that does it for us today. join us tomorrow. now it's time for "squawk on the street." good tuesday morning. welcome to "the wall street journal report." i'm carl quintanilla with jim cramer and john faber. the two-day fed meeting begins.

alibaba upping its range. the bookses could today as the jack mott tour hits singapore. >> futures fall. the nasdaq suffered its largest one-day drop in 2 1/2 months yesterday. >> apple moving lower down over a percent. some new reports say the new iphone will not be available in china any time soon. >> with equity markets near record highs, companies buying back their own stock at record rates. humana, a $2 million plan just the latest of many. ingalibaba taking another s in what could be the biggest ipo in world history. increasing its range from $66 to $68 a share, up from $60 to $66. that would raise $28 billion at the top of that range with potential to expand 25 million if they exercise the option to buy more stock to satisfy demand. you were so early on saying we would feel the effects before it ever came to the tape.

>> thank you. >> i assume large degree that's what yesterday was about. >> a lot of friday growth selling. a lot of nasdaq underperformers. facebook, $200 billion company, almost identical characteristics on ebitda. also by the way on the growth, so that's a $200 billion company. this one is actually a lot of faster characteristics. great mode. i'm talking about a situation that people will pay $90 to $100 for in the aftermark. >> they may. this is our second story which is yesterday's decline especially in big momentum names in the nasdaq. there will be selling ahead of this to make room. i am not a full believer of this story. >> people doubt me on this. >> it's $20 billion, but i know a lot of hedge funds not necessarily selling anything putting in for big numbers. they still want to own their facebook.

>> you remember when you came to me, you said the boston road show. those people in boston, talking about very smart funds, they look at certain valuations and say, you know what? we want to be able to get a company that has faster growth characteristics, better situation, we will sell x for y. then people pile on. i think yesterday was a pile-on recognition these stocks are for sale. hedge funds hated these stocks for ages. they hated social media and facebook. they pile on. algorithms kick in and it becomes el foldo. >> we had early valuations, morgan stanley cutting tesla, scottish referendum. >> yes. and the fed. some of these names, a go pro mobile, i know. that's retail. this is frightening. they tried to rally the stocks and couldn't. when i look at characteristics of let's use amazon.

amazon is, for all intents and purposes, mr. man who did the documentary, a second rate alibaba. >> all right. very different business models. >> no. >> very different. >> again, talking about if you have capital. >> alibaba is a much better business model. holy cow. >> right. if you want to demonstrate to the book runners, look, i want to take down 10% of the deal, meaning they want a million shares, you've got to show them the money. i liquidated this. it's going on. it's going on. boots on the ground that i'm on this story. >> i know. i'm talking to people, too. i know. we may end up at the same conclusion here. it's people thinking this thing is going to price wherever it is and go up and be the top. by the way, i want to sell all of these related stocks because this is going to mark the top and i'm getting out now. i think that's as likely as i'm making room. >> making room is not the right

rubric. early march/late february, in the cloud, high multiple stocks 0. i think people want to be able to come out on thursday and say, you know what? this is it and call the time. you've got easy money going away. the fed. you've got the -- >> which probably tomorrow will say october is it. we are done. >> exactly. then you have this overall sense that the world is slowing at the time when the fed is getting ready to consider. it's like the world is stopped. the chinese numbers are the worst i've seen. the worst. >> 2 1/2 year low today out of china. >> right. when i look at the industrial sector, i just cannot believe how fast it is slowing. caterpillar downgrade.

>> you don't thing that's strong dollar mining, strong dollar oil? >> absolutely. everything is bad except for restaurants, retail in america. domestic. >> i'm not sure retail is that good. >> it's hit or miss. not sears, ouch. >> we'll get to that later. >> all i'm saying is you have a bad set-up. i've been saying this week is a bad set-up. it reminds me too much of the first week of march, end of february. take a look at workday, a great company. it didn't come back. >> you mentioned the first week of march. back in early march i interviewed the man who runs soft bank which owns 34% of alibaba, largest single shareholder by far. he's on the board. will be diluted down, but not selling a share till 2.5% roughly. here is what he had to say about alibaba's prospects when i asked six months back. >> internet does not create

boundary. it can be going worldwide. we are not going to be able to come to the u.s. market and compete with amazon overnight, but maybe there is some angle that we can expand at least beyond china. the asian market outside china is great opportunity. u.s., europe, maybe we have some opportunity to expand. we haven't decided, but that is a huge opportunity maybe five years, maybe ten years, maybe next year, i don't know. we are always open to opportunities. >> of course those who will be buying this ipo or looking at it primarily because it owns 81% of

the e-commerce market in china. they are still expecting an enormous growth from that company. it is interesting to hear talk about potential for growth outside of that country. soft bank a big beneficiary of this run-up but suffering because of the sprint problems. it's similar to what yahoo has been doing. >> yahoo's been terrific even though business valued at pretty much nothing. the stock should be at $52 if the $90 to $100 alibaba price holds up. i come back to this idea that this could be that moment that hedge funds feel they've got to press their bet and send this market down. they've been waiting and waiting and waiting. i think you are going to get a crescendo of negativity on thursday. >> you've got a lot of negativity yesterday. we already talked about the fact that you watch tesla, netflix,

facebook go down. all this also coming as the federal reserve policy makers begin what is a two-day meeting when central bank issues its policy statement tomorrow afternoon. many expect the fed will remove the phrase "considerable time" from its description how long ultralow interest rates might remain. we are trying to figure out what that meant. was it six months, eight months, a year? >> i think the focus, there happens to be a piece of research, talking about the barclays research referred to about the buybacks. i look at the buy backs and how much they mattered. i think buyback, cheap money. the ones that have really done a lot of buyback have used the fed as a way to do it. >> for those who aren't familiar with the headline, "the journal" today, highest level of buybacks since 2007. nearly $340 billion. the number of companies, 740 companies, the most since 2008. >> i didn't like that article. no, no.

