tv Squawk on the Street CNBC November 13, 2014 9:00am-11:01am EST
students still in school is falling. that's encouraging. >> thank you, everybody, for a wonderful program. >> tomorrow's friday. happy pre-friday. >> jolt is coming out at 10:00 a.m. >> "squawk on the street" begins right now. good thursday morning, welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber is on assignment. cisco john chambers coming up this hour. buffet buying duracell, walmart earnings and a lot more. futures looking to rebound after yesterday's relatively flat action. the ten year up to 2.35. the dollar is riding high.
big news in m&a. berkshire in deal to buy duracell. walmart cautiously optimistic for q-4. cisco out with earnings topping estimates. the company sales forecast sends the stock lower. cisco's chairman john chambers is going to join us in a half hour. >> first up, buffet is making a bet on batteries. berkshire hathaway agreeing to buy duracell from p&g. terms call for $4.73. in the release adownsing the deal, buffet said, i'm always been impressed by duracell as a consumer and long-term investor in p&g and gillette.
duracell is a leading global brand and will fit well in berkshire hathaway. he sat on the board. >> the stock had run up in anticipation of something big. this was not big enough for some of the shareholders. proctor up about 10% this year. i think people were expecting big cash pay day or maybe a spin-off it. don't think people should sell proctor down. this is a quintessential cash cow company. i think everyone knows the brand name is good and he likes brand names. >> p&g might be down on their guidance on 4x. two points head wind on the 2015 sales. they do see significant negative effects from currency in the current quarter. >> a lot of these companies are breaking out the currency. i think they are going to see gasoline fuel, crude very important and positive for them down the road. a lot of these companies are hedged. that's going to be something
fabulous for proctor. i would not sell proctor. i think it's doing everything slowly right. a lot was put in place by bob mcdonald. he was largely reviled during his tenure, but the last 18 months, i think he did good. this is the grind-up we've been getting from consumer products. >> this is berkshire's biggest deal since heins but the biggest sale since folger went to smucker's. why batteries? >> it's a great question. i think brand names have been good to him as opposed to ibm. >> we are at an age where your smart phone gets charged. your gopro doesn't take a battery, right? >> again, you are totally right. there are enough devices where batteries work.
it fits into this pastich of businesses that work. i've yet to see him get the short end of the stick in deals, whether it be bank of america. people said we got a call you'll never get, whether it's goldman sachs. he does quite well in these deals. i'm not questioning the great man. >> people forget duracell was sold to gillette by kkr for $7 billion. buffet's not paying anywhere near that amount. >> no. you're still seeing duracell and you have to have the cs and ds and as. >> still a big business. >> nothing replaced that yet. it's interesting. i still haven't seen the generics take on duracell. there are a lot of companies where you go in. the other products look a lot
like the store brand. one day i think a cvs is going to have a battery and we'll use it because it will be the same as duracell. right now duracell convinced people they are different and better. >> shares of dreamworks surging premarket. hasbro in advance talks to buy the studio known for ""shrek." such a deal would help them find a new big screen outfit for its toys lineup. a lot of skepticism about what this would do to hasbro's risk profile. in a business where free cash flow is hard to come by. >> i like what hasbro is doing. this is a big leap of faith. people behind dreamworks, brilliant. i did this danny meyer index,
the great hospitality king. he put dreamworks in the original that is a high-quality product that gets high-quality people. and the company that never got there. do i want hasbro to be in the movie business? i think i want disney to be the movie business. >> there are questions about what it would do with hasbro's relationship with disney. >> exactly. that's been a fantastic business for hasbro. this to me is not suicidal, but it's nothing i want. >> people asking, all right, does a massa who has been interested in a film come in with a competing bid? is dreamworks the object of many people's affections. >> it's been a dog. >> faber asking jack ma whether he is interested in the film business. >> one of the highlights of that interview. i think that was a moment where a guy loves movies, he is rich
enough -- i know he's unhappy. maybe if he buys a studio he would be happy. when sony bought columbia, oh, yeah, it's a play thing for the rich. own a studio. we should ask ballmer. maybe ballmer. he is a play thing for the rich guy, owns the clippers, maybe buys a movie studio. i did like the way hasbro pulled away from the business leaving mattel behind. i would like to hear from bob iger. i think this is the kind of thing where bob might say, you know what? that was a good relationship with hasbro. let's see what the other guys have. >> good point. let's get to walmart. third quarter earning, $1.15 a share. e-commerce made up 40% of its u.s. sales growth. no big downward guidance. they narrowed the range. they bring the top end more than
the bottom end. >> this doug mcmillan he may have game. he goes to stores, checks things out. home and apparel driven by newness. i felt of walmart as oldness. i like the idea of newness. organics doing well. this is a terrific prerecorded conference call. i think mcmillon is going to do real things there. gasoline going down directly impacts his customer. there's been a lot of negative press about walmarts. the walmarts i have been to felt dowdy. i'll have to go this weekend and check out the newness. entertainment, everyone loses money in that category. >> neighborhood stores up 5.5%. a lot of discussion about buybacks. then this effective tax rate which added 4 cents. without that they would have missed, quote/unquote. >> again, i think somebody's got
to say they've got step. they've got buoyancy here. managing inventory levels appropriately. i felt they had been doing those poorly. there was an article the other day how out of stock they are of the right items. this sounds like they've got new categories. i remember going into a walmart a couple of years ago and said i would like to see your natural organics and they drove me to the rice crispies bars. this company has a much better handle on what the consumer wants. i think mcmillon may be a budding star. >> actual store traffic down eight quarters. people aren't going to the store at all. >> well, this is a traffic issue. i went to a container store yesterday, there was a traffic issue problem. macy's did not have a traffic
issue problem. macy's stock up. we have to watch traffic because of the omni channel of macy's. macy's call was brilliant. when it says traffic was doing okay because of the omni channel, you return products you pick up at the store and you buy other products. makes it sound like a mall relevancy. walmart is not irrelevant. sam's club is good. i encourage people to listen to this call. it has an eloquence to it i have started thinking walmart was just the old days. tobacco road, so to speak. a great play that ran for a long time and got supplanted. >> contrast that with a kohl's. misses by four cents. revenue a miss. comps down worse than they announced four days prior to the end of the quarter. somebody this morning wrote kohl's can't warn right. >> yeah. that was disappointing. my socks have been coming down all day today. i buy my socks at kohl's. they are not so good today. >> you haven't been a fan in a
long time. >> i should say my daughters have become fans. kohl's has gotten more upmarket. i wonder whether it's gotten too upmarket. i got denied a credit card and there were 13 people behind me. i'm sorry, sir, you don't have the credit. half the people were saying boo-yah behind me. holy cow, am i in a jam. kohl's, okay. jc penney. >> we have time. smaller than expected loss. looking for jump in same store sales, but warmer than usual weather. >> if you go over that call, they are going to talk about how the dot-com was woefully undervested. they had too much home goods for the stores. the comps had disparity. macy's is spending a fortune on technology as is nordstrom.
