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tv   Squawk Alley  CNBC  November 24, 2014 11:00am-12:01pm EST

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good morning. 8:00 a.m. atpel headquarters and 11:00 a.m. on wall street and "squawk alley" is live. ♪ welcome to "squawk alley" on this monday morning. twitter co-founder biz stone will join us to talk about
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super, his brand new app. then a little bit later on doubleline founder jeffrey gundlach will join us in a cnbc exclusive talking everything from the treasury curve to his outlook for apple and tesla. news making interviews you will not want to miss coming up this hour. we are awaiting an announcement from president obama on the resignation of defense secretary chuck hagel. you are looking at the state dining room right now, and that is expected in a few moments. when it happens we will bring it to you live. lot to talk about this morning here at post nine. markets are up yet again, sixth week running. john steinberg from the daily mail north america is here brightening up our morning. we have to talk about apple first of off the bat moving higher after ses ca hanna upping its price target. an analyst with kgi securities who has a good record on apple is predicting the company will
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sell almost 72 million iphones in the current quarter and predicting sales to fall dramatically after the holiday season. as for the competition, though, according to the "wall street journal" samsung is considering a major leadership shakeup after a year that's seen the stock struggle due to weak profitability. let's start with apple. 72 million iphones is quite an astonishing number even though we expected it to be a strong holiday season. >> to give a little context, gene munster at piper jaffray, i think is still at 61 million. btig is at 62.5 and evercorp is at 65. this is definitely the high end at 71.5 of kind of where analysts are coming out. i think a key issue here is inventory. apple is expecting to hold more inventory than they have in the past, so it -- they're going to ship more. we know they're going to ship more. they always fall off after the holiday season. actually what they're expecting is it would be high for the --
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for what would be the march quarter. >> yep. >> if they actually hit that high. >> the big issue is 41 million iphone 6s, only 15 million iphone 6 pluses. that constraint may be due to an inability to produce the volume. more complex components. the interesting thing they put out last week the watch sdk which i looked at and our head of product we were both surprised by how easy it is to integrate that into it. it's basically notifications for the phone, will flow right through to the watch. so that softness in the first quarter coming after the holiday, i think that might be a little too negative. i think we're going to see a lot of excitement with the watch assuming it gets out the door. >> softness is relative when you think how strong apple has been throughout the past two quarters and then on the flip side you have samsung, a report in the verge saying that samsung actually sold 40% fewer galaxy s 5s than it had anticipated and though we knew there were troubles rocking samsung's bottom line 40% fewer would make
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you think that the top line is really hurting as well. >> yeah. samsung has had a lot going on. not the least of which is that lee can hi the chairman over there hospitalized this summer, the patriarch, well into his 70s and questions about their overall leadership going forward not just leadership of samsung electronics. >> next up a few days away from black friday. we are getting interesting statistics from google. shopping searches on smartphones according to the tech giant increased three fold year over year, with this holiday season likely to be the most mobile ever and how about this, nearly 50% of 25 to 34-year-olds use their phone to shop on-line while standing in line. >> i love this press release. i love this press release. this is a google blogs post and what's amazing about it nearly 50% of 25 to 34-year-olds are standing in line. what they don't want to say they're price comparison shopping on their phones. what is standing on-line when looking to buy something saying i can get it cheaper on amazon.
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a bit of word play, don't know where the people are standing. they want to show how big mobile commerce is without alienating brick and mortar. >> one of the reasons they're losing patience standing in line because the lines are so long, which ultimately is still a benefit on the net side to retailers. >> that's true. from the blog posts we can tell they got this information from a survey. they don't have their tracking inside good enough to know where in the store you're standing though i'm sure they're working on that. i did this. i was buying dress shoes for my kids over the weekend and i'm price comparing making sure i'm not getting taken. >> i did it yesterday. my son wanted a teenage mutant ninja turtle. i looked on amazon in the app the bar code is in there and i had to suck it up and buy it on the spot because i promised him. normally i would be like, i'm going to amazon. >> my little pony. >> yes. >> one of the top toy searches from the google survey does that surprise you? >> no. i mean -- >> were you ahead of that trend too. >> to think that jeffrey katzenberg could have been
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making movies and having the toys integrated had the deal gone through. >> we know that this will be one of the most mobile holiday seasons ever. we will be saying that for several years to come. the question remains, jon fortt, to what benefit of google, how much can it make off of the most mobile holiday season ever now that it's closing its base camps, its retail google glass stores which they didn't do that much in sales, but still a retail presence, backing away to some exit tent from google wallet. how do they benefit from the uptick? >> a ton because people are searching on their phones and whether they're on android, where the search is pretty much universally google search or on iphones where chances are they're searching google anyway, google is getting a lot of traffic, able to charge for ads for those searches. some goes to amazon or ebay if you have the app installed but a lot of people are searching on mobile and google's share of that. >> i think the other thing this is going to be a consumer electronics holiday season. when you look at all the
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consumer spending numbers, the one area we see strength is people buying gadgets, everyone still excited about gopro. lot of advertising, higher cpms, inventory constraints coming into q4. it's going to be a digital and very consumer electronics q4. >> i know we will be talking about it in the lead up to black friday. appreciate you being here today. >> good to see you. >> and coming up, we have a great show for you this morning. twitter co-founder biz stone with us in a first on cnbc interview to talk about his new app. and the management at his former company. and a little later on, double lines jeffrey gundlach will join us in a cnbc exclusive. talking oil, stocks, bonds and even a few individual names like apple and alibaba. "squawk alley" is back in a moment. (vo) watching. waiting.
