Transcripts For CNBC Squawk On The Street 20141103 : compare

of strength following the best two-week run in nearly three years. >> apple reportedly set to hold an investor call today ahead of a potential bond sale that could be priced in euros for the first time. >> and two big deals. we'll get more details on that. but we begin november after a halloween rally which saw the dow and s&p set some record closing highs each with gains of more than 2% for october. the nasdaq outperforming them up 3% and this week more earnings reports, midterm elections tomorrow and big october jobs report comes up on friday. really, jim, getting through october some consider a success. it's the biggest mid month comeback for stocks since '09. >> you had a couple of things. you had people betting that ebola was going to become a very big issue because people felt that the late mr. duncan was going to make it so that there were multiple infections. there were a lot of people who were shorting restaurants, retail, theme parks, airlines. turns out that none of them had a downturn. there was a frantic scramble to cover. at the same time, i have to respect to people who talk about various qes. japan went nuts at the end. they went nuts. was there anything they're not buying? are they going to -- there was nothing they weren't buying. they were buying everything around the world and so what happens is that if you were short, you got a double whammy. i know purists will say it's not fair. you know it's never been fair. what's fair? >> how about when the market was truly weak, you had been worried about eastern europe and multinationals. >> i think that you can't be as worried because merkel looks like she might fold and because ukraine is speaking with russia. we had this checklist at ten points that people said on twitter you are a bear because they will never meet ebola under control and make it so earnings were good. i had a guy on last week from spirit air. i don't know if you know about ben. planes are running 99% full. refineries running 99% full. auto factories running 99% full. steel mills. we're 99% full in this country. >> 99% is a lot. >> you cannot -- >> that's serious inflation which might get the fed more concerned. >> with natural gas about to go to three bucks. oil about to go to -- >> oil concern is more about deflation but everybody thinks the dollar is going higher which makes me think it won't because everybody is on that train. >> if you're a retailer that wants to bring in things from overseas, i wish argentina made things. you could really buy everything from there. >> things would come cheap. >> thank you. colgate is sending a letter right now. >> those that import and it hurts exporters. >> we export -- hopefully we export oil. we just don't export that much stuff. >> we export a lot of stuff. >> we do export a lot of stuff. it's not as one dimensional because i think that we are getting -- we're the beneficiary of a lot of good things with the dollar. you mention no inflation. we have no inflation but for good reasons. not if your labor because wages are stagnant. >> are you a believer in the seasonality with buybacks coming back starting this month? >> my colleague to the left said there was a lack of confidence in deals. i come in today and i see deals that i would have told you covance is not a great company. >> we'll talk about those deals. i guess what i was saying was that robust deal market we saw much of this year was royaled a bit but you can look at the deals as a sign that things got back online fairly quickly although neither one is a blockbuster but they are both significant. >> i hate took back to ebola because a lot of people felt that had nothing to do with anything. when you spoke to ceos offline, what they were saying is do you think this ebola thing can be contained? restaurants worried about -- i think that -- >> we don't know that -- we could well see another case. >> i think one of the things that happened is that it's no longer regarded as fatal if it happens here. >> i think people may be having a more rationale response to what we're aware of. >> did you get a flu shot? >> i will. >> go get a flu shot because many thousands of people die from flu. >> they do. of course so many people on twitter pointed out to me when i said we should be more concerned about the flu because the death rate is far higher than ebola. >> i can sneeze on you, i can sneeze on your keyboard. >> the flu is transmittable. we are talking about it again. >> when i dealt with a couple restaurants not on camera, it was about potential downturn of people and by the way, retail did have a downturn mid october. now, you could say that's because it was too warm. i say it's because people were afraid to go out. >> all right. you talked deals. lack of confidence. it wasn't really a lack of confidence. it was where are we going to see more things that were online but might have been pushed off by that volatility we had earlier in october. this morning at least we do have a bit of a merger monday. 25 bucks a share. >> did anybody notice the volume last week? >> i would give them a call and look through who did buying. >> the deal did not leak. late the journal had something on it. the other deal is labcorp obtain ing covance. when you pay largely cash or all cas cash. on the labcorp one, some people say strategically i'm not sure i get it completely. it's not horizontal. is it kind of vertical? one company that provides laboratory testing and services and you have another that does comprehensive drug development and nutritional analysis. >> when corning spun off in 1996, they felt that they worked together. >> and now quest has been the name most often heard in terms of would labcorp if they were to consolidate -- >> if the government would let them. >> covance group is letter q and they did a lot of -- they're doing a lot of ebola work. reported a horrible quarter last week and a competitor that is not really a competitor that drove charles river down. i was amazed. they said they have a cure for ebola. so what. suddenly that issue became -- >> i asked this question to those representing the company on the pr front. this is the answer i got. in terms of strategic rationale doubles down on the lab business and adds great linkages that fits with the market is heading, personalized medicine being the case and then also say labcorp has data on 75 million patients and that will help covance's ability to run efficient drug trials. i think shareholders -- >> if you want the answer to the sapient deal, kevin spacey. go to the sapient website and go to a speech that kevin spacey made about second story sapient. it's brilliant about how the idea is if you go to whole foods, the new whole foods rollout, you'll see screens all over the place about how the food is coming right from farm to table. that's a sapient ad campaign. coca-cola uses a lot of sapient ads to talk about the mote that is coca-cola. this is an explosive acquisition. not for government work but for the notion that we can reach people on youtube. we can reach people on facebook. i encourage people to go listen. kevin spacey is the greatest. >> publicis was unable to complete a deal. >> meantime, the journal says that apple will hold an investor call today ahead of a potential bond sale adding that the company is considering selling debt in euros for the first time. apple reportedly scheduled to launch a smart watch in the spring later than some originally anticipated. apple's retail chief addressed employees in a video message saying we're going into the holidays. we'll go into chinese new year and then a new watch launch coming in the spring. average yield, 1.2. >> i'm surprised -- i know there's been a lot of talk this was going to happen. this is just another apple beat going from being don't care about the stock to being we're going to buy in every share. we'll get cheap money. one of the few companies that looked at what the fed is doing and said other than verizon, we can just clean it up here. it's very additive. >> capital allocation is interesting. we've always talked about how they hit the bond market at a low when they sold -- >> maybe they're hitting a low in europe. >> verizon borrowed more money than any corporation in history. they missed it by a few weeks but they did okay. >> raised 12 billion this year. 17 billion of course last year in what was the biggest deal ever. >> and we had apple pay. i know that starbucks is going head to head with their own apple pay. >> you like ebola and you like apple. >> i like things that people talk about. >> things you don't like, twitter. you have turned on twitter. fire coming out of your eyes. >> you know the best way to get to explain why twitter needs new management? twitter. it's a revolt of the tweets. there may be new management that comes in. >> you said that. is there another story? >> the turnover there is insane. the turnover seems to happen every day. have you looked at the turnover? who has quit in the first ten minutes of our show? >> new ceo, new heads of product and new heads of engineering. >> everyone is allowed to be fired except the ceo. the ceo is good and everybody else needs to go. is that the way it usually works? >> stock is down 1.5% this morning. >> they say it could be defining. i just think when you go on twitter, there are people who love twitter as a form of advertisement. but the management itself is curiously missing how much revenue could be brought in. facebook is spending too much money. google is recruiting all over the place. twitter spending. the discipline of these companies is called into question. i'm