i love the article. i didn't like the implications. i know that the free money is behind it. i know there's a lot of bond market and equivalent stocks. i do not want to portray a market i think is horrendous here. i'm just saying 18 times earnings, you could say for a lot of stocks international where business is slowing, there is going to be money shifting to other areas. it's kind of like, those transitions, those rotations are tough. and they are happening right now. this notion of this alibaba, which is going to be such an easy thing to make fun of after this chinese company. every time i pick up the paper i find there is another 42 people who own stock i didn't know about. i'm waiting for the estate of mao have? is it 5% of this thing 1234 it's convoluted.

>> there is a lack of transparency. during the road show, i've spoken to many people who asked the questions and not gotten the answers in terms of transparency. they own 48% logistics. >> they don't own that either. it's a great company, but if we were an american company, i think we would say just call it two classes. the class that's going to trade and class owned by the people who really own the stock. >> when we come back, an exclusive interview with goldman chief u.s. equity strategist david kostin. sarah will sit down with the ceo and chairman of deere sam allen this morning. russell down 5.5% from the july first high. ]

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the china iphone may not debut until 2015.

a report at fortune say the reps say the iphone may not be available until year's end. there are other reports saying it will debut in the middle of october. apple is on pace for its worst open since july. >> the china problem gets resolved. i remember before the big run. there was this concerted effort on the conference calls to say you guys, your china strategy is nil. you don't know what you are doing. there were a couple of conference calls devoted to how badly apple is doing in china. then it got resolved and the stock took off. if you want to sell the stock on it's delayed, be my guest. >> your larger point is don't trade it at all.

tim cook, the ceo mr. cook watches the show. my point is that he addressed the china strategy when everyone thought he hadn't. he does it behind the scenes like he does a lot of things. he doesn't say, hey, guys, china, don't worry. that's not tim cook's style. what should have been up a couple of yesterday will come down today. if you want to sweat the program, go right ahead. >> for those yesterday who have a portfolio telecom, media related, what are they going to say when they walk in? tesla at any price, it doesn't matter now because it's a different world now that it's down 9% yesterday?

>> okay. i did a piece this morning for "real money." it talked about go pro. the fellow travelers, the people who don't know what tesla is other than it's a cool car, they sell. the people who understand these companies, they don't have 100% of the portfolio in it, and there are people who do, they take it easy. it's that part of the portfolio that is going to go down right now. you say, look, i have to taking that. in the meantime, my boss in scientific and my st. jude will make it. the names have gains of 40, 60, 70, 80%. >> mobil is a $10 billion company that was a $5 billion company that opened up at a $7 billion company. go pro is a big squeeze. i'm behind them all the way.

go pro has a new eco system. these are the stocks people are in that defy the four walls of the campus. i go to jim cramer at twitter. do we buy go-pro? guy jc penney. >> what about celgene or gilead? >> i still believe in gilead. i think celgene has irons in all fires. they own a lot of different pieces. it's a very inexpensive stock. it's a natural place to go.

natural. these stocks are up huge. take a look at the gains. remember the october factor. there are a lot of people who want to lock in gains with this theory of the market you're using. i really like it. maybe accept the fact you are going to get hammering here. >> i remember the blackstone ipo. remember that one? may of '07? >> you want to go back to groupon? what do you want to do, play memory with me? >> i'll do whatever you want. >> why don't you do a mad dash with me. >> after the break, we'll count down to the opening bell and talk about what rihanna just tweeted to cbs. take a look at the premarket. che can mean lower returns and fewer choices in retirement.

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a little less than eight minutes away from the opening bell on this tuesday. time for a mad dash. visa had one of the largest ipo of all time. >> bankers decided everybody should win. short term, the guys who put in for the deal win and the member of the community banks that own visas have been well done. stern, mastercard. these stocks have really been biding their time. they are payment processors like everybody else.

i gist think they are terrific stories that have been stalled. people come back to a secular growth theme which is paper to plastic, which continues. these are well-run companies. one of the reasons i wanted to talk about this, this is where people go. when i say it's a rotation and they don't leave the market entirely because of tesla, the tesla factor, they'll find a visa, what i call faux financials. don't need the yield curve. you don't need rates to go up. i'm just looking for places people will hide in, whether they hide in humana, hide in visa. money gets shifted around because we don't have new money in which is the main reason we are having this alibaba problem to begin with. people buy etfs and s&p. there was a big discussion about the futility of individual stock picking. you know i disagree with that. i know the big guys say i've got to be in something here. i don't want to -- i'm selling stock. i think that the top might be

in. i'll buy something like this to have some exposure. >> it's not as though there aren't significant changes coming to this business. last week apple pay, a positive, a negative, the growth of paypal? >> in the end this is cross border to international. stocksed by their time. it's almost like okay, this -- they have three different brokers come out in one day and recommend it with a lot of electronics payment news that is positive. >> mastercard was recommended. >> yes. all i'm saying is i'm trying to tell you where money goes. if they feel like it should go and they don't like the financials because the yield curve is not right and they are worried about tech. this is a tech financial. people like that. i'm just trying to show the alternatives the way big money managers think. >> we'll see how they think when we get the big opening bell. see if that carnage in the nasdaq are some names continue this morning. for over 60,000 california foster children,

