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tv   Squawk on the Street  CNBC  November 4, 2019 9:00am-11:00am EST

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>> great investor, he'll spend it when he sees value. and i think you can't look at his cash forward and say that's determinant of one thing or another. >> peter, thank you, for being with us. >> thank you >> thank you, all. >> make sure you join us tomorrow what are you talking about "squawk on the street" begins right now. ♪ good monday morning, welcome to "squawk on the street." a look for new highs at the open, including the dow's first record high in about four months as trade optimism reigns despite turbulent corporate headlines today. stock downgrades europe up. ten-year 1.76. road map begins with a shake-up at mcdonald's, firing ceo steve easterbrook for violating policy over a relationship with an
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employee. and shares of under armour under a lot of pressure, a federal probe of the accounting practices. and wall street's record rally on the heels of both the s&p and nasdaq the dow is on track for new highs at the open. we'll start with that stunning news from mcdonald's, the company has fired ceo steve easterbrook after he spent more than 4 1/2 years on the job. mcdonald's says he violated company policy by having a consensual relationship with an employee the new ceo is chris kempczinski, president of mcdonald's usa in an email to employees, easterbrook admitted the relationship violated policy, saying this is a mistake, given the values of the company, i agree with the board it is time for me to move on. already today, jim, one downgrade, piper to neutral, says changes of this magnitude tend to be disruptive. >> i think that's why -- i hate to say this, the stock was down badly on friday. i would like to know more about when and how long they have known this this is one where it is pretty obvious the stock has been under a lot of pressure. some of it was because of
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wendy's breakfast, some because of the miss domest abically and some because of this, don't know for sure the ceo has good technology exposure probably has the franchisees' love domestically. but there is so many questions here in terms of what they're -- the company's under attack from wendy's for breakfast, under attack by impossible burger and burger king, they dropped the morning star burger. the company is challenged on a lot of issues involving loyalty. delivery, who knows where they really are they have that ecumenical delivery approach. he should be on right here, right now. >> chris, the new -- >> yeah, that's silly to not come on right now. he's afraid of us. chris, just call in. i'm not going to ask about what easterbrook did. i just want to know what you're going to do. >> just a matter of time, we hope what if the dollar breaks here, jim? what if the dollar breaks in, all of a sudden they're a completely new international
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balance sheet, right can we have more faith than $200 targets? >> if you come out and talked, i think you would feel great because i think that what happens is when you have one of these incidents and, of course, these are unplanned, so to speak, but you have a successor as opposed to intel, you have a coherent story to tell right now, ought to be thinking about are they in disarray i don't think they are in disarray i think easterbrook was loved. easterbrook was loved in the media too. all day breakfast. >> interesting as well from a government perspective and changing regulations i don't know, you know, that a board is now obviously going to adhere to in terms of employee behavior, regardless of where it is brings to mind brian's exit at intel, another consensual that had happened in the past, but once they learned about it, he had to go. >> had to go >> and in this case, mr.
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easterbrook, agreeing he made a mistake -- >> lam research, stock goes up 100%. >> right and, listen, intel, took a while, bob -- interim, then permanent, it does take -- it can take some time, particularly these are ceos who conceivably would have been in place for a long period of time. easterbrook is 52 years old. >> there was some chatter it was time to move on. are you kidding me stock is up 100% the decision to throw your life away is not done idly. >> i suppose not >> in a world where we know -- >> the oldest story in the book, man. >> the world has changed memo of the ceo is not the way it was never should have been the way it was but it doesn't matter if it is consensual or not, you're the boss it becomes consensual if you're the boss. >> it means no one, no one, that's it. everybody is off limits. so look elsewhere.
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>> you're the ceo of -- >> you're probably only with colleagues, but you got to really make an effort. have your friends set you up, whatever, you know there is a lot of dating services >> go beyond sex go to beyond meat. >> go to whatever it is. ceo dating site. >> i don't know what to do look, that's irrelevant. what matters is -- >> it is not -- it is not like this won't happen again, conceivably. >> the earnings might be under pressure. >> you bring up swan, do we believe that the disruptive ceo succession results in turmoil, operational turmoil? >> no, mcdonald'sis a place that had a bunch of ceos and that did hurt the -- >> some have died on the job. >> mcdonald's is a bench this guy has not been there that long he's a consumer package goods guy. look, i think this is a company that where the stock has to be bought if it gets too -- really way, way discounting the 20,000
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people that wendy's is hiring, there is -- why did they do a test in some province of canada on beyond meat and impossible burgers rolled out. by the way, let's understand, these are not -- these are not vegan and vegetarian, these are people who just don't want the -- they like the food chain to be changed. by the way, easterbrook did that too. free range chicken, fresh beef, a lot -- a million initiatives going at once. he was so hard charging. whenever you spoke to him, i remember speaking once what is the difference with you? he said i got mojo mojo mojo per share mojo per share he loved that. mojo per share he adopted it. >> well, the mcdonald's story and there is under armour. beat with the quarterly results, cuts the full year guide on revenue alone. the stock is getting hit as the company does acknowledge it has been cooperating with the s.e.c. and doj in a probe with the accounting practices kevin plank is set to step down as ceo in january.
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you said something on twitter about how this now makes sense, how everything at under armour makes sense. >> stock is under a lot of pressure quarter wasn't great, but the stock was actively -- i'll tell you, here is an interesting thing, that they'll deny completely that's what people do. the fact that they didn't reveal this earlier is -- >> they only -- we commented on it as a result of the journal story. it is not in their earnings release. >> that's great. the justice department is crawling all over their office and they don't release it until today. what do you think, that's some sort of -- hey, that's a december closeab decloseable event. the stock has been getting hit. >> how does a company not disclose some sort of an investigation, informal or otherwise, by the s.e.c. >> i'll calling it illegal, unethical, calling about just disgraceful. disgraceful you have the justice department in there and don't disclose it. you should be immediately issuing a release saying we're in trouble on revenue recognition, and we tend to
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address it it is a disgrace i really think that people are buying that stock on friday. and people are selling and we didn't know about it? come on, address these -- they'll have some lawyer at some pr firm who will say i'm wrong i happen to have unfortunately revenue recognition issue. we had it at the street. what you immediately do is you say, okay, you shine a light on it, we got a revenue recognition you throw everybody under the bus, that's the way the s.e.c. wants it you disclosed it first you get out ahead of it. they may say i don't know what i'm talking about. i had the best lawyers in the world and what the lawyers said it is time to fall on your sword, mr. cramer, you had everyone in the world know you did this perhaps a year from now, it will be over. well, took about 18 months and the s.e.c. put out a release that said we were guilty and they realized we weren't put out a release soon after saying, hey, we didn't find any guilt, thank you, s.e.c. this is a disgrace having been involved with one of these, i know exactly what they're supposed to do and what they did is wrong
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now, i want their lawyers to come on and do the usual fibbing that i see, which says we didn't need to do anything. let's get that over with have they changed the ceo? what was that about? >> we don't know he is executive chairman, but you're right. >> i like that, that's meaningless, it is about money not friends. you don't do it this way everybody knows, their lawyers should come open and explain or someone should come on and explain how the justice department could be crawling all over their office and people seeing these people, they're not the auditors, hey, man, how are you doing? i'm from the justice department, shut up. that's what it is like >> your complaint is with the board, i assume. >> they have a board >> they do the board -- >> who is on the board >> mohamed el-erian. >> listen to me, you should be -- you have the justice department in there, what are they doing when they're in there? do you think they're saying, hey, i love those new sneakers. >> here is what under armour had
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to say in response to the journal story, according to the journal itself, when they actually called in and asked them about it. began responding, july 2017. >> that's great. >> accounting practices related to disclosures, they went on to say the company firmly believes that its accounting practices and disclosures were appropriate. your point is a good one, jim. you never know what the decision-making tree is, we who says we don't have to disclose this, not something investors want to know seems hard to imagine. >> they said you got to tell everybody. i said, but i didn't do anything wrong. we didn't do anything wrong. okay, good tell everybody like, look, it is a horrible thing. to have a revenue recognition problem. it can be criminal but s.e.c. already referred it to justice i would have disclosed it if i were there in the s.e.c. had an issue. but justice? the justice department >> that's criminal that's -- >> that's called criminal.