jc penney underinvested in technology. they say they are going to compete vigorously. i like their stanford shirts. i do think jc penney needs to spend more on technology. terry lundgren spent more on technology. >> gas prices, you see the forecast, u.s. government's forecast for gas prices next year below $3 a gallon. that's $61 billion in consumer savings over this year. >> someone saying $40 billion in investment is going to come out of the oil patch. that is untrue. i would point out that the longer it stays down, the more people acclimate to it and start changing their schedule, start
changing they do. >> believing it will last. >> right. environmentalists, hold your ears. this will be a real denton carpooling. more cars will be bought. people say the f-150, you don't have to worry about gasoline. wrong call. people use more gasoline when the price goes down. this is according to one of the biggest producers, marathon. >> interesting. >> i think this is all good for the consumer. as the consumer gets adjusted, the consumer will spend more. jc penney did not go there as much. >> walmart did say one of the things working in our favor. >> you have an incredible percentage of people on money spent on gasoline. this is a game changer for america. >> when we come back, cisco's chairman and ceo john chambers live and first on cnbc. a lot to talk about, including the impact net neutrality could have on his business. >> anheuser busch carlos brito.
revenue dproet projections coming in below expectations. we are going to have a live and first on cnbc interview with john chambers in a few moments. jim, for the january quarter they see revenue up 4% to 7%. street was at 8%. was emerging markets, but there is a new wrinkle now. >> this is net neutrality. service providers, this was the best quarter i've seen in a long time for john. that the guidance is added measure of conservatism primarily related to reduce spend at several large service providers. that was talked about several times. he used the dramatic word, dramatically slowed. this was a shot across the ballot the president of the united states who intervened where the fcc was basically having a kind of laissez-faire attitude in order to get a return on broadband. he is saying, what's the point? what's the point of these
companies spending all this money if they are not going to recoup a return? i think it's remarkable how well he is doing given the fact the world is a tough place to do business. >> china is down 33. apac down 12. >> this is a u.s.-dominated call. u.s. was very strong. emerging markets weak. bricks down 12%. if you ever got the emerging markets to do well again, you would have quite a story. i'm urging people not to sell the stock. do not sell this stock. if you get any sort of break in net neutrality, the service providers, they can't afford to not spend. that's the thing. one of the things i would have emphasized in the call was how long can the service providers sit it out? in the end one of them breaks ranks and start spending. you've got at&t mobile, sprint, they can't say one of them
blinks, then take share. that's what i think chambers has got going for him. >> you don't believe long term, the rules on net neutrality will be so restrictive? >> i can't. why are you bullish? my history says i'm not in the pocket of john chambers. what i like john said and i never heard him say this before. he respects the competition. i would say we are not only pulling away from, while they have more left on the table, i think it's game over. john has never said that. i've bone following john 20 years. he never said the competition folded. when you look at the other players in the business, you can argue he beat them. it game over. if service providers were to come back, you only need a couple of things to happen right. you will see an explosion of earnings. $53 billion in cash. $52 billion. $3.8 billion in the united states. amazing.
ceo retiring. that i don't like. the new cfo introduced. let's give her time. >> a long game john is playing. >> john plays a longer game, longer than geno smith. >> we will get cramer's mad dash as we count down to the opening bell. take a look at the premarket. ♪ 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. ♪
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♪ though you may find from time to time ♪ ♪ complication >> a few minutes before the bell on a thursday. "moving on up." twitter up premarket. >> it should be. anthony noto who is also known as the cfo told an amazing story yesterday. i think dick coslo has become more ceremonial. everybody wins. i like the hidden $500 million. there are 500 people going. we get from one change advertising to 5%. this is the story i've been looking for. 1.4% feeds goes to 5%. this is the new twitter. >> what changed other than a new metric here and there. talks about a more instant timeline. >> noto gave us a sense of the future, of how we get to $14 billion in revenues. gave it an "a."