talking against myself. i don't care. the spending of these companies versus a lot of other disciplined companies like microsoft kind of taking advantage of the fact that no one seems to care they spend all they want. that does come back to haunt you. >> they have at least in the case of google and facebook they have incredible growth rates. that solves a lot of problems. >> i think they are hiring a lot of people. >> amazon, facebook, google, twitter, are responsible for a tremendous amount of hiring and not a tremendous amount of worrying about the bottom line. i think that that is ultimately -- you have to do both. >> it's a big day meantime here in lower manhattan. we'll explain that after the break and then later on this morning, google venture's president bill maris is going to join us right here on "squawk alley." another look at futures this morning. relative steadiness as we kick off november. when change is in the air you see things in a whole new way. it's in this spirit that ing u.s. is becoming a new kind of company. one that helps you think differently about what's ahead, and what's possible when you get things organized. ing u.s. is now voya. changing the way you think of retirement. ♪ there's confidence... then there's trusting your vehicle maintenance to ford service confidence. our expertise, technology, and high quality parts means your peace of mind. it's no wonder last year we sold over three million tires. and during the big tire event, get up to $140 in mail-in rebates on four select tires. ♪ live shot of lower manhattan where one world trade is open for business today. 13 years after the 9/11 attacks, about 175 employees will start moving into the freedom tower today. the 3$3.9 billion skyscraper is the nation's tallest building but it remains to be seen how much of the floor space they will be able to rent. it's been a challenge filling it. maybe not getting anchor tenants but there needs to be more. >> it is a beautiful area if they could get some of the construction done i would love to visit there. >> it's come a long way of course over the last 12 years or 13 years. given what they have done with the station. it's the most ever spent on a single building. >> the unemployment rate in this city is among the lowest in the country. a number of new people come in and number of companies is a great success story. >> especially when you look at lower manhattan in general and what's happened on the west side. goldman sachs headquarters. >> a change in industry. goldman is down there with their headquarters. financial services is not carrying lower manhattan. >> most of the buildings i pass every day have been turned into apartments. it's an amazing transformation. it's kind of nuts. >> downtown is being visited again is my point. and brooklyn too. >> you do get asked for directions a lot when you come out of the subway. we'll get cramer's mad dash as we countdown toward the opening bell. a very busy week about to get started in just a minute. in a world that's changing faster than ever, we believe outshining the competition tomorrow quires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. [ inhales deeply ] [ sighs ] [ inhales ] [ male announcer ] at cvs health, we took a deep breath... [ inhales, exhales ] [ male announcer ] and made the decision to quit selling cigarettes in our cvs pharmacies. now we invite smokers to quit, too, with our comprehensive program. we just want to help everyone, everywhere, breathe a little easier. introducing cvs health. because health is everything. >> all right. we'll have the opening bell in eight minutes from now and start off this november. i can't believe this year is going by so quickly. what an october we had. we have a mad dash now. >> this is very interesting. this is the beginning of what i think you have to pay attention to if you're retail. raymond james downgrades home depot by a hold. why valuation? look at this. this is a retailer that's just done incredibly well even though housing is not that good. it's been a refinance play. it's been a management play. keep this in mind. this did have a credit card breach and nobody cared. >> why did they get it so easy and target take it so hard? >> home depot management is revered and previous fellow from target was not liked. that's a great question. like i think pr crisis manager should study how home depot handled it versus how target handled it. they were second. >> i feel like we still don't know all of the details about home depot. we did learn more about target. >> i know that is a new credit card situation for me. apple rejects you. >> to your larger point at 97 bucks, this is trading high. >> it's really expensive. most of the retailers are not up. i think october was walmart and another degradation of which these guys pick up. sears, walmart, target we have to see. target is not doing that well yet. new ceo. he hasn't had a chance to reform things. giving away the chipping will be interesting versus amazon. improved websites not great. >> let's move onto the oil patch. >> you and i saw a series of ideas. most of which have not panned out. >> so far not so good. >> national oilwell. we had this down a great deal. they offloaded services business. this is a great company. what do they make? they make rigs onshore and offshore. there's a decline going on in the prospect of drilling. lead story today in "the wall street journal," chevron and exxon cutting back. that's disastrous for national oilwell. there are so many orders. there are too many drilling companies and there will be consolidation and too many service companies. this company is the idol of everyone and it doesn't matter because oil at these levels, it's not worth drilling. >> is there a point at which because you like this long-term where you buy it and put it away and things will come back? >> if you think oil can stabilize at 80, yes. there's still a lot of people who feel no. natural gas is going to come down big. rbn put out a big report this weekend talking about possibility of $2 natural gas. we're flooded with natural gas. the drilling for natural gas, be very careful. could slow. the marginal cost for natural gas for some of these oil companies is zero. we are going to be largest by far. >> we don't have an energy policy. >> what we are going to have soon is opening bell. starting november off on this third day of november. a monday. we're back after this. ♪ there's confidence... then there's trusting your vehicle maintenance to ford service confidence. our expertise, technology, and high quality parts means your peace of mind. it's no wonder last year we sold over three million tires. and during the big tire event, get up to $140 in mail-in rebates on four select tires. ♪ you can bring back from a trip around the world. but you can't always bring back customer data. because many customers don't like it when their data moves around. can i go now? if you're going to do business globally, you need a cloud that can keep your data where it needs to be. today, there's a new way to work and it's made with ibm. you're watching cnbc "squawk on the street." the opening bell in just about 90 seconds. election day tomorrow. jobs number on friday. a lot of data all week long and then earnings. tesla is going to report. whole foods is going to report. >> some companies are coal orientated. tesla with mercedes-benz. i think these are names that captured the retail investor and the retail investor is feeling bullish but most is etf. i don't know how to read the employment number. you're going to get a lot of chatter about how the fed is going to have to tighten sooner is what i think. >> even with the kind of inflation numbers we've been getting? >> it seems so out of whack for them to tighten but if industrial production is above 80, they'll talk about doing something before 2016. that's at odds with what a lot of people are saying. i wish they would sell some of the bonds. the market desperately needs them. they're not. we know they're not. they're going to let them roll. >> balance sheet stays where it is. >> first time in a couple years we'll have additional asset purchases. we'll get the opening bell here a few seconds early and look at s&p at the top of your screen. at the big board, maker of electronic measurement technology keysight and at the nasdaq, winners of the new york city marathon. what a day for the race. >> here we go. >> we need some new twitter downgrades today. it's west coast. that's why there's nobody dismissed yet. >> we are getting auto sales today and phil lebeau has gm and ford. >> we'll start first with general motors. general motors selling a slight increase for the month of october. it's shy of the estimate which was calling for an increase of 2.1%. one note on those gm sales for october, the company ended the month with 94-day supply of vehicles compared with the end of september when the company had 81-day supply. you don't want to see an increase in supply so that's something we'll be looking for later this morning. as for ford, ford reporting a decline of 1.7% last month. that's a little better than the edmonds.com estimate which called for a decline of 2.7%. overall the industry is expected to have sales come in at a pace of 16.3 or 16.4 million units, which by the way is the expectation for the full year. about 16.3 or 16.4 million. back to you. >> all right. i talked about industrial production. that's past utilization. that doesn't sound full out if you will have that level of inventory. >> so you think that peak auto theory lives? >> i don't know. these numbers are -- auto nation reported a great quarter. and chrysler