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they made a mistake. >> i was thinking of tis cldisce when it came to elon musk and -- >> you get the justice department in because key thing about the justice department, do not pick names out of phone book okay they don't say, let's go after this company i don't know i thought this was just outrageous just outrageous. and i'm waiting for their crisis pr firm to say, no, you see, it is fine. we had -- we had justice department agents in there, but, you know what, they were dressed, they looked like us, what were they wearing under armour clothes think they were in there wearing under armour clothes the mesh you know >> i'm not a big -- yeah, i know the clothing. >> where is your sdoes your sonr >> he's 17 now. >> heads up, justice department doesn't wear under armour. >> we're going to see the extent
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to which this is all addressed on the call. >> yeah they ought to address it more important than the -- than the quarter. >> all they say on the call so far is they have been fully cooperating with the -- for nearly 2 1/2 years we began responding back in july of '17 to their request for documents and information, firmly believe their accounting practices were appropriate and that's it. they said they are breaking from their typical policy of not discussing regulatory litigation matters regarding the investigation by the s.e.c. and the u.s. zblept they'department >> they're breaking because the press found out about it david, david, david, the justice department, the press finds out, they issue a release that is, like, hey, listen, we missed the quarter. the quarter? the quarter? >> they -- >> not the playoffs. >> they cut the revenue guide, they do see earnings at the high end. any idea how that's going to work >> how do we know they are
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given the fact they had revenue recognition, can we stipulate that maybe we should question their ability to beat, beat the number let's have a restatement what i wanted to see was the restatement would not affect the numbers, it did not affect the cap. that's what they're supposed to do i'm going to go down there and i'll explain the way it works, i like kevin very much, he's a good guy, but there is a way to do it and a way not to do it and they're textbook about how every major criminal law firm, white collar, tells you not to do it who are they using who are they using >> i'll find out. >> will you find out my bet is they're using -- they took a coin flip about who to -- this is crazy. it is crazy. >> it is not it is fact specific. it is fact specific. >> it is not fiction specific? >> my point is that investigations occur and it is a close call, but you don't always feel obligated to disclose
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>> once again, you're not obligated, but i'm talking about the way you do it, if you're what i call a professional company is you disclose because you cannot have justice department agents in there remember tenet come on. >> we spent a lot of time talking about their failure to disclose what about the impact of -- we don't even know if it is true, what they'll find. >> why don't they say, listen. >> we have done a preliminary and it does not -- they should say it does not affect our cash position it is a restatement, a shift from quarter to quarter. that's fine. give us that i know kevin's -- i'm sorry that i'm being so harsh this is the way it goes. >> he's on the call now, so -- >> he's -- he's jammed he's jammed. >> he's a really good guy. this is just terrible. >> yeah. stock specific stories though we'll get to the record highs we expect at the open here, we'll get cramer's mad dash, countdown to the opening
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bell we have downgrades of mcdonald's, verizon, harley, papa john's and some others. more "squawk on the street" straight ahead woman: what does the word "partner" really mean? someone i can trust. (impact, click) who is with me for the long-term. who understands i'm dealing with lives, not only livelihoods. that in order to help people, i need more than products, i need quality support and insights. can i find someone who partners with me to achieve people's long-term success? with capital group, i can. talk to your advisor or consultant for investment risks and information.
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all right. >> first mad dash of the week. because it is monday talking a little ge, which had a good week last week. >> yes, it did i felt there might be profit taking, could fall below 10. but barclays comes out and says,
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listen, healthcare, very good. aviation, very good. starting to get the most important thing, this is really interesting, you have a story that says no nasty surprises from legacy liabilities, then you can start thinking, you know what, maybe larry culp's further along than we think. we know 2019 he said was a restructuring year he did say that 2020 could be good >> you're disregarding tusa? you don't care about him anymore? >> i think tusa is -- tusa is right about honeywell. >> what does that mean >> he likes honeywell. >> he's wrong on ge. >> david, as you said, he had his chance, right? he had his chance. and right there was when he should have upgraded it. now he's stuck captain ahab is stuck, right that's how i regard him. you just shouldn't bet against culp it was a nice move, you one, declare victory and move on,
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david. he didn't. >> talking about the jpmorgan analyst. >> i don't want to joke around he's a really good analyst told you to get out of 3m, told you to get out of this you can argue, even if he upgrades it tomorrow, it would be a good call >> my point is, every other analyst put together doesn't amount to one tusa, do they? >> tusa is -- >> in terms of influence. >> let's put it this way, culp takes tusa really seriously. >> this is the chance. >> here's what i think is what he did wrong culp, one of the first things he does is call tusa and said, listen, what do you think i should do? he then goes with the tusa game plan, so why not go hold if you got the tusa game plan tusa is that powerful that culp, the ceo, said, listen, i want to know what to do. what do you think? in the meantime, free cash flow getting better i'm not as worried about long-term care because they really have done -- they scrubbed it very clean the only thing i'm worried about, david, will the boeing max, will the assembly line
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be -- then you have a reverberation that knocks down the gdp. we're all watching boeing. so is larry culp. >> and watching ge this morning as well, which had -- had some momentum last week we got an opening bell coming up ten minutes from now stick around, a lot more "squawk on the street. heading into retirement you want to follow your passions rather than worry about how to pay for long-term care. brighthouse smartcare℠ is a hybrid life insurance and long-term care product. it protects your family while providing long-term care coverage, should you need it. so you can explore all the amazing things ahead. talk to your advisor about brighthouse smartcare.
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brighthouse financial. build for what's ahead℠ brighthouse financial. by the way, she's the it wasnext mozart.g day. as usual we were behind schedule. but sophie's enthusiasm cannot be dampened. not even by a run-away donut. we powered through it in our toyota prius. because a star's got to shine, no matter what.
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it's unbelievable what you can do in the prius. toyota let's go places. look for new highs at the open that includes the dow this time for first time in four months. futures up about 1340 here. opening bell in seven minutes. i knew about the tremors.
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signal at least a push into phase one. goldman today saying we're shifting our view, we no longer believe tariffs will increase further. >> that's important. i think what is interesting is that the president held out, did something very smart he raised tariff, raised tariff, raised tariff. so then if they can just get advance on thedecember tariff, looks like the government, the prc is willing to give in on serious approvals for the bank stocks, which is why to be able to actually bank single-handedly and not with perhaps joint ventures jpmorgan is up and citi is up. 5g, looks like we may have given a little to huawei there you have a great number on friday, sky works doing really well, marvel upgraded by wells fargo. this is why deere has been up a lot. looks like an ag buy i know that the -- that the quality of tone has changed. there is -- where is the name calling? >> not as much
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and if it is there, it is sort of related to human rights in hong kong and via pence. >> it doesn't -- right, the president has been very quiet about what is going on in hong kong. >> pompeo not as quiet. >> no, no. those guys are hard-liners look, wilbur ross is different from mnuchin and different from -- though he's a little more like lighthizer we know wilbur ross. he's known on wall street. and it seems like the president once again tweeting he loves the market here. >> he did say spend your money well as we await the new highs at the open. >> wealth effect. >> he suggested having the deal signing in iowa because of -- he said it would be the largest order in history >> he learned not to sign at doral, that's for certain. doral is very nice doral would be great i don't know where you're staying.