laid out a long-term story why twitter will be your personal time line news service. it's what i've been looking for, big picture. typically you don't get that from the cfo. he did run the show. i i think he is enjoying anthony noto running the show. terrific cfo for the nfl. still a good brand. then comes back to goldman and does twitter. he's got it under control. i love this story, the $500 million. >> so you're happy here. you were buying at $40. >> i'm really happy here. >> not cheap. >> i don't care. if they've got this revenue ramp. they do the $500 million, clearly articulate the strategy. anthony noto understands money. perhaps they are not going to give the store away any more. they've been giving the store
away and not monetizing. that takes it from a negative to positive. twitter might be back. it's important that noto stay front and center. you feel good when noto talks. he is the equivalent of a corporate finance lovie blanket. >> cyberark is the newest kid on the block. talks about how this is still front and center with every ceo. what i like about this, they are the keys to the kingdom. the key section of privileged cyber account. one key gets into everything, they defend the one key strategy. the bad guys are one step ahead. these guys are one step ahead of the bad guys. >> we'll talk to cisco's chairman and ceo john chambers. first on cnbc interview. my name is frank griffith
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world. opening bell in just over a minute what a morning it is. warren buffett buying duracell. a decent quarter out of walmart. politically looks like we might get a keystone vote in the senate next week for the first time in that pipeline's troubled six years. >> i still think they have the votes and i think the president will find a way to frustrate this. 800 million barrels a day, this is a pll hot button. they have to wait for this nebraska ruling before they can do anything. that's the ruling about whether it's safe to go through that state. i remain convinced this is something the environmentals will stop. >> they have the ability to regulate commerce with foreign
countries. that's how they get beyond any executive action the president might take. >> alexander hamilton comes into play, this will be one of them. >> there's the opening bell. a look at the s&p at the top of your screen at the big board today. johnson & johnson doing the honors. over at the nasdaq, the children's tumor foundation. j&j. >> they cleaned up the joint that was badly in need of cleaning up. >> certainly an enthusiastic crowd. >> i like that activity. >> not every day you see walmart at the top of the list of s&p gainers. >> it's since the days sam walton was alive. this is a different walmart. this mcmillon has that feeling
of, listen, we've got things going here you've got to believe in. i'm a believer. he's got the right categories, the right merchandise. the number has been reduced. gasoline going their way. consumer starting to feel better. employment going up a little. this is walmart's time. >> fascinating. the guidance which generally we brace ourselves for what they are going to say about the quarter to come. >> walmart cuts forecast. that's like d.a. probes rockets. when you go there it should have the unsmiley face with we are cutting our forecast every day low prices. >> stock up 2% today. you think this is the beginning of something? >> yes, i do. i think it is very inexpensive on the numbers they are putting out. it's the numbers that rule. i am not going to give them a 20
multiple. they can do 550. i don't know. you can go the 84, 85. >> all right. viacom will get love today. adjusted fiscal fourth quarter profit. $1.71. nice revenue hikes from film and media. >> people have been very negative. there are a bunch of sells on viacom. media is case by case. do you circle back to cvs? yeah. i think you do. >> people do note like this hasbro deal. hasbro will be one of the worse lagga laggards. >> financial suicide. the movie business is a tough business. >> is that a comment on dreamworks or hasbro's ability to do something new. >> hasbro will explain it as the extremely long-term view. i don't know. when bob iger talks about a movie slate for 2017, he has
movies for 2014, '15 and '16. hasbro has been killing it. why mess with success? >> this deal makes no sense to us at all. its risk profile would substantially change entering into the movie production business with a company that has not generated positive scss in several years. >> i would call that somewhat negative, that analysis. >> kohl's, as well. going to be one of the laggards along with some -- most of the retailers are hanging in there. >> kohl's will be okay. it's a very inexpensive stock. when you go to kohl's, you get the sense like jc penney. maybe not as busy as it used to be. that's not necessarily why i want to own a stock, but i think retail has a lot going for it. these have etfs led by walmart.
that can take up everything. >> cisco is lower at the open, but it's coming back a lot more than it was last night after they reported that guidance. first quarter earnings beat wall street. joining us first on cnbc, cisco ceo john chambers. >> a pleasure to be back on your show. >> you bet. you were very conservative in your guidance, but also three times you used the word dramatic in terms of slowdown for service providers. if we got a return of spend for the service providers, wouldn't that mean you would be back on track for very good number in 2015? >> that is correct, jim. i think if you look we have a number of tail winds. our switching is back and growing well. data growth is good. wireless is going well. digitization of countries and
cities and businesses are going very well. we have two head winds. if either one comes back in 2015, that will help our growth a lot and we are extremely well positioned for both. i think your premise is exactly right. >> i was a little surprised by what the president did. the fcc seemed to go along with the pattern that allowed broadband to be good for everybody. next thing you know, two to three decided, whoa, maybe we shouldn't spend. bad for everyone? >> i think it was a major mistake to revisit title ii. i just came out of europe last month. the european commissioners country lead companies view the u.s. model as one that is right. our broadband buildout the last four, five years has been very good. to go back to the 1950s voice mentality with title ii net
neutral would be a mistake for our country. you won't be able to introduce the digitization of companies in business. imagine having a conversation with your doctor about your health and the video goes down or you're operating mining equipment remotely and because you can't get a given quality of service, the equipment breaks down or runs into things? this is a very bad decision. i think the whole country has to rally behind. this will cost the company. >> we have been a much praised nation until this. i think you are right. one thing you did and i never heard you do. i followed you for many years. we are not only pulling away from, while they have more left on the table, it is game over against the competition? you have never pronounced the competition in a position where they can't compete any more. >> jim, our competitors made a couple of key mistakes. we made a big bet on
architectures and convergers in storage, the data center, combining applications with security, skill, with the network. that is working very well. whether it's our small start-ups, the sdn is done. in two quarters we move from being in comparable products 50% less our net reported revenue to 50% higher. that means we are going at four to five times their growth rate. when do you that and break away from a competitor, you're going to leave them behind. you're well aware of our competitors in juniper, lucent, you are in good shape. >> sorry to see the cfo retire. one thing important, $52 billion in cash in the united states. if you could repatriate that
cash, what would it be for our country and cisco? >> this is a no-brainer. i hope the republicans take the leadership. you can bring back $1 trillion overseas, invest $100 in a fund, build highways out, create jobs, et cetera, charge a reasonable tax, perhaps 5% on what to repatriate, and let the companies invest the rest. you would see job growth and much stronger financing capability, et cetera. this is one of the quickest ways to introduce a win-win with a new congress in place and with the president. repatriation is a win for everyone if you combine it with a national infrastructure fund. we would buy companies and grow. >> it's carl, by the way. good to have you. >> a pleasure. >> are you impressed with what gopro has done in a space you tried to attack? >> so in the sequence you raised
it. we have been aquisitive over the years. whenever i acquire a company, that is where i grow. if i acquire in uk or israel, that's where future growth is. our country is causing ourselves not to have head count at the time we want. the example of what we did with flip many years ago, our acquisition strategy the last 18 months has been the best ever in terms of results. all big bets above $600 million have hit or exceeded our expectations. one out of three acquisitions will fail. it's important when you get into market if you're not successful, you have to get back out. quickly admit to yourself. the only way to lead is to have the courage to take risk on tough competitors and beat them. the strategy is a good one.
