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tv   Squawk on the Street  CNBC  December 5, 2017 9:00am-11:00am EST

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the largest ecommerce or largest growing ecommerce company in the world. probably do that on thursday that's all i got from shanghai. >> do you spend more time in the air or on the ground this trip >> the air is competing with the ground probably very similar. >> exactly andrew, want to thank richard. >> thanks for having me. >> "squawk on the street" is coming up right now. ♪ >> good tuesday morning, welcome to "squawk on the street." looking for modest lift for stocks at the open as the tax overhaul on capitol hill remains the key story for many investors, got global pmis in focus as well. europe is mixed and imm services
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heading our way in an hour and crude inventories not long after that new record at the open but the sell-off for tech stocks continues to weigh on the nasdaq and s&p. >> jack ma, the push to brick and mortar and why jeff bezos struggled in the chinese market. a turning point for snap, a key 2018 outlook upgrade shares are up in the premarket. futures are pointing to a higher open after the record setting day for the dow and s&p off-set by the sell offin technology microsoft and amazon had the biggest impact on the nasdaq and optimism surrounding tax reform. we did manage to get the vote in the house to go to conference with a little bit of drama last night. jim, you said the reversal yesterday, doesn't bode well >> well, look, i was doing my show and you posted a little squib about reversal and i did not realize how serious reversal was
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obviously it's more serious for the -- but i find reversals catch people out of position when you're out of position, you scramble and start reaching for things you shouldn't or reach for gap stores or reaching for macy's, i like these but then you decide there isn't any place that i won't sell a western digital. there's no price i won't sell a micron the key to the market right now will be to see when the money stops going into verizon and at&t those are at the follow krom of what people are running to if the raises -- if we have a raise of rates, watch them they are going to tell you what's going to happen. >> they were up 1.6%. >> did anything happen >> broadly speaking telecom and tech, fang, was down 1.9% or s&p tech i should say.
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fang was even worse. then that move into media which the old media stocks -- i watched discovery -- >> discovery was one of the best performance stocks. >> amc, by the way, discovery is a malone company think they have a high tax rate? that's not even -- had nothing to do with fundamentals, heavily shorted stocks that have not seen a lot of love that we're getting movement into them and meanwhile the big tech names were taking on the chin. it was nasty. >> what's good is their opening down every one of them. if you start looking at 2019 numbers, which for a tech company you're going to do, you're going to see astonishing things i was working on alphabet last night. what do you think alphabet trades at if you get the decent number 120, 119 it's 21 times earnings 21 it's not just a search company anymore, it's heavy into the cloud. it's heavy into youtube, we saw
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those people have to be added but clorox sells -- colgate, huge premium to these stocks product tcter is that right the answer is they are all one, fang trades with fang. and i'm beginning to see after this decline, some of these stocks represent value it's just that the problem is that the rotation is so brutal, that you'll have a stock like auto zone, they were supposed to be destroyed by amazon it had a big number. it beat the numbers. it's -- bought back stock the whole way. look at that yesterday was the revenge of many companies we thought would be destroyed by amazon. >> that's for sure as far as the nasdaq goes, over five days, only once in this entire bull market has the nasdaq underperformed the s&p by as badly as it did over five days. >> that's a good sign. we have to watch for internal
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reversal of tech and a decline of bank and decline of teleco. i don't know if you can get a decline of retail, because retail is pretty darn good that was a big change. the inventories are so mean at retail, there will not be a promotional environment. let's watch banks and at&t area verizon and micron and western digital and lam research those stocks have been crushed. >> apparently the selling was led by the multistrategy macro funds, doing most of the damage out there, selling the stuff. >> multistrategy, they go to the ohio stay pension fund >> macro, right. >> you know what they are, really idiots >> there have been -- there have been some good calls, costen told you -- >> i like costen. >> neutral on information technology on november 21. >> costen is --
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>> got you out before it got dicey. >> he's got a multistrategy five times x algorithm machine learning guy who really is about artificial intelligence. we're not pirating sky net to run a portfolio. okay okay >> okay. you've got an okay for me. >> you want another one? >> you want to talk beamus >> i don't they put it up for sale. you know what symbol has, buy my store, bms >> we'll get to beamus maybe in the b block, how about that? jack ma might be a bigger story ramping up the retail strategy during an interview with andrew ross-sorkin in shanghai. take a listen. >> we've been moving very aggressively in the four years ago when we grow so fast, we got a lot of complaints about traditional retailers, ecommerce
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take away all of our jobs, all of our business. so we asked ourselves, do we want to serve our customers or kill all their retail, their traditional retail we think we should work them together we believe online, offline should work together with the data with the customer experience, we think retail, the traditional retail has a huge potential if we do properly, if we work together that is why we're going aggressively in the past four years. >> we think traditional rea tail has huge potential if you do it properly. >> well, they've been a huge winner it's interesting as he talked alibaba stock dropped and that's just coincidence. >> i think so. >> he's had a tremendous run. >> i think alibaba is actually kind of interesting. >> it's had a great year, up 93% as the stock -- they have already embraced the idea of brick and mortar this is not a new strategy, that has been part of harmony,
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harmony they are trying to present of all of the different pieces of alibaba. >> i did a profile on half dozen chinese stocks two weeks ago, be careful, they are all down about 20%. got to be really careful about the chinese market all of the ones listed, you know what they listed >> day after day here, what happened to them >> they all go down? >> yes >> why >> because you look at the if many -- financials you don't know what they are. >> there's a lack of transparency. >> i know our friend herb greenberg thinks there's no transparency but you and i -- >> could we hit them any harder when we were asking questions. >> it's a year and a half ago we're talking about. >> that far? macy's call? >> that was two plus years ago. >> someone recommended tech resources delivering alpha and that was right. >> that was good >> that was a year and change ago. >> what happened last year that was worth being involved in?
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>> at delivering alpha you're asking >> yeah. >> i don't recall. we weren't part of the best ideas -- >> this summer, they got rid of our panel. i want that panel back. >> no, you don't. >> no, you don't. >> working with you. it was like the two guys in sesame street up in the balcony. >> statler and waldorf you're statler. >> waldorf is closed, isn't it >> for renovation by the chinese. >> chinese. >> that was full circle. by the way, he's still missing, chairman wu. >> we don't know where he went he disappeared. >> ma also told andrew about president trump. take a listen to this. >> i think americans also should have a patience -- maybe you do not agree with him when he say i want to do this, been president only one year or something, can never achieve something within one year at least he's trying >> ma, at least he's trying,
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that's what jack ma says about the president. >> he's trying. >> hard to do a lot in year one. >> i don't know. he's a diplomat. jack ma is a diplomat. between ma and ma, which do you like ma being alibaba and ma being mastercard >> i saw that, $4 billion? >> i prefer ma over ma. >> which ma are you preferring >> the american ma >> got it. >> aj bonga, ceo of mastercard brilliant ceo and jack ma is brilliant -- i like yo yo ma, in my class. >> he's excellent. >> you can't buy him. >> he's the only musician at the table that i'm aware of. >> pretty good. >> you play harmonica or something. >> my daughter plays uk lele. >> real quick, we should get to
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news on dish charlie ergan stepping down as ceo. he stepped in as ceo -- take a look at shares of dish, was it joe clayton who had the job. he focuses on the wireless business and they are promoting eric carlson, previously president and coo so he'll still report to ergen will remain as chairman previously he stepped down and now stepping back in it now stepping down again. >> i haven't talked to him in a while. >> he's talking to me now. >> no, he's not at all we're very competitive against each other some guys i throw him so he doesn't say, you know. >> his self-esteem doesn't collapse. >> so you don't beat me down every single time, like oh, my god, how did that guy get on "mad money". >> mcadoo, i'm sorry, david, i
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don't know. >> when we come back, snap gets an upgrade this morning at barclays is the worst over for that stock an exclusive with brian moynahan on many issues including tax reform they did announce a buyback today. stocks up almost 30% in six months take a look at the premarket we'll keep our eye on speaker ryan today as this bill tries to get to conference. more "squawk on the street" from post nine in a minute. [ mouse clicks, keyboard clacking ] [ mouse clicking ] [ keyboard clacking ] [ mouse clicking ] [ keyboard clacking ] ♪ good questions lead to good answers. our advisors can help you find both. talk to one today and see why we're bullish on the future. yours.