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you are watching cnbc "squawk on the street." opening bell in just two minutes on a tuesday where there is a lot going on. we have repricing of the range of alibaba two. -day fed meeting begins. russell coming off a rough day as did the nasdaq. the data, you mentioned shanghai which worst day there in six months. >> you see the chinese gambling stocks selling off because that's another proxy. the one thing people don't think is maybe it's alibaba. i don't think it is. it's secular growth story. people are going to raise cash. people of the big funds. i think the regular investor, the mom and pop investors are saying, what's the deal? give me alibaba, i'm happy. i don't want it to be a facebook. they are going to price the deal tonight. they shouldn't. they ought to accelerate it. do it for tomorrow and not friday. >> they are not going to. >> why? >> they are all set.

you know how many people they have advising on this thing setting schedules? price it thursday night. they went to the top of the range. they didn't go crazy. they didn't do what facebook did. >> if it opens $90 to $100, don't you think people say, do we need -- is it going to be when grub hub priced -- remember there was dancing food here and you said dancing food equals top? >> yes. >> it was. it was a top for that group. it's a trading sell-off, not a bear market or top. >> adding to the temperatumany rihanna. you pull made song last week. you want to slide it back to this thursday? no y'all are said for penalizing

me for this. the game in the wake of the ray rice scandal was up 100% more than last season's opening. she'll follow that up with a letter. this is the beginning. that game was worth watching regardless. good game. >> opening bell. at the big board this morning celebrating miller howard strategic dividend investor. at nasdaq green bancorp celebrating its recent ipo. hershey. we talked about the price increase a couple of months ago. that's going to start to take effect in q-4. >> what people don't realize in hershey, most of it sold in convenience stores. this lower gasoline story is one of the best stories going out there. when you have lower gasoline,

you do more driving. cracker barrel is having the same thing. that is a good reason to own hershey. skee convenience stores, i want a chocolate bar, is the driver for hershey sales. >> they want them to sell first party hardware. >> this is a mobile play. it's huge amount of mobile. it fits with the whole premise they have to be more of a mobile company. it's very big in mobile. mobile matters. do you think when we talk about something like that that we are missing the bigger picture? obviously, we are going to be under pressure today. microsoft is doing what's right. that is a good place to go where i'm going. after the smoke clears, go to microsoft before you would go to go pro. >> i would think that makes some

sense. that sounds fairly rational. >> you like that better than wave four? that was the company i came on tv and said bad things which long since disappeared. >> i'm amazed you bring that up. >> there were times there would be sell-offs. people would say i want to go to a blue chip like wave board. >> you've been a supporter of go pro. now you're lumping it in wave board. >> i would go back to microsoft before i would go to go pro. go pro is a holiday season. >> you believe in this content creation theme. frankly, if they are device maker -- >> no. they are not. you guys have used it. it is the way younger people make -- everything's changed because of the web you. make movies of yourself and you can actually edit it. it's like advent meets facebook. >> did you see christmas day 100 days from today? >> is that true? >> yes. >> go pro normally would be,

don't go short it. people feel all it is is a camera stuck on your head. it's an editing system, exciting, an eco-system. the new ones are not sold out. if you deal with sporting good stores, it is the hottest. >> it is the beginning of what will eventually be the recording of every single thing that occurs in human history by everybody. >> yes. we all have a right to be spielberg. >> yes, but nobody will be in the moment. we'll be thinking about capturing the moment you just had as opposed to living in it. >> are you against progress? >> i don't know if i call that progress. >> 30 minutes of reading has great benefits to your brain. just reading. >> not video gaming? >> no.

reading. >> i think the big ones we see are grand theft take two. i like that, the stock is going higher. >> anywhere you take it, he can give you a stock. >> oh, yes. soda is up more than 3%. this report that they are in talks to sell to a british investment firm for somewhere in the $40 range. >> i'm giving a talk at the nj-pac for my friend leon cooperman. he said give me a list of stocks you don't like. i said i'm afraid it will get a deal. i think this is suspect, but it shows you -- a lot of people felt pepsico had to do something. >> things have run up before. it's a good time to sell. >> this is not monster beverage which was an actual real company coca-cola felt they had to take a stake in. >> hld down despite in report they have borrowed $400 million

from lampert hedge fund. trying to get liquidity going into the holiday season. >> and the $400 million they are borrowing from the hedge fund. they are paying 5% for the money. they seem to be okay heading into christmastime. it's important, particularly for a company that lost over $1 billion. you just wonder sometimes with lampert. there was that period of time we talked about them being one of the great investors. he would be mentioned as heir to buffet. here he is now, his hedge fund lending money to the company he controls. it's all about sears. you even forget about some of his other very strong investments that he has made. >> he had a lot. >> autozone. >> i was in that camp. i started the same day as eddie lampert did at goldman sachs. eddie has got a problem on his hands which is that every other company has decided they are

going to kill sears. it's part of your operating plant, let's kill sears. >> to be fair, it has not helped itself. >> no. i don't want to touch the stock. it's so heavily short it's even where it is. i think people forget what retail is like. i remember because my mother worked at lidzt and my father worked at gimbel's. those were it. those were sears. gimbel's is when we think about santa claus, macy's versus gi gimbel's. >> don't want to get too negative. tesla is the stock unlike go pro, tesla bounces. i would prefer you to buy microsoft. the fundamentals are really good. tesla is a wonder stock. that's when people are done saying that the market is over. they come back to tesla.