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. welcome back to "squawk alley." you are looking at the state dining room at the white house where we are awaiting remarks from the president on the resignation of defense secretary chuck hagel. we are told that the president is expected to announce that secretary of defense chuck hagel is stepping down. we will have those remarks as soon as we get them, but eamon javers is live in washington and we will get his thoughts after that. for now let's listen in on the president who is approaching the podium in washington. let's listen in. >> about a year ago, secretary of defense chuck hagel was
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visiting our troops in the republic of korea, thanking them for their service and answering their questions and they asked about the usual topics, about our national security, future of our military, and then one soldier, a sergeant from ohio, asked him what was the most pertinent question of the day, which was, what was your favorite college football team? to which chuck replied, born and raised in nebraska, i don't have a choice, i am a strong cornhuskers' fan. now there was a time when an enlisted soldier might have been reluctant to ask that kind of question of the secretary of defense, but chuck hagel has been no ordinary secretary of defense. as the first enlisted combat veteran to serve in that position, he understands our men and women like few others because he stood where they stood, he's been in the dirt, and he's been in the mud.
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and that's established a special bond. he sees himself in them and they see themselves in him. their safety, their lives, have always been at the center of chuck's service. when i asked chuck to serve as secretary of defense we were entering a significant period of transition. the draw down in afghanistan, the need to prepare our forces for future missions and tough fiscal choices to keep our military strong and ready. over nearly two years, chuck has been an exemplary defense secretary, providing a steady hand as we modernize our strategy and budget to meet long-term threats while still responding to immediate challenges like isil and ebola.
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last month chuck came to me to discuss the final quarter of my presidency and determined that having guided the department through this transition, it was an amount time for him to complete his service. let me just say that chuck is and has been a great friend of mine. i've known him, admired him and trusted him for merely a decade -- for nearly a decade, since i was a green behind the ears freshman senator and we were both on the senate foreign relations committee. there's one thing i know about chuck, he does not make this or any decision lightly. this decision does not come easily to him, but i consider myself extraordinarily lucky to have had him by my side for two years and i am grateful chuck has agreed to stay on until i nominate a succescessor and thas confirmed by the senate. he will continue to guide our troops at this challenging time. i'll have more opportunity to pay tribute to chuck's life of
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service in the days ahead. for now let me just say this, chuck hagel has devoted himself to our national security and our men and women in uniform across more than six decades. he volunteered for vietnam and still carries the scars and shrapnel from the battles that he fought. at the va he fought to give our veterans, especially his fellow vietnam veterans, the benefits they had earned. as head of the uso he made sure america always honors our troops. as a senator he helped lead the fight for the post-9/11 gi bill which is helping so many of our newest veterans and their families realize their dreams of a college education. as secretary, chuck has helped transition our military and bolstered america's leadership around the world. during his tenure, afghan forces took the lead for security in afghanistan, our forces have drawn down, our combat mission there ends next month, and we'll
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partner with afghans to preserve the gains we have made. the nato alliance, is as strong as it has ever been. we have reassured our allies with our increased presence in central and eastern europe. we've modernized our alliances in the asia pacific, updated our defense posture and recently agreed to improve communications between the u.s. and chinese militaries. chuck has been critical to all these accomplishments. meanwhile, chuck's ensured that our military is ready for new missions. today our men and women in uniform are taking the fight against isil in iraq and syria and chuck helped build the international coalition to ensure that the world is meeting this threat together. today our forces are helping support the civilian effort against ebola in west africa, a reminder as chuck likes to say, that america's military is the greatest force for good in the world.