reported a great quarter. there's a lot of moving parts. >> those are already in the supply chain. there's a sense that they might have stuffed it a little bit this past quarter. >> it's been hideous. it's been one of the worst performers. >> they say it's the cheapest stock out there by far. >> it is the cheapest stock but what does it matter? most expensive stocks are doing the best. >> don't you think that will change at some point? >> if rates would go up. gm could buyback a lot of stock and increase the dividend. it's frustrating. the inexpensive stocks become more under valued and nobody cares. people want biotech. >> we're back in that kind of thing? >> you know the best performing stock on the nasdaq last week was tractor. >> tractor supply. there you go. >> talk about a barometer of sentiment. >> i was wearing my tractor supply shirt i got when digging potatoes at my garden. >> you can pick them before the frost. >> i want to get to american realty capital properties. the company came out and said there were some misstatements that first time they were made were a mistake and second time they were false and although it didn't appear to be affecting gap or anything else. a deal that the company said was going to go through is no longer going through and that is why the stock is down yet again. look at this stock, jim. they said in fact in last week's press release, which we gave a lot of time to, that they did not expect the matter being this accounting matter to impact a previously announced deal under which they were selling coal capital to rcs capital but today rcs says we terminated that definitive agreement to acquire coal capital from arcp and the stock is down yet again. >> and reuters reported on friday, i believe it was, that u.s. authorities opened a criminal probe in the wake of the real estate investment trust disclosure that uncovered accounting errors. the fbi conducting an investigation. again, people run and ask questions later. >> typically what happens if you do what they did, you went forward and go to the s.e.c. s.e.c. looks over. that whole process got short circuited when the fbi gets involved, it tends to be arrests. there tends to be arrests. fbi really bad when they knock on your door. not a good sign. s.e.c. doesn't knock. they just call your lawyer. fbi kind of, hey, how you guys doing? that's when you get the smelling salts out. talking about when you knock on the door with the fbi and justice, people often faint because they are white collar people and not conditioned to guy at the door, fbi, tell them i'm busy. doesn't work like that. white collar. don't work like that. >> meantime, as you look ahead to the next couple of days, what is going to be interesting to watch? a lot of media companies. time warner and discovery is reporting. what's going to set the tone? >> i think there is so much money there and so many buy recommendations and i think they have to blow the number away. by the way, one of the things that's so strange, copper is going up. baltic freight is up 40% from the low. could there be something going on in china that we don't know that's positive? half of the country is not signed up yet. they need to show signups and global. they need to show big profit. >> i don't know about global. now on 11/11 they'll sell more stuff than ever and in the quarter previous buying slows ahead of singles day because everyone knows they're going to ramp up. >> is there big sales on singles day? >> yeah. there's big everything on singles day. they'll ship more stuff and sell more stuff than ever happened on the planet. i remember last year -- the comparisons will be from last year as well. that could be helpful. you do get a slowdown in the quarter previous to the singles day quarterback. >> what movie will we hear inspire by for singles day? "sleepless in seattle." >> could be "forest gump." >> old school "splash." >> he's stuck in another era. >> maybe with movies but not with his company. >> the question is how much is mobile versus pc. the tag rate on pc is higher but everyone is moving to mobile in china as well as they are here. these are some of the things we'll watch for. >> that will move facebook. that will move google. that will move the group. may not move twitter which once again that most recent little thing we had to crawl underneath, that was old news. i want to point that out. >> morgan stanley made comments this morning on google, twitter and facebook. >> they love facebook and it's important. i mentioned rob peck had a list of what has to happen with twitter at the analyst meeting but loukewarm twitter from morgn stanley. i think they're probably concerned about the turnover. >> and one last point. you mentioned whether china something might be going on. what tends to outperform in the november to may period is materials. 70% of the time over that best six-month period, materials outpace the broader market. >> they've been horrendous. that would be interesting. i saw the iron companies doing poorly. freeport doubled down by doing oil and copper. that's been a poor performer. that would be very interesting. the street is not set up to have the materials go up other than caterpillar not going down that much. that would be really interesting to follow. i'm glad you told me. >> dow is down 19. let's get to bob pisani on the floor. good morning, bob. >> good morning. sort of an indeterminatied open. the s&p 500 not fractional in co gold stocks. gold is down but gold stocks are on the upside. some of the gold stocks and gold mining index are up this morning. unusual. gold moving in a different direction than gold miners. it's november. everybody expects a big month. you should be suspicious. nothing traditional has been working very well so take a look. october is traditionally a down month for the s&p 500. it was up. we ended up 2%. sell in may go away. you sell may through the end of october traditionally weaker. that didn't work either. last six months s&p 500 up 7.1%. the reason i bring this up is that consensus is on one side in november that it will be an up month because it's strong seasonally and because buybacks reappear after trailing off in october and everyone smart looking at this should be suspicious about the idea that november is necessarily going to be an up month. now, earnings we're 75% through for the s&p 500. and earnings have been excellent. if the current trend holds, we'll be up 10% for the third quarter. right now according to s&p capital iq we're up 8.2%. that's a good number. up 10% in the prior quarter. what i find a little disappointing is revenues did not move up and they did in the prior quarter but not now. they are stuck at 3%. that's a big gap. 8% versus 3% on earnings versus revenues and a bit disappointing. i think more questions you should ask is what happened to the slowdown in global markets? that was a big concern going into this quarter. we didn't get a lot of comments. we're seeing numbers come down for the fourth quarter and more important analysts are taking down numbers for the first quarter of 2015 and second quarter of 2015. that's aggressive. normally they don't touch numbers until they get close to quarters themselves. they are taking down the numbers particularly in the oil companies where concerns about lower oil is definitely impacting that group overall. let's look at cisco. not a lot on earnings front. cisco the food company had decent numbers overall. they were in line with expectations. i think the big thing is that acquisition of u.s. food still happening out there. remember, this would make them far and away the biggest food distribution company in the united states. by most estimates i've seen, they would have 25% of the market. company didn't say much about this only that they did not expect it to close before the first quarter of 2015. this was announced last year. remember, it was december 2013 they announced they were buying u.s. food and still don't have regulatory approval. it's fdc they need that from. the number of hurdles that still have to be overcome for this particular deal to still go through. right now the dow down 16 points. guys, back to you. >> all right, bob. thanks a lot. let's get to the bond pits and check in with rick santelli at the cme in chicago. >> good morning, carl. welcome back. a two-day chart of tens shows mostly sideway activity. on the options market it's busy. if we look at month to date chart of tens, it's been a steady move toward higher rates since the 15s culmination from the sub190 intraday trade. to contrast that, a much more timid looking chart although we did see yields move up. if we look at the foreign exchange side bank of japan is where the action is at, look at what's going on with regard to the two-day dollar index. one of the main reasons outside of the uur euro/dollar is the y. looking back to december of 2007 since we've been this close or traded near 114 handle. many traders think technically 120 is in the cards. i can't tell you if it is or not but i can tell you the most perspiration i see are those short the dollar against the yen. carl, back to you. >> the return of bill gurley. we'll talk tech valuations and why he's so upbeat about pros peb prospects to uber and other starts. don't go away. this is charlie. his long day of doing it himself starts with back pain... and a choice. take 4 advil in a day or just 2 aleve for all day relief. honey, you did it! baby laughs! i'm spending too much time hiring and not enough time in my kitchen. 