>> what did you make of the morgan stanley argument that there is a reason their rivals are not jumping into electric vehicles? they don't sound convinced that this is really the technology, necessarily. that tesla can write history all by itself. >> i think when you test drive a tesla, like i have, you just do feel that it's monument. you do feel it's monumental. you feel it's a different experience. you feel like you're ecologically clean and has more people. >> cbs, i wouldn't say it's the rihanna effect. i spoke with les moonves last week before the ravens game which was going to take place

the next day, before rihanna was canceled and before this nasty tweet she sent. here is what moonves had to say about the nfl and its importance to cbs. >> the nfl has proven to be the best thing there is in television. that's why people are paying so much money, yet we still make a profit. the nfl is basically invincible. the numbers keep going up just about every year. the product is something people can't get enough of. i'm really happen why i we have a long-term deal with the nfl. >> this of course given the continuing controversy whether it be ray rice or adrian peterson. >> hasn't hurt between the lines. >> when i heard that, i blanched. i thought that news was great. invincible is something you never want to hear. i thought there was hubris with les who was in the fantasy league with me in 1969. if you want to sell a product, i

haven't heard a single sponsor back away. it's the best sponsors. people think it's about owners. it's about sponsors. i'm not seeing big cancellations from the likes of the companies. i'm not seeing boycotts of the products. >> i think radisson did distance themselves from the vikings overnight. they haven't fallen in the way you suggest. >> good point. is mcdonald's backing away? is there a boycott of mcdonald's? it takes that kind of action and there isn't. people want to be affiliated with the nfl as much as always. i think people want their eyeballs. try digital video record sproles having unbelievable runs. don't show me any paper in the world, let me watch that tonight. i'm going to time shift to victory? who does that?

>> s&p cracked that 1950 level. mary thompson is on the floor. >> we are seeing a continuation of what we saw yesterday. markets while lower have come up the worst levels of the morning. so far the nasdaq extending its loss from yesterday, one of its worse performances since the month of july. we continue to be in a holding pattern, awaiting the fed's decision tomorrow. of course, the alibaba ipo yesterday was low volume day here at the new york stock exchange. let's look at the world markets. we have lower open here on wall street. there was disappointing data overnight in china where you saw the chinese benchmark index posting its worst one-day decline in six months after closing at an 18-month high yesterday. a 2 1/2 year low raising concerns about slowing growth in that economy. then in germany, of course, we had a reading on investor confidence which dropped for the ninth straight month. the world indices lower coming into today's session here on

wall street. we are also watching the eem, emerging market etf, down for its sent straight session. that is a six-month low for the eem. concerns about rising rate environment in the u.s., slowing growth in china. russian central bank said these economic sanctions are hurting the economy. why is that important? 5% of the stocks in that etf are russian. one thing moving lower right now are the yields on the benchmark ten-year note. we should note riots have been rising as investors look ahead to tomorrow's decision in the statement by the federal reserve. many anticipating them to remove that considerable time reference with regard to the amount of time they are expecting interest rates to remain at very low levels. oil, turning around in the premarket. now moving higher. it was one of the reasons we saw the dow close higher because of the strength in energy stocks.

you can see wti up just about 0.5% right now. transports are lower. tomorrow we should see how federal express will impact this group. it will be reporting its results tomorrow. $1.96 is what investors are expecting ahead of that report. stock is down about 0.5%. regeneron receiving break-through treatment for eye treatments. the stock is responding favorably. dow off about 26 points, nasdaq down 12%. back to you. >> thank you jim, we do have an important development in the continuing battle between el again/valiant/pershing square. it would seem to have allergan's

decision to hold a meeting with stock holders on the originally scheduled date. it will now take effect december 18th. most importantly without restriction. many times i reported on how many of those consents they were taking in. they reached above the 5% mark. when you take into account the 51 holders of allergan stock that put in their consent, the overall percentage would be 39%. that is not what they filed with because of the various impediments, if you will, that allergan put in place, whether it be certifications and the like. that's what they say they will be bringing to the meeting right there from those 51 holders. most importantly, december 18th. roughly three months from now. allergan shareholders have the opportunity to make their voices heard on whether they want to support the six directors that

bill ackman put up to replace the six existing directors on allergan's board of nine. then say we want the valiant deal. allergan faces a few choices over the next few months. we pointed out many times when this thing started in may it was going to play out over a long period of time. it has done just that. they can if they think they are going to lose the vote, try and negotiate that deal with valiant. the deal is worth north of $170 a share. you see the stock price trading around that. valiant is well off its lows. that brought a lot of question marks. shareholders will have the opportunity to see valeant report earnings. october 20th it will report earnings. record date for special meeting october 30th. allergan has questioned those

numbers many times in this battle. at least giving itself one more chance to see how do those quarterly numbers look. allergan's other opportunities? they do an acquisition that takes valeant out of play. they use the balance sheet it was counting on to finance its own deal or find a white knight. now we are finally getting down to it. we shall see over these next weeks as popposed to months. we've got december 18th. shareholders will be allowed to vote without restriction. show up at the meeting. >> we have a 10/29 allergan report for their earnings. maybe this changes the dynamic. maybe a little less rancorous. maybe more, we are going to make you money either way that. could put a bid under allergan.