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finally, if a very difficult budgetary environment, chuck has never lost sight of key priorities. the readiness of our force and the quality of our life of our troops and their families. he's launched new reforms to ensure that even as our military is leaner, it remains the strongest in the world and so our troops can continue to get the pay, the housing, the health care, the child care, that they and their families need. reforms that we need congress to now support. at the same time, after the tragedies we've seen, chuck has helped lead the effort to improve security at our military installations and to stamp out the scourge of sexual assault from the ranks. chuck, i also want to thank you on a personal level. we come from different parties, but in accepting this position, you sent a powerful message, especially to folks this city, when it comes to our national
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security and caring for our troops and their families we are all americans first. a when i nominated you for this position you said you would always give me your honest advice and irp formed counsel, you have. when it's mattered most behind closed doors in the oval office you've always given it to me straight. for that, i will always be grateful. you know, i recall when i was a nominee in 2008, and i traveled to afghanistan and iraq, chuck hagel accompanied me on that trip along with jack reed, and it's pretty rare at a time when sometimes this town is so politicized to have a friend who was willing to accompany a nominee from another party because he understood that whoever ended up being president, what was most important was that we were unified when we confronted the challenges that we see overseas
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and that's the kind of class and integrity that chuck hagel has always represented. now, chuck, you've said that a life is only as good as the family you have and the friends you surround yourself with and that you are blessed. i want to thank your son and daughter for the sacrifices they've made as well. i know as reluctant as we are to see you go they are equally excited to getting their husband and father back and i'm sure the cornhuskers are also happy that ap fan will be there to cheer them on more often. today the united states of america can proudly claim the strongest military the world has ever known, a result of investments made over many decades, the blood and treasure and sacrifices of generations. it's the result of the character and wisdom of those who lead them as well, including a young army sergeant in vietnam who rose to serve as our nation's 24th secretary of defense.
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so on behalf of the grateful nation, thank you, chuck. >> thank you. [ applause ] >> that was president obama in washington thanking secretary of defense chuck hagel on a personal and professional level for his service over the last two years which the president called a period of stabilization for the department both in terms of strategy and budget. with more on defense secretary hagel's resignation let's get to eamon javers in washington. the president described a meeting he had with secretary hagel a few weeks ago where they discussed the direction for what the president called the final quarter for him in office. what direction do you see the department of defense and the president going in with this change? >> well, actually, kayla, what you're seeing now is a pentagon and a white house that are sort of unraveling a lot of obama's core goals as president. he wanted to get out of iraq. that was what he campaigned on back in 2008. that's what he had seen as one of his signature accomplishments
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and now u.s. military forces are back in iraq fighting a battle against isis. this pentagon is going to be asked to do a very different thing than what president obama had initially wanted them to do and what he signed up chuck hagel to do. the president here, kayla, very much trying to give the impression that this was hagel's decision to go at this point. that's at odds with the reporting from nbc's jim miklaszewski who says hagel was forced to resign and a senior official had concluded that he simply wasn't up to the job. when you see that kind of leaking behind the scenes of people saying that somebody isn't up for a major job here in the nation's capital, that indicates a very awkward period to come here where you've got a white house now depending on a secretary of defense who will remain in his position until a successor is confirmed. that could be any number of months. and the white house is now signaling and officials are now signaling behind the scenes privately they don't think he's up to the job. that's going to be an awkward test it for them to manage. hagel is speaking right now,
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which you would not expect from an event at which somebody had been fired, so there really at pains here to give a graceful exit to this secretary of defense and you can tell part of the reason why is that president obama went back to again and again, their personal relationship and friendship they developed as united states senators together. this is clearly deeply personal for the president and this is not a president who is known, kayla, for firing anybody except under extreme pressure. so clearly some tectonic plates moving behind the scenes on this one. >> important context to have given that secretary hagel was only on the job less than two years. he narrowly was approved by congress in 2013 and was the lone republican in the president's cabinet, so certainly we will be watching to see how difficult it is for the president to nominate a successor. >> that's right. remember, going back to his confirmation hearings, secretary hagel had a very difficult situation in his confirmation hearings. didn't appear to be up to speed
