been trying to do is distinguish between good hacking and bad hacking. >> good hacking is -- >> every state is going to spy for political and military reasons. and those are the kind of things we have been involved in, we probably hack into russian computers, military secrets, understand their leaders. bad hacking is -- primarily what the chaeinese have been doing, stealing intellectual property and what we think the russians have been doing, hacking into the dnc, to try to create political influence within the united states. >> so going at the softer underbelly of nonstate functions, though you say the elections is a state function, or state by state function. how concerned should we be about that very point, the russians may be probing and disrupting our elections? >> i think the concern already exists and it is legitimate. i think we have seen -- the russians have hacked the dnc, hacked john podesta's e-mails and others and did enough to create doubt and uncertainty about what you can trust. i don't think it is likely they could change the outcome via the election. if systems are local, state, 40,000 plus, so you can't change it at an international level, but can create enough doubt and uncertainty you can create a level of chaos. >> talk to me what happened last month, the denial of service attack that affected the functioning of the internet. talk to me about that and whether you think american corporations, american government, are ready for those kinds of disruptions. are they investing enough of both money and mind share in it? >> i think we're not seeing enough investment on both sides. the companies that are creating these products are not investing in enough in security. we knew this type of attack was going to come. if you attack -- if you link something to the internet, it is going to be vulnerable. that's what we saw. we saw all of these did vrs and cameras and things and stuff linked to the internet and taken over and used for an attack. on defensive side, we know companies haven't been spending enough and we have massive vulnerabilities because we centralized the control of the internet in this company like dyn. we have been focused on trying to keep people out. we haven't been focusing as much on resilience. >> can you get back, how quickly and how easily. >> and business continuity. >> thank you. we appreciate it. back to dominic chu for a quick news alert. >> tyler, what we have now is early on "the halftime report," scott wapner and the crew had jim chanos on. he continues his campaign to at least talk about alibaba as a good short selling candidate. so in response to jim chanos' recent comments, alibaba issued a statement. they continue to say that jim chanos is wrong and continues to be uninformed about alibaba, we have been cash flow generative every quarter since our ipo. they talk about some of their financials. they also say that his assertion that alibaba has 2 million employees shows a lack of understanding of our business model. we're a platform based tech company with 46,000 employees. and they say they invited jim chanos to come to the campus in china to learn more about the company. they say they invited more than 200 investor to spend time with their management team but he refused invitations to date. this response in reaction to jim chanos' recent comments on "the halftime report" earlier today about alibaba as a short candidate. back over to you. >> thank you so much, dom. do not miss this video. beer run. you got to see this. come back after the break for this video. it is a bird, it is a plane, no, it is larry page's flying car. right there. that story next. my hygienist said the most random thing. she said i should think of my teeth like an apple. it could be great on the outside not so great on the inside. her advice? use a toothpaste and mouthwash that strengthens both. go pro with crest pro-health advanced. it's uniquely formulated with activestrength technology to strengthen teeth inside and is better at strengthening the outside than colgate total. crest toothpaste and mouthwash makes my whole mouth feel amazing. advance to healthier gums and stronger teeth from day one. my check-up was great. crest. healthy, beautiful smiles for life. check out our disaster du jo jour, the disaster of the day. nielsen earnings and revenue coming in below forecast. the company says it is exiting noncore businesses. they provide market data, most notably television ratings. one of the biggest televisions facining corporatio today, attracting millennials to a brand and keeping them loyal. the oil market getting ready to close. the final trades next after this break. hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. investment visionaries and strategists share their forecasts and money moves. hi, everyone. i'm sue herera. here is your cnbc news update. a federal judge signed off on the landmark $15 billion settlement deal in the volkswagen emissions scandal. roughly 10 billion will go to buy back dpracars from consumerd offer payments up