>> john, you go by geographic. i was surprised europe being strong but equally surprised to see the weakness in emerging markets. when can emerging markets get back in the game? i don't know how far they can fall behind. how did europe get good? >> we are more optimistic on europe than our counterparts. i purely follow the numbers. what you saw, would you expect the uk to grow 20%. germany 6%. europe was remarkably consistent. southern europe grew 20% including with france down 17%. you are seeing a balance of economic activity. i would expect europe to grow solid next quarter. i'm more optimistic and bullish on europe. you are seeing merkel digitize her country. that is extremely important to cisco. we partner with deutsche telekom and government leaders.
you're seeing cameron and the uk do the same. russia, brazil, china, each unique in their approach, but in india, mexico, saudi arabia, you are beginning to see the pick-up. in this last quarter we saw more of a divergence in emerging markets. 12, 15 months ago, all were in trouble. it was unfortunately a clean sweep with the challenges. today you have a number of them progressing. perhaps in a couple of quarters that can happen. we need service provider or emerging markets to stay well and it gets exciting for us. we positioned ourselves very well in our established markets. >> i should point out it is the right trend. negative market numbers could mean something good. you are talking about perhaps a
service provider slow, if not pause completion of the broadband buildout. i know the government, the president may be doing the wrong thing, but at what point do these guys say we can't afford to sit on the sidelines? we have to update cyber security and write checks for cisco? one of these service providers might say we've got to step forward with technology. can they all afford to sit back and wait? >> jim, in the long run they cannot. there is a difference between investing a little bit and investing what the country needs to break away. >> a search provider ceo would be irresponsible if they built out an environment where they not have a reasonably good chance of a good return. this is what government needs to deal with. do i agree with your point service providers can only
hesitate so long because networks are heating up? i expect europe and asia pacific to grow. if you take out the top three service providers in the u.s. pausing for a number of reasons, and i don't want to see only net neutrality, there are other reasons there, our service provider market is flat. it could turn and could turn quickly. i would like to see us address the underlying issue here and not deal with the symptoms and put a band-aid on the symptoms. >> it's early days. even the messaging out of the white house has not been entirely consistent. if you had to read the political tea leaves at this point, which way do you think the fcc would go or congress, for that matter? >> let me use an example. if i could draw the parallel to what the president did in china this last week, china and the u.s. relationships were not good. i don't think the interface between our political leaders were as effective as it needed to be. this last week was huge
progress. i think both sides compromised and focused on issues. the fcc is an independent organization. chairman wheeler gets it. he understands what this means to the future of our economy and whether you're republican or you're the two democratic members, i think all five ought to do what's right for our country. we need to load them with the data to support that. we have to get the information out to the public that net neutrality could be very damaging. there is a way to do both and achieve both objectives. >> i want to finish things up. you often talked about the internet of things, the explosion of data, what it means for cisco. you used huge numbers. do you feel more confident that the internet of things, connections, connectivity growing faster than you thought? >> it finally hit an inflection
point. two years ago i would have to buy you a cup of coffee or a glass of wine to listen to the internet from me. we have government leaders. when i go across to europe, i met with the very top government leaders about digitizing their countries. it will be the economic growth engine for the future. $19 trillion at stake over the next decade. the network and security and digitization is the hottest topic going. walmart is an example you talked about earlier. i agree with you. i think the new ceo there is doing an amazing job. a couple of weeks ago i sat on stage in front of his top 500 managers, what did it mean to them, how this would give them the competitive advantage in a virtual and physical world? it is the hottest issue going. i think you're just beginning to see what the potential is, jim. >> one last question on repatriation. we are hearing from a lot of viewers on twitter, we've been
down this road before. there have been promises bringing cash home. it's never spent the way people believe it should. is there any way to give them the confidence companies will invest the way you're envisioning? >> the important thing on the compromise, let's put the jobs there. if you bring back $ 1 trillion, put $100 billion in the infrastructure bank, let them build on highway, it will grow jobs. if you bring it back, we know you are going to create jobs. secondly, charge a reasonable tax on it. spend that money however you want. paying down the debt or creating job. let the companies spend the money whichever way they want. we are not dependent whether the companies themselves create jobs or not. you do it through the national from structure fund. that is a win/win compromise.
president clinton believes that is an excellent idea. i do, as well. >> i want to congratulate you on a great quarter. i hope you win over on this issue of net neutrality for the company. john chambers, chairman and ceo of cisco. stock did go positive. dow is up 47. look at the commodities space. it's moving the markets. oil moving towards $70. look at the xop there. that's hurting, as well. they are both down 1.5%. gold here. other thing happening. gold is up slightly. gold stocks again today outperforming overall. that's very interesting. now they are in blind here. earlier on they were up better. that happened several times. s&p 500 moving in a narrow range the last week and a half. maybe seven, eight points on the day.
the trend is on the up side. slow, steady move. good for the markets here. walmart traffic down eight quarters in a row. they were concentrating on the beat on earnings. e-commerce, up 21%. that is a good pattern throughout the last several quarters. kohl's was a miss here. they made 81 cents in the year-ago quarter. department store trend driving traffic and sales really a challenge. mall traffic is weak. event-driven sales is moving everything. back to you, carl. >> thanks. let's get to the bond pits. rick santelli. >> good morning. today's last of the options 30 years. if we look at a ten-year intraday, we are down a basis point or so. look at the following three charts. look at our ten year and 30 year and 10 year boons across the pond. patterns all bucking up against
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two big deals. hasbro and dreamworks. buffet and duracell. what that means for the market and future of the company. >> and a rare interview with the ceo of anheuser-busch. which markets the company is trying to conquer next. >> walmart a winner while jc penney falls sharply. which one will conquer the holiday season? >> dow up 60 points. s&p 2043. a lot of discussion whether or
not we are in that long-awaited chase that money managers have talked about all year long. people who wanted to own apple, but didn't get it now having to buy it at much elevated levels. 112, a new record high for apple. >> the overall markets are strong along with the idea fund managers are chasing returns to the end of the year. this is typically he seasonably a strong period for the u.s. equities. we'll see how these trends continue to play out. we are seeing a rally. better news out of walmart helping. >> a lot of the market positioning might go to the end of the year. the big wild card has to be oil. pricing in, some say at the edge of the market a hard landing in
china. china will now deliver probably the slowest growth in 20 years. we'll talk about it later in the show. two big deals for the consumer. hasbro in talks to buy dreamworks animation. warren buffett's berkshire hardaway is buying duracell batteries. andrew sorkin has more on those deals. let's start with the hasbro deal. the potential of the hasbro deal, do you see that as a defensive move by the toy maker? >> well, i would argue that the deal of hasbro has been trying to get into the entertainment business in a more meaningful way. he's done it in fits and starts thus far. trying to do a deal with discovery, with creating this network called the hub. they rebranded that discovery family. they've been edging slowly towards this direction. the big question is whether