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on a lot of issues he was questioned about. this has been rocky from the start. a lot of pressure on the president to pick somebody who will be able to get off to a fast start for the remaining two years of his term. >> i know you will be listening in to secretary hagel's final remark. we appreciate you joining us this morning with that. >> you bet. >> eamon javers in washington. >> let's switch gears for a moment. a busy year for twitter co-founder biz stone who launched his first app under his new start-up and published a book on his lessons from twitter. biz is out with a new social app called super. i just posted a little something from super on twitter. so it's like a biz fest happening right now. talking first to cnbc on his new app and how it fits in with the competitive social media landscape is biz stone. twitter co-founder and ceo at jelly industries. biz, thanks for joining us. i just downloaded super this morning. made my first post about this interview. how meta can you get. why this particular app at this
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particular time? why do you think this is going to take off? >> well, first of all, thanks for having me. you know, this app is fun. that's what we're going for when we made it. you know, i've learned over the years that when something is fun, then people use it and if a lot of people use it, it can become important. so the key is to start with fun and, you know, that's really what we did and that's what we were doing with -- when we started twitter. we were just having fun. so having fun is one of the most important things you can do. >> so what is it about imagery that makes this particular app the one for the time? i mean instagram has got a lot of growth going on. facebook was built on photo sharing. what is it about the images and the graphic appeal of super that you think is going to drive growth here? >> well, i think, you know, people just really love looking at pictures on their phones. i mean we see it all the time. there's cameras built into the phones. i mean these are really just
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cameras with phones on them if you really want to look at it that way. but, you know, the way super works and you can download it at the way it works is you type an opinion in, turns out people like having their opinions posted to the internet, who knew, and images automatically is suggested for you. if you're lazy and don't want to find one it's automatically suggested based on what you typed. if you don't like that image you can choose some artwork, choose another image, and then you put your text over it, kind of inspired by that artist barbara krueger who took popular images and put big bold type on top of it, fun, bold, artistic app that lets anyone kind of become an artist. it's a lot of fun. >> it certainly looks fun, biz. i'm wondering when you think about who is using this app and what type of people will be posting their opinions is there any platform be it twitter, facebook, instagram that you think is the best fit for this
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type of content? >> you know, we don't know yet. it hasn't been out for even a week and we know -- we do have a sharing functionality that allows people to posts the -- their super posts to instagram and to twitter and to facebook and, you know, our super posts are square in format. so maybe instagram is a good place, who knows. we'll see. >> so is it too early to even think about growth trajectory or business model? i know, you know, with entrepreneurs you generally don't think about business mod until a fun app like this up front, but what are the key things that you're watching in the early days with this app to see what tweaks you want to make and how well, it's doing. >> well you're right about we don't, you know, we don't -- we're not too specific about a business model early because business model follows when you have a lot of people. you know, there's no such thing as an application that has, you know, hundreds of millions of
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people using it that doesn't have a revenue model. but you got to get there first. you got to focus on fun. and, you know, we look, the type of patterns we look for now early honestly are what are people trying to do with the app and what kind of value are they trying to get out of it that we can make it easier for them to do? that's something we did in the early days of twitter. we looked for patterns, saw what they were trying to do an made features based on that. that's what we like to do. >> biz, some of the early coverage of super calls it a side project or diversion or pivot from jelly. i'm wondering how super fits into the jelly business model or if this is a recalibration for the company with this new product? >> it's a little bit of both. i mean it's a completely different product. it has -- jelly was not fun. it was more like doing homework. it was my ha louis na genic optimism people would like to
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just help each other all day long and people were actually doing homework with jelly. with super, it's just really fun. and the only link that the two share is that super posts are kind of like answers to questions that haven't been asked on jelly. it turns out that the most -- that the funniest part of jelly was really just answering questions so we took that fun part, we made it into a whole app. so now we just support two apps at jelly industries and we're keeping jelly alive. people who use it love it. when it works it really works great. but we wanted to go back to my roots as an artist and make something just a lot of fun. >> biz, why didn't twitter create this product? i mean there's some criticism of twitter that products aren't coming out fast enough, they're not innovating or iterating fast enough to drive growth. why shouldn't they have created this? >> well, they have a lot of stuff they're working on that they don't necessarily release