>> i don't think jazz is likely. pia was down yesterday. >> pyott was out yesterday. there was an approach made. nothing was imminent. if there was a name it would be sailant given the size. then you are going to go into. meeting having stiff-armed valeant. >> i just don't see david pyott doing anything to hurt his stock. >> maybe the deal would help his stock. >> i don't know. a lot of companies being thrown around don't extend the franchise to any great level. it's an eye care franchise.

>> it's botox. they haven't had good luck in the white reduction part of their thing. it's botox and eye care. regeneron passed them on eye care. it's a very interesting story. macular degeneration diabetes. sanofi got hurt buying all that stuff. david kostin will weigh in how stocks will move after the fed begins raising short-term rates. back to 1983. back in a moment.

know that chasing performance can mean lower returns and fewer choices in retirement. know that proper allocation could help increase returns so you can enjoy that second home sooner. know the right financial planning can help you save for college and retirement. know where you stand with pnc total insight. a new investing and banking experience with personalized guidance and online tools. visit a branch, call or go online today. big day? ah, the usual. moved some new cars. hauled a bunch of steel. kept the supermarket shelves stocked. made sure everyone got their latest gadgets. what's up for the next shift? ah, nothing much. just keeping the lights on. (laugh) nice. doing the big things that move an economy. see you tomorrow, mac. see you tomorrow, sam. just another day at norfolk southern.

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paypal taking a shot at apple when it comes to apple pay. releasing an ad that states, "we the people want our money safer than our selfies." the ad ran in papers across the country as well as "the new york times" and twitter. trying to knock apple after the celebrity hacker a couple of weeks ago. fair? >> they have to do something. i continue to think about that line every time i read about alibaba. that ebay and amazon don't equal alibaba. ebay's got to grow. they have not been growing. and the payment. i think apple is going to be the payment story for a long time.

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what's on "mad" tonight? >> i want to talk about all thetive payments. i have life lock on. home depot, i want to know who knows and i want to know how bad the threats are. todd has a good handle on those things. informational. >> congratulations to your birds. >> thank you. >> only the fourth team in 30 years to win consecutive games where you are down 14 points or more at the half. unbelievable grit. >> it was fantastic. for good news, read a "the washington post" article by rebecca williams, the mother of dylan who worked for me this summer. an amazing story. a miracle story. you usually don't get that. watch "the washington post." i tweeted it out. we'll see you tonight. >> thank you. let's get to simon. >> we have an exclusive interview with goldman sachs chief u.s. strategist david kostin. we are going to hear from deere ceo samuel allen and look how

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welcome back to "squawk on the street." markets are just crossing into positive territory. david kostin will join us for an exclusive here and we'll find out where he thinks stocks are headed. >> alibaba ceo and director of soft bank weighs in on the alibaba ipo and what it means for the company. >> sarah eisen will join us later on for an exclusive interview with the chairman and ceo of deere. >> we want to bring in david kostin over at goldman sachs. joins us exclusively this morning having treated us to a new report called global equity macroscope. great to have you. >> nice to see you. >> what is the lesson here?

>> the purpose of this report, went out to visit fund managers in london, new york and boston. we saw a variety of fund managers talking about what was happening in asia markets, europe and the united states. consensus view is looking for opportunities and ways to be investing in stronger dollar and weaker euro. i focus in particular on ways to play that into the u.s. equity market. paychecks or discover financial services where 100% of revenues is domestic. the intuition or or thought process is u.s. economy growing roughly 3%, we are looking for ways to play a better tail wind revenue story and head wind for a lot of exports. that was one of the purposes of visiting fund managers this. year about 75% of the community pour growth and value managers are lagging benchmark. many hedge funds are having a challenging year. these are some ideas to focus on

from now to the end of the year and into 2015. >> if someone were thinking of playing domestic, what explains the russell action this week? >> there are lots of different cross currents in terms of what's happening. russell is more learniveraged t domestic activity. larger cap more than 2/3 are domestic. within asia, the same trend and same theme holds. the idea of owning asian stocks selling into the u.s. as opposed to western europe. >> the headline here we should recap is you believe the s&p 500 will rise 8% during the next 12 months. that's where you are coming from. a lot of the commentary you have here is around the way which the stock market behaves in advance of rate hikes from the fed. it usually does typically well

before the fed starts hiking. after may struggle. the other central projection is they are not going to raise rates for one year. if that is wrong and they raise rates earlier than one year from now, i'm assuming a lot of the other projections are what the stock market could do could be wrong. >> the way we want to think about positioning equities relative to bonds in the rate environment is to think about it in the following way. in the year ahead of a fed hike, in the six months ahead of a fed hike and in the three months ahead of a fed hike, first initial fed hike after a period they were not raising rates, the stock market tends to do well. we respond to your observation. perhaps if the fed tightens earlier than goldman sachs expects, we expect it to be the third quarter of 2015. that is a year from now. more like the second quarter of next year. in any event, the experience 20

years ago in 1994, 15 years ago in 1999, and a decade ago in 2004. all those experiences suggest the market can have jet wind in advance of a fed hike. as you pointed out andtainly data would support, the idea once the fed begins to raise rates, it becomes a more challenging environment for stocks to move higher. multiples tend to go lower. >> let's leap to one side whether your timing may be out on what the fed does. this is very different from other years. the historical comparisons may not match because we had something called qe which is about to end in october. must have had an effect or why would they have bothered doing it in the first place? you have this huge rally on the stock market coming out at 2009. that, too, could change how it responds to rate rises, presumably. >> an important part is where is the market starting from? the market trades around 16