to $10,000 per person. volkswagen admitted to equipping 11 million cars with software that would trick emissions tests. concerns over using schools as polling places is prompting districts across the country to cancel classes on election day. parents and officials are worried that the current political climate may cause unsafe conditions. the associated press reports voting has been moved from schools or classes have been canceled in at least seven states. four students were injured this morning after their school bus was involved in an accident and crashed into a house. according to local reports. the children and the bus driver were taken to a hospital with minor injuries. and climbing the himalayas is very challenging. but leaping off one of its tallest peaks may be just nuts. that's exactly that this 51-year-old russian man did, breaking the world record for the highest base jump in the process. do not do this at home. that's the news update at this hour. brian, back to you. >> hard to do at home unless you lived on top of mount everest. >> i know. it is a joke. it is a joke. geez, brian. >> that was funny, brian. >> that was actually funny. >> thank you, melissa. >> literal sullivan. that's what they call me. thank you, sue. and only sue. let's get pack to the charles schwab impact conference. we're joined by liz ann saunders, chief investment strategist with charles schwab. liz ann, thank you for joining us. we spoke with walt a bit earlier on about the macro environment for the company. let's talk about investing and where you see the markets, the election, the brexit still concerned, we still got china, slowdown fears. what are you hearing from all of the financial advisers out there about what their biggest concerns are or what yours happen to be. >> there is so much more conversation around macro. there has been studies recently on macro versus micro as a driver of how asset classes are performing. i think the macro discussion which is so paramount is important to have. given the proximity of the election, that's what a lot of the buzz is about. i try to be objective in our analysis and my analysis and look back at history and we know what is unique about this election. it is also an open election year, which tends to see a little bit more difficult the market and central bank policy, not just fed policy, but i think we may be at the beginning of sort of this realization that central banks are not omnipotent, qe is not the last forever and there are maybe some unintended negative consequences of things like negative interest rates. >> why do you think -- this market is, like, i don't know, trying to think of the dating game where you got to pick one of the three bachelors or bachelorettes, don't want to go out with any of them, but you have to pick one. people have to own stocks for the most part, 401(k), 529, everybody seems to hate it, for seven years, like, okay, i'll pick one stock, but i hate it, why is this has been such an unloved, but incredibly profitable bull market? >> it is extraordinary how persistent the at best skepticism and more typically pessimism is. i think it is muscle memory. not just because of the severity of the financial crisis and the attended pear ma eed bear marke drop in the market, we had the tech wreck drop in the market. at the low in the march of 09, you had a negative 3.5% return. that stays with investors. we changed the psyche of a generation of investors as a result of not just the financial crisis, but -- it is not all that different than what happened coming out of the great depression. i think it changed the psyche of investor and it changed the psyche of consumers as. with and i'm not sure that dissipates anytime soon. >> in terms of sectors, ahead of the elections there are some absolutely decimated out of fear. and perhaps potential new regulations coming. do you see opportunity in those or do you say, you know what, health care, i don't need to be in health care right now, for instance. >> we have a neutral on health care. a lot of it has to do with the uncertainty surrounding the outcome of the election. from a values standpoint, health care is pretty attractive. but i just don't think it is worth the risk making a decision like that heading into the election. where we have had outperform ratings and continue to is on the tech sector and the financial. so a cyclical bias to the sector recommendations and then on the underperform side, it is concentrated in some of those areas that have been hot for perceived safety and income. so utilities and telecom. we think that's where you have a lot of overly rich valuations because of how much money has gone toward, you know, those low vol investments, and i think now with the expense of valuation. >> liz ann saunders, real pleasure, thank you very much. i'll see you tomorrow. >> thank you, brian. see you tomorrow. you will, thanks. >> yeah, all right. there you go. a giant cutout of me -- i'm kidding, i'll be at the schwab impact conference. >> tyler is at the net net summit. >> sometimes getting here can take as long as getting to san diego as you all know. joined now by clara shy, the ceo and founder of hearsay, author of the new book "the social business imperative, adapting your business model to the always connected consumer." welcome. you consult with dozens of fortune 500 companies. what percentage of fortune 500 companies are using social optimally. >> optimally is the key word. i say the vast majority on social. in terms of optimally, probably a minority of them. >> minority. give me a number. 