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and they -- >> isn't that a problem? >> they also have a lot of other things to deal with. i mean, twitter is a public company. it's difficult to do the -- i have seven people on my team. so we can do anything we want whenever we want. we can change our plan, we can make a new thing. you know, twitter's got a lot of people to deal with and a lot of things to deal with before they can -- they can't just, you know, rock something out like we can. >> right. no certainly being a public company has its unique challenges. we would be remiss if we didn't ask you more broadly about twitter. we were talking a couple weeks ago about the one-year anniversary of its debut here on the new york stock exchange and i'm wondering what you think the biggest priority or the biggest challenge for that company at its current valuation and with the strategic missteps as some have called it that have happened in the last year? >> well, you know, i don't work there anymore, so you got to think of my opinion as kind of an outsider opinion. you know -- >> sure. >> i think the biggest challenge
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i think really is just thinking long term. because, you know, when you -- when a company goes public, you tend to fall into that habit of thinking quarterly. and you really got to remind yourself that you're building a company of eternal value and, you know, you want to think decades in advance, not quarterly. that's something that you really have to remind yourself and all of your employees to do is think long term. >> how will you be able to tell if twitter starts doing more of that? i mean, facebook is known for thinking very long term, but how can you tell from the outside as we both are, whether twitter is doing more long-term thinking? >> i don't know that you can. i mean i don't know that you see what people are thinking. if we can do that, that would be a good app, i think. that would be a great app. >> biz, i know you started multiple companies and there
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seems to be this hubris coming out of silicon valley i would love to get your take on. we had a guest that said to start a company you have to be enough of a jerk to think you can disrupt an entire industry but not so much you alienate your investors or customer base. i'm wondering whether you think silicon valley has jumped the shark or striking the right term of jerkiness. >> depends on who you're talking to. when i launched super i launched wittist a tweet and wrote a short medium post that said we're not trying to disrupt anything, we're not trying to change the world, we're not making the world a better place right now, we're just having fun. if you -- you know, the implication was, if you don't like fun, you can take your ball and go home. i mean i guess that's the jerkiness part. i didn't write that. but some companies really need to have an aggressive ceo founder in order to in order to push the boundaries to get the
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things done they need to get done. i don't have to be that kind of ceo founder because i'm making something that's fun and, you know, it's like take it or leave it. i don't have to do battle, you know, to -- in order to get my app into cities, infrastructures and things like that. >> seems like you're alluding to uber which i would love to get your thoughts on. a company that stands on the opposite end of the spectrum of what you're trying to do. do you think they're pushing the envelope too far, being too aggressive in that market? >> well, i don't know. you know, i'm not good at speaking to other people's, you know, strategies, but i will say that i'm a huge fan of uber. it gets me where i need to go around the city because i'm totally bad at drebesirections. i love what they're doing. i think uber is one of the
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companies that needs to be aggressive. i heard an anecdote from their coo one time at a dinner party and he said, you know, we went to some city, it was some city in the u.s., and the mayor said you know, i don't think -- i just don't think we're ready for uber and the founder said back to him, you know, uber's in somalia. i think you're ready. >> booze, iz we appreciate your comments on everything. a lot going on in the valley and we hope you come back soon. we will probably become addicted to super. >> download it. >> biz stone, thanks so much. >> thank you for having me. >> let's get to phil lebeau with some breaking news. phil, over to you. >> thank you, kayla. this comes to us out of texas where a judge has declared a woman who was previously convicted of negligent homicide for an accident in which her fee
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yan say was killed in a gm vehicle, a judge has declared she is innocent of those charges of which she was previously convicted. this comes a few hours after general motors sent a letter to the attorney representing this woman, candice anderson, the letter to the attorney basically said look, the vehicle that was involved in this accident, was, in fact, a vehicle that had a defective ignition switch, so today there was a hearing and this morning a judge in texas declared the innocence for candice anderson who was previously convicted of negligent homicide due to an accident in a recalled gm vehicle back in 2007. guys, back to you. >> all right. thanks so much, phil lebeau, in chicago. when we come back, double line founder jeffery gundlach has been silent on bill gross' dramatic departure from pimco until now. he will join us in a cnbc exclusive next on "squawk alley." there's a difference when you trade with fidelity.