times forward earnings, which is at the higher end of a range of fair value. it's not extraordinarily high. so we are looking for ways in which fund managers could position a portfolio around the idea that my view the stock market rises modestly. i'm looking for ways to have more leverage to a beta in the economy, improvement in the u.s. economy, improvement in the market. for example delta airlines. you could have netflix. you could have halliburton. ways that have more beta but trade, in the case of halliburton and delta, at reasonable attractive valuations. those are the stocks from goldman sachs analyst. >> delta, halliburton and netflix? >> gm, cummings. >> why are you throwing netflix? >> looking for high e beta to the market. i forecast the market will rise

about 8%. higher priced target, leverage the company based on historically how those stocks have tended. >> this is the highest multiple since 1987, '89. you look at that and say maybe the's higher than it should be. >> looking at 40 years of history are, right? forward market valuation on the median stock at 17 times is certainly very highly valued. other than that period of time in 1998 to 2000, and briefly in '04 the market has tended not to trade above 17 times on an aggregate basis. i would agree the market is not -- it's reasonably valued on the higher end. >> which is why lower value stocks generally speaking is an important ate bermuda of what you are looking for. >> at a time when the world is slowing down. at a time when -- you're talking about the euro plunging by 30%

over the next two years. china slowing down. the united states is crawling along its knees quarter to quarter. >> of course, the u.s. economy is accelerating. the data is suggesting things are getting better. >> from contraction in the first quarter, yes. >> where ism manufacturing index is. the highest since 2007 before the financial crisis. nonmanufacturing index, the highest since 2005. nine years ago. some of those are macroeconomic metrics. earnings of individual companies and res and revenues growing 8%. fundamentals, the market is not a cheap valuation. the fundamentals still look good. margins are running at the highest they've been at 9%. >> one final question on color, sentiment, attitude. what do you say to those who argue alibaba will market top? >> focus on the fundamentals.

real focus this week has been on the euro. votes in scotland. technology stocks as a category are statistically more attractive than other sectors. >> i'll take that. please come back often. david kostin, goldman sachs. not much in the headlines seem to faze wall street from ukraine, isis to scotland. broadly the markets keep rising. what do other top economists and experts think about the geopolitical issues. steve liesman is here with the results of his exclusive fed surgery. >> with the fed meeting tomorrow, the announcement coming tomorrow, they are meeting today. the real answer is meh. that's what they say about the issues out there, all these gruesome geopolitical headlines. let's take a look at where they think the s&p is going to be. you can see they raise their outlook for the end of 2014 relative to the prior survey.

they've gotten more bullish and more hawkish. how about june 2015? again, a little bit higher than they were. 2015 end of the year, 2150. that's the average for our guys 15 months from now. david had it about 12 months from now. they've gotten cooler on interest rates. 283 was the forecast. how about 2.76%? little bit higher stocks. touch less or flat when it comes to interest rates. we asked people about what they think about the global risks out there. first we want to do the fed funds rate path. you can see 1%. fed 1.2%. something we wonder if janet yellen deals with which is where the market is versus where the fed is.

2.13% for the end of 2016 and 3.22% is the terminal rate. let's get to the issue of global risks out there. european economic weakness is the number one risk. russia/ukraine 5.0. i know we are making a lot about this. as far as the market concern, scottish independence is a big yawn. maybe because though don't think it's going to happen. it's the least of the independent crisis out there. dennis guardman saying the concerns are materially overblown. russia and ukraine trade with one another and trading partners rarely go to extended war. >> "the stock market view of a world in turmoil. don't worry, be happy." and "the modest growth/modest inflation economy has been living with unlikely to change

over the next 12 to 24 months. the cyclical bull market has more room to run over the next two to three years." the entire survey cnbc.com. >> always a good set of data. thank you, steve liesman. when we come back, what does soft bank and ceo director of alibaba think about the ipo? bulldog: it's true! i am a bundle of talent!

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welcome back to "squawk on the street." i'm morgan brennan. casino stocks moving lower for a second consecutive session. saying it has not found a bottom because analyst he's mates are still too high. wynn resorts, las vegas sands, mgm and melco losing ground. back to you. >> thank you very much. the alibaba ipo is only a few days away. it's an important day for soft bank. we talk about yahoo with its stake and selling some of that stake in the upcoming offering. soft bank which owns 34.1% of alibaba is not selling. it will see its ownership position diluted to down about 32.5% after the offering is completed. earlier this year, i had an opportunity to sit down with the chairman and ceo of soft bank. and talk to him about the

prospect. at that point it was only the possibility of alibaba going public. what would it mean for the company? >> having a public position would give the company more confidence from the user point of view, from the many of the margins on the platform of alibaba. give more confidence. it will give more financial ability to keep on investing for the technology or acquisition of the companyies. as a general discussion, it's a good thing now to have the public status. >> you are supportive? >> i am supportive. >> how is soft bank's ownership going to change once alibaba is

public? >> well, we are not the seller. we are long-time strategic holder and the partner with the management. we supported them from year one. >> what was the original investment? >> $20 million. when the company's revenue was zero, okay? only very small number of employees like 20 or 30 employees. >> is that your greatest investment of all time? >> i believe so. i believe so. >> i'll say. $20 million for 32.5% of a company that will be worth $200 billion by the end of trading on friday or let's call it $180 billion. soft bank stock has been moving on that investment. he is not a seller, as you heard. they are not going to be selling any. they can't phi any more either. highly unlikely. chinese government doesn't want them going up any more in that. it will be interesting. we focus on yahoo.

yahoo japan is the other connection between soft bank which they have run extremely successfully which they control, but which yahoo own as significant stake. >> he described it as an animal smell, that initial investment. he just knew it would work. similar to when jerry yang from yahoo came to him and made a similar investment. you have these three poster boys who are going to be united on the board again. jerry yang will be an independent director in alibaba once this goes through. those three will be at the top working together. >> yahoo came in in 2005. we spoke with dan rosen yesterday. spent $1 billion for a 40% stake. this was a little bit better, i think. $20 million. >> true. >> and just one guy. it's going to be fascinating. always an economy of language. you can say a lot using very few words. great interview. shares of apple dipping below $100 a share earlier on.