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[ female announcer ] over 100,000 businesses have already used zip recruiter and now you can use zip recruiter for free at a special site for tv viewers; go to ziprecruiter.com/offer2. but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier. it's your idea powered by active trader pro. another way fidelity gives you a more powerful investing experience. call our specialists today to get up and running. it's in this spirit that ingu u.s. is becoming a new kind of company. one that helps you think differently about what's ahead, and what's possible when you get things organized. ing u.s. is now voya. changing the way you think of retirement. red lobster bringing back more surf getting ready of more turf. the struggling restaurant change announcing a revamped menu that eliminates several non-seafood items that were added by prior parent company darden. they were sold off this past summer. it is 85% seafood up from 75%. jim? >> red lobster had been a troubled division. it doesn't hurt to try anything. when everything is working, don't change a thing and when nothing is working, change everything. >> darden criticized heavily and losing the entire board of directors in a proxy fight as a result in some ways of this transaction against a number of others and now searching for a new ceo. >> i don't know. they didn't do oktoberfest. i used to go to red lobster all the time. you would get fat as all get out going there. >> not exactly low cal. >> no. i always love the schooner. >> i have never been. >> are you american? >> olive garden in colorado. >> you're not an american, are you? >> never been to red lobster. >> you shock me every day. red lobster. >> i like to keep mystery in our relationship. >> you sound like you're more constructive on restaurant stocks in general. >> i just think that -- i like starbucks very much. i thought there was a big starbucks opening in a third tier city in china this weekend. the line was around the block. starbucks has to refocus on a way overseas. i like -- i think there's something -- i don't understand why that stock keeps going higher, inching higher. that's an interesting situation. >> there's a great deal of expectation when it comes to mcdonald's that there may be an activist that shows itself. we'll see if it happens. no stranger to the market that rumor. >> i was in china last week. i ate at a mcdonald's and pizza hit twice. not long lines out the door. >> not kfc? >> is it because you were rushing or because it was the best alternative? >> convenience. try salmon pizza. very nice. >> that's a good combo. okay. a couple ideas. when i think about ihop, i think of you because i'm sure you've never been to an ihop. >> i've been to ihop many times. >> applebee's. >> been there. >> and chipotle back to where they were before the bad quarter and dominos keeps blowing out the numbers. i'll see if i can enter on the app a salmon pizza and see if the ceo doesn't say coming at you. >> my favorite tweet over the weekend was dominos is one marketing campaign away from sending you a pizza every morning unless you call them first to stop them. >> look at that stock, will you? that's been just amazing. they just use technology and now they'll have an app to speak to it. domino's is the most forward thinking of the restaurant chains other than -- i won't mention again a coffee company because you get angry about a coffee company that i've been mentioning that is doing well technologically. >> starbucks. >> yes. >> did you notice that maureen asked whether he would run for president? he deferred. he didn't say no. >> he didn't. i think that is interesting. it didn't say he was doing this for business. it did say he was doing it for betterment of veterans and he did say i'm kind of sick of government. >> he has made hints in the past of his interest. >> november 11th will be free for hbo when they have a lot of great talent. i think he's running to starbucks going to 90. that's what he's running for. >> we'll get stock trading with jim in just a minute. we did have a new record on the s&p. we'll keep our eye on that. "squawk on the street" will be right back. what if we finally had a back yard? that would be amazing. hey, what if we took down this wall? what if this was my art studio? what if we were pre-approved? shut up! from finding to financing, how'd you do that? zillow. no question about that. but your erectile dysfunction - that could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any allergic reactions like rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a free 30-tablet trial. time for cramer and stock trading. >> a hacker made a big splash in 3-d printing last week. the defenders of 3-d came out hard today. don't forget hp won't ship in bulk until 2016. that's totally true. i think that stratasys can run. >> corporate product. now, wells came out today and said that biomarin is doing great things. they join the pharmaceutical company as one that's doing the great junior work. they could be the heirs. keep that in mind. junior going to senior. i like all three. biomarin is a great company. >> what's tonight? >> the spin-off of kimberly clark and then david steiner with a terrific quarter for wai waste management. we have to find out. volumes weren't what i wanted but then the pricing is. it's a price story and not a volume. good to have you back. >> good to be back. i missed a lot. but the notion the qe with the baton handed around the world, it's not fair but it's never been fair. >> you also missed a critical denver broncos lost. >> that's harsh after your eagles took care of the texans. >> doesn't matter the quarterback when you have the best running back in the league. >> glad you can talk about football at all. >> you can't. best of luck to the giants tonight. >> i'm familiar with that team that you just mentioned. >> rex ryan, the quote was we would do anything for a win at this point. >> maybe he should leave the building. that would help. >> one of the nicest people. that doesn't matter. nice guys finish last. >> they finish last. >> i think he is last. >> a lot of nice guys in new york sports apparently. >> we'll see you tonight, jim. when we come back, breaking news on construction spending and market reaction. keep it right here. for tapping into a wealth of experience... for access to one of the top wealth management firms in the country... for a team of financial professionals who provide customized solutions... for all of your wealth management and retirement goals, discover how pnc wealth management can help you achieve. visit pnc.com/wealthsolutions to find out more. ♪ there's confidence... then there's trusting your vehicle maintenance to ford service confidence. our expertise, technology, and high quality parts means your peace of mind. it's no wonder last year we sold over three million tires. and during the big tire event, get up to $140 in mail-in rebates on four select tires. ♪ i'm spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast? go to ziprecruiter.com and post your job to over 30 of the web's leading job boards with a single click; then simply select the best candidates from one easy to review list. you put up one post and the next day you have all these candidates. makes my job a lot easier. [ female announcer ] over 100,000 businesses have already used zip recruiter and now you can use zip recruiter for free at a special site for tv viewers; go to ziprecruiter.com/offer2. welcome back to "squawk on the street." rick santelli live on the floor of the cme group. big movers and shakers since bank of japan last week are mostly foreign exchange. if you look at the dollar/yen, screaming and getting close to 114. best level since '07 and as we get ready for 10:00 data, i look at ism coming in close to levels that we haven't seen since early 2011 which was the case last month when we were looking at the number at 59 and change. 59 two months ago. latest read on october manufacturing is 59.0. that equals august. last month stands at 56.6. it equaled august and august you had to go back to march of 2011 to find a 59.1. it doesn't end there. we have september construction spending down 0.4. a huge disappointment. if we look at last month, august was down 0.8 and now revised down 0.5 and we come up to down 0.4 on the current read. even though we did gain several tenths on last month, even when you average them together, it's a bit below a two-month consensus on the numbers we're looking for. if we look at the equity markets, they are down just a little bit in front of midterm elections. will politics make a difference? of course they will. will market figure it out before tomorrow? maybe too close to call. carl, back to you. >> a phrase they like to use in politics. thanks a lot. rick santelli. lets bring in steve liesman. >> a screaming report on this ism is all i can describe it at. you have new orders at 65, which is huge. up from 60 the prior month. production at 64.8. employment up 55.5. the only thing that's a little bit below the 50 line is customer inventories which means room to grow. these are very, very strong numbers. only thing you can say negative is it would be very difficult to sustain at this level. i haven't had chance to look at construction spending numbers but they were a disappointment down 0.4. i look at them now and it looks like a big decline in manufacturing, construction, and again the public spending numbers with 3.7% decline in highway and street spending, which is very strange. private sector down 0.1. less of a disappointment there. the manufacturing numbers, the context isn't following. i want to read you some of the commentary out there where there were some positive commentary on the holiday spending numbers with