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uber,. welcome back. it is the first time double line's jeffrey gundlach is on the record after the dramatic exit of bill gross from pimco. sara eisen is in los angeles with jeffrey gundlach himself, the proclaimed by some in the media the new bond king. i'll send it over to you. >> all right. thanks very much, kayla. we are here on double line's
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trading floor. thank you for hosting us here today. >> sure. >> you're having quite a moment here. $2.6 billion of in flows in october. that was a record for you. >> okay. >> money coming in from pimco investors? >> probably, yeah, sure. >> how has that impacted you? we haven't really heard from you since the departure of bill gross in a very dramatic fashion. what are you seeing in terms of clients? >> well, what happens is, when there's a big organizational change, a lot of seasoned advisors know that they've seen this movie before and pull their money the first day. so you saw a lot of money going into money market funds and index funds, which is understandab understandable. people at first flee from the organizational change. they don't know where they're fleeing to until down the road. i think a lot of money is still in motion. not so much in the mutual fund industry because i think a lot of that happened in the first few weeks, but institutionally there's a lot of things going on
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that investors move more slowly than self-directed money making changes because of the organizational switch there. >> you had that meeting with bill gross about possibly joining you at doubleline. are you glad he's not here? >> you know, mixed feelings. it was sort of a 50/50 kind of proposition in terms of my interests. there was a lot of positives and maybe a lot of negatives. i'll say one thing our investors are happy that didn't happen because they invested in something that they thought that they knew what it was and they've been happy with it and it's been successful and if you make a major organizational change like bringing in somebody with that kind of power and personality, it's understandable that investors would ask what does this mean and the only honest answer would be, i don't know. we'll hope for the best, but we don't know. so we wouldn't have known what would have happened. i would like to think it would have been successful but it's just as well because as i said at the time doubleline doesn't need a make-over. we're a mature company,
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performing very well, operating like a well-oiled machine. so glue in the gears probably not a positive. >> i want to talk about the performance in a minute. some calls on this bill gross idea, people crowning you the new bond king, an article in "forbes" glory to the new bond king. is that a title you're happy to accept. >> i never try to court that kind of thing. that's something that came out because of the coverage on barons in 2011. i was surprised by that headline. >> with the spectacular downfall of bill gross i think that super charged it. >> how come no one says who the stock king is, who the potato chip king is. >> the bond world, it's so much bigger and in ways it's harder to master. i mean you know that. you had a flat year in 2013. this year is a little bit better. >> we outperformed by a lot in 2013 actually. the market down 2% and we were slightly positive. it's quite a strong performance here relative to a benchmark. but bond yields went up in 2013.
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a lot of investors were in a portion we weren't. it wasn't a huge positive return because of the rising interest rates. >> let's talk about that call. that was a good one, 2014, all of wall street, the consensus view was that yields had to go up, treasuries were overvalued, you said the opposite. >> yeah. >> it turned out to be right. >> treasuries being overvalued was a strange opinion to have entering 2014. you might not have thought they were wildly attractive but they weren't overvalued. in our work during 2014 the treasuries were the cheapest sector of the bond market. today treasures are still slightly cheap. >> treasuries are cheap. >> versus many bond sectors, yes. >> versus spain. >> no versus corporate bonds, versus municipal bonds, treasuries are cheap using certain historical analysis. they're less cheap than they were. entering 2014 everybody was negative. 68 economists said rates would rise. everybody was bearish. it was like a 97% on a daily
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sentiment survey bearish and yet there were all kinds of reasons to like treasuries, interestingly. cheap versus other bond sectors, relative value versus europe and japan. >> does that carry over into 2015 all of these reasons to like treasuries? >> they're less compelling but the reasons are still i think fairly strong, particularly the relative value. today for the first time i think ever, spanish ten-year bond yields are below 10%. it seems almost unthinkable u.s. interest rates could rise in any meaningful way against a backdrop of spanish bond yields being less than 2%. of course french bond yields being close to 1%. >> i think ireland is at 1.5 or something. >> italy at 2.17. treasury bond yields are actually reasonably attractive. it's a sad state, right. >> what do we see for the ten-year next year? we see this range, 230 now? >> well, it's been -- the line in the sand for me has been 220 on the ten-year. remember that in the middle of october, the ten-year breached