50%, 10%. >> the thing is, social and digital are a moving target. so you can be doing a really well today and tomorrow, consumer preferences change. you have to keep working at it. >> of the ones who are doing it well, what are they doing? of the ones who are not, what are they not doing? >> the ones who are doing it well, the social strategy, the broader digital strategy, are being owned and driven by the ceo and the management team. not some silo technical project that has been -- >> the digital media group, the social media group. >> not the innovation team's job, it is everyone's job, starting with the ceo. >> give me an example of a company you know, that you work with, you're aware of, that is doing it well, by that measure. >> new york life. they have been around forever. and the ceo -- >> old company. >> old company. just down the street. tim is an innovator and owns a strategy and he works with his broader team to execute on it. >> one of the things that you mentioned a moment ago is that the election and how social media has played in the election can teach us or teach companies something about what it means to use it effectively. what are the lesson of the election for corporate execs on social media? >> absolutely. i think the first lesson we can learn is that, you know, donald trump, he speaks his mind. as a big fortune 500 organization, you may have donald trump among your employees. what happens had they go and tweet and represent views that might not align with the company brand promise. i think -- thinking about balancing that company brand and voice, of course, with the privacy of your employees. that's number one. number two, even voters who said they disagree with donald trump's policies, they say they support him because he's authentic. authenticity is the key to social media engagement. >> sounds like a person, not like a press release. >> bingo. >> all right. clara, thanks very much. we appreciate it. >> back to you guys. >> a news alert on sumner red stone, back to julia boorstin. >> sumner redstone saga keeps on going. the former viacom cnbs is suing his girlfriend, alleging elder abuse. he says he paid $45 million to each holland and herzer which triggered more than $90 million in additional tax liabilities. redstone saying he was forced to borrow $100 million from national amusements to pay his tax bill. yet another lawsuit in this ongoing saga. back over to you. >> a mess. >> only the lawyers are getting paid. thank you, julia. gearing up for apple, apple's earnings are set to cross just over an hour from now. we're going to get an early read on the iphone, holiday shopping, growth in china. it's not just a car, it's your daily retreat. the es and es hybrid. get up to $5,000 customer cash on select 2016 models. see your lexus dealer. upgrade your phone system and learn how you could save at vonage.com/business a huge truck hauling beer, nobody behind the wheel. anheuser-busch and otto, the truck drove itself and the beer on the highway in colorado. there was a person in the truck, just to be a fail safe. but not at the wheel the entire time. >> see him when he gets up, very strange. >> how many millions of truck drivers are there in the united states right now. >> very high paying jobs. >> yes, they are. very good jobs. look at that. >> that's -- that weirds me out. >> why? >> strange to see a guy get up from the wheel while it is going down the highway. we'll have to get used to it, i get it. two slices of the apple today. company reporting results in a little over an hour. apple, a key component in a new cnbc index. dom chu will explain that in a moment. first, we start with tim lesco with granite investment advisers. jim chanos on cnbc, listen to what he said about apple. >> apple is the ultimate value stock. we don't own it as a growth vehicle. we own it as a counterweight to a lot of the crumbier pc companies and pc related companies we're short. >> so that might have surprised some reviewers, everybody knows chanos is a short seller but long apple. just because he thinks it is a value stock. tell me what you're looking for from earnings this afternoon. everybody going to be focused on the two weeks of sales of the iphone. >> i think they're going to be focused on iphone sales, two weeks of iphone 7 or just the gross number. you're seeing reports out there, 48 million phones, 44 million phones, boy, trying to pick how many phones they sell in a quarter is very difficult to do. you're talking about