33 cents above that on reports the iphone 6 might not be available in china until next year. what do you do with that stock?

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apple is off its lows. the iphone will not be available any time soon in china. joining us on the phone is scott kessler at s&p capital iq. welcome to the program. it's not clear exactly when the iphone 6 will be available in china. why it will be delayed. are you able to shed light on this? i hear there is some suggestion they may not have got some network license from the product for the chinese government? >> thanks a lot, simon. to be honest, there is not a lot

of clarity on this issue. as you indicated, i think a lot of folks are expecting now that the new iphones won't be available in china until perhaps next year. that obviously would be a significant blow as china actually is the second largest country contributor to apple's revenues accounted for 15% in fy-13. i think it's fair to say a number of factors play here. obviously, there is the certification process, which i think many would acknowledge is challenging and somewhat onerous. i think last but not least, we've seen recent indications about the rollout of new wireless technologies causing delays and problems for u.s. providers. >> is your view on the stock changing, scott?

>> it hasn't changed. we have a hold opinion on the shares. our 12-month target price is $103. to be frank, we think a lot of the good news is priced into the stock. we were, i think, like a lot of folks, pretty impressed and encouraged by what apple communicated a week ago today, but the reality is that people are already factoring in a lot of these positives in the stock price at this point. that's our opinion. >> basically, you don't think it's going to go anywhere for the next 12 months? >> well, i guess the way we think about it, most pointedly is we look at it as a market performer. we see it performing in line with the s&p 500 over the next 12 months. >> while we have you here. obviously, there's a lot of buildup to alibaba listing here on friday. you cover yahoo. talk us through that, if you

would. >> sure. what is interesting to us is how it seems like a lot of folks have been suggesting that yahoo isn't a sound way to indirectly invest in alibaba. once the offering occurs, folks that are holders of yahoo height suddenly transition over to becoming holders in alibaba. while that might be the case to some extent, we see tremendous value in yahoo, largely as a result of the significant stake in alibaba shares. a lot of people don't realize yahoo owns 22.4% of alibaba. they are only selling a relatively small stake in the company. so they are still going to own roughly 3/4 of what they own now after the ipo. they are going to be able to participate in the buildup and the positive after the ipo, as well. >> now they are also saying that it's kind of they are trying a

strategy of holding on to the rest of the stake. they may not monetize that for a long time. >> that's possible. i think our view at this stage is that it's an asset worth having. who knows exactly what their strategy is for selling? i think if i were yahoo and i knew that i had an asset that might be worth more in the future than it is now, i'd love to hold on to it. that being said, however, they've indicated that the proceeds associated with the ipo, and we see them as in the many billions of dollars, more than half of that is going to be committed largely to buybacks. that's going to help support the stock, as well. we haven't talked about what we see as an $ billion stake in yahoo japan. people seem to forget about that. >> scott, good talking to you. scott kessler from s&p capital iq. a feud seems to be brewing between rihanna and the nfl.

rihanna tweeting, "cbs you pull made song last week, now you wanna slide it back in this thursday? no. fu. y'all are sad for penalizing me for this." after they decided not to play that intro song. the song was pulled to achieve the appropriate tone and coverage in light of the ray rice scandal. interesting how this is going back and forth. "usa today" has a big defense of roger goodell arguing he is trying to bring about change in the league. the story is not going away. every day it's in the headlines is probably bad news for football. >> though it doesn't seem to be impacting the ratings. even the ravens game, for example, last thursday night was a big win for cbs. one they are counting on. when i talked to les moonves last week, he said we'll make plenty of money from our nfl deal. >> the nfl has proven to be the best thing there is in

television. that's why people are paying so much money, yet we still make a profit. the nfl is basically invincible. the numbers keep going up just about every year. the product is something people can't get enough of. i'm happy we have a long-term deal with the nfl. straight ahead, sarah eisen sits down with an exclusive interview with the chairman and ceo of deere. who's going to do it? who's going to make it happen? discover a new energy source.