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snap is up in the premarket, barclays believes now is a good time to start accumulating shares of snap, adding the worst is behind the company. target goes from 11 to 18. they've been fairly cautious up until now. >> i thought this was a very good upgrade talking about the redesign we talked about last week, ten cents open market purchases create a floor put on it this whole notion that facebook is killing snap, that seems to be a narrative that maybe we could live without in the sense there's room for more. i like this piece. and i guess one of the reasons why i like it, they didn't like it when i see a guy that didn't like it and suddenly upgrades it, and really told -- i think
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that gives you some gravitas. >> it is the same analyst who upgraded apron yesterday. >> that was another good call. apron is in tatters but the redesign will be very good i felt that when they decided last week to split the news from social, i thought that was a very smart move. >> you did >> i've been trying to find an entry point for it i think that it's down for the year so you may have people selling and i see the stocks are down, aren't coming back this was very clever ross sandler has been very good. very smart. >> ross sandler is the analyst in question here >> yes. >> i'm not familiar with his work. >> you're not familiar with it ross sandler does quality work i always felt his work is quality. you could have just agreed with me. >> i don't know ross sandler i like saying his name though.
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>> ross sandler. >> okay. well, leave it to my thinking that this is the right level i think this is -- >> you think this is an entry point for snap >> i have felt there's a level where you have to just accept the fact that younger people like this and if they get their thing -- look, i tell you, i send something in twitter recently which i said if instagram stories were to develop news, it would be very powerful against snap. but it doesn't and instead people say people don't use both, jim, what do you create instagram is better than snap no, a lot of younger people get their news from snap the fact they separated the news from social, means there's less fake news. >> do you think, retooling a big part of the ad model, nine months after the ipo does that compare to facebook getting the picture on mobile? >> i thought it did. i was thinking now in a lesser extent because they aren't as savvy as -- you had cheryl
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sandler in there i see no sherl sandler -- >> sandberg. when she was on a conference call initially, very bad second call, unbelievable. third call, you added zuckerberg and sherl telling a fabulous story. after they say mea culpa, you get momentum twitter at 20. >> similar, a little bit, billion dollar less than market value than snap but similar size. >> not all going to go to facebook i think that people who have kids who are -- you're seeing kids who are 18, 19, 20, stepping up, to stick with snap at 20, 21, 22. that's new i think there's room for -- whoever thought there's not room for snap and instagram >> well, plenty of people.
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people who sent the stock reeling, didn't have -- they have not shown a great deem of momentum in the business. >> no, none. this could do that snap's engagement is already best in class, 25 times sessions, we should get them on the show. >> ross? >> well, that would be good but we should actually get evan on the show you think he have ven will come on >> no i don't. he has shown no willingness to speak with us in public. >> today is a new day. >> it is >> i'm going to reach out. >> i'm going to reach out today to zuckerberg and bezos and larry page -- >> follow them for tonight. >> they are all on my show, mostly -- some of them i had to give the heisman to. not today but that was musk. >> zuckerberg is on parental leave, he's got time. >> let them get in line to be on
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"mad money." got so busy getting hock tan on the show. >> don't even start with me. >> competitive fellow. >> sore loser, really. >> aaron bud on the show. >> i got ben mcadoo. >> that's actually possible. yeah, that is. >> he has his own show, ben, loser show. >> cramer's mad dash in a moment as we count down to the opening bell take another look at the pre-market, more "quaua on esqwh street" straight ahead predictable incomeseek in an uncertain world? pgim sees alpha in real assets. like agriculture to feed the world. and energy to fuel its growth. real estate such as e-commerce warehouses. and private debt to finance transportation and infrastructure. building blocks of strategies to pursue consistent returns over time from over $120 billion dollars in real assets. partner with pgim. the global investment management businesses of prudential.
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>> let's get to a mad dash on this tuesday we've got about seven minutes before we get started with trading, toll brothers not so good. >> this is kind of amazing up 64% for the year. so it's had -- you can't see the big gain from this chart because it's from the week kind of a weird chart. but what's happened is that they had fabulous order growth and some people are worried about the gross margins, i think this is the kind of thing you need -- oh, wow, you need to see in order to get money to come out of what's working and into what's not working you certainly -- if you buy toll brothers here, you have to deal with the idea that someone is going to downgrade it tomorrow because it's up so much. they've done many things right but still it's a housing play and you can argue rates are going up and you've got a fed meeting.
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so what will happen is that i think you have to endure a day of profit taking. >> you need to start looking whether they have a lot of capacity or blue states as opposed to red i say that because state and local, it is going to have an impact on economies and potentially housing. >> i think you're dead right. >> i want to see the transcript from the conference call, there's going to be a decline in the value of housing in jersey and they have a lot of jersey housing. decline in california, moved aggressively into california yes -- >> got the big development in brooklyn as well. >> they have gigantic -- it's a beautiful place. i looked at it to buy but i just felt like it's gorgeous, i don't want to give up my apartment yet but i will tell you, you're spot on and i think one of the things we're all going to have to accept the fact is that if you are big in these straitates, ne york and new jersey and
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california, you're going to get hurt it's an untold story, better start being told your values are going down hard hate to say that. >> inability to deduct state and local taxes in high tax states as a result of tax bill is going to be significant. yet to come. we just don't know. >> it's a great point. i think that even -- i think office real estate could be affected, where you put your head quarters. >> yep. >> and another move to texas. >> why will people want to work in the states when they know they are paying a higher tax rate than anybody else >> if you can move to texas, you can do it. >> we'll be in houston tomorrow but for now we have an opening bell coming up after this.
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about 90 seconds, a lot going on as we continue to keep our eye on capitol hill, watching the rotation from yesterday, oil is going to be in folk u. goldman ups their target for crude for next year by a couple of bucks. >> they have been all over the place. there is -- i think a sense that venezuela is falling apart and they can't get money to do more drilling iraq had a decline we're pumping at the highest level, which is incredible if you think about it who would have thought at 57 we can do the most? and we're exporting in gigantic amount i would tell you as long as the saudis are trying to keep things under control ahead of the big equity offering, you're going to see nice pressure on the upside. >> the argument is saudi and russia, displaced a stronger commitment -- >> absolutely, that's really important. let's get to the opening bell at
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the big board today. it is uscf investments, to replicate the returns of a private equity investment over at the nasdaq it's patterson companies provider of dental and animal health products >> stock is under pressure, there's a lot of worry in the dental industry, a line was down yesterday which is inadvivinvis part of a move out of stocks. >> we mentioned the buyback out of bank of america, an additional $5 billion by the middle of next year. >> a red hot stock and have the biggest deposit base every time there's a rate hike they do quite well it's been a very strong stock. brian moynahan will be interviewed and he's done a remarkable job and getting credit for the job he's done it's about time. >> and upgrade in mcdonald's which is going to lead the dow at the open to buy target goes from 150 to 200.