one manufacturer saying that you have very strong holiday orders exceeding seasonal forecasts and customers demanding additional quantities above prior orders and another person saying weakness in commodity prices is positive for the business. these are the positive impacts. so the question was whether or not we were going to get hit from the weakness abroad. right now this manufacturing data says no. the united states fortress usa is standing the impacts from abroad. sarah? >> bright spot in the world. thanks very much, steve liesman, on those strong manufacturing numbers. let's stay on the markets. mixed right now. s&p in record territory. we are coming off the best two-week run in nearly three years with a dow and s&p 500 gaining more than 2% for the month of october. will the rally continue into november? joining us now, chief investment officer at web bush and art hogan. art, you were with us. you told us it would be bullish. october was a bit of a wild ride. are you looking at the rally continuing here on the fundamentals like that manufacturing report we just got or on quantitative easing for parts of the world like japan? >> i think that what has really changed and i think this is an october phenomenon for us, we've seen investors interpret good news as that. the biggest change in month over month is the world was coming to an end in the middle of the month. sky was falling. we had a selling period that culminated on october 15th and out of the blue investors have shifted to look at good news as being just that, good news. whether it was more upbeat commentary from the fed or an increase in gdp print, all of that is pointing investors in the right direction. i think if we are at the point where we interpret good news as being good for the market, we should see a strong period. this november to april time frame is good for markets and it looks as though we can move f e higher from here. >> steve liesman called it fortress usa. better economic fundamentals given what's happening in the rest of the world. is that sustainable and will it continue to drive the money into u.s. equity markets? >> they say money is the mother's milk of politics and low interest rates are the mother's milk of the stock market. what we saw last week from the boj was big, big news. it takes the fed off the table. fortress usa, yes, but we're going to start to have a competitive export problem between our currency and others. right now initially it's very good for us. but what's very good for the stock market is the fact that we continue to have aggressive policies from central banks worldwide. >> that is a bit of a debate as dollar continues to soar and we eye key levels in the dollar/yen. does that hurt u.s. stocks because history shows us the two can rally together even if competitive export edge is lost a bit. >> to the extent that you worry about that because it makes us less competitive in global marketplace, you have to sit back and say what's the makeup of the u.s. economy between 10% and 13% of gdp but we consume two-thirds or 68% of our gdp. to the extent that the tail wind that we have a stronger dollar is a much larger impact than u.s. gdp than losses in the exports. i think they go hand in hand. >> goldman sachs said a $10 drop in the price of oil would increase earnings per share for the market by $1 and in 2016 by $4 earnings per share. have you seen this small business lending survey that came out suggesting that small businesses have now boosted their borrowing and were at 7.5-year high? i wonder if that means in the context where he talk about a strong economy. the small cap stocks, russell 2,000 can pull back or can rise further. >> well, i certainly think stocks will continue to do well and i did see that survey and you could also look at it by seeing what's going on in business development where they are making lots and lots of loans and i think small businesses are doing very well right now and will continue to do well. back to art's point, their business tends to be domestic. they are not as reliable on export markets. i think they'll continue to do better. large cap you are going to have an issue with export given what's going on with currencies and it will have a greater impact there than with small cap companies. >> on the russell 2,000, where are you now? >> i think it was telling in terms of how it pulled back in front of the broader market and started leading before we saw a rally in the bond market. that's a good sign. to steve's point, it is an index that's domestically facing. it's also an index that has companies that are more sensitive to interest rates. in a rising interest rate environment, they'll come under more pressure. i don't think that's something we're forecasting for the next 12 months. to the extent that you see russell more, this is the time you want to see it and leadership for russell 2 is something we see for the balance of this year. >> are you looking at any midterm election trades? are investor ignoring it and okay with the status quo even if republicans do take the senate or industries we should be looking at if that happens? >> i don't think there's going to be much of a change here. the republicans are certainly not going to lose the house. they may take the senate. the presidency is off the table so it's gridlock, gridlock, gridlock whichever way you look at it so the election is a nonevent because there's no way that one party is going to gain control of washington, d.c. here so policy will remain as it is today. >> all right. we'll stick to the economics and earnings. thank you both on this monday morning. >> despite recent stock market rally and low interest rate environment, new data out this morning on first-time home buyers may surprise you. diana olick has more. >> good morning, simon. the economy is improving. home prices are recovering but first-time home buyers are just not coming back. not even close to the normal levels. in fact, the share of first-time buyers dropped to 33% this year down from 38% a year ago. that according to the realtors annual profile of home buyers released just a few minutes ago. long-term average in this survey dating back to 1981 shows that four out of ten purchases are from first-time home buyers so still way off from that and surprisingly not improving. why? sticker shock. prices rose very quickly last year in most local markets faster than income growth. investors are moving out leaving the market to mortgage dependent buyers. interest rates are low but to get that low rate, you have to have skin in the game. money to put down and close to pristine credit. that's not the profile of young first-time buyers. nearly half of first-time buyers surveyed this year said the mortgage application and approval process was much more or at least somewhat more difficult than they expected and that's up from 43% a year ago. and that's why this continues to sizzle. this brand new rental development. i'm not in downtown d.c. i'm up in a residential neighborhood where the bulk of the housing is single family. picket fenced, backyards on either side of us. this is where good schools are and where families are and yet there's still strong demand for this kind of rental property. it's got apartments. to town homes, retail in the middle. >> activity behind you as you speak. diana olick joining us there. thanks a lot. let's get a quick market flash. >> speaking of activity, look at ryanair flying high this morning. raising the annual profit forecast nearly 20% thanks to a surge in winter bookings. it said it would cut fares by 10% in the coming year as it tries to make market share from its rivals. last year the ceo pledged his airline would improve its much criticized customer service. ryanair shares up by 6% to 7% in the early trade. back to you. >> when we come back, should google's next innovation be itself and what past two accidents could mean for the future of private space flight. oil crossed back below 80 bucks. keep your eye on that. we'll be right back. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. requires precision and anattention to detail.g it takes knowledge, hard work and a plan. at baird, we approach your wealth management strategy that same way. as an employee owned firm we have the freedom and resources to create customized financial plans built to last, from generation to generation. we'll listen. we'll talk. we'll plan. baird. apple is expected to host an investor call today ahead of what could be a blockbuster bond sale. josh lipton has more in euros possibly. >> another i bond could be on the way. "the wall street journal" reporting that apple is eyeing the bond markets again lining up a potential new deal. deutsche bank and goldman sachs are arranging a call for the firm with investors this afternoon in london and the deal possibly at least partly in euros could come as soon as tomorrow and this would be a first. apple has never issued debt in currencies other than the dollar before. apple just now confirming to me that the call will take place. remember, this call is for potential buyers of the debt. it's not a public call. apple is simply taking advantage here of the current interest rate environment. they would expect apple to use proceeds of the bond sale to fund the buyback program and keep paying dividends and make acquisitions. decision by apple to jump into the bond markets again isn't a total surprise. earlier this year the ceo said the company planned to be active in domestic and international bond markets during 2014 for an amount of debt financing similar to what apple issued last year. apple was last in the bond market on april 29th with a $12 billion deal following up on last year's $17 billion sale according to deal logic. carl, back to you. >> thank you so much, josh lipton. 