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eg eagles will probably go further than the jets. >> is it necessary >> you're right. it was insulting. >> thank you yes. it was >> meanwhile, jim, stifel who has been cautious on the market today says the next six months are going to favor cyclicals because you got fed with this quasi qe you got trade, softer tone, dollar is breaking its 200 day, and seasonality is in our favor. >> where is this call a few weeks ago? >> to be fair, they made this -- they sort of framed this on the 13th of october. >> okay, all right it is -- the big run in this market has been in the cyclicals. even the ones that did in the report great numbers have been the stocks have been on fire even the ones that are deeply connected with boeing are on fire so it is important to point out that boeing is the linchpin for a lot of the companies and the autos are not -- it
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really is the hardware company, the heavy manufacturing, emerson has been unbelievable. unbelievable this week >> emerson has been unbelievable what do you mean >> the stock performance, quite good. >> yeah. >> look at that, david. >> yeah. >> you flagged the reverse head and shoulders. the numbers could be coming up -- >> the numbers are coming up don't forget they have been in a conversation with d.e. shaw, man a bit. they're making some progress in terms of the window for filing nominees closes on the 6th of november >> still the private plane issue? >> you expect they can find common ground. >> a reasonable guy.
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>> i like the union pacific rally on friday. and the rally in the united parcel i think we go back to united parcel and realize it wasn't that bad a quarter i really -- the tone in this market is very good. >> let's get the opening bell, s&p, the cnbc real time exchange, the big board, it is time celebrating the first anniversary under new ownership. >> oh, wow they're here tonight, the new york stock exchange, that's -- doing a good job, and, by the way, juul will be here. >> oh, good. >> yeah, juul. >> at the nasdaq, northwest bank shares holding company of northwest bank there is your dow all time high for the first time since july on a closing basis, you got to go to the 15th. intraday, the 16th but that is a hat trick now, jim. >> yes really is. a lot of dow stocks, industrials
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still, essentially verizon downgraded today, that's in keeping with the idea you don't want to be in that sector. you would rather be in fedex, which is doing incredibly well or nothing we have not seen anything from the cyclicals that makes it feels like it should be good except for the fact we believe china is going to be less of an enemy. >> that's a pretty big deal. it has been a significant break on the performance of a lot of the companies. and or the stocks. >> that group has been a total bow wow. faang, apple, gigantic initiative to help in housing, worth more than $2 billion. >> how about the fact that apple stock is up 63%. >> got china doing well. >> i won't remind people you have been consistent in saying own it, don't trade it. >> the analyst -- >> you have for a long time. >> thank you, david. >> anybody who listened to that at least is the beneficiary of a 63% gain every so often i got to call it -- i always call it like i
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see it you've been dead right on it. >> one thing people don't realize, the 11 takes unbelievable pictures at night i was in the eagles box, had some people with the 5 and the 7, but no one -- remember, tim cook invented nothing. don't you love that? where is tony sag nettie he'll call in on his 11, he can facetime and it looks like real tv 5g, and this, do you have the credit card? are you getting the cash back? >> no. >> $2.53 today. >> my son brought in his case, which had broken, they said they were going to -- they would re place it he had to go to -- got to go to the genius bar and get an appointment and don't want to give you -- come on, guys. >> i would rather have a beer at the genius bar just the wait to get the new phone is extraordinary when you go, go to the brooklyn store you have to go to the brooklyn store. they have game, man. really nice. >> but from here, jim, with the 63% gain, granted, remember.
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>> it preannounced >> they preannounced but still, does it have more room to go for the next few couple of months. >> if it is more of a consumer product, it sure does. it is at 19 times earnings we got a lot of stuff that sells at 21, 22 times earnings that doesn't deserve it i want to mention that housing initiative, just because when you're out in san francisco, my daughter's in healthcare, she went to look for an apartment, she got -- she thought the price per month was the price per year they got to do something >> tim cook tweeted a few moments ago, says before the world knew the name silicon valley, apple called this place home there is a link to this initiative, which by the way, helps for starters people who are first responders, teachers, afford homes because it is impossible in that area. >> look, she wanted it teach in san francisco, she's teaching in spain. her first choice was san francisco until she realized as
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a teacher, you know, it is kind of laughable, but -- >> this is the true national emergency. homelessness/housing >> are you ever right. >> it is not just there, it is every city it is small cities it is all over this country. >> i know. it is really -- we don't talk about it enough. >> the numbers are astounding. >> people that want to give themselves of something and aren't paid the way that you're paid as a lawyer or a doctor, well you got to live in the -- you got to live pretty far pretty far away from the school district you're in a lot of times. how about europe being on fire today. >> why i know >> i know europe -- >> nothing in brexit today and there is -- they need -- look at ferrari. i think that's a good -- >> there is also underlying current arguing that if the dollar is truly headed for lower levels, global money managers will be interested in real case. >> i thought about it this
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weekend for my action alerts for the club, when santander, i thought santander is a great option, and boutique, 10% yield. >> what is the more powerful dynamic, that cross boarder allocation story or the fact that a weaker dollar will help exporters? >> i think it is weaker dollar is such a big story. look, apple, very matter of fact, okay, so we left a billion on the table, but the billion dollars, still matters, david, a billion, i know that there is 50 hedge funds with houses near me that -- they have to take the -- they have to raise the table because of global warming doesn't exist. sorry. caused by methane from cows. that's why we like beyond meat i do think a billion is just the new normal for when you do international business these consumer package good stories, like procter. procter does a tutorial about the dollar periodically. and how bad it is that it is strong carl, you're so right.
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it would be unbelievable for u.s. manufacturing president not tweeting about it. don't know why should be tweeting about that. >> how about oil part of the stifel cyclical call, oil goes to 80 in six months. >> i know, you're starting to see stock like bp, which my trust owns, which has been a complete disaster, actually picking up what a good time to do the -- maybe a better time to do the aramco deal than i thought chevron had a good quarter, nobody cared -- >> exxon, good quarter my bad chevron quarter not so good. how is oxy doing >> i don't know. >> not good. exactly right. >> do they know? >> maybe she'll join us at some point. aramco is going to be -- >> that's between -- >> aramco is going to be listing in saudi arabia. local listing. will it come in anywhere near the original hopes or will it be less than the 1.5 trillion
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it still will be most valuable company in the world unless apple moves up by a few hundred billion. that will be tough >> they'll be wi >> that will be tough. what happened to microsoft >> still doing well. 2% gain, 1.1 trillion. eclipsed by apple. market cap race. >> is he getting old hat, these new highs, david is it old hat. old hat. >> we're done with it? that's it? >> what else have you done for me lately. >> come on give me a new story, will you? give me something involving baltimore. interesting contrast baltimore -- baltimore ravens. >> yes >> winners over the pats ravens, under armour ravens, under armour. >> youngest player to have beaten a bill belichick team
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>> last quarterback taken in that draft last year >> of that great class >> yeah. yeah, i think so >> so was sam darnold. >> no, he's mono man >> sorry, right. >> he had mononucleosis. i had it once bought it was because of drinking. the old days you know a different life. >> couple of deals this morning. >> the right medical in. >> i got the right medical deal. striker buying that. right medical is the leader in upper extremity portfolio things so that will help you -- >> members of podcast, you can't do that anymore. >> it will help you up and lower extremity and biologics you can see wright medical shares up sharply.