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>> talk about refranchising and that's andy barrish, good analyst, but i think there's a sense that like the dollar general article in the paper, mcdonald's is doing some real bargain stuff. easterbrook continues to amaze the one trick all day breakfast has proven to be far more than that it's done a lot of good things. >> very good >> t-mobile out this morning just once again talking about the strength of their network, et cetera, et cetera, saying shell, by the way has chosen them as the carrier for employees. >> really? >> t-mo shows up a little bit. the cfo speaks tomorrow at the conference going on here in town a lot of questions about how big with the buyback will be that's the key >> well -- >> maybe we'll get more clarity from him. >> that has been a stock underperformed of late versus the two yield numbers rising, people focused on yield at a time when you would think that you shouldn't be because of rate
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hikes but obviously verizon, at&t have tremendous rotation. >> verizon is now down -- down less than 3% for the year. that stock at one point had been down as much -- i think 16 or 17%. it has made up a good amount of ground and not on fundamentals i wofrnt think, maybe excitement for 5g, buying into the fundamental thesis that says this is going to become a very important as verizon would have you believe, important driver in the future, but there's a lot to go between here and then even providing any sort of broadband service in a home. >> i have to question whether verizon can hit up on the speed and whether the teches can continue to go down at this pace i think you're going to see at this pace, somebody will step up and buy these techs and i was very down on them yesterday. i don't like the reversal but
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when you start down like this you tend to find buyers, i would find something like a facebook which is not nearly in trouble i would watch alphabet, way too cheap. say if we don't catch buyers by around 10:30, 11:00. >> recode reports that sports business journal is hearing from sources that they are prepared to spend a fuel billion dollars on sports rights eventually, wouldn't be a lot of money for facebook but streaming rights in sports -- >> all of the big lockups and long-term contracts have really done as a defense to facebook and alphabet they worked out the long-term contract but paid a lot of money. >> it's so interesting because sports is what pushes the price of the bundle to a point where many people can't afford it, which is leading to the
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dissolution of the bundle itself to the proliferation of these over the top platforms, many of these include sports but some now that don't the entertainment only groupings of networks that we're going to see more of, and so some wonder, well, is sports still going to lead can you still keep paying these numbers? if you're addressable universe is going down. >> a lot of people feel they are caught people who made these deals in order to box out facebook and alphabet and ended up with these long-term contracts that while they do box them out, has left them not making as much ad money and cord cutting because it's so easy what some -- disney is going to have to start getting credit for how we watch things. i don't think they get enough credit i think today could be a reversal day for tech. i really do. i think that the toll brothers deal and fact that these
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retailers are down like a macy's, this is what is needed to see a reversal and money back into tech. the tech sell-off, remember i told you lam research is one i'm not crazy about any semiequipment company because i do believe we're going to see a decline in the price of flash but micron, these stocks have been -- the decline in micron, this is staggering prepare have lost fort tunes in these. >> micron for the month is down almost 7%. up today a lot of retailers and given back the gains. >> i wish they wouldn't start gains so early you'll have heat seenging missiles with a chance to get out. watch the rails, they've gone up too much and watch the stock like micron, this is just to se when the rotation runs its course you had to sell these stocks to
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plow into a macy's and macy's may be doing better but that doesn't mean you want to give up on lam. >> right you just don't. >> macy's is down 2% after what has been a very strong move over the last few weeks and as a result of tax cuts and in part because people are and you've been saying it, it's not going to be a bad christmas. >> since pvh came on mad money and said, listen, i've got to tell you, we're having a decent holiday season in the country, people think of macy's because they sell a lot of pvh, that's calvin klein and hilfigehilfiger you see the product in macy's, pvh, good portion of the stock has had like no days up. but this is important. don't bite on first rotation in the tech it's very early. and a lot of these guys have been trying to get out of tech they've been trying. don't bite on first, maybe bite
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on the second. it could happen. what do you got there? >> i'm getting ready for my faber report >> going to do it now or wait until -- i think we're going to wait. want to do it? >> i think we should do it right now. i think clear the air between us. >> is there something -- people think we're mad at each other -- >> i've been noticing them banging heads lately. >> my late father would say, you've got to make up with them, i really love them what makes you think i did anything wrong make up with him, he's a good fwi. >> it's not worth it. >> we're still very much sim patco. >> maybe i'm from new jersey. >> you saw the animation, that means it's time for a faber report let's bring it to you. >> let's do it again you can never have enough faber report animation, we know, it's like cow bell, never enough. >> right. >> disney and fox, story that of course i broke -- it's been a while now, a few weeks back,
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they are getting closer to a deal, the two companies are in fact closing in on a deal according to people close to the information. does not mean they are going to get there but does appear more likely than not that they would and could announce a deal as soon as next week. >> what? >> according to people who are familiar with these talks between the two companies that by the way, have been going on more or less ever since we reported the story at the time they said we were not an actual conversation at that moment but they resume those conversations very soon after and have been engaged in those conversations since. they have created a good deal of momentum i will add that fox does continue to talk to our parent company, comcast but the talks with disney have gone far deeper and further and may result in a deal in which disney will purchase the fox studio, the fox networks fx and a&e and regional
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sports networks, not fs 1, fox sports but the regional sports networks the star in india, the ownership of sky, the 39% they own the 30% they own of hulu enoem mx eno enoemol shine group as well. if you're a fox shareholder, this is what at least they are approaching it at this point, you would get a spinco, one share of spinco, that would be what is remaining at 21st century fox, mainly fox news, fox broadcast network and fox sports network those you would get a new share of, that company and then you would get some proportion to your holdings, shares of disney as well. in a fixed ratio and that is
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what is kplied at this point the deal going to be worth more than $60 billion that's an ent price value, there's going to be assumption of debt on the assets and that's unclear exactly how much then there will be an exchange of disney equity for said assets the regional sports networks could be worth as much as $250 billion on their own dwenz on where you look in terms of the value and a&e, it genz looking at different an lifts, star, probably $10 billion, may be arguing for more. studio, 12.5, 13 to 16 the ownership of sky and ownership of hulu and that adds up to a very large number. will they get there? well, let's see. there will be tax linkage and taxable transaction but the two sides are closing in on a deal that could be announced as soon as next week, guys.