1 world trade center is open for business 13 years after the 9/11 attacks. about 175 employees will start moving into the freedom tower as it's known today. the $3.9 billion skyscraper is the nation's tallest building. david, you said the most amount of money ever spent on one building. >> i believe 3.9 million is still the most given -- remember that not just security of the building materials were far beyond anything ever used on a building before to make sure that nothing ever happens and so it was extraordinarily expensive. >> can i make the point that actually the transportation network under it is eight years under budget and 2 billion over schedule which is why bridges and tunnel tolls have doubled in the last ten years. >> a beautiful design terminal. >> is it open yet? >> that's not necessarily connected. the port authority -- a lot of of the money for that came from the federal government. >> a lot because it's 2 billion over budget. >> that is true. >> okay. investors bracing for alibaba's report. we'll get you ready for that. ru? whose analysis is accurate? how do you make sense of it all? a simple, unbiased stock score consolidated from the opinions of independent analysts... is that too much to ask? nope. equity summary score, powered by starmine, will help you execute your ideas with speed and conviction. and it's only on fidelity.com. open an account and find more of the expertise you need to be a better investor. today could be the day. the day we give you hope. relief. a cure. today, we believe every life deserves world-class care. as one of the top four hospitals in the nation, over 100,000 people from around the world come to cleveland clinic for care each year. and we're ready for you with a second opinion or a same-day appointment today today today and everyday. call today, for an appointment today. october was quite a volatile month for stocks. how did the whales navigate the choppy waters? we look at which hedge funds won and which lost. by early accounts, october was brutal for them. >> it was the gyrations of the markets that were as difficult as anything else. it was a huge dip mid month that created billions of dollars in losses for the hedge fund industry but in the last couple weeks, the markets really came roaring back allowing a number of key players to regain steam if they lost it or at least preserve performance from prior in the year. look at the fund that's a best performer in 2014. it was down about 4% for the month in october but managed to climb back to a flat performance by the 28th finishing october dead flat and maintaining its dominant position with 33% returns. helped by names like alergan and air products. faring less well for the month and year is dan lobe. up 4.6% for the year in its flagship fund. the performance is hard to explain with stock holdings since he invests in credit and overseas stocks. he may have things we don't know about. in the stock arena, he appeared to get hurt. but at the same time, he benefited hugely from his new activist target which was up more than 16% on the month and a big stake in alibaba as well and the pain continues with 8% for the year through late in october. fortress down 1.8% for the month of october. it's worth noting there that the fortress fund had a sharp turnaround in the final days of the month. an upswing of 3% last week alone thanks partly to its bullish stance on japan which benefited from a surprise round of qe there. fortress down 6.6% in macro fund. a bounce back from being down more than 9% on the year as of a week or ten days ago. >> there is some suggestion more broadly that this very strong rally we've had 10% on the s&p in 12 sessions is due to that underperformance that so many people are desperately trying to make up. >> meaning they are purchasing some of the names they like aggressively and flooding into the market. another theory that i heard was that hedge funds which sold so many big names in that mid month volatility may now be seeing people rotate into index funds a little bit so those funds are benefiting, the stock market benefiting broadly from the movement there. that's not an explanation if you think about redemption policies that require more notice than that. >> you mentioned japan and how a lot of hedge funds were bullish on the stock market there. dollar/yen is at 114. i remember last year this was a popular hedge fund bet shorting the japanese yen. is that still the chase aase, a so who is benefiting from that? >> we talked about this at the hedge fund conference in july. the fortress macro manager said buy the topics because he thought that's what japanese investors were doing. hard to say. i think big believers in japanese bull story have hung in there from what i am told. on the currency side, i'm not sure who is involved at this point. as david faber knows, bass has been bearish for a number of years. it's a debate within the hedge fund community. >> that trade is finally working out. >> so over the moon you managed to get dollar/yen in the show. look at you. >> currency nerd at it again. >> we e-mailed about it two weeks ago. he said it was going higher. >> remember he said it was going to 200. >> thanks, kate. good to see you. coming up on the program, what google ceo is saying about innovation and leadership. keep it here. your customers, our financing. your aspirations, our analytics. your goals, our technology. introducing synchrony financial, bringing new meaning to the word partnership. banking. loyalty. analytics. synchrony financial. enagage with us. i'd just gotten married. i was right out of school. my family's all military. you don't know what to expect. then suddenly you're there... in another world. i did my job. you do your best. i remember the faces... how everything mattered... so much more. my buddies... my country... everything... and everyone i loved... back home. ♪ [ male announcer ] for all who've served and all who serve, we can never thank them enough. ♪ there's been a 46% surge in alibaba stock. tomorrow investors get a full update on the chinese as they report for the first time as a public company. joining us now is scott devitt. welcome to the program. >> thank you. >> risks to the upside or downside here do you think? >> we think there's risk to the upside in terms of relative to where expectations are going into the first quarter. we expect 45% gross merchandise value growth and 49% revenue growth and expect upside on both estimates. >> interesting. so what is your target? where are you on the stock at the moment? >> our price target is $112 a share. and of course that would be updated based on performance in the quarterback. >> right. is it correct to say that more than the online market for the small business operators, which is an advertising based model, that it entices names like apple to come online and take a cut of those transactions that will be the biggest growth driver moving forward. >> that's about a third of the business today in terms of the marketplace gross merchandise value. that's the direction just like the u.s. market in the earlier years transitioned from d to c model from ebay type merchandise to amazon. alibaba is leading that transition in china from its marketplace. the other important thing to keep in mind is also that they monetize on a commercial basis helping them transition to mobile distribution as well. >> a lot of analysts are bullish on this stock like yourself. where is long-term growth going to come from? from further penetration in the chinese market or alibaba expanding outside of china to markets like the united states? there seems to be a mix of opinions here. >> i would say both. china if you look at gdp growth is one of the fastest growing markets as it relates to e-commerce. china is the largest market and will be significantly bigger than the u.s. within a couple of years. maintaining or closely maintaining its share in china will be a big growth driver for alibaba and then taking capital and also the strategic institution knowledge they built in terms of understanding e-commerce in china and deploying that outside of china secondarily will be a growth driver for the business. some of that will come organically and then otherwise i think you'll see potentially some m & a that's done as well. >> we broke through $100 on the stock last week when it was suggested they would like to work together. we assume within mobile payments. what sort of shape does a partnership look like given that it is moving into financial services and tim cook is doubling the bricks and mortar operation in retail within china? where do they move together forward? >> you know, i don't have a strong view on that topic. alibaba also suggested at some point in time it would be comfortable with partnering with amazon as well. there's a lot that's being said with not a lot of depth behind it and some very big companies involved. we'll just have to wait and see in terms of what, if anything, develops in those areas. >> good to see you. thank you for your time. scott devitt joining us. the justice department and epa reached a record settlement with kia. >> this is the largest civil penalty ever in the history of the clean air act. hyundai and kia agreed in a settlement to pay $100 million. 