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30.75. stock was 20 bucks not long ago. it is an enterprise value 4.4 billion, $4.4 billion deal on the equity, all cash they expected to close second half of next year. we have a merger of equals in the banking sector first horizon national and iberia bank getting together and what they're calling an moe, if you're an iberia bank holder, 4.84 shares, you own 44% of th combination. >> byron jordan, first or zohor, he's done a remarkable job he's where all the action is when bernstein moves to nashville, it is extraordinary you have byron jordan just running a great bank he's just fantastic. he doesn't seek any limelight. amazing ceo. first horizon goes higher on us. >> it will be one of the top 25 banks in the u.s. in deposits with about $57 billion in deposits that is when this deal
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closes 55 billion in loans, 75 billion in assets. >> they cleaned up -- >> there is consolidation taking place in that second level down. >> nashville hottest city in the country perhaps. >> right >> amazon and -- >> my friend david akers from the egowholz moagles moved downe this is where -- our companies are fleeing to in the new york area. >> see the companies jamie dimon made about texas, how one day it may house more jpm employees than any other city, any other state. >> very tough time for new york. >> how about new jersey? >> the lack of the availability to deduct the state and local income taxes, which are higher that tax bill could over the years spell doom for -- >> very republican smart move. right? these were -- democratic states the ones -- >> penalizing the blue states. >> willfred will talk to dimon
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tomorrow. >> i tried to get that interview, but you know wilf. >> the guy who covers the beat. >> sharp elbows. went to london to get it i debated going to london but it is the jaguars this weekend. i was going to hang there and just, you know, just kind of weasel in on wilf's interview, but i decided i'll stay here and get some other people. >> maybe get buffett talk about this cash balance of 128 billion plus >> got to get becky on that. they have more money than they know what to do with they could buy -- this is the time they should be looking at sky -- at southwest air. they already did that. >> made this point in the past, if you were to just set this up as an unno known company with $ billion in cash that they haven't been using and a succession plan in place for an octogenarian ceo, you might say, god, that sounds like it is worthwhile for an activist to take a look. that will not happen here.
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no >> you're so right all -- >> ackman is in there. >> how about the fact he got into apple people thought he didn't know how to do tech he went to dairy queen, everybody had one of these, bought apple >> it has been a good -- >> unbelievable stock. value up. >> uber will report after the close. >> what do you make of that? >> it opened up, but now down over 3%. we'll see what the numbers look like from the company. it is, what, second or third report now as a public -- last quarter, of course, they took that enormous charge, i think 3.9 billion, associated with the compensation from the ipo. this time it is going to be a bit cleaner, but there will be losses and the question is what is the revenue growth rate going to look like, how large are the losses going to be what do we hear from mr. kosrashahi. >> the number of shares coming is just kind of totally s
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suboptimal situation. >> what about the obvious argument that the cash balance and berkshire means there is nothing to buy bargains are scarce? too simplistic >> i think there is also antitrust is running rampant now. it is no longer you can just between china, which can veto deals, antitrust, it is not -- you can't just go out there and buy somebody you might look -- something aerospace, got rescission cast parts, you have to really dig down, maybe buy a housing -- i don't want to put words into his mouth. >> it also comes back to the idea that he likes to -- he likes to take a particular situation where he gets the price he wants to pay, and management will come on board and they're going to -- they like the fact that he doesn't bother them to a large extent, they're just a portfolio company. precision cast parts tough to find those.
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>> really hard to find >> i just don't know what he should -- what he should do. he doesn't know what to do he's doing it. but they're just -- the kind of mergers that i'm seeing done are niche mergers, right >> smaller stuff, yeah. >> or defense where you don't have to worry about chinese. >> yeah, that's true maybe that picture gets easier now. we'll find out >> wouldn't that be something if we have a -- with the chinese. peter navarro must be upset. don't you think? >> you would know better than -- >> anyone on planet earth. >> why would i know? >> how is your phone want to check anything coming, recently >> just my wife about our dog. >> with all that, 3082 to bob pisani. good morning, bob. >> that's a new high here for the s&p and the dow. this is a decisive breakout. friday may have been a very, very important -- i want to show you the s&p 500. remember the old high, 3025, that was back in july. the important thing is we're now
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1% -- more than 1% above that. and we're getting in the area what i call decisive breakout. and the important thing is we are seeing breakouts in sectors that are important cyclical sectors that people want into. take a look today, new highs, not just the dow and the s&p, these are sectors. industrials, tech, two classic cyclicals, communication services, because we're seeing media doing well, financials new high, and there is europe, efa is the etf for that. this is european stock market. also 52 week highs these are significant breakouts that we're starting to see the important thing is we have donne dodged a bit of a bullet september and october, lousy months, below expectations, september is up almost 2%. october was up 2%. so all of the historical patterns really didn't hold and that's been the reason that we are hitting new highs right now. why are we hitting new highs we know about the trade optimism, the fed being generally supportive of the market overall but i think the important thing
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was friday, better economic data, the u.s., in europe as well as china, and that may starts changing people's attitudes about earnings in 2020 remember the motif has been earnings estimates are too high. 10% for 2020, they have to come down the market has been work on flat to midsingle digits. if the economic data stabilizes, it goes up a bit, higher, all of that could be wrong and that means the market may not be too high priced. things may be better people are starting to wonder what the data is we got on friday the question is are we going to see efforts to -- ability to have had that continue the strong economic data that's the question right now for the markets. the big issue, of course, is december everybody is afraid of december. last year, what happened wasn't i want to point out again, november was the number two month historically it is up two out of three times.
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the start of the best of the six-month period as for december, it is true, we're down 16%, 17%. all the way down, there we are, that's about 16% decline overall. and the important thing is it is different this time. the data economic was moving to the downside seems to be more stable now. earnings were thought to be way, way too high at that time. little bit of different mind set now than it was last year. finally, on the ipo front, not a lot going on we have eight or nine this week, small ones one big one, this may be the biggest canadian ipo ever, big company, gf environmental, recycling, waste management and this -- look at this, this could be $2 billion here, we'll keep an eye on that good year for ipos, not a record, but good year. keep an eye on all that. waiting for sector breakouts >> bob, thanks
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to the bond pits, rick santelli at the cme good morning, rick. >> good morning, carl. you know, friday was the first day of the new month thursday was the end of a month. and markets were a bit messy many of my sources said there is a lot of end of the month here, especially exaggerated on the bond side. we had a good number on friday and really today is the day back where we have now seen fed meeting, we have seen the biggest data point in the month in the form of jobs. and here we are in november, and the equity markets are strong. there is a lot of variables, trade is one of them and talk about how it is progressing with china in phase one. no matter how you slice it, that has really had an outsource effect on what is going on in interest rates two day of 2s. up 4 basis points. we're up 4s and 2s, 5 and 5s, 6 and 7s, up almost 8 basis points in 30s 10s, not 7s and 30s curve is steepening. look at eight day chart of ten-year note yields we popped last week above the
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180 level. we lost it as we went into fed and jobs numbers and here we are, coming right back up to it, important psychological level to be sure here is the level most traders are looking at start the chart in mid-august. that 190 close many traders believe it is not only a psychological past top, but it is also a big trend line that many traders are paying close attention. funl finally, one week of bunds. a cycle best since their all time minus 71 close. finally one week of the dollar index, finally up a day, as you see on this chart, it has had a rough time, lost a lot of technical upside momentum. carl, david, jim, back to you. >> rick, thank you so record highs for the dow, the s&p and the nasdaq s&p 3082 breadth looks good today a lot of news in a busy week ahead with media earnings and more don't go anywhere.