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>> disney up 5 yesterday i think this will cause a major rerating of disney because i think the india property is big. >> the property star, the values on that, the trajectory of the cash flow may signal a bigger number i'm sure that's been an area of focus in terms of valuation, jim. there had been talk they might have wanted to take it public at some point but the regional sports networks, some would have thought, why aren't they being kept to our conversation on disnis, we were having a moment ago, if they were to have a direct to consumer espn or all sports, wouldn't they want to own all of these rsns too and say you're going to get everything? >> how about if you spunoff espn and bam tech and fox regional, i want a sports entity and i believe it could turn around and you have this incredible international entertainment company that could be fabulous in the meantime, the achilles'
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heel that is espn died down, it's not goi down to 75 but this is worth a huge amount to disney. >> synergies are quite -- >> fantastic. >> the studios alone, so many other areas they can realize real cost savings and synergy, you're left with a very strong cash flow producing assets, it's a news and sports company. depending on how much dealt they fl -- debt they flowed with the deal, you could see the murdoches thinking about trying to take it private or buying news corp with that and bringing those two together that's speculation on my part. nothing more than that but it will be interesting and again, there is always some room to go and between having a deal close and getting done. >> what a nice swan song if
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you're bob iger -- >> you know, it will take probably a year perhaps to get the regulatory approval for this deal and it's a easier deal than a comcast deal, one reason why the bid is not as perhaps favored, even though numbers may have been higher iger is leaving in july of '19 he won't have a lot of time -- >> the notion that espn will no longer control the narrative is so sporn, such an important thing because every time i try to get people excited for disney, for their children and grandchildren, they say, yes, but espn is going away espn is not going away it's just what people talk about. they don't talk about the theme parks and don't talk about china and movie site but the marvel, to have all of that united would be fantastic i love the deal. i hope they do the deal. i think it's why disney was up
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big yesterday and will regain its luster i think it's brilliant >> yeah, disney -- softening today a bit. >> but it was up yesterday. >> fox at the highest level since the summer. >> disney was up yesterday also. the move beating down media, benefitting from as well. >> i would like to buy some. i do want to point, all of the tech stocks are coming back today and we have the transports giving up, transports were insane yesterday but it is 944. there are people who are so dying to get out of these stocks, that you might get a hit and that's your chance watch micron, key to the market. >> all of the tech -- all of the big names in tech have turned. >> they opened down substantially and now buyers are coming in and taking profits and the stuff that is just up gigantically for the last few days that were just endless. >> right. >> endless. >> and final thought on disfox
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it's a big number. it is taxable, that transaction so just to keep that in mind. >> watch service now, that stock was down and watch paypal, the quarter is shaping up to be fabulous but the stock was down hid yously watch home depot to see if that finally stops going up it is excessive but they have a big analyst day and i think it's going to go very well. >> so the rotations continue today, dow is up 21. let's get to bob pisani. >> mixed open, about even on the advanced decline let's look at the sector the big issue, the whole debate, how much longer does the tax cut trade have to run here banks open positive now turned negative so a lot of moving around here energy, health care, you see how mixed the market here, indeterminate trading. the market has been logical in the past week because now the tax cuts are real. if you look at the biggest gainers from the 20% tax cut in
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terms of earnings, it makes some sense. energy, financials and industrials and telecom would be the biggest percentage gainers from a 20% cut technology would be the smallest gain, only about 1.5% on the earnings if you look what's doing well in the last week, this exactly mirrors that banks, energy and industrials and telecom have been up technology has been down it's not irrational, there's a lot of rotation going on. we have seen here the trade going on for tax cuts. question is what's the limits. look at the bank etf we had wild action huge volume in the last three or four days in all of the bank etfs look at that this is a two-day chart. we sold off aggressively most of the banks ended up but they were selling heavily in the middle of the day. these are people saying, wait a minute, the big banks are up 10% in a week, i'm out of here and
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taking some profits. it makes eminent sense the question is, are we at the end of this trade or is there any more to run overall here the bottom line, this is still very healthy we've been obsessed with fang stocks this year and semiconductor stocks this year the fangs are down this week thts healthy because it creates a new base of stocks that could see earnings get boosted and takes action away from the fangs and semiconductors the fang stocks, all opened to the down side a few moments ago. this is just in the last five minutes, just turned positive. again, still people trying to figure out whads going what's going on the fang stocks dropped big in august and came back after a sell-off of 5 or 6%. we're not out of the woods on tax cuts, the deal is not done and there are several things that can make this less appealable to the market so the senate -- they are bringing up 2019 for the tax
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cuts and president trump mentioned it could be 22%, not 20 this would change dynamics and numbers for the earnings increases and may impact the market jim was talking about toll brothers, they finished the fiscal year, it's important to remind everyone what an amazing year this has been contracts up 25% five quarters in a row up 20%. that's really an impressive number the stock is trading to the down side but the highest new home sales in a decade we just had recently, supply of new and existing homes con strained, quite an amazing number, down 9%, up 60% for the year. bitcoin is at a new high, we're going to have the man responsible for the first bitcoin etf -- bitcoin futures this afternoon, ed tille, he'll being on qutd power lunch" 2:45, talking about bitcoin and bitcoin futures and possibility
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of a bitcoin etf. >> big story, bob, thank you let's get to the bond pits as well rick santelli, good morning, rick. >> good morning, carl. we'll go quickly, one week of 2s, you want to see a nice slow ascent, picks off a basis point or two we clicked off 1.83 but still basically to 2008, before the 2-year was as high as 2% plus. one week of 10s, a bit of a difference scenario, more flat but not giving up a lot of ground 2s are up 3. if you look at 10-year, you can see we have been in a range, blur your eyes, 2.30 to 2.40. we get beyond the 2.40 line, most traders believe you'll see selling elevating that yield pound versus the dollar, a nice
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uplook even giving a little back today. pound versus euro, same thing, nice uplook and spike on the left and right a little different. which means 1.14 and a quarter, you want to watch out. break out or break down, not any middle ground. doesn't look bad remember, the dollar index is 57% euro versus the dollar, and the euro looks nice on itsope. it seems like the only chart that doesn't look good from november 1st is the dollar index. as it bumps along, 92.25 to 93 many traders don't think that's going to change much back to you. >> rick santelli still to come, an exclusive with the ceo of bank of america, brian moynihan, as the dow is up nine points. s&p largely unchanged at 2640. we're back after a break [ keyboard clacking ]
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[ click ] [ keyboard clacking ] [ clacking continues ] good questions lead to good answers. our advisors can help you find both. talk to one today and see why we're bullish on the future. yours.
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the whipsaw action continues this week as money rolls back into tech and semis and faang to some degree. transports, media, retail giving back some of their recent gains. dow down 20. we're back in a minute
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see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade
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jim, what's tonight on "mad money" >> a little tech company, hot as a pistol and then cyrus one, why is that important? a lot of people feel the selloff is because the data center is slowing. i haven't gotten that, but we'll go right to guerra the data center slowing would be a major reason to sell tech, and i'm not buying it. coming in hot. >> no question "mad money," 6:00 p.m. eastern when we return, goldman's chief economist on reform, job creation and a lot more. dow down seven
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a leap into the digital era draws youthful populations to mobile banking and e-commerce. trade and travel surge between emerging markets. everyday 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." rick santelli here, live on the floor of the cme with breaking news our november read on ism nonmanufacturing, the service sector expecting a number around 59 a little disappointment here, 57.4 57.4 it follows 60.1. and the last 20 years, there's only been two reads with a 60 handle one was last month, actually,
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three. then there's two in '05 and '04. it's a rarity. but we kick down 57.4 is the smallest number only going back to august, when it was 55.3. we've gotten a bit spoiled 57.4 historically is a solid number in the context of our last look at 60.1, maybe that alludes us to some extend the market doesn't seem to be paying a lot of attention to that, but it does seem to pay a lot of attention to the fixed income markets, to the equities. yields coming down curves steepening with two-year yields quite firm. >> good tuesday morning, everyone welcome back to "squawk on the street." i'm carl quintanilla with david faber. michelle caruso-cabrera is here. sara eisen is off. the markets, crazy rotations in various sectors, but the headline indices down a touch on the dow. down 34. s&p largely unchanged. our road map begins with a busy day in washington.