56.8 million will be coming from hyundai. here's the issue. they admitted that they misled the public when it came to greenhouse gas emissions saying that they would be lower than they actually were in reality and remember hyundai and kia both had a number of vehicles where they overstated the fuel economy for those vehicles so hand in hand with that they also are now paying a fine for misleading the public when it comes to the greenhouse gas emissions for those vehicles. total fine $100 million. back to you. >> to put that amount of money into context, is that a bigger bite than you expected or not? >> it's hard to say. with he don't see this happen very often. we do realize that the epa and doj have been focusing on this over the last couple years but a hundred million dollars is one that will get your attention. this is not just a slap on the wrist. >> that was my first reaction too. thanks a lot. meantime, could google's next big innovation project be itself? the ceo talked corporate reorganization to financial times saying we're in unchartered territory. how do we use all these resources we have and have much more positive impact on the world? the comment follows not only recent changes at google but also at a string of other silicon valley companies. is innovation the real driver here? harvard business school professor bill george sits on the boards of exxon and goldman. nice to see you at post 9. welcome. >> nice to see you. >> looking at the stock, it's almost exactly flat for the year. not that this is about that. are they having trouble getting to that next chapter? >> of course they're having trouble. they're investing in a whole lot of things and they're doing all of the right things. the question can larry keep all of those things on track? it's a bottom's up innovation company. they are the best innovator in the world today? >> why bother we reorganizing now? >> larry is writing leadership for the company as did eric schmidt before him. google is a well led company. that's a big difference on tech companies. play short-term and you look at products and look at investment. long-term, and not play volatility, look at the leadership. they have got it. facebook has got it. yahoo! twitter, they don't have it and that's why there is incredible volatility in the companies. the fish rots from the head. the head here is strong. >> reminds me of the "times" piece this morning on michael dell talking about being private and things he's able to do without having to have a couple board meetings and wait a whole quarter for a deal to close. >> these are all people with two tier stock arrangements and so larry has control. mark has control. and you look at apple, it's focused innovation. google is going in all directions. they have done a lot of deals with google glass and getting into eyecare and diabetes so they're going in a lot of directions. i love bottoms up innovation at going. >> is it harder to do keep it on track given the size of google? it's gotten so big. >> it's much harder but it is key. otherwise you get into one trick pony like ballmer took microsoft and you go into a cul-de-sac. if you don't do that, you're trapped. tim has to come up with the next big thing at apple. and clearly zuckerberg is trying to do that with facebook. >> larry page makes the point if you make inkrecremental improvements, you become irrelevant. what else comes out that's interesting is he believes there's underinvesting in the basics like cheap energy that are on the table and could be taken and people are chasing the consumer internet boom because as he puts it you can have ten people that get billions of customers and make an awful lot of money fast and that's sucking the investment and interest away from things that could actually improve society and even says government should come in. larry page says government should come in and fill that hole. what do you think about that? >> i don't know about that. they are taking a -- some of these will not work, simon. we just have to be patient with that. some will be grand slam home runs. they'll get big things going for them. >> how do you tell the difference between this and truly irresponsible spending which for years was their problem, bill. >> look at amazon. is that good spending? i think it's good spending. he has to deliver bottom line. google brings you the bottom line. apple is so disciplined they bring a lot to the bottom line. can they broaden out, i don't know. some of these will not work out. you have to make the bets and you have to spend a billion dollars here and there. it's like drilling for oil. you will hit a lot of dry holes but the one that's a gusher can be worth 30 billion or 50 billion. you have to think long-term. i say bet on the leadership and not just on the product. who are you going to bet on and look do you have a product person on top and do you have a really sound business person? i'm worried about organization like twitter because you have dick who is there and does he understand the product? he's on his fifth product guy and i don't know if the guy he brought in is any good. he's not in the league of the other guys. consistency. that's what founder led companies, i'm positive and betting on. >> someone has to be a check. you know what you're getting into if you're a shareholder. who is a check on grander ambitions that may be foolish? is it the board? or is there not one? >> they are shareholders. they're all shareholders. they have skin in the game. they're not just hired hands. the boards clearly have to be a check. that's why i like some of these boards like facebook is trying to develop. >> future is different. i understand that the offices in lower manhattan every friday parts of google present to the rest of the staff. almost always i'm told they are consumer led products. so they are generating business from basically b to b. that's the cash cow. the future is always what can you have in your home? how can you drive to work? it's a different future for google than how they are monetizing now. >> they'll monetize. i understand that. they have ways of monetizing. they do things offbeat. they did a deal with my son's company with breakthrough technology they are willing to pay for. is that the future? i don't know. we have bet on a lot of things and some of them materialize and some didn't but the ones that materialize really hit big and so that's why i'm betting on these people. i would bet on them over just about anyone right now. >> good to see you. >> thanks for having me on the set. >> talking google. >> coming up after the explosion of the virgin galactic spaceship on friday, is the tourism of space really in question? 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(phone ringing) ...hello? oh, man. that never gets old. no it does not. not all credit report sites are equal. experian.com members get personalized help and an experian credit report. join now at experian.com with enrollment in experian credit tracker sm. so i can reach ally bank 24/7, but there are24/7branches? it's just i'm a little reluctant to try new things. what's wrong with trying new things? feel that in your muscles? yeah... i do... try a new way to bank, where no branches equals great rates. a parade of auto sales figures continues. phil lebeau has toyota. >> toyota increasing sales 6.9% last month. that was better than the edmonds.com estimate of an increase of 6.1%. we should point out with more than two-thirds of the auto sales reports in for the month of october, right now the industry is on track to finish somewhere in the range of 16.3 or 16.4 being the sales pace for the month of october. back to you. >> i'll take it. another strong month for auto sales. let's go over to cme group. rick santelli with the santelli exchange. a man i know is watching dollar/yen. >> good morning. happy monday. i would like to welcome our monday morning guest larry mcdonald. wrote a great book on the credit crisis. thank you for taking the time this morning, larry. >> great to be with you. >> let's make this easy. let's start at the beginning. we see that europe is slowing down. it's not about an export/import situation as much as it is about other ways that their weakness can be sent to the u.s. can you talk about how you think these transmission lines are going to pan out if at all? what about credit default swaps? do they figure in? >> since lehman failed we had a shift from private sector debt to public sector debt and a lot of that is in europe. if you think about credit -- what i call credit spread contagion, this is why u.s. investors have to listen to these words, before every big drop since lehman, you think of summer of 2011, the summer of 2012 and then october of this year just last month, all three times we had credit spreads blowing out in europe before those 8%, 9%, 10% drops every single time because of the debt that's over there and risk it presents to the world. >> there was great op-ed in the journal today talking about debt as a percentage of gdp up 36% since '08 to a record 212%. that's pretty scary to me. so i guess in the final minute what i would like to know is this inflation or deflation is what is the enemy in european central bankers think by trying to manipulate that, they'll end up with demand and growth. is that a good strategy or does that chapter of economics 101 need to be ripped up? >> alan greenspan said last week deflation is dead in the short-term because demand is dead. we have ageing populations in europe, japan and the united states. since lehman, 75 million people have left the u.s. labor force. if you add europe and japan to that, you're talking close to 150 million people. so you have all of these people that are leaving the workforce into giant social safety nets that well intentioned liberal politicians have created to buy votes and what does that do? that takes a tremendous amount of demand out of the economy. so let's stop using monetary policy to offset political buying of votes. >> we still have 20 seconds left. you're so fast. listen, my next question is tomorrow is midterm elections obviously. once the dust settles, are you optimistic that even if the republicans take both houses that some measures can be accomplished that will help the economy whether through less regulation for some smaller businesses under 10 million or more importantly tax reform? >> tax reform is extremely important. housing -- i'll give you an amazing stat. last year only 36,000 mortgages around that were issued conventional were issued to african-americans out of 1.6 million. 