investors in hasbro are going along for the ride in all of this. given that, frankly, it's a much riskier business to be in hollywood as opposed to licensing your products to hollywood. of course, this does make it somewhat defensive. by the way defensive we should say for the other side of this. dreamworks animation. the movie business is a volatile business. the toy business, a lot less volatile. you have a small independent studio effectively part of a much bigger business that may help that company. the big question is going to be price. i'm told jeffrey katzenberg would like to see a $35 a share price on this. i'm told hasbro side of the world thinks the number should be less, probably starts with a 3 but doesn't get to $35. we'll see whether a deal really happens in this space. i should also note that katzenberg did this dance a month ago and that deal didn't
happen. >> that's really important. even now with the gain on the stock today, dreamworks is only valued at $2.2 billion. any tech company, netflix, amazon, alibaba, soft bank could come in here. >> others could come in here surely. the question is what is ultimately the value of dreamworks animation? it has been a roller coaster ride, not only for that stock and value of the company, but frankly for his profits. it had good years and very bad years. as a result, i think there are folks that are reticent about jumping into that space and what the ultimate value proposition is. they have a new deal with netflix. that is going to be extended for some period of time. they obviously have tremendous brands they built. they continue to need new brands. the other question, by the way, that overhangs all of this, where disney is. hasbro is a huge licenseur of
disney. is disney going to say we have a problem with this transaction? are you going to start putting dreamworks animation products in front of our own? >> right. that is a good point. i want to mention the ordeal of the day that broke during your show. any insight as to why warren buffett would want to get into the lousy battery business? >> i'm not sure warren buffett thinks it's such a lousy battery business. just last month procter and gamble said they would spin off that company. surprising they are getting involved. it's a tax efficient transaction. warren buffett has been involved with duracell before. duracell was sold to gillette $7 billion back in 1996. he's gone round with these folks before. i imagine he must think that duracell is a long-lasting business. probably doesn't put it necessarily in the technology category so quickly, which he himself has been reticent about. >> will be interesting to see what he does with it begin the
fact battery sales have been in secular decline. >> that is true. >> it's hard to believe the battery business is going away. sadly, innovation in the battery space has not kept up with, as you know, your iphone runs out of battery like mine. >> good to see you, andrew. anheuser-busch having another busy year. acquiring ten barrelling brewing as well as a rollout of a tequila-flavored beer. carl carlos, it's great to have you, good morning. >> good morning. >> just looking at the quarter, you said in terms of ebitda performance, it might have been a bit of a one off. beer volume is down 2.7 in the quarter.
what is going on in the beer business? >> i think the way to look at the business is to look at a nine-month basis. revenues are up 1.9%. ebitda margin expanding. >> sounds like europe is one of those puzzles that everybody is trying to figure out. russia and ukraine certainly affecting your business, as well. >> yeah. russia is less than 1% of our business. less than 0.5% of our business. it's important as a total market. we tend to focus on more the americas than asia. >> in terms of innovation, are we going to see more of these tequila, novel-type flavored beers? >> yeah. our focus continues to be bud light, budweiser, stella. but we will expand because consumers want variety. >> do you think these trends we are seeing, namely craft beer
and mexican imports are going to continue in the future? how are you investing a position around that? >> craft is a great beer business. they are bringing in new business. it's high-end business. it's better to have as a market leader. better to have interest in the category that will get consumers to trade up than otherwise. >> i'd love to get your take on what it takes to win in a volume business at the moment. today we've got a deal where p&g is exiting duracell to focus on its other brands to drive volume there. coke is in trouble. mcdonald's is in trouble driving volume. how do you win in a world that is largely globalized and increasingly consumer tastes are splintering? it can't just rely on craft beer, can it? >> of course not. you have to rely on big global brands that are growing fast.
it gets us excited every day about growing the business. >> it's the allure of large numbers here we are seeing the big iconic names that might apply to the brands you've got. >> we used to think about that five years ago and never looked back. we continue to grow. i've been in the company now 25 years. we started with a very small company. now we are $70 billion market cap. there is room to grow, for sure. >> in terms of input prices, we paid a lot of attention to what aluminum is doing. malt barley had interesting times in the market. where is that headed >> who is to say where that is headed. we have a policy for the year to come. if you allow me what i'm really excited today, we are launching to get a new product at the
united nations today. road traffic accidents are the number one killer for ages 15 to 29. there is much to be done. we are putting together a coalition of companies to look from different angles. the fact of the matter is it affects society in different ways. emerging countries have 80% of fatalities. 1.3 million people die every year of road accidents. there's much to be done there. >> an important issue we were going to ask about, but clearly, you beat us to the punch. it was great having you. thanks so much. >> you're welcome. new data. rick santelli has the jobs.
>> job openings and labor turnover, 1.735 million. our last look was slightly revised to 4.853 million. both numbers are the best in 13 years going back to 2001. the data only goes back to 2000. the number is $5 million. we are going to be comping 13 years. there are a couple of categories i would like to go over. on the higher side it was 5 million. on separations, 4.8 million versus our last look in august at 4.5 million. good picture at least based on jobs. we'll continue to monitor the barb board janet yellen likes to look at. >> morem property in the job market. thanks. warren buffett snapping up duracell from procter and gamble. is getting into the battery business the right move? we are on the value of that. anything worth pursuing requires precision and attention to detail.
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mallinkrodt's drug which is said to may not be as effective as a drug made by concerta. johnson & johnson up marginally up by 0.1%. >> warren buffett setting his sights on battery. berkshire hathaway acquiring duracell. announcing the deal, buffet said, "i've always been impressed by duracell as a consumer and long-term investor in procter and gamble and gillette." duracell is a leading global brand and will fit well within berkshire hathaway. why does buffet want in the battery business? joining us from phone, rbc capital market analyst nik modi. i want to get your thoughts on the price of this deal. looks like berkshire is going to contribute $4.7 billion in stock. p&g is going to get $1.8 billion
in cash. is that a fair price for duracell? >> berkshire is paying nine times ebitda for duracell. proctor will only get seven times ebitda. i think a nine times multiple is darn good. i would say certainly higher than what i think a lot of people thought the battery business would go for. >> are you surprised to see buffet stepped in here as a buyer? a few weeks ago, p&g said duracell will spin out. didn't seem like they had a buyer. >> we've been of the belief private equity and berkshire hathaway would be in the battery business. while the category may have challenges right now, it's a good margin and cash flow business. there is a lot of overcapacity. there is a lot of cost-cutting opportunity going forward. it seems like the perfect fit for philosophically how berkshire thinks on assets. >> it's been a weak category.