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markets today. all-time highs for the dow, nasdaq and s&p we'll get stop trading with jim in just a minute behind, we all . this is a problem that affects each and every one of us. together with ibm, we created a whole new kind of school called p-tech. within six years, students can graduate with a high school diploma, a college degree, and a pathway to a competitive job. you know what's going up today? my poster. today, there are more than a hundred thousand p-tech students around the world. it's a game changer.
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let's get to jim and stop trading. >> people talking about huawei and whether they'll start doing business with them levered is zillex. you could argue sky works and then carvel. this is what people are playing and why it's up. i think it's a big deal doing business with huawei such a huge customer for somebody. >> doesn't sound like you're trading this rally >> i can't fade it because the president seems to be in a good mood he's not lobbing bombs i don't think anything's changed but he seems to be -- i say content with how things are going. very interesting he is just kind of in a good -- good frame. >> ex-impeachment inquiry? >> no name calling with the chinese.
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maybe preoccupied with washington certainly -- probably a little preoccupied. >> jim, what's tonight >> okay. we have one of my favorite companies that nobody knows is called j2 global vivek shah runs it a then ojo, max smith. i think the scooter story not living in new york is huge and so we're going to scoot -- i won't ride on a scooter because it a es too dangerous. they go 15 miles per hour. slower than tyreek hill. >> last thing we need in new york. >> scooters. but the ojo apparently is premier. >> jim, we'll see you tonight. >> great show. >> dow up 146. s&p 3082 don't go anywhere. so what are you working on?
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driving specific sectors of outperformance. where a rising middle class powers a booming auto industry... a leap into the digital era draws youthful populations to mobile banking and e-commerce... trade and travel surge between emerging markets. every day, our 1,100 investment professionals around the world search out opportunities for alpha. partner with pgim, the global investment management businesses of prudential. welcome back to "squawk on the street." live breaking news september final read on durable goods orders is out. and it is minus 1.2% sequentially minus 1.1 in the rear-view mirror this is the weakest since may.
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if we take out transportation, ex-transportation, it improves to only down .4. you know not necessarily a great number if you look at factory orders, factory orders are down .6 if you look at nondefense ex-aircraft that is down .6. .6 this is the weakest number actually equals august if you want to look for weaker number down 1.1 in april. this is important. that is glimpse into business spending and that has been very, very light if you look at factory orders ex-transportation down 1.10. capital goods shipment also down . these are not good numbers for the marketplace. we know that manufacturing and trade and business spending are wrapped in a conundrum trying to figure out where it goes with phase one complete and move to phase two but the sets of data points on the waeg side. carl, back to you.
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>> all right rick, see if the market can hold after those numbers. good monday morning, everyone. welcome back i'm carl quintanilla with david farber and with leslie picker. >> and our road map today starts with the record rally rolling on the dow now hitting an all-time high getting a boost from positive trade news. can stocks continue this march higher >> big slakup at hkd firimcdonas firing ceo easterbrook >> and an under armour accounting practices we we'll discuss that next we begin with under armour stock down almost 14% this morning. justice department and s.e.c. are investigating the accounting practices and a spokesperson said the disclosures were
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appropriate. goes back as far as 2017 now, this comes as the ceo plank is set to step down in january he will remain executive chairman of the company. few people, well, followed under armour more in depth than sara eisen who is on maternity leave and frankly able to join us on the phone right now. sara, give us your take in terms of what it means, why perhaps we didn't find out it or know about it until "the wall street journal report"ed it. >> well, good morning, david being on maternity leave this morning was too much for me. i started with the earnings call this morning and they opened the call with the classic kevin plank and now patrick frisk incoming ceo pep talk to reignite the brand and then the ceo transition announced less than two weeks ago and ended the opening statements with a statement from the cfo bergman
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on this accounting probe which was first disclosed by "the wall street journal" yesterday even though as you say it's been going on for about two and a half years bergman said that they have began responding to questions starting july 2017 confirming that report he said they're fully cooperating an he says that the company believes their accounting practices were appropriate and that's it. they were asked by an analyst to give more details on what took so long to disclose this and whether it was a distraction for executives and what the answer was from the company which was no details we cannot discuss it so there are some serious questions for under armour right now and for investors of what took so long to disclose it, size and scope, the resources dedicated to this and, of course, sort of elephant in the room is this why but obviously
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people speculate on it, why kevin plank decided to resign as ceo after 23 years of leading this company, after founding this company the company has framed that decision as part of a long-term succession planning issue but, of course, the timing can hardly be ignored announced less than two weeks ago and i wanted to contextualize it for you it's a tough run of headlines for ceo kevin plank and for the company over the last few years. this is just sort of icing on the cake and the latest negative curveball for investors. i'll go through a few of them for you. the company's had three cfos since 2016 after several years of very fast -- the company basically hit a wall a few years ago sales began to slow. the company reported a fiscal year net loss. and there have been some serious
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questions internally, externally about operations everything from a me too male dominant culture inside this company to whether they're executing in north america which represents 70% of sales and no longer growing. >> sara, you go, of course, talking about the growth issues and it does go back to this period in question, doesn't it, in terms of whether or not they accounted for sales appropriately, i guess, in terms of the given period they took place. >> right that's the core as we understand it of what the doj and s.e.c. are looking into and if you look at the heyday for under armour, david, they reported 26 straight quarters with more than 20% sales growth. and the company really became obsessed with talking about this point. whether it was talking to ceo kevin plank in numerous interviews with me and cnbc over the years, and you saw it in the
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stock price and it was always given a premium valuation. since 2016, really 2017, and the growth halt, there have been questions about a founder-led executive structure. remember back in april 2016 when the company issued a new class of shares which cemented kevin plank's control over the company but though he was selling off shares when the problems started to develop so in the last few years it's unclear because they have been reporting losses and the growth has slowed down but before that it was a moon shot when it comes to explosive growth during the early years of the company and that's likely though i have no confirmation of that, david, what the federal investigators are looking into. >> yeah. and finally, sara, what about the current quarter in terms of the actual performance right now? how did it look? >> so, it was actually better than expected on a -- among them better margins, an as well
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and the outlook was better and the company said because of the better margins in the middle of a multi-year transformation they will allocate more spending to marketing and try to reignite the brand but sales are still flat and sales in north america are still flat they were a little better than expected but still not growing also, footwear which was their big bet, steph curry, their athlete, the curry shoes, declined 12% in the quarter. so this company still has a long way to go to turn around sales and many skeptical analysts on the street wondering how much shelf space they left because the problems come when nike is killing it right now they're growing market share they have a hot innovation streak and so there are questions to tush it around under armour is decreasing the off price channel and trying to boost sales for products they have been trying to focus
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on direct to consumer which is all the growth is in the industry but so far no growth despite the fact that under patrick frisk, incoming ceo, they have been taking more discipline as the company said and trying to expand the profitability. i don't want to underestimate the questions right now. not just around this probe but around the shift of the company, the culture of the company, the executive departures, the string of bad head loins and just how they're going to recover from this and grow sales and reignite the sales under the deep problems going on. >> and, sara, normally with situations like this there are checks supposed to be in place such as the role of the board. according to the company's latest 10k, their outside auditor, pwc where were all of these people and what was their role kind of in this investigation, as well was there any mention of that on the call today
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>> there was no mention of that on the call. has not been discussed i'll say that their accounting reports of pc -- pwc clean as they point out today so this really does come as a surprise to outside investors though there have been issues. as i said, not just with the ceo departure. their chief of communications abruptly stepped down in september. they have lost a number of executives within the -- ranks gone through three cfos as i said they lost some heads of accounting f. you read the tea leaves there have been problems for years and this really just is sort of a latest issue. i'm hoping to learn more about what the board knew when and why they decided not to disclose it because i think that's a key problem for investor this is morning but so far we don't have much more information on that. >> yeah. those disclosure issues are always interesting
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the choices they make. they're not obligated necessarily to disclose it but you think investors would want to know. sara, so good to hear your voice. it's been a while. how's harrison doing >> he's doing well i had to lock myself in the room just for the period of time. the last hour or so to get ready to do this report. being on maternity leave is hard but the biggest ceo transitions in the industry in more than a decade and under armour, there he is on halloween mickey mouse and he's very sweet, very good baby does everything he's supposed to, eats and sleeps and pee and poop and he's a very -- he's got a very excited older brother samuel who is having a blast with him so happy to be home but miss you guys. >> well, we miss you, too. looking forward to you coming back but harrison takes priority as herb. sara, thank you. >> thank you, guys. >> hope to talk to you soon.