a company that is going to earn mid-8. you could see this stock rise appreciably. i think jim chanos is right and we're happy to have him along for a ride. stock trading at cheap multiple to earnings. >> it has been for a long time. we hear that for a long time, only a -- >> the market has known that for a long time. and it doesn't seem to want to give apple that bigger valuation. is that the law of large numbers. how much bigger can it become the next trillion dollar company anytime soon? >> i'm not so much worried about the law of large numbers. everybody expects over time margins get competed away. it is particularly true in technology. the pc cycle, the end of the pc cycle was damaging to a lot of companies. if you look at landscape of the dells and hps. but the mobile lifestyle and the presence of the iphone and the apple ecosphere has longer legs to us than traditional pc cycle. i don't think we're worried it will suffer the same fate as the pc as maybe jim chanos is looking to prepare the trade against or what happened to save blackberry. >> why do you own it? he owns it because it is a hedge against the other crummy technology companies. you sound like you think maybe at some point the market will give it a bigger multiple and appreciation in the price there. what is your underlying view of why you own apple right here? >> basically on valuation. here you have a company with no net debt, tons of cash on the balance sheet, trading at cheap multiple. the earnings quarter after quarter get more sustainable. typically technology stocks like this could trade at a discount because people don't believe in their earnings. >> why are they more sustainable when the majority of revenues come from iphones and that's not a recurring revenue stream. i would argue that it is more sustainable if they had a subscription fee for whatever it is that counted as a vast -- large enough proportion of the revenue. >> i think you're finally starting to see those services are becoming more important. >> tiny part of their business on a percentage basis. >> well, 15% of the business. iphone is about -- 15% of the business now. but it is tied to the iphone. so it is not just a service that people are buying x the iphone. you have to look at them together. locks them into the next iphone. i think you're right, iphone purchase cycles are going to slow. but as long as you continue to lock the customer in, you can maintain the margin you enjoyed. >> ecosystem. thanks, tim. >> thank you. >> apple is a big part of a new cnbc index launching today. dominic chu joins us to explain it. >> we're launching the cnbc iq index, an iq 100, 100 companies that have been deemed innovation leaders in some way, shape or form. here is what we're talking about. we're taking the large cap universal stocks, russell 1,000 stocks out there, and our research partners over at mkan financial have developed a rules based approach to picking stocks within that index that have shown they have intellectual property of their own. you think brand rights, patents, that sort of thing. and are able to make sales. monetary value, out of those particular patents. we troll and they troll all kinds of public statements from public companies to make sure that these companies are able to make that kind of money off of their intellectual property. now, if you look at this, the 100 companies, apple is one of those companies on that list and perhaps no surprise, apple has a lot of different patents. however, apple over the course of the past few quarters has been slowly slipping down the ranks of that list. one of the things we want to watch for here is the cnbc iq 100, you'll be seeing more of in the week and months ahead and apple shares, apple underperformed this overall index of 100 different stocks. we asked the head of mkan to tell us about what happapple ca to get better and improve the position on the index and this is what he had to say. >> not just about making an interesting i 7, i 8, i 9, i infinity, they need to offer something which has a technical background, technical integration framework that is something that they uniquely own. and that hasn't been what they have done in the past and that's where they knead need to go to their score and move it further up on the index. >> you'll be seeing more of the index weeks and months ahead. if you want to know more about the methodology, go to cnbc.com. one recent hot ipo getting a ton of bullish calls on the street. and the small cap call of the day. a biotech up 20% this year. but why some think it may rally another 30% from here. street talk on deck. okay, so what's our latest data say? our customer is a 21-year-old female. heavily into basketball. wait. data just changed... now she's into disc sports. ah, no she's not. since when? since now. she's into tai chi. she found disc sports too stressful. hold on. let me ask you this... what's she gonna like six months from now? al 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. time for street talk. there have been a lot of bullish initiations today. 