it was the worst hit of all the consumer products and personal care products in terms of sales. what is the future of this category in a world where we are all using i phones? they are still powering flash lights and toys, but how big is that market? >> we have to think about this asset in a couple of ways. first, it's certainly cost and cost-cutting opportunity and cash flow it brings then reinvestment to other businesses. second thing, clearly the market is shifting to a personal power kind of model. because one problem i think all of us have, we don't have enough battery life. there is innovation opportunity to meet those challenges. keep in mind the battery category has taken a hit because of the economy, device trends that batteries are used for have been declining or weak over the last few years. those trends are starting to pick back up as some of the u.s. economy sectors pick up.
this is going to be a category that is flat to maybe slightly declining on a volume basis. it's the pricing and promotional activity that could drive it forward. >> do you say hang on a minute, why is procter and gamble doing this? this is a worldwide brand. an awful lot of money. what did they pay $3 billion for this business? there is a lot of good will sunk into that brand around the world over the years. can't p&g make it work? surely if buffet can make it work, they should be able to make it work with the huge network, all the contacts, all the retail relationships they have. >> great question. i think the one thing to understand about batteries, it is execution intensive. more number of places you have batteries in the store, the better your business will be. it's a high impulse purchase. batteries are sold in a lot of outlets proctor doesn't have
like home depot, bed bath and beyond, et cetera. as it focuses back on its core business, i think this makes a lot of sense for them. >> now looking at it from a more holistic view, a.g. lackly has been back at p&g in more than a year. this is one of a series of steps he is taking in the business. are you confident in his strategy as investors seem to be? the stock has rebounded in the last few months. >> proctor stock has recovered just like the consumer staples. it's been more of a mark dynamic than a p&g specific dynamic. i think they are headed in the right direction. the issue with big companies is that it takes time for some of these changes to take hold we haven't seen their top line accelerate. that's what we are waiting for. we need to see them close the gap with their peers.
>> nik modi, thank you. up next on the program, oil prices still under pressure this morning. that move you see on the screen is good for motorists and many businesses, but not potentially for the shale industry. we'll put figures on that double-edged sword next. this is a burrito made with chocolate, soybeans, and apricots. what kind of chef comes up with this?
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the price of oil dropped below $77 a barrel. fresh evidence that china is slowing and opec warns shale boom will reduce international demands by 1 billion barrels each day next year. the chief economist from stern ag joins us now. >> thank you for having me. >> this is a double-edged sword as you wrote earlier in the
week. on the plus side are these huge savings motorists feel from lower gas prices. you extrapolate that could be worth $40 billion to $60 billion to the economy. how do you get that? >> it's for the consumer. if we call it a decline of 50 cents over the past three months, that translates to the number of cars per family about a savings of $100 to $100. on the individual level, that doesn't appear to be a lot of savings, but assuming gasoline station sales account for 10% to 11% of monthly retail spending, that translates to $900 million. that's the direct savings. if we assume a very positive wealth effect where consumers feel wealthier having that extra cash in their pocket, maybe they save $1 but spend $1.50 or $2. that direct savings number doesn't take into account then
the producer side whereby lower import costs translate into lower ticket prices and other goods and services in the marketplace. producers pass on some of that cost savings. the direct savings is $900 million if we extrapolate that trickle-down effect that could translate to $40 billion to $60 billion on an annual basis. >> on the flip side, we are at $75 a barrel now. we've fallen another dollar. projects will be canceled in the shale industry. where are you on where that threshold is? this is contributed to gdp growth and oil growth. >> that's right. there is the other side of the argument while businesses and consumers will see lower energy bills at the end of the month, domestic energy producers are seeing declining profit margins. analysts disagree over what is
the break even? some argue with increased technology, it's lower than that $75 mark, maybe around the $60, $65 mark. but we are seeing momentum, a lot of momentum in terms of the incentive to invest and hire. when we look at -- >> okay. just getting to the end argument here, if this is a double-edged sword which do you think is sharpest, the good side or the bad side? >> this could undermine a significant number of state and local economies. this has been a sector of significant hiring strength. high wage strength. so you're talking about a loss of millions, hundreds of millions of dollars in terms of potential income and spending power which is a simple 40% to 50% of the gain we see in terms of cost savings on the consumer side. still the benefit comes from at least short term on the consumer side. longer term, if this continues to erode domestic energy
production, i think the cost may outweigh the benefits. >> how come we haven't seen it then? if it's such an immediate help to consumers. we are still 70% consumer economy and net oil importers, why haven't we seen it? will it show up in friday's retail sales number? >> we have seen it to some degree. august retail sales were above trend. arguably they would have been more negative if we hadn't seen the continues energy price. consumers are putting it in the bank p, building up their savings. they are paying down outstanding debt. a lot of consumers spent that savings on going out and buying the new iphone. >> bigger question is whether we are pricing in a hard landing in china. we'll save that for another occasion. thank you for joining us. >> crude at a fresh four-year low. this time stocks like it. a mixed bag for retailers today. walmart on the rise. jc penney blaming the weather
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the ultimate arena for business. hour after hour of diving deep, touching base, and putting ducks in rows. the only problem with conference calls: eventually they have to end. unless you have the comcast business voiceedge mobile app. it lets you switch seamlessly from your desk phone to your mobile with no interruptions. i've never felt so alive. get the future of phone and the phones are free. comcast business. built for business. welcome back to "squawk on the street." i'm jacqui deangelis at the nymex. usually we get the gas weekly storage, but it will be delayed because of the veterans day
holiday. gas prices lower. we are looking at them $4.11. crude is the big story in the pits this morning. a three-year low for wci trading at $75.68. we are expecting to see a little bit of a supply decline at 11:00 when the weekly number comes out on inventories. traders are saying that supply stocks are so built up right now, they are not worried about it. especially with the fact opec is not saying it's willing to do anything to stem supply. these prices continue lower. we are looking at brent prices under $80 a barrel. we've got the opec basket at $76.96. expect crude to continue to decline. >> brent on the move lower. thanks very much, jacqui. retailers some of the big movers in the stock market today. walmart and kohl's out with results. jc penney falling sharply after results after the bell yesterday.