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other big corporate story of the morning is mcdonald's. parting ways with steve easterbrook because of having a relationship with an employee n. an e-mail to employees he writes this was a mistake given the values of the company, i agree with the board that it is time for me to move on. joining us this morning, senior managing director and analyst david palmer good to see you. >> hey, carl good morning. >> some negative calls on this today because of the disruption, some argue, that happens with an abrupt ceo change. what's your view on that >> well, obviously, this was not expected so there's no part of this that's good news. but you do have a co-architect of the plan now taking over in chris kempczinski and managing the most important market just in the size of the market but also the turn around they went through a lot of change in the last few years in the u.s. went through some pretty tough relationship issues with
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franchisees because they did so much change at once. but there does seem to be some recovery in the u.s., both in cash flow and franchisee relationships and coming on to this promotion. >> the journal, for example, in their story sort of frames it as, okay, maybe the succession itself is not an issue but coming when rivals are right on the heels on some critical day parts. does that make it more important? >> well, the good news about that is that you have rivals showing that you can do some things you can grow breakfast certainly. there's the chicken wars as we all know and the fact of demand creation happening in the industry, the industry's doing over 4% comps right now so very strong results mcdonald's has outperformed generally but that's compressed lately mcdonald's just fired their ad agency for advertising and they're going to get going with a new direction and plus signs to get after breakfast and
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chicken in 2020 so a lot of blocking and tackling and way ahead of the other guys coming the reimaging of the base. about 70% done at the end of the year so that's the good news for mcdonald's is that their assets in great shape to just make a marketing push in 2020. >> and yet, mcdonald's shares trailed other restaurants this year up about 9% do you think that the company actually needs more of a strategic shift if they are going to go through a ceo change >> well, they need -- they've gone through so much change that they've let other things fall by the wayside. so the reimaging, the technology investments, launch of delivery. remember fresh beef? they had a sort of a failed value push with the one two three. all these things cause disruption now it is back to basics with throughput and drive through, better marketing, a push on some of the basic type of areas of the menu like chicken and breakfast and these are things
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that were essentially orphaned but they were hard heavy lifting. that's behind them so naturally there should be a shift that's going to happen and it should happen whether steve was there or chris k.'s in charge. >> when do you see that inflection actually taking shape? >> probably the first quarter of '20. we'll see a lot of this stuff happen then. the big drum roll for the street is checking the growth of lapping the early 2018 launch of the one two three so the bottom line is tough comparisons but our feeling is that they should be able to sustain at least a 3%, 3.5% plus comp into 2020 which should ease some of the fears out there just basically because of some of better blocking and tackling around throughput and the innovation and advertising. >> you mentioned marketing of course, they have open spots in the chief marketing officer and in the communications division which some argue let
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chris sort of have a spots to fill by convenience rather than having to reinvent the team but watching the shares here, david. some were wanting it to defend 190. do you get more interested under that level >> yes we're interested here. one of the reasons we are is because of free cash flow. the cap x is coming down through into 2021. you will have the cap x coming down under a couple billion and putting a 4% free cash flow yield on that you get over $230 a share. this thing by the end of the next year should be doing well if the comps even are pretty good and would be that 3.5 or higher. the valuation should be higher from here. on the advertising front, yes. they need to fix, hire somebody in that global chief marketing officer role and the other thing that's happening is you're getting this new head of the u.s. coming back to the u.s. joe erlinger and he might bring
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improved bedside man tore the franchisee relationships and could help the u.s. in the new phase. >> interesting easterbrook's severance package is given some details and apparently is non-competes as an interesting list of restaurant chains and see if he winds up anywhere else. but, david, we'll watch and the price action today thanks see you soon. >> thank you. >> david palmer. when we come back, stocks hitting all-time highs at the open dow up 110 right now k. the momentum continue into the end of the year? later on, lee cooperman on the half at 12:00 eastern time on the record rally as well as his letter last week to presidential candidate elizabeth warren don't ay.gowa
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we are starting the week on an up note dow jones industrial average notching a first record high since july the headlines for trade and earnings are good and helping fuel this rally. vice chairman of investments and frances donald guys, good to see you both got to give you credit because when the data was coming in super weak between quarters you were like, buy it. the targets were an aggressive. >> absolutely. i'm sticking with 3100 but more interesting thing is 2020 and that is probably shaping up more like 3400, 3500.