37 price target, analysts citing that the it total address on the market could be $5 billion. credit suisse initiating with now a $38 price target. >> hyper con verged. new word of the day. second stock, high companies are much less technological. mccormick, the spice company. from outperform to a neutral. this stock down 10% over the past 90 days. recent selloff gives investors unique opportunity to own a truly competitive name in the food space. millennials i guess obsessed by chefs are cooking more meals from scratch, so they need more spices. and they think market share acceleration will become stronger by stronger retail relationships. $111 a share target. >> trends benefiting the quick serve restaurants and casual dining restaurants are benefiting from things like mccormick. >> love cilantro. >> we could never share a meal. third stock, manabank of americd pnc, underperformance creates a compelling entry point. a total potential up side of 10.5%. some key catalysts here. could yield cost reductions. and could increase consumer loan penetration and it's underowned by u.s. active managers. >> and finally, your last call is the smaller cap call today. five prime therapeutic. san francisco based biotech, citigroup starting buy rating of a $65 target. that is 30% up side. they say the company is a hot target for a gastric cancer drug. in a stock right now up lee quart three quarters of 1%. average target price of $58 per share.lee three quarters of 1%. average target price of $58 per share.ee three quarters of 1%. average target price of $58 per share. three quarters of 1%. average target price of $58 per share. three quarters of 1%. average target price of $58 per share.three quarters of 1%. average target price of $58 per share. another big move by at&t, check please, next. some things are simply impossible to ignore. the strikingly-designed lexus nx turbo and hybrid. get up to $5,000 customer cash on select 2016 models. see your lexus dealer. when whirlpool builds an appliance, they put everything they know into it. but once it's sold, there usually isn't a way to keep improving that product. today, whirlpool can analyze iot sensor data from connected appliances on the ibm cloud. so they can continuously learn how customers are using their products. and how the machines respond. harnessing data to make great products better - that's what the ibm cloud is built for. 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(the lion sleeps tonight.) woman snoring take the roar out of snore. yet another innovation only at a sleep number store. from a reality tv show, but this group of grads share a house and i think could you baiting businesses that will eventually open in cities like detroit that are in serious need of revitalization. for more watch sunday mornings at 7:30. big noinsment from at&t's dregt it tv. 35 bucks a month for dregt tv now which is 100 channels online. your take. >> so as a consumer, first thing i think of is does this mean i can get rid of my broadband and at&t will provide it this way? no, this is on top of it. you have to have an internet connection and then start to do the math. 35 bucks plus your internet connection, how does that compete. i have time warner. so if i get tv and internet, it's 80 bucks. if i want unlimited enter sunset wi internet with a lot of speed, it's-this i mean it's a wash in terms of making the decision.su internet with a lot of speed, it's-this i mean it's a wash in terms of making the decision. >> if you pay $150 for cable, $50 for internet, so 200 bucks a month, you can pay the $35 here, you still need the internet, depends on what you want. what are they offering? espn, cnbc, the channels people demand or is it animal planet 2 which not bad, but you never know. >> you don't like animals. >> i do but i don't want animal planet 2. >> arm chair analysis is that it strengthens companies with both content and distribution. on the back of this news, the immediate stock reaction that i saw was from charter communications, that stock hit session lows on the back of this, down 1.25%. so that's where we're seeing -- >> which is odd because you could see maybe where a company like a disney might then want to pick up a distribution model. no? >> then you're talk you go comcast nbc universal. >> used to be you needed content and distribution and then you split the two and now it's back. don't let your babies grow up to be cowboys but do let them grow up to be investment brokers. >> thanks for watching power lunch. "closing bell" starts right now. welcome to the "closing bell." i'm kelly evans at the new york stock exchange. >> and i'll wilfred frost. it was a busy morning for earnings with numbers from practical to proctor and gamble and united technology. we'll get numbers from apple. we'll tell you what to expect from their earnings. >> and speaking of earnings, an ugly day for under armour. we'll tell you why the stock is sinking, down 13% and putting pressure on the likes of nike and lieu