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220 in the wild day when the stock market was down 460 points and then ended up -- >> that was low. >> and the ten-year treasury took off and reached 220, down to 186. what's interesting now we're back above 220. you were almost the next day. 220 basically held in a certain sense except for the poor person who ended up covering their short which is what must have happened, to get the ten-year down to 1.86. i think what's remarkable is the lack of progress for the ten-year to ever go higher in yield. that's the story of 2014. not just that rates fell against a consensus viewpoint of the opposite, what's been fascinating how the ten and 30-year bond yield have almost never gone up at any time even locally for a short while this year. think about 2011 when the ten-year treasury dropped 2 hu0 basis pointses from 375 to 175 along the way it had setbacks went up 70, 80 basis pointses, it goes down irregularly the
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bond yield. this year no setback. people waiting to short the bond market have been completely frustrated. and values are going to drop because if they can't go up, then they have to go down. >> does the fed give a reason to go the opposite way? do you expect a fed rate increase next year? >> i think the fed will probably raise rates next year, not for fundamental reasons. the fundamental reasons for raising rates are completely absent, particularly the inflation argument. commodity prices the same they were in 2010. they were up in the first quarter, there was a little bit of inflation argument you could have made back in march. it's gone. we've had four months in a row of cpi being zero, and if oil is going to stay in the mid 70s or go lower which is possible we're probably going to see a year over year cpi of zero. the fed should not be raising interest rates and yet they don't want to be at zero. they're in a connumb drum. they don't have a reason to
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raise rates. >> that will force them to do it? >> might raise rates to see what happens. >> what happens to the dollar? you have had this strong dollar call. everyone is on this trade. are you worried it's getting crowded? >> sometimes the consensus is right and currency trends are incredibly powerful and long lived. i think on a short-term basis anything can happen. the dollar will probably appreciate, particularly if the fed raises interest rates. >> more against the euro or the yen or both on easy street? >> the yen has been weaker than the euro versus the dollar and every reason to believe it will continue to be among the weaker currencies. again a crowded trade. the yen has been short the yen has been a popular trade. guess what, it's been right. >> it's worked. >> you never really felt any pain. >> correct. >> it wept from 80 to 102, sat there in kind of a mind numbing way for so many months, you swear it was being ma manipulated and then the next thing it weakens and boom at 118. everyone thinks the yen is going
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to 125, 140, i do too. i said two years ago the yen will ultimately find its way to 200. >> you told us a few months ago. >> not this week but will ultimately get to 200. >> we've got to take a quick break. jeffery. we are here at the doubleline trading floor and we will come back and talk to jeffrey gundlach about his other famous calls, including equities. some of them have been not so hot including apple, the stocks we talk about here regularly on "squawk alley," we'll have to ask him about alibaba and the massive bond sale when "squawk alley" returns on cnbc.
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coming up at the top of the hour, while many strategists are cautious for 2015 oppenheimer is raising his target for stocks and tell you why he's bucking the trend. why she's adding risk no matter what mario draghi does next. big call on big oil does it mark the bottom for crude? back to l.a. and sara eisen and jeffery gundlach. >> thank you very much. here in l.a. on the trading floor of doubleline with jeffrey gundlach crowned the new bond king. i want to talk about stocks with you. scott mentioned oil. do you think oil prices are going lower? >> i think oil prices will go lower. i think we're in the second part of the cycle where first prices drpds for maybe economic reasons or global activity reasons but now the producer of oil are really getting squeezed. many countries need higher oil
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prices to balance their budgets. iran, for example, needs oil at 130 plus. >> that's why everyone is looking at opec this week. >> right. >> you're at the stage with oil prices having sort of settled below 80, that a lot of countries will probably start increasing their production, maybe on the sly, against what they're supposed to be doing or say they're doing, but i think production might be ramped ups because countries that need revenue from oil, well, you know, the price isn't what it used to be, so it's price times volume equals revenue. with the price down the volume could go up which could create a vicious cycle about oil prices going lower. >> wti, what levels are you thinking? >> well, i think it's going to go to 70. that's really like i said, 2.20 the line in the sand on the ten year e, i think 70 the line in the sand on oil. drops below 70 -- i'm not really -- i don't really have a view whether it will or won't, but if it does i think it's going to drop pretty quickly a
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lot lower because of the second part of the cycle countries pumping a lot. one thing that's interesting when i started in this business 30 years ago, everyone was fixated on oil. they remember the '70s and how that fueled so much inflationary problems. oil is still a fantastic indicator. it's highly correlated. if oil stays around $75 a barrel, which i think it will. >> deflation. >> it means that the cpi should probably go to zero. year over year. zero. so certainly not inflation. so again, there's no real reason why bond yields are supposed to rise and they don't because the inflation picture has definitely shifted towards one of fears more of deflation than inflation. it's fascinating again, when i started in this business, everyone was fixated on inflation. now you hear japan and european people like mr. draghi saying, there's a dark cloud over our economy.