courtney reagan has a busy week. >> it is a mixed bag for retailers' third quarter reports. there is caution surrounding the holiday season. national retail federation is forecasting holiday sales will grow 4.1%. retailers don't seem as confident. walmart beat analyst estimates on bottom and top lines reporting $1.15 a share on revenues of $119 billion. u.s. same-store sales gaining 0.5%. that is the first positive comp in seven quarters. e-commerce sales grow 20%. the largest retail below consensus. the ceo says he is cautiously optimistic about the holiday quarter. kohl's is forecasting same store sales will grow by 2%, stronger than what analysts expect. jc penney wasn't warning enough.
the store saw last same-store sales in the first quarter after lowering its previous guidance from low single digits to mid single digits. penney did record a lower than expected loss. the retailer forecast continue to see improvement in the holiday quarter for margins, despite that promotional environment. they are pleased with the business in september. he used "pleased" a couple of times on the call. he also introduced marvin ellison who only spoke briefly. >> thank you, courtney. for more let's bring in stacey. mixed bag but walmart turns out to be an you unlikely winner. is it too soon to call some turnaround in walmart? >> yes. walmart hit a new high today. they are making progress after
seven quarters of flat or negative comps. they finally comped positive, 0.5%. >> if you look where that came from, the neighborhood markets and double-digit growth and e-commerce, that is very much a part of doug mcmillon's strategy. >> kudos to him. he said we are getting serious about e-commerce and omni channel. they had fallen behind. he is saying not only are we going to invest in that sector and take a hit, but we are going to invest in our stores again. we are going to invest in grocery. they are doing a good job executionwise. it's just not cheap to do those things. >> the thinking for some people it's real why i cold and gas prices are low. that's going to move a lot of inventory in the fall. is that happening? >> not quite yet. the end of october fell off a cliff. you saw kohl's decelerate, jc penney talking about deceleration. november is better, but we are seeing a lot of clearance. we'll see heavy black friday
promotions. most retailers saying things picked up slightly in november. >> do you believe apple and gopro are seriously taking share away from apparel? >> no. it depends on the player. do i think they are taking away from kohl's? no. i think that's bad execution. do you think they are taking away from walmart? no. certainly on the margin as people, they are getting help from gas prices, maybe they are upgrading to the iphone 6. i think apparel is just not an exciting category right now. >> you are pessimistic going into the holiday season. could it not be we end up talking about businesses that have execution problems. they grab the limelight and distort what the overall picture of the consumer is? retail sales haven't been great. they could pick up. people could be saving up for the holiday season. that's reasonable they are putting money in the gas prices
aside. >> they could. what we've seen in the trend is that consumers are basically only shopping around events. only shopping around promotions. so the dips and peaks have become more pronounced here. i think you have to look at what retailers can win in the holiday season. i think that's an lb. potentially target is doing free shipping. they are getting serious about their cool factor again. >> would that be your pick? people point to macy's as the executor in the space and nordstrom because it's been investing heavily in its business. >> nordstrom is interesting here. if all the stars are lined in q-4, they are more promotional. they are finally getting in the game. that is an interesting one to look at. target, if they exit canada at some point, that could take the pressure off. >> you look at polls, americans know gas prices have come down. they don't believe they are going to stay down. cramer's point this morning was the longer they stay down, the more they get used to the idea
maybe it's not just for five minutes. maybe i can start spending money somewhere. >> potentially you look at walmart and say has it hit the brain of the consumer they have a few extra bucks in their pocket? also we talked about the beginning of the week. food inflation. walmart talked about food inflation over 200 basis points. people are taking the money they are saving on gas prices and feeding their families. >> i wonder if that realization will set in by the time of holiday shopping. >> i think it will. the low end players, the dollar stores, walmart, on the margin they see a little extra help there. >> good to see you. >> good to see you. cisco earnings out. they did beat street. nice performance from the shares. they were negative in after hours trading, but did turn positive this morning. up 2% after john chambers joined us earlier. we asked him about the
president's offensive on net neutrality. >> i think it was a major mistake to revisit title ii. i just come out of europe last month. the european commissioners, country leads, companies view the u.s. model as the one that is right in our broadband buildout has been one of the best in the world. to go back to a 1950s voice mentality with title ii and net neutral would be a tremendous mistake for our country. >> he did not mince words. he said he believed the s.e.c. was an independent organization, chairman wheeler gets it, in his view. talked about bringing cash back from overseas. when your cash is overseas, you've got to acquire overseas. that is a mistake from a policy standpoint. addressed walmart's ceo. >> i thought that was interesting he gave him a compliment. just the latest, ceos in this industry to weigh in against president obama's initiative.
>> they have flesh in the game. they want a capitalist solution to it. the president is arguing what you might argue to be a consumer solution. do you drain investment away from the industry? >> hopefully -- we'll see. the comments wheeler reportedly made in private meetings is he is trying to flip the baby. make the administration happy but not remove entirely incentive to invest. >> does the time warner cablecom cast deal get linked in a grand bargain? >> you have to have somebody who covers m&a. stock performance of our parent comcast and time warner would suggest a concern. they believe it's on track. >> up next on the program, hasbro is in talks to buy dreamworks animation. a deal that could lead to a flood of toy movie hybrids.