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tax reform, banking regulation and a bill to fund the government all on the docket a look at your money straight ahead. >> and a dizzy/21st century fox deal getting closer. both sides closing in on a deal that couldcome as early as nex week >> and starbucks announcing a partnership with alibaba we're going to take you live to shanghai, and hear from howard schultz. >> the long awaiting tax bill has passed through congress. a looming shutdown at the end of the week threatens to derail some reform efforts. for more on the impact on the economy and markets, jan hatzius is here at post nine for a cnbc exclusive. good to have you back. welcome. >> nice to be here >> upped your odds of the bill being enacted prior to the senate vote, which ended up being a smart call how likely it is now >> very likely that we'll get something by the end of the year in the next couple weeks probably and there is going to be a conference committee, so there
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will be some type of compromise, although ultimately, we think it's going to be closer to the senate bill than to the house bill >> in that respect, implications for timing on corporate tax? amt, sunsetting? >> so our expectation on the timing is 2019 for corporate tax. 2018 for the depreciation, 100% depreciation that has some interesting implications for cap x in 2018 may be some pull forward effects. on the amt, that's still up in the air, i think, but in general, we think the senate bill is actually fairly close to what we're ultimately going to get. >> not finalized yet, but what do you think it does for the economy and also for the stock market when it passes? >> right now, our expectation would be that it boosts growth in 2018 and 2019 by about .3% and obviously, it depends on what ultimately gets finalized it's a little bigger than what
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we had been assuming previously because ultimately, the individual rate cuts and the passthrough income as well as the lower corporate tax rate are just a bit more voluminous than we have been building in a few months ago >> where does the growth come from is it just that, delivery to the bottom line for corporations or is there more than that? steve liesman, for example, reporting on the effects, the wealth effect, for example, and what it can do for growth. >> i think there's that as well. financial conditions have been easing, and some of that has been due to anticipation of a tax bill although i think most of it has really been the good performance of the economy in 2017 even when it looked like the tax bill might not happen, financial markets were generally doing well but that's probably a little bit of an extra kicker, harder to disentangle, i think >> the .3 addition to growth,
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does it mean the bill is not inflationary does it change the fed dot plot at all >> i think we'll get another important data release at the end of the week, so we'll see what that says but in general, we would say that dot plot probably stays the way it is, three hikes in 2018 would be our guess at the moment our own forecast is actually that they might end up doing four instead of three, but i think it might be a little too early for the fed to put that into their dot plot at this point. >> the states of california and new york both have fairly large economies overall, when considering the rest of the 48 states any impact that you see on those economies and therefore perhaps slowing the overall growth as a result of this repeal of state and local and what that's going to do to companies and spending by individuals >> i mean, it does have some negative effects, obviously, on the ability to raise revenue through state and local income
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taxes. and some negative effects on especially new york city, new york state, some of the other northeastern states and california in terms of the overall impact on growth, we don't think that this is going to be a very large effect overall, we think it's somewhat positive for growth in an environment in which the economy, of course, is already growing at a pretty rapid pace and it does -- i think it does add to that overall despite the fact that there are winners and losers >> you have written about the impact on property values, right? and the potential for population exodus, at least out of new york >> at the very top end, there is more of an incentive to relocate so you could get, you know, some number, 2%, 3%, 4% of top income earners relocate that's what the academic literature on responsiveness to
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taxes would suggest. and i think there could be some small negative effects on home prices as well >> is there academic literature on how then state governments respond when they start to see people vote with their feet and do they end up sometimes lowering taxes, understanding that they're pushing people out of the state >> that's something that we haven't looked at as much, as closely, but it certainly makes sense that it would go in that direction. at least it would be a little harder to raise taxes in an environment where that comes out of pretax income as opposed to post tax income. >> two-year yield, 1.835, highest level since october of 2008 you talked about the fed and expectation for rate hikes narrow it down to yield, what are you thinking about for the yield curve for the next year? >> in general, rates are likely to drift higher. that's mostly driven by the facthat the market is only priced for about two hikes in 2018 our expectation is four hikes as
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a baseline so i think there's quite a bit more room. the term premium at the longer end of the curve seems quite compressed probably negative based on most models >> is that a way to say flat flattening, that the curve is flattening >> the curve is very flat. relative to the epressed level of short-term rates. i think there are arguments both at the short end and longer end for yields to drift up going forward. >> a lot of global pmis today, and anecdotally, we keep hearing about cost pressures in japan, in the eurozone, in the uk, in hong kong. how important is this wage number on friday, when we're not going to get a chance to talk to you? >> i think it's always only one of many wage indicators. there are 12 of them during the year, and of course, there are a rapg of different wage indicators and employment cost indexes and a few others in addition to the average earnings
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number i think we're due for a stronger one. we're at .3 with a bit of upside risk calendar probably helps a bit. there were some potential distortions in the last report that kept it very low. >> year on year, that would look like - >> 2.7, i think is sort of what we're looking for. so it seems certainly that we're due for gradual wage acceleration i think we have seen some of that, but 2017 as a whole so far has been on the disappointing side as far as wages are concerned. >> safe travels wherever you're going. jan hatzius of goldman sachs >> roughly one month since we first reported on the talks between disney and fox, designed for fox to sell many of its assets to disney we can tell you that that deal is getting closer. and in fact, the two sides, according to people familiar with the situation, are closing in on a transaction that could be announced as soon as next week now, that's not to say that they will still -- they will reach a deal with certainty, but it does
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appear they are headed much closer, having agreed on many of the different considerations that would be necessary for said deal to occur. of course, price would be one of the key ones we don't have that for you i can, however, tell you that the assets in question would be exchanged for disney stock and also the assumption of debt by disney with a value exceeding $60 billion. in other words, an enterprise value for those assets what are they? we talked about them many times. of course, the fox studio, the cable networks, a&e, fx, and others the regional sports networks, important component of this deal as well, and a high price there. 30% of hulu owned by fox 30% of bskyb the sky distribution network in india. did i mention the studios? those comprise what disney would be purchasing, and many people have their own views in terms of
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value. the structure of the transaction would be as follows. fox shareholders would get a new share of the spinco, the spun company. that's what would remain of fox, namely its broadcast network, its fox news network, fox business, its fs1, its sports network, and it would essentially become a sports news broadcast company. somewhat similar to cbs, with very strong cash flow production characteristics. given the debt that conceivably would be transferred, it also might have a fairly low level of leverage as it moves into the futures as an independent company, and then the remaining company would be exchanged for a fixed ratio of disney shares again, that would be worth more than, when you also include the assumption of debt, $60 billion. that deal moves forward. it doesn't mean it's done, but they have made great progress. i am told fox is still in conversations with our parent company, comcast, which also
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entered the fray a couple weeks ago, or actually really very soon after we first reported on the fox/disney talks the antitrust complications of a potential deal with comcast, despite what i'm told, may have been a higher overall number, make that a very difficult deal for fox to consider doing, particularly in light of what we know is going on at the doj right now and what will be going to court at some point to block the at&t/time warner deal. >> can i ask you a couple questions? >> ask anything you want >> you broke the story a couple weeks ago. >> november 6, i think it was. >> if i recall correctly, didn't disney stock go up didn't people like this idea, this combination >> yes >> we now see today disney stock is lower >> it's lower although it was up sharply yesterday. >> okay, all right and 21st century so my question is, when we see the trading in the stock today, does that tell us anything about how investors would receive this deal or should we look back to that first time? >> i would look back at the
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performance of disney over this time there's been other reporting by other news organizations that the talks are on or off. they have more or less continued at a pace with brief moments of not talking and made a lot of progress over the last month the synergies for disney are significant. the direct to consumer offering they're going to be bringing to the public in 2019 would certainly be a more robust one with the addition of the fox studio, with things such as, you know, any number of different series that they have at fox and the regional sports networks would also bolster espn and their direct to consumer offering of sports should they or when they go down that road as well, as they are >> interesting to listen to you and cramer kind of toss around all of the different permutations and possibilities as things get lodged loose and shaken up. what would the future of media look like.