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the dark cloud is we can't get inflation to accelerate like it's supposed to at this point of an economic cycle. so interestingly, now inflation is viewed as the friend and deflation is the enemy. i've been saying for years the united states will ultimately have inflation. but i think it won't happen until people want it. they actually want inflation. because indebted societies and indebted developed economies need some amount of inflation to help devalue all of their debt. it's a really terrible situation as u.s. homeowners found out in 2008, 2009, when in debt and your assets are depreciated. >> i want to talk about some of your stocks views as well as the big picture thoughts. apple right now on its way to a trillion dollar company, about $700 billion in market cap right now. a few months ago you told us it was a sell. >> well i bought apple at 405, so selling it at -- well that's before the reverse split. you have to -- >> sure. >> selling around 700 isn't
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exactly a road map to the poor house. but i think what's happened to apple is this apple pay thing seems to be potentially a big deal and so sort of fired a retro rocket underneath the potential for -- >> would you be a buyer? >> i don't like -- i don't like buying things when at an all-time high. i'm a buy low person. i'm not a buyer of things when pushing new highs. i think apple has like i said fired a retro rocket under their economic prospects. it's probably going to be a market leader as opposed to a market lagger. >> you talked about the headline grabbing technology stocks before, tesla, amazon, any of them piquing your interest? >> i spoke at a thing back in may where tesla was at 200 and i said i have -- i like tesla. it's the batteries. all about the batteries. i think they could ultimately
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change society if they pursue battery technology that really creates the ability to store enough energy that you can say run a house on, get yourself off the grid, particularly in the sun states like here in southern california you put solar could really take over. i think tesla is an interesting company, not for the cars. in fact -- >> what about the stock? you said you buy low. almost a $30 billion company now. >> i like to have 200. it's higher than that. been flopping around a lot. i think tesla really has an ability to be a major, major deal. so it's risky. because you're right, it's at a high valuation. i like it. and so i like that one. and amazon i've been mystified forever. i remember back a year ago going to my equity guys and saying i don't get this amazon thing. they never make any money. >> it's about the long term. >> and they say -- and one of my guys said, i love that stock. my favorite stock in the world. i said but they never make any money. he says but just wait.
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they keep reinvesting. the market has sort of given up on amazon. i think my point of view has become sort of embraced by the market, that, you know, it's sort of show me. people from missouri now on amazon as opposed to saying okay it's going to happen. it's been 17, 18 years. at some point you have to produce. i think there's -- they're going to need to show some profits for that stock to get back. >> while you're thinking about game changing companies and technologies what about alibaba? >> alibaba is probably the, you know, the best company in china. they have been well embraced. i don't know an awful lot about it frankly, but apparently they have the ability to be the largest company in the world. >> would you be a buyer if you learned more about it? >> i don't have an opinion. >> you like chinese stocks? >> i kind of do. just on the market action. the chinese market was the weakest market just about in the world for a few years until recently.
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yet the chinese economy has become noticeably weaker. the chinese are easing. strange as the economy has gotten weaker the stocks have started to get stronger but they appear on a chart basis to have put in the base and they've been persistently strong ever since they broke out above the 2100 level. the chinese market is strange but seems to be a leading marker. >> final question, we've gone through a lot of assets and countries and themes. we need to make a headline here. what is going to be the biggest call of 2015 that you have? the biggest trade on? >> i have to come up with it first. it's not year end yet. >> isn't that what you do here? >> i think thats surprise will be, i don't know if it's 2015 or 2016, how low a level the u.s. yield curve flattens out. i think the fed will raise rates. the message of 2014 has been, as
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the potential for fed rate hikes has increased the long end has done nothing but rally. the yield curve is going to flatten at a level previously thought unthinkable. >> previously thought unthinkable. we'll leave it there. very jeffrey gundlach. thank you for spending so much time and having us at your office on the trading floor. back to you guys in new york for "squawk alley." >> thanks, sara. up next, the prospects for commercial drone use in this country are up in the air in more ways than one. we'll explain when "squawk alley" comes right back. they challenge us. they take us to worlds full of heroes and titans. for respawn, building the best interactive entertainment begins with the cloud. this is "titanfall," the first multi-player game built and run on microsoft azure. empowering gamers around the world to interact in ways they never thought possible. this cloud turns data into excitement.
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because at scottrade, our passion is to power yours. some clarity on the future of drones. according to the "wall street journal" the faa getting ready to publish a proposal for rules on the use of commercial drones. operators will have to have a pilot's license and limit to flights during daylight hours and need to fly below 400 feet, within sight of the person at the controls. current faa policy allows recreational drone flights but bans them for commercial use. the journal says drone flights face faa hit. do you think this will be
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restrictive some. >> extremely. if these rules go through commercial drones will not be a big deal at all. >> we're expecting that proposal to examine by the end of the -- come by the end of the year. it could be a couple years before we get the rule but the industry we'll be watching. we will send it to the halftime show with the dow in negative territory. scott, over to you. >> kayla, thanks so much. welcome to the halftime show. starting lineup, stephanie is the coportfolio manager of jim cramer's charitable trust. joe is senior managing director at vertis. josh brown, the ceo of rid holtz wealth management and dr. j, jon najarian, co-founder of option munster. our game plan, a big call on big oil. we're going to talk to the analyst who made it and what it says about where crude could be headed from here. what will draghi


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