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been an interesting in the market so far. s&p cracked that 1980 level a lot of people called a technical line in the sand between the bulls and bears. managed to get that back at 1987. dow not showing big gains or losses either way. want to send it out to sarah eisen in washington with a special guest. >> good morning. i'm here with sam allen, ceo of deere. chairman of the national competitive council. we just got off a panel talking about this on a day where, at a time where companies are relocating their headquarters outside of america to save money on taxes. we can't pass infrastructure

spending, we can't pass immigration spending. are we losing our competitive edge here? >> as we discussed today, i don't think we are losing it, but we have a lot more opportunities to become more competitive. a number of things we talked about today, including just the overall american economy, u.s. as a nation, the energy boone we are talking about. all those things bode well. certainly there are a lot of things we can be doing to increase competitiveness. >> does this feel like a 4% competitive economy to you? >> no. our ag business doesn't relate to the gdp side, but our construction, forestry business and turf business do. they normally are driven by gdp. we are not seeing it to the same level. it doesn't feel that way. the people that i get to talk to also would say that it doesn't feel like we are really at that level yet, even though the last six months have indicated we are

there. >> construction. you mentioned, which is a business you used to run before you took over the whole company, has been a relative bright spot. does that mean the outlook is good and you are going to expand that business begin what we've seen as a housing rebound takes over? >> it has not come back as quick as we thought it would or others. we thought by now we would certainly be over a million housing starts. we are still not over. the business has come back. it was at such a low level in '09 as a result of the financial crisis had almost nowhere to go but up. we would argue we are not at an average year yet, but the forecast still shows some improvement, though it is coming at a modest level as opposed to we would have thought it would spike up more quickly. >> the bulk of your business. you mention agriculture machines. farmer incomes are down, prices are low. this hurt you. we've seen this in your stock price and your financial results. have we seen a bottom in terms

of the prices of those crops and farmer incomes? >> certainly as you indicated, commodity prices have come down. they are continuing to come down because yields are forecast to be up, all record yields. we'll have to get through the crop this year. what will happen as a result of prices being down, we can't forecast what will happen next. what we do know if prices stay like this, farmers not only here but around the world will start switching acreage out. they won't plant as much corn. right now they've got this crop coming in. that's what we would expect to happen next year as farmers around here would switch from corn to wheat or some other crop. >> this funk, do you see this lasting beyond this year and next year? are we talking about a multiyear phenomenon here? >> what we've always said, we think we are in a couple of decade-long time period where

what's been driving this, which is population growth, dietary changes which create additional demands for grains. that is going to continue. that's long range. >> that's big picture. >> we've also said the highs will be high and lows will be higher, too. we will still have highs and lows. we are in a period of low prices. we'll have to work through that. offsetting this is the live stock and dairy industry. that's at very high levels. it's not as good for our business because we are focused more on grains in terms of our equipment. what will happen is we'll see a moderation of supply. i think people lose sight of is if you take corn, for example. corn consumption since 1995 has gone up every year consecutively. even in '09 and '08, corn

consumption has gone up. >> we had good weather, now this bumper crop. prices are the lowest in years. >> and we'll have to work our way through that with our farmer customers. our argument would be grain supplies will come back in alignment at some point. once they come back in alignment, then we are one bad weather pattern or anywhere away from having a situation where capacity cannot keep up. you'll see prices rise again. >> as a result of this environment, you had to right size production. you have announced about 1,000 lay-offs. could we see more on the way? >> certainly, that is something we'll continue to look at. we said we are going to look at it very closely. we obviously don't like to lay off people but we have to run the business on a sustainable basis over the long term. we'll keep looking at what's coming in front of us and continue course correct to

ensure we can run the company very profitably through this time period. >> another thing we talked about, even though the environment is tough, you are spending a lot on r&d. is that pace of spending going to continue? how excited are you about this new product lineup we've seen? >> so we have been at record levels. we are cutting back some. a lot of what we are spending have to do with emission regulations. some of that will go away going forward. we are still at very, very high absolute levels. to continue to invest in bringing out new technology, especially technology tied to smart equipment, telematics. we'll see new products coming out of our product portfolio.

what product has you most excited in the pipeline? >> have to be careful in the pipeline. >> we haven't seen yet. the one that just came out, one of the critical enablers of a high corn yield is to plant with the right spacing and right depth. if you can get that accurate, you can get 15%, 20% yield improvement. that used to be a machine that could go 2.5 to 4 miles planting. we just introduced on a limited basis and coming into full production, a machine that can do that at 10 miles per hour. it's more than double and more accurate. and the monitors in the machine is monitoring every one of the seeds being placed in the ground as it goes through. that will be one of the examples. >> very quickly, i want to ask about russia's import ban on agricultural products. are you negatively impacted by

this? >> i was there three weeks ago. as of this week, i would say we have not from the agriculture because it was not equipment. we have been impacted by the financing side as a result of banks not being able to use banks and customers have been impacted. business is down dramatically. in terms of a ban on ag equipment, we have not seen that. >> it will hit sales. >> yes. we talked about that in our last call. business is down significantly. >> thank you for taking the time to talk with me on "squawk on the street." that is a topic to cover on squawk alley, farm technology. >> improving yield. great interview sarah eisen with the head of deere. from the basement to the new baseline. how kids leaving home are changing the foundations of the housing market.

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take a look at utility stocks today, one of the best performing sectors in the s&p. highly tuned to rates. morgan brennan back at hq with that. >> check out the utilities. they are the second best performing sector on the s&p behind energy. investors looking for a dividend play here. northeast utilities leading the way followed by edison international, duke energy, american electric, entergy. it's a good start of the day for the utility sector which has seen a fall-off in the last couple of months. down about 4% this quarter. back to you. >> i guess the fuel keeps falling and values helping them. new data out about the best places to live in this country and how those places correspond with millennials looking for jobs. diane olick has more on that. >> millennials are slowly starting to move out from their

parents' basements where a record number have been living the past few years. they are still renting. over the past year, all the growth in net household formations has been among renters. for those 35 years and younger, their homeownership rate has fallen 44% to 36% over the past decade. back to that migration from the basement. how big is it? we are going to get new census numbers on that