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where is everything going? >> and the bigger theme, and that was why it was met with such head spinning on the day we reported it, is about scale. and the fact that murdochs don't necessarily believe that fox, even though lachlan murdoch last week said we have enough scale, they don't necessarily believe competing against the likes of facebook and google and amazon and netflix and alibaba and tencent for that matter, is enough with what you currently have >> great thanks, david. >> when we come back, starbucks opening its first roastry in china. teaming up with alibaba. what starbucks executive chairman and alibaba's ceo had to say about the expansion and the deal we're going live to shanghai next >> in just under an hour from now, we'll speak with the chairman and ceo of bank of america, brian moynihan. don't want to miss that. "squawk on the street" will be right back don't go away.
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getting some breaking news on the fed steve liesman is with us this morning. >> mome wants ago, the senate banking committee voting to advance the nomination of fed chair jerome powell to the senate what's interesting is the vote was 22-1, which means most democrats backed powell, and it's kind of the way you want your fed chair approved. it suggests on the full senate floor, he'll get a lot of bipartisan support the only opponent was elizabeth warren who was concerned he would roll back some of the
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crisis era financial regulations. and also, the idea that some republicans who had voted against powell as a fed governor when he was nominated by president obama now voting for him as fed chair so michelle, a little politics in that, but it looks like powell headed for bipartisan support on the senate floor. but we don't know when that vote will take place. either this year or perhaps early next year. michelle >> yeah, that process is moving slowly thank you, steve >> yeah, it is >> starbucks is continuing its push into china. the coffee chain opening its new location and first roastery in the country in a massive 30,000 square foot shanghai space, teaming up with alibaba in the process. andrew is at the roastery and reserve tasting rooms and joins us with more hey, andrew. >> hey, there. we are live. good evening to you from shanghai, good morning to you from shanghai. it is the grand opening. it's going to happen technically tomorrow morning this is a 30,000 square foot facility really represents the
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transformation of starbucks. right now, starbucks, about 70% of its profits come from the u.s., but that may change and it may change soon. literally, every 15 hours here in china, a new store opens. we had an opportunity to tour this place with howard schultz they have also partnered with alibaba and alipay jack mao was here, and we had a conversation with both of them one of the conversations and perhaps most interesting comments came from jack mao when i asked him about amazon right here doing business in china. here's what he had to say. >> they have been here for almost 15, 20 years. but you did not see them here anywhere >> because >> because i don't think they do properly here. it's the markets you need. maybe ten years, amazon becomes big again. good people, good services and i think we're working together online.
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>> jack ma there, clearly taking a shot at jeff bezos's amazon. i also asked him specifically about the battle, and it's remarkable when you're on the ground to see it here between alipay, and tencent's wechat wechat had about 8% of the financial payment market here, just about a year ago. it's now up to 37% meanwhile, alipay has come down. i asked what he's going to do about that >> why should i stop them? i mean, first, if there is only one alipay, they could not grow that fast. when there's fair competition, grow fast. no matter how fast they grow, we're still bigger, still better we have a fair, healthy competition. it is good >> and while i should tell you guys clearly they sell coffee here, it is nighttime. they also sell beer, and they sell liquor and other spirits. they're going to be bringing
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that to the new york roastery, which is going to be coming up online in september. they also have another roastery coming online in milan as well, and then after that, tokyo so lots going on here in shanghai, guys >> andrew, i don't know how you do it, but you go to shanghai. you interview ma and schultz, and at the same time, you break some news regarding steve case's rise of the rest, the list of investors now that have been disclosed trying to bring venture capital to rural parts of america is maybe unpr unprecedented. >> i wrote part of that column on the airplane on the way here. it's funny because when you hear about jd vance, the author, who had teamed up with steve case, they have been going around the country for at least the past six months, if not longer now, talking about the potential to raise a fund, and i'm not sure everyone knew really what it meant, but then to see people like jeff bezos on the list,
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henry kravitz, michael milken, david rubenstein, the waltons, the kochs, it's a remarkable thing. it's not really about the money. the fund is only about $150 million. but it's about the idea of trying to create a network effect for small towns and entrepreneurs in small places. you know, silicon valley has this remarkable eco system, and that's sort of what makes it tick and work. all the connections people have with each other. this is really about trying to be a catalyst so if you start a business in allentown, pennsylvania, you have the opportunity to hook up with one of these families, one of these entrepreneurs who then gets excited about you and hooks you up with their network. then the next time a new entrepreneur starts a business in allentown, pennsylvania, they go to them and say hook me up with the next guy. hopefully, you can try to really sort of start an ecosystem it's exciting what they're trying to do >> a lot of viewers saying maybe not so much about the capital, but the degree they can help guarantee if you have thallant, you get hired no matter where
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you live safe travels home. rack up the frequent flier models >> when we return, sexual harassment in the work place we'll speak to the president of bbg ventures, susan lyne dow up six pntnoois w. "squawk on the street" back in a minute
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sexual harassment and assault claims over the last few months, real costs are adding up for the media companies at the centers of those scandals. julia is in los angeles with more on that this morning. morning, julia >> good morning to you, carl tv news, movies, digital streaming, every corner of the media industry has been hit by the wave of sexual harassment claims and the costs are adding up in tv news, "today" and cbs's this morning, dealing with fallout from firing anchors matt lauer and charlie rose putting at risk the $508 million in advertising the "today" show brought in last year, and $177 million in ad dollars cbs's "this morning" brought in last year fox paid out $90 million in
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settlements so far, and that doesn't include the cost of losing bill o'reilly or $40 million in severance to roger ailes. fox news ratings are up for the year, but argus warns the loss of on-air and executive talent has raised investor concerns about the ability to maintain momentum the weinstein company is now cash starved and unable to find investors or a buyer warner brothers is cutting ties with brett ratner, and sony is reportedly spending over $10 million to replace kevin spacey with christopher plumber in the upcoming film "all the money in the world. in the streaming berserk amazon and netflix are suffering major costs. amazon studios fired its top entertainment exec, and three of their lop lieutenants have been fired or left. and netflix canceling louis c.k.'s second stand-up special, and pulling a biopic with kevin
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spacey on top of the costly hiatus of "house of cards. netflix announces it would make a final shorter season of "house of cards" with no kevin spacey >> julia borsteen, as you're talking, headlines crossing involving john conyers who says he will retire from congress today. of course, plagued by sexual misconduct allegations says he's endorsing his son to replace him, but is not announcing his immediate plans for more on the sea change taking place in the workplace when it comes to sexual harassment, we're joined by susan lyne, former ceo at the guilt group, martha stewart living, and the former president of abc entertainment great to have you. welcome. >> thank you >> julia goes through the contracts broken through all this, but what happens 1 those are settle how much changes after that? >> i think that remains to be seen i think this was long overdue. there has been sexual harassment
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in workplaces forever. and i think for many, many years, women were afraid they wouldn't be believed or that nothing would happen or that there would be retribution against them so they kept quiet i think the big turning point was actually when the uber memo came out, susan fowler's memo, and it had an impact you know, uber became a poster child for this bad culture that enabled not just sexual harassment but also a culture that just didn't put women forward. so i think that started this momentum of women thinking, okay, i can speak up and it's actually going to create change. >> i agree that women were probably afraid, but the fact is when you see some of these cases, especially in our industry and people start to talk, quote, everybody knew.