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take a look at the airline sector. one of the day's best performing sector in the s&p 500. brent crude under $80. >> that is a big part of the story. airlines, a subsector of the industrials group are all moving higher. oil prices continue their descent now moving below $76 a barrel for west texas intermediate. the top five gainers in the transport are airlines. united continental, delta, jetblue, alaska air leading the way higher. a good day for the nation's bigger carriers. when it comes to the s&p, there
are only two, southwest and delta in the overall airline sector. still the industry group doing well today. >> shares of dreamworks animation spiking on news the toy maker hasbro is in talks to acquire jeffrey katzenberg's film studio. hasbro toys already starring in a number of movies. ear ying handler joins us saying he has significant reservations about the deal. good morning. thank you for joining us. >> good morning. thanks for having me. >> i imagine if you are very talented and creative working at dreamworks, would you want to work for a toy producer? >> i think there is a bigger issue here. this is not a good fit with hasbro and dreamworks with. first, you look at the reports of dreamworks wanting about $35 a share.
that is a 56% premium from last night's close. this is a township that's been up for sale on and off five years now. there is really no other bidder, so why pay so much for that business? secondly, when you look at hasbro, it's a stable, steadily-growing toy company that's done a good job turning around the last couple of years. why do you want to acquire a volatile feature film business company that has had a lot of trouble making profitable films the last several years and hasn't produced positive free cash flow for at least the last three years. those are big issues. >> i don't know why they want to buy if there are no other bidders. it could be jack ma when he was in hollywood met with them. we know soft bank met with them. i guess if you're dream works you might say do i want to run the risk of this creator of licensees bought by the chinese putting into their ecosystem to
the detriment of mine? >> this is a company up for sales the last five years. they talked to the hollywood studios. they all walked away. they looked internationally. why not look at hasbro? hasbro is trying to make a jump into the media and entertainment space. they do television productions. getting involved in the feature film business is a risky endeavor. i don't see that being a good value for hasbro. >> what about the disney factor? it might put them in an awkward position. does that make this deal look less likely? >> 100% agree. if i'm disney and hasbro makes a lot of money off the licensees to sell marvell products, "star wars" products, they were just awarded the license for disney princess. why would you subsidize hasbro in a feature film business that will be in direct competition to
disney? that makes zero sense to me. >> how do we make money at the moment? what do you like? >> the names i like, i like the movie theater stocks, cinemark and i-max. i like video game names take two and activision. >> thank you for joining us. >> thanks for having me. when we return, former kansas city fed chairman bob funk joins us. dow up 85. ok, if you're up there, i could use some help.
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that's funny, for that price with comcast business, i think you get like 50 megabits. wow that's fast. personally, i prefer a slow internet. there is something about the sweet meditative glow of a loading website. don't listen to the naysayer. switch to comcast business today and get 50 megabits per second for $89.95. comcast business. built for business. markets looking okay here. dow up almost 90 points. walmart and cisco, a couple aermgs we've been looking at. s&p up. and apple helping the nasdaq. >> helps to have a $4.7 billion deal from warren buffett. >> let's get to dominick. >> one stock not in the green
theme is sun power. the stock is moving sharply lower after they forecast a much lower than expected 2015 full year profit. following light guidance from rival canadian solar as well. the shares down 6 or 7% so far. and programming note here. sunny power ceo tom werner on live. >> i'd like to welcome my special guest bob funk. and looking at your resume, chairman of the kansas city fed from 2006 to 7. your timing was impeccable. you got out of dodge on the last bus out. and and chairman and ceo of -- professionals. and it is on that light i'd like to discuss issues with the employment and benefits. the government stopped the emergency extension of
approximate employment benefits but before that north carolina was kind of the canary in the coal mine. their unemployment dropped to around 6 and a half percent from 8. my first question is did those people disappear? or did they get jobs. >> i believe the best social program is to have a job. and the u.s. is a very compassionate country and expresses employing professionals is a very passionate company about finding good jobs for theme piece outse of work. and we're passionate about that. >> with north carolina, my question is unemployment has gone down. so from where you sit we did the right thing by kind of taking, at least normalizing that aspect of the non employment benefits. but are the people coming out of the unemployment rate getting work? do you have any research on that aspect in particular? >> well we took a harris poll
last summer. and 82% of the people out of work are unemployment or on disability. so they really wanted to work if there are opportunities. and that is one of our jobs is to find opportunity for people who really want to work. working takes pride and helps people to have self confidence and helps them to have upward mobility when they are on social benefits. >> i like the way you phrased it with regard to being compassionate. because of course there is that negative buy line that people on unemployment they are lazy. they are not lazy. and you go out of your way to point that out. that this is really a discussion, if you take the politics out of it, about what is a better incentive versus dissentincentives for the publi that run into hard times that get back on track. >> they say they are lazy.
they are just looking for jobs and opportunity. we're out here on main street where we deal with medium and small sized companies. and 90% of companies in america are less than 100 employees and they are looking if are good, bright well-valued individuals that are willing to work. and it is difficult of course finding those types of people but we are certainly passionate about doing that. last week we employed 98,000 people. and this year about 500,000, almost half a million. >> let's take look at this from the policy standpoint and kick the tires. janet yellen and company, even ben bernanke and ex company really believe their programs are responsible for people getting work, the improvement in the labor force, less unemployment. but in some ways it seems the government is awfully proud of trying to create six year cures for one year flus. is this the case here? time heals owl wounds,
normalization is what we should strive for. would you agree with that? >> that's certainly the case. and if you have basically 40,000 in unemployment benefits and disability benefits it is going take about 55 to 60,000 dollars for them to go to work. so it is a disincentive and there are so many government programs. we have an individual that we offered $81,000 to start the job and he could not afford it because his benefits were just too large to afford that job. so yes it's disincentive unfortunately. and many of them are in the trap and it is hard for them to get out of it. em but we'd certainly like to find those individuals and help them get jobs. >> great work bob. pleasure having you on. sarah. >> appreciate it. >> and thank you rick. over now to kayla tausche with a look at "squawk alley." >> has bro and dream works, which company needs the other
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a lot of the focus on energy. has a lot to do with the fact we've seen wti and brent te clining to new lows. interesting to see on a session where the dollars weaker. a lot have been looking at the strong dollar/weak energy prices. energy is weak and so is the dollar today. i wrote a piece for cnbc on how this dollar trade is extremely crowded. everyone and their mother is in on this trade on the idea that the u.s. is going to outperform and move faster when it comes to interest rates and that is the story for 2015. >> england -- home prices are
falling and the bigger question, that we'll without question come back to time and again now is china heading for a hard landing. the data again was weaker out of china. the chinese seem unwilling at this stage to boost their economy by even cutting interest rates. >> and iron ore are down more than 40% all this year setting up for another year where the u.s. is outperforming. >> let's get to the nymex and jackie. >> the department of energy out with its report on crude stocks last week. a draw down of 1.7 million barrels. watching prices in the high 75 range. pretty much staying flat on this number. even though we're seeing a draw down, it is because traders are seeing overall supplies are well stocked and u.s. is in good shape in terms of the output now. the saudi oil minister saying
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