36,000 of 1.6 million. that's 2.5%. that's wrong. >> freddie and fannie need to be mixed. the problem is it's been six years since the crisis and the category of surrogates just aren't around. there's no push in this arena. do you think new programs to modify them will be successful or raise the moral hazard bar higher? >> this is the perfect end around our first point. there's no demand because there's no credit. securitization in 2006 and '07 brought on a lot of bad things and brought on a lot of credit contagion and bad credits. there's a good part that's being thrown out with the baby in the bath water. if we bring back securitization next year, just even if we just brought back 20% to 30% of the securitization market that existed in 2006, 2007, we woul be up 1%. >> that would make a huge difference if we get productivity to follow. thank you. let's go back to simon, sarah and carl and the rest of the gang. >> all right. thank you very much. when we come back, authorities still looking for answers after that virgin galactic spaceship exploded in the mojave desert last week. we'll bring you the latest when "squawk on the street" comes back. use, for me, the challenge of the search... is almost as exciting as the thrill of the find. 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>> workers are coming to the hangar behind me as the ntsb may have its first clue as to what went wrong. not an explosion but midair breakup. looks like the back part of spacesh spaceshiptwo, to help slow its re-entry on to the earth's surface, looks like it was deployed too early in what may be some combination of pilot error or pilot and mechanical error. >> who steps to command it. one is a lock/unlock lever that has to be moved to unlock the second is a feathering lever that has to be pulled. the lock/unlock lever was moved prematurely and the aerodynamic forces moved them in this position on command. >> who unlocked it? >> the pilot in the right seat. >> do you know what that is yet? >> we do, but we don't release names of the people involved in our crashes. >> you know which of the pilots was sitting in the right seat but you're not identifying whether it was -- >> that's correct. >> the traditional co-pilot, if you were, or the chief pilot? >> that's correct. >> now, killed was 39-year-old co-pilot michael asbury who worked for scale composites which designed and tested the spaceship two. the pilot survived. the ntsb won't say which was in the right seat. one would traditionally think it might be the co-pilot. but reuters is reporting seebald was in the right seat. we do not have that confirmed. richard branson says everything in his half billion dollar start-up is on hold until they figure out the cause. he calls this a grand program with a horrible setback and they are not giving up. there are many, many other companies like his out here in this space sport. this northern part of the antelope valley, guys, all working towards the same things, new spacecraft, new fuels. few have the deep pockets of a billionaire to fund them and funding from investors may have gotten harder. back to you. >> thanks very much, jane wells. did want to update our viewers on our ongoing coverage of the fight between valiant and allergan as many may know, december 18th, crucial day where shareholders will have the opportunity to vote on whether to retain the board of directors at allergen. in convection with that, allergen continues to update its proxy and included a shareholder letter in which language seems to be new and specifically seems to point to the possibility that there is another potential acquirer for allergen out there. and let me give you that language. it states, in addition, and this is again, in this letter, the company says we have been approached by another party regarding a potential transaction. we cannot provide assurance on the outcome of these contacts regarding transactions, we have not announced and because our board is determined that premature disclosure with respect to the possible terms of any tracks action might jeopardize continuation of any discussions or negotiations our board has instructed management not to disclose the possible terms of any such transactions or proposals for the parties thereto unless and until an agreement in principle relating has been reached or upon the advice of counsel. this is what you get when lawyers write these things. the market speculating perhaps that is a reference to activists, from any number of people may have interest in this it. we'll have more as we go along. is that the case? they are at least pointing to what does appear to be another party that has interest in discussing a transaction. as we get closer to that meeting on the 18th. >> thank you very much. as we get closer to "squawk alley" send it to jon fortt to find out what's on deck for that show. good morning. >> hey, simon. good morning. quite a bit. first of all apple watch, apple said it was coming in early 2015, now we have a little bit better idea of what that might mean. we'll tell you about it coming up. also, bill gurley from benchmark, the venture capitalsist going to talk about uber, valuations, you want to miss that. and bill maris from google ventures, where is google putting extra cash when it's investing. not just the places you might think. tune in to hear what he has to say coming up on "squawk alley." , but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier. it's your idea powered by active trader pro. another way fidelity gives you a more powerful investing experience. call our specialists today to get up and running. there was no question she reminds you every day. but your erectile dysfunction-that could be a question of blood flow. cialis for daily use helps you be ready anytime the moment is right. you can be more confident in your ability to be ready. and the same cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently or urgently. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a free 30-tablet trial. check where we are on the markets down 28 points after the surge in the last 12 sessions which took the s&p over 12%. >> s&p is positive. we've got a mixed session with the nasdaq in the green. >> i would say trading around the flat line. >> starting out november -- >> you're absolutely right. >> on a mix after a very strong two weeks. the best in nearly three years. >> just want to mention hilton, blackstone which is still a major shareholder announced this morning it's going to offload about $2.3 billion of stock. it hasn't moved the stock that. . still trading $25. big week for travel, priceline reporting tomorrow and then within on-line travel agencies orbitz towards the end of the week. >> we have a new investment outlook from bill gross at janice capital talking about the possibility of deflation outlining why it's bad to see prices going down and this whole idea central bankers are losing wart on inflation. >> yeah. >> higher price. something to keep in mind. >> people -- >> strong economic numbers in the united states looking ahead to friday's job report and very little inflationary pressure. >> people who sell bonds for a living tend to talk up the possibility of deflation because it's bond positive. and, therefore, people will give them more money to invest. >> can i point out the biggest mover of the day, continues to be the u.s. dollar. strengthping across the board particularly against the japanese yen. it's important for stocks, because we are seeing just as a federal reserve has wound down its quantitative easing program the bank of japan has wound it up and many are asking, simon, whether the ecb is next going to feel the pressure of this currency war that everybody is engaging in. >> is that the third time you've got that in the story, dollar/yen. >> biggest story of the day and my article coming out on cnbc.com later today. >> okay. with that, let's hand it over to "squawk alley" and the gang as they take it this monday morning. >> i knew you would finish one way or another. 8:00 a.m. at apple headquarters in cupertino, 11:00 a.m. on wall street. "squawk alley" is live. ♪ ♪ keep your eyes on the road ♪ hand upon the wheel welcome to "squawk alley." two specials guests john steinberg, ceo of the daily mail north america and the mustache yo slava ruben. founder and ceo of indigo go. jon fortt and kayla tausche a lot going on, according to the journal, apple considering issuing new bonds in our ross would mark the first time the company, which has yet to sell bonds in any currency other than dollars, apple holding an investor call arranged by goldman and deutsch and more apple news, according to nine to five mac the watch is scheduled to launch in the spring, later than many had originally expected. coming from a video message from retail chief angela airns to apple employees. we will get through the holidays, chinese new year and then the watch. what's the

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