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right? so everybody knew. and yet the companies didn't do anything when i look at a lot of these people, matt lauer, bill o'reilly, kevin spacey, they made their companies a lot of money. >> yes >> so there was tolerance of their activities, maybe, allegedly, who knows, because they were profitable did these numbers that julia just posted show actually they're not that profitable? >> right, well, in the long run, it's going to be very challenging for them to make up what they thought were those profitable numbers but i think there are a lot of people at those companies who will say, you know, i knew he was having extramarital affairs. i knew that he was a flirter >> lady's man. >> yes >> but i didn't know he was harassing women. i didn't know that he was molesting women. and i don't know how much of
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that is the i don't want to know, don't tell me, only tell me what you need to tell me. and also the fact that most hr departments unfortunately are not working for the employees. they are working to protect the company from liability and so their impulse is to figure out a way to fix that instance, and either make a settlement and get someone to sign a nondisclosure agreement that will bury it, and that's been a problem, i think, for years. one of the reasons that many of these stories have not come out. >> do you think, by sector, by industry, it's been incumbent on news to be tougher on these cases because your currency is credibility? what does that say about hollywood, what does it say about silicon valley, politics >> i think there are certain industries where extremely powerful men are put in contact
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with women who need their approval in order to move forward in whatever they do. and that's the movie industry, certainly the vc industry where first-time founders are looking for money to start companies it's true of elite sports. we see it's true in the classical music industry but it's also true in a lot of industries that are not getting coverage right now and if you look at where these cases have been most prevalent, it's in the service industry, it's in industries like construction that are dominantly male i don't know that there's going to be the same kind of change there that we're seeing in some of the more high-profile cases right now. if there's one good thing that comes out of this, if it makes every single man think twice about how he behaves at work, that's going to be a step forward.
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>> given your long experience in so many industries you managed, do you think we'll see more cases, and ceos as well? we haven't seen a ceo of a big company yet. >> we'll see less of that. this is more prevalent in talent where people feel entitled and i think once you get into the upper ranks of a public company, you just know better than to do that for the most part that's my guess. but i do think there will be a lot more cases that come out >> i went to a woman's college, at 2:00 in the morning we would ask angstful questions, if women ran the world, would it be a nicer, better place, or would women being in power be like the powerful and it would just be the same because they had the power. any thoughts >> i am a big believer that the
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best thing in the world is to create diverse teams of people and if -- this will not be fixed in the long run until there is a lot more workplace diversity and until women are not second-class citizens at companies like these. you know, if you look at the workforce under vp or under director, it's very diverse. certainly gender diversity once you get to vp and above, it suddenly becomes a man's world again. and that hasn't been fixed in fact, i don't think there's been much progress across the board in those upper reaches of corporations i thought ten years ago that we were making progress i look at a lot of the industries that i thought were really moving in the right direction, and they have taken steps backwards. so this is a more systemic issue that's going to have to be addressed. until it is, i think you're
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still going to have issues around power and when there's an imbalance of power, things like this happen. >> one final note. people still talk about the degree to which legitimate workplace romances are going to be tough to groom. holiday parties are limiting some employees to a certain number of drinks i mean, do we get to a point where we can treat employees like adults or we don't deserve that >> i think the holiday party thing, that's probably smart why encourage someone to do something that they may regret deeply the following morning but i think workplace romances are going to be around forever you know, that's where many, many people, if not most people, meet their spouses >> right here at this desk >> oh, yeah. >> not same company, though. same industry. same industry, yes >> we hope you'll come back and talk more about it
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>> thank you >> let's get to sue herera she has a cnbc news update at this hour. >> good morning, everybody here's what's happening at this hour secretary of state rex tillerson greeted by the belgian prime minister at the official residence in brussels. later, held a joint news conference with european union foreign policy chief following talks on security issues related to north korea, syria, and iran. >> resolute stance of our european allies to send a message to the regime in north korea of our, we do not accept the nuclear weapons program that they have undertaken and we view that it is an important objective for all that there be a denuclearized korean peninsula. >> heavy air strikes by the saudi-led coalition pounded yemen's capital overnight, targeting that city's densely populated neighborhoods. the strikes are apparently retaliation for the killing of the former yemeni president by
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the country's houthi rebels. >> and heavy winds in southern california fueling really an explosive wildfire it's prompted the evacuation of more than 27,000 people. the blaze broke out on monday. it's grown to more than 48 square miles it's burning at least 150 structures, zero containment so far. you're up to date. michelle, i'll send it back downtown to you. >> thanks very much, sue when we come back, republican leaders in the house and senate racing to merge their tax plans and get it passed before the end of the year we'll breakdown the impact on the markets right after this stocks at this hour, god, a see-saw couple of days dow industrials down by 8.5. the nasdaq reversing the losses, higher by 35 points. "squawk on the street" wile be right back i've been thinking.