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everything is falling in place, that is, the reacceleration, the global economy is beginning. the fed is on pause. every central bank in the world is easing and trade issues are getting settling lower the key message with the fed is missed in the shuffle which is they may not cut but they're not going to raise rates any time soon and that long-term outlook is very different than what they used to talk about before which was, well, we create more room for ourselves for the next recession or we are really worried about asset prices and now allabout inflation and that's critical for this rally. >> what about six-month targets on oil, ten-year anything like that >> so ten-year for me is probably going higher. so my outlook is probably 2%, probably 2.5% by middle of next year again, the driver of that is the rise or the reacceleration of the global economy so the fear that we had, we are going to get to a recession, i think is
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getting priced out. >> still 3100 isn't that far from here. is there a risk the stocks near overbought territory at this stage? >> what you are seeing is forward pricing of what is going to happen in the economy so 3100, 3150, doesn't really matter the likelihood of a significant pullback is very small and 2020 is looking very good. >> how about you are you -- has the enthusiastic of 2020? >> i have to agree the fed gave stocks a beautiful gift last week they said we'll not raise until we see significant inflation in five-year forecast i don't have significant inflation and i have the fed on hold for four years and a dramatic call and essentially says markets don't have to worry about the data getting better and the fed raising rates. good news is good news and bad news is a good news. it is a great environment. >> looking for neither a cut nor
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a hike for four years? >> very strange forecast right? what is it telling you we are in a slow growth, slow inflation environment for an extended period of time that allows the fed to stay on the sidelines and let fundamentals come back into play. >> morgan stanley looking at those dynamics said a mix of 60%, 40% no longer works and kind of a low inflationary lower growth environment with lower bond yields. so you work in asset allocation. is that kind of what you are looking at as you recommend -- >> it is a massive theme where do you get carry and yield when bonds give you nothing? it's a negative yielding rate. you have to move into international. you have to be in things like emerging market debt you have to find carry and you are not going to find it in the same places we have been in the past. >> well, i think the 60/40 thing is kind of interesting because i think morgan stanley's point is
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important. that is, if bond yields are bottoming out here then having a 60/40 portfolio and hoping that does really well i think is less likely and therefore i think adjusting that allocation favoring equities more than bonds at this point makes perfect sense. frances' point for carry the world over, whether that is in high yield bonds in the u.s., whether that is in emerging markets, if you're looking for income out of the port yoel ofo, away from government bond is probably what you need to do. >> it doesn't sound like you're worrying of the dollar weakening or a democratic candidate spooking the market next summer. >> no topic is more important from my point of view than next with the u.s. dollar but again it comes back to the carry component. go to a trader, tell them to be short usd and he tells you that's an expensive trade. at the same time we know there's
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technical factors, if it's risk on again u.s. dollar can pull back we're in a window of u.s. dollar weakness, good for equities, good for u.s. growth is it going to persist for five, six, seven years probably not. >> the benefits and not the risks? >> for the time being. this is a one to three-month call it's a little bit of a reprieve for global financial conditions. a key call to make in the next quarter. >> i think, though, the case for weakness even if it isn't as good, the case for dollar strengthening is very, very weak so i think a u.s. equities in that context makes sense but international equities and even emerging market equities make a lot more sense because i think the cyclical rebound is more pronounced in those areas than the u.s. and i think that's where the action is going to be. >> and what if warren wins iowa? >> so warren wins iowa, focusin on exclusively is all of herbig
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projects but i think the likelihood of those big projects getting implemented still very small i think she's probably going to be the likely candidate but if she is i think toning down all of that is going to take place in the actual campaign. >> in terms of trade, you have said that you think that the concerns of peak globalization are overdone how does that relate to what's going on with the trade agreement? do you think that there is a likelihood that some kind of trade agreement to result in more global trade? >> i think more global trade is given as long as u.s. fiscal deficit is a trillion dollars from here until the end of the world i think the likelihood that the only way it can get funded is through global trade so global trade will continue whether that is through china or not is a totally different question but i think even there the engagement with china is significantly more rather than confrontation tall than i think negotiating a real agreement and that's going to happen over 12
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months. >> guys, good discussion thank you very much. >> thank you. >> thank you. the world's largest ipo oil giant saudi aramco finally announcing their plans to go public we have the details next when adequate squa "squawk on the street" returns gold! right, uh...thank you, for that, bob. but i think it's time we go with gbtc. it's bitcoin exposure through a traditional investment account. nice rock. it's time to drop gold. go digital. go grayscale. their medicare options...ere people go to learn about before they're on medicare. come on in. you're turning 65 soon? yep. and you're retiring at 67? that's the plan! well, you've come to the right place.
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welcome back, everyone i'm sue herera president trump tweeting that the whistle-blower's offer to answer questions in writing isn't good enough and he must testify. a lawyer for the whistle-blower announced over the weekend that his client has offered to answer questions submitted by house republicans, quote, in writing under oath and under penalty of perjury, end quote. iran announcing its latest violations of the nuclear deal with world powers. it says it now operates as many as double the centrifuges and wokking on a prototype 50 times
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faster than those allowed under the deal. a flash mob chanting anti-government slogans staged a rally in a hong kong mall to protest what they said was police violence over the weekend. the group condemning a bloody incident last night in which a knife wielding man believed to be a pro china supporter slashed several people injuring five. and passengers at l.a. international airport waiting for more than an hour for their ride sharing pickups after officials opened a new transportation lot officials say moving the line away from the terminals, though, helped speed up traffic there. that's the news update this hour back to you. >> thank you. when we come back here, we'll get more details or some details on steve easterbrook, the former ceo of mcdonald's exit package and of course discuss what's next for the company. let's also give you another check on the markets we are in rally mode
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getting some details on stooe easterbrook's exit package from mcdonald's. >> good morning. mcdonald's filing a separation agreement with former ceo steve easterbrook. dating october 31st. last day was this last friday entitled to 26 woks of severance paid in a lump sum six months following the last day and keeping insurance through may 2020 it's a form of a despite the exit the noncompete is interesting. he cannot perform services, work or for consult with restaurant names large and small that include starbucks, yum brands, chipotle and dominos and other smaller restaurants and can keep the stock options. the filing say this is
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easterbrook fired without cause. there's no specific dollar amount in terms of payout and we were looking for a lump sum and did make more than $15 million last year. and if we find anything else interesting in here we'll bring it to you. >> kate, thank you mcdonald's shares have surged over 95% in the time that easterbrook was running the company. watching them, of course, as you see down 2.5% this morning joining us is leadership expert bill george, a senior foal low at harvard business school he says this is, quote, a tragedy for the company. bill, those are -- tragedy i usually think of something really horrible. like a plane crash why do you put it at that level? >> well, first of all, to steve to show poor judgment, the board is very strong and did the right thing, david, but i feel that he has done a fantastic job for three and a half years this company was going straight downhill and he brought it back the last three and a half years.
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now, the good news is he brought in chris kempczinski for head of u.s. to succeed him and they have a strong management team today. they brought in 11 of the 14 senior officers are new. so he's revived the whole company. taking it into ai and much more automation the $4 billion in-store or home delivery business, the in-store pickup, the automated kiosks in over half of the stores so he's done a terrific job i think and the menu offerings are much better today so here's a brand that can go downhill and he's brought it back. and they i think -- it's a tragedy because they're going the right way and doubled the stock as you pointed out tough environment for retail and he's got same store sales up 5%, 6% 5% u.s., 6% international. all in the right direction that's why i said that. >> right interesting. it is not the first and not the
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last time to see this kind of behavior resulting in a forced exit boards are sort of -- they have to do this, right? even though mr. easterbrook is divorced and it's consensual relationship, obviously. it doesn't matter i guess when you're the ceo at this point in the world we live in right now if you have a relationship with an employee you've got to leave. >> that's right, david and he personally was involved in rewriting the code of conduct. can you enforce it to the employees and not on the ceo this board had no choice it is a good board they did the right thing frankly, they did the right thing three and a half years ago replacing the ceo with steve and allowing him to bring in a much stronger team than they had before so this is not the old guard this is the new guard. so yeah. i think boards have no chance today. very much like intel is doing a great job out there and replaced for the same reason.
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so just -- good lesson to anyone ceo, we tell people at harvard, you are a public figure and your behavior must be above reproach to set the standard for the whole company. >> in terms of the process of how it went down, it sounds like they received a tip that this consensual relationship was going on the board had an investigation they took action and then disclosed it appropriately how would you assess the process by which this went down? do you think they did the right thing in terms of how they announced this news to the market >> i think they did. and they announced it, acted quickly. they have a successor in place by the way, chris' successor is head of the u.s. coming in from international and they have other talented people like lucy brady and could be a potential ceo some day so she's done a lot of this great work i was alluding to earlier so they have a good team the board acting correctly
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they had to do an investigation. you can't take a tip and assume it's correct you have to look into it and they did i give them an a-plus on governance again, i think it's sad. >> all right let's move on to under armour where i would guess your grade is less in terms of the board. specific, bill, to this question of disclosure. when you've got the s.e.c. and the department of justice investigating accounting practices at a company for two plus years but you haven't told investors. they have leeway on this i know but i'm curious to get your perspective of the obligations of a board and management team to divulge these kinds of things. >> david, i'm a transparency person i say when you have the information, get it out there. tell people what you know as soon as you know it even if you're still studying the matter i think they withheld this information. it is not appropriate for investors. now they have a criminal investigation with the justice department these things can get very, very messy and, frankly, one of the
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easiest ways that companies get in trouble is revenue recognition and seems clear to me that under kevin plank trying to keep this tremendous sales growth going or keep the impression of it going and as the sales slowed they weren't willing to acknowledge it. maybe next quarter and then the following year that mountain is higher and higher and deeper and deeper trouble so i always say face reality. look at yourself in the mirror and say what did i do about that david, i'm going to go one step further here this is very serious they need a clean sweep. and so, yes, they brought in patrick frisk to become ceo. i think that's an excellent move he had a great retail background it's a very small board. often these are founder dominated board like in silicon valley kevin is stepping aside january 1st.
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i think he needs to resign now. >> when you say clean sweep, you mean of the board, as well we should point out under armour said they did everything appropriately in terms of accounting we don't know the outcome of the investigation and apparently going on but when you say clean sweep you mean plank out as executive chairman and much of the rest of the board, as well >> no. by that, i mean plank to resign. he's also chief brand officer so he's involved and the s.e.c. and justice will look at this. as long as the founder's there, they have trouble getting the whole story. so i think they needed to have a distinguished chairman let patrick frisk -- they have big problems at retail, big competition of nike. nike is more aggressive. adidas tough competition, david so i think he's going to have to -- they need to bring in an outside chair to help them navigate these accounting practices and get through very tough job.
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maybe from alex brown in his 70s to step up and do it but i think they need that person who's impeccable integrity. no questions and so that's why i think it's almost impossible for kevin to do that and that's why i think to protect himself and his own stock and legal position, he needs to step aside. and there's no admission of guilt here but to clear the air on this, this a tough one. >> tough to see founders step aside as you well know. >> but david - >> yeah? >> go ahead. >> well, all right. >> i was going to -- >> i'll ask my question. which is,they are splitting th chairman and ceo roles which we have seen more of, the journal reporting on it today and higher levels than ever before. you agree with that move >> in this case, yes i think they need to i think the chair should be a true outsider. not someone from inside, not someone who's -- could be
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someone from the board, david. has to be a true independent outsider who's seen that way, not only by investors who are now suspicious because they don't know what's there and also by government officials and if they're going to clear the air and get through this situation, they'll get through it but it's faster if they clear the air with an independent chair and not kevin when's been there before they'll never see him as nps he is the founder. this is unfortunately a real problem with founder-led companies. they have a problem with succession it is not atypical. >> bill, always appreciate your many insights on these matters, thank you. >> thank you, david. meantime, after years of planning and several stops and starts, saudi arabia formally kicking off the ipo for state-owned saudi aramco aiming to trade by december, there are few other details other than
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just the fact it's beginning to trade and could become the biggest ipo on record raising about $45 billion. the kingdom has targeted a $2 trillion valuation for the deal. it sounds like the underwriters are believing it could be significantly less than that, though. >> yeah. >> trying to assess what the investor willingness to pay is for this company i think valuation is the key question. >> i'm sure it is. and they could -- to think you have a half trillion difference perhaps in perceived value is extraordinary. >> there are some benefits for this one significant dividend yield to aim for, over 5% for this one. you know, it is obviously a massive, massive company but it comes with risks. there are political risks like we saw in september with the attacks on the oil fields. also just the headline risk of a saudi company. after what we saw with the tragic murder of jamal
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khashoggi, certain investors may not invest in this thing, not to mention the fact it's an oil company and seeing the funds steer away for esg purposes away from companies like this so they have a large, large book to fill at $45 billion if that is what they attempt to raise. >> they haven't lacked for visitors and attendees at con frern ferences as we see. >> we saw big names attend last week, you know >> so this is quite a process. somebody pointed out to me some time ago, it's been so start and stop, like taking a country public. >> it is. >> it is not a typical company it is literally like taking the country public. >> only looking to float about 3% - >> on the local exchange, as well, correct? >> i think they expect 50% of the investors in this deal to be local.
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the rest to be international but even at 3% of the company this is a massive book to fill. it could be more than $20 billion, more stock they have to sell than alibaba's. we should get more details november 9th only a couple more days to wait. >> all right thank you for that, leslie good stuff. a quick programming note going to break two big interviews in our show tomorrow we'll start with hedge fund manager ray dalio at 10:00 a.m., talking about the record rally and his predictions for social turmoil and the years to come. an exclusive with jpmorgan's jamie dimon and talking china trade concerns, the presidential race and a lot more. that's tomorrow right here on "squawk on the street. we call it the mother standard of care.
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on trading nations more "squawk on the street" coming up.
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welcome back rick santelli live here with the my first guest of the week, dr. slock, chief economist let's get right into it. ceo confidence is ebbing business is opening up the wallet it's been super light and one of the big reasons many give for why the economy economy isn't doing better is that all about trade? what's your thoughts >> what's very important is that if you look at the market, it gives the impression everything is fine, there's nothing to worry about. what the pictures tell you is a story, confidence is the lowest level in a decade. should be paying attention why are ceos worried cap ex has been slowing steadily
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in the last 12 months or so, and also again, why are companies not investing more all of that combined with manufacturing and nonmanufacturing ism trending lower is making us a little worried that maybe there is an underlying worry in particularly corporate america about trade war uncertainty. maybe that's something we need to pay more attention to >> well, i understand all of those can be attributed to trade war. do you think that's all it is? let me rephrase. if phase one is signed and the markets get optimistic, get detail on phase two and are okay with it, would all of these issues over time in your opinion disappear or is there something else >> this is critical for the market this is not so much about what's happening in beijing and washington, d.c., it is more what's happening in corporate america. how do corporate ceos and cfos think of trade war uncertainty do they think now that it is over, let's do more cap ex
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or is there under lying fear the trade war comes back, may not go away all these worries how do you quantify impact of trade war on ceo and cfo confidence is an important aspect and finally, going into election year if we're fortunate, we have trade war uncertainty to election uncertainty, and raises questions on the outlook for cap ex >> i had ed lazear, middle of the road economists, no political bias, he brought up the ever growing notion that you have to start taking some of the democrat candidates seriously and proposals, one will be the nominee. your final thoughts. could the unknown of political candidates that could be president, could that have impact on ceo spending with the unknown in some of the policies being on the aggressive side
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your final thought >> i do think it could i mean, think about it whoever wins the election, even if trump is reelected, there's a lot of uncertainty what will happen a lot of discussions in the macro community as you know too well, do we have unlimited spending available, can we go out and spend more money politicians at the moment are told not only by jay powell and draghi that please go spend more money, then we could get a scenario where not only the u.s. but europe and around the world, politicians may think that okay, we can spend more money. >> we have to leave it there i'm going to get you back closer to the election cycle. thank you for your thoughts. david faber, let's go back to you. >> okay. thank you, rick santelli. let's send it to jon fortt he is not here, he is in san francisco, but he still has a look at what's coming up on "squawk alley. good morning, jon. >> good morning, david a question this morning. should facebook stop running
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political ads all together well, allen wine traub, chair of the federal election commission says no. but s haan idea about a major change they should make. we're going to talk about it coming up on "squawk alley." make fitness routine with pure protein. high protein. low sugar. tastes great! high protein. low sugar. so good! high protein. low sugar. mmmm, birthday cake! pure protein bars. try lemon cake.
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welcome back to "squawk on the street." i am dominic chu stocks are trading, energy is pacing the gains the group rebounded sharply off august lows, trading in positive territory over the past three months among names leading it to the up side, halliburton, devon energy, noble energy up by about 4% or more keep an eye on energy. carl, i will send it back downtown to you guys at the new york stock exchange. >> thanks. w 1"squawk alley" is up next. doup30 sometimes, the pressures of today's world can make it tough
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