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tax cut optimism has stocks in record territory. stocks are going to keep moving. show you the dow jones
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industrial average higher 3% nasdaq composite higher by .2% the theme of the last week has been the dow celting new highs as the nasdaq takes it on the chin will the rotation out of tech continue joining us is eric davidson, and david sebrg is head of sales good to have you here. >> great to be here. >> eric, are you more likely to buy stocks now because it looks like the tax cut bill is going to pass, or have you already done that? >> yeah, that's largely baked in there's certainly some optimism. the good news is the republicans are finally going to get a hit after striking out that's where the market is finding some optimism. >> what do you think about what we're seeing with technology stocks selling off they had been a leadership group for so long. suddenly, they're not participating. is that a healthy rotation or a foreshadowing of something badder and bigger for the broader market >> at this point, it's probably healthy. we have to keep in mind in the context of where technology has been this year, we're coming to year end and they have had such a great run. people are positioning
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themselves for what the family photo will look like at the end of the year. >> what are you doing? >> we're still positive on technology our biggest concern in equities is that people are becoming complacent not the time to get rid of your equities but because of the strength of equities you have seen many portfolios creep higher, and people have to get back to their target weights >> david, weigh in here. >> yeah, i mean, look, i agree i think technology is going to continue to work i look at finding the names that you should be buying in weakness here this rotation isn't going to last forever maybe it has more legs maybe into the final decision where it gets signed by the president. the tax bill, but ultimately, you look at a sector where earnings aren't impacted you have earnings growth and really just a secular sort of story that is behind this group right now. so technology will continue to win. i think financials continue to win. and i would stick with even like a biotech, here, large cap in particular i think they're going to pick up and show signs of life, if you
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will >> david, this rotation, i mean, obviously got a lot of hedge funds, i guess, who were caught short on some of these media names and long on technology it's reversed already today, at least some of the tech names we know are up. is it over or are wiig go to keep revisitting this? >> i don't think it's over yet we're going to have, it's probably until a final decision is made on tax that we're going to continue to see a little back and forth. i do believe you're looking at technology names some have had massive runs you have an investor taking some chips off the table and rotating it into value names. in particular, into financial names that in ten years we haven't seen a setup for the financials that has been so solid. i look at it and say it could last a little longer you know, but again, i don't think the story in technology has changed so you have to look at the names like a micron, like a nvidia, even in the faang stocks amazon or facebook facebook is an amazing story
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you can't argue being long in that stock and buying a pullback you have to find the names you really believe in, the names that have that growth trajectory and buy them on weakness as they come in more >> on a more tactical basis, eric, say the timing of the corporate rate if it is delayed into '19, does that mean '18 is better or worse? >> we believe something is going to happen. and in the market is excited for some sort of win it will be forward progress. if we get forward progress on taxes, could we get forward progress on deregulation, forward progress on infrastructure the markets have been so surprised that although the republicans hold all the power, they to date have really not been able to achieve anything. this could be a step forward >> on some of these internal moves, amt in, amt out, corporate rate 18, corporate rate 19. does that mean we're in for some continued whipsaw action, at least for the next week? >> no question whipsaw action.
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you'll see volatility depending on what comes out over the headlines. the readings that are going to react immediately, but the long story short, i said this, you have to pick the stocks you believe in names even on the opposite side that you should be taking off the table, you look at some of the retail names if you look at tax and say retail, in particular, some of these like a macy's or a jwn, you're looking at 10% to 15% boost to earnings. that's what the stocks are trading off of, not fundamentals you look at the names and say maybe they have a little more runway, but maybe it's time to look at the names where the fundamental story isn't supporting the short term movie scene and start to take some off there. i look at burlington it's absolutely moving on fundamentals and the tax story macy's or jwn - >> you're suggesting these could sell off on the news, basically. >> no question >> okay. >> no question >> thank you guys. >> news alone will have some of these names fall off >> slight delay there. sorry. good to have you >> as we go to break, watch
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shares of toll brothers today. the luxury home builder misses result reported its slowest growth in six quarters stocks down about 7% home construction having one of its worst days in seven months also forecasting a decline in its adjusted growth margin for 2018 the dow down 15 points
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bank stocks are breaking out, and one top technician tells us which names you can still buy. find out on more "squawk on the street" coming uch
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a lot of data lately let's get to the cme group in chicago. rick santelli with the santelli exchange >> good morning, michelle. thank you. i would like to welcome my in-person guest, patrick flynn portfolio manager. just the guy i want on a day like today all right.
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we look up at the board, and yes, maybe today's ism nonmanufacturing was a little less than expected, but for the most part, would you agree that the data has been pretty good? >> overall, the u.s. economic data has been good we're expecting the fed to raise rates next week. we think that that could result in some upwards rate pressure. we think the fair value of the ten-year is around 2.70. we think it's going to be hard to break out much above that because of the strong international demand for yields. >> which is part two of the equation you have the strong economy, domestic, even globally to some extent then you have all the issues of negative yielding securities, questionable central bankers in japan and europe that brings in a whole raft of international buyers >> exactly, and that's what we have seen continuously we have seen short rates going up, but long rates staying pretty close to where they are because of the international bid for yield. >> so that flattens the curve, patrick. everybody says, oh my god. that means recession by our very discussion, the force keeping the curve flat isn't necessarily an economic
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u.s. issue it's a global demand issue >> that's exactly right. and we have had periods in the past where the curve has been flat and we haven't had a recession. we think we could be in a similar period like that today >> the next issue, if i recall, about four weeks ago, the hyg has a bit of a hiccup, the spreads widen just a little a hd everybody is worried because of the relationship between high yield and equities it seems as though that chapter has passed any thoughts >> so we've seen this several times this year. there will be some sort of a hiccup in the market, in this case there were some outflows and negive earnings, so we saw spreads widen out. what happens is issuers stop issuing and meanwhile cash is building up in investment managers' accounts and they are bidding up the secondary market. >> describes like a golden parachute. if you get nervous because they start to sell off, you're saying there's other issues including income their managers get, that can be plan b.
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another issue, we passed the tax plan, hasn't been ratified by both houses, but probably will there's a consequence there, is there not? >> there is. it's a pretty big change for corporate bonds, so interest deductibility is going to be limited, meaning it's going to be less attractive for corporates to issue desks. >> you're not talking about the investor side, you're talking about the issue side >> exactly so that could result in less supply of bonds, which means our clients' existing holdings could be somewhat more valuable. that could be another sort of -- >> quickly, we're almost out of time if there was a hiccup in equities, makes high yield investors nervous. outside of what you outlined, you think a presence in that sector is a good thing finish us out. >> yes, if there was a hiccup in equities and a sharp downturn, you would see a move in high yield, but it would be contained because what really hurts high yield is defaults, and right now they are at cyclical lows. we're getting close to 1% right
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now. >> duration in your cash flow. >> exactly >> patrick, we're out of time, but a real pleasure. thank you so much. carl, back to you, sir >> rick santelli, thank you very much we've been watching this house gop leadership meeting wrapping up their weekly press conference with headlines on the tax bill and government funding. ylan >> carl, unclear how long republicans now are seeking to keep the government funded for house speaker paul ryan initially sought to keep the government open through december 22nd, but now amidst a backlash from conservatives, he said today at that news conference that the deadline is now uncertain. conservatives have been pushing to keep the government open through december 30th to make sure that the spending negotiations don't interfere with the tax bill negotiations also that news conference i asked him what ryan's position was on the corporate amt, which is included in the senate version of the bill, as well as
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the estate tax guys, he said he didn't want to nitpick the tax bill conference committee and would let the process work itself out. back over to you >> okay, thank you, ylan in d.c. now let's get a look at what's coming up on "squawk alley." john >> coming up, we've got the father of net neutrality, tim wu he coined the term we'll talk to him about net neutrality, but also this disney/fox story and the impact t iert.oing to have on content onhentne that's coming up on "squawk alley"
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some headlines from reuters. the president has informed palestinian president's intentions to move the u.s. embassy to jerusalem, saying abbas warned moving the embassy would have dangerous consequences when we come back, brian moynihan you do not want to miss that dow's up four points "squawk alley" starts in a minute for your heart...
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welcome back to "squawk on the street," i'm dominic chu dow marginally lower and s&p and nasdaq marginally hesitant sector up almost a percent in trading today. you have shares of micron, ebay,
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and nvidia all lifting that sector higher, trading more than 2% higher in early trading that does it for this hour of "squawk on the street. let's send it back downtown for the start of "squawk alley." guys, back over to you >> dom, thank you very much. good morning, it is 8:00 a.m. at facebook headquarters in menlo park, california, 11:00 a.m. on wall street, and "squawk alley" is live. ♪ ♪ goods tuesday morning, welcome to "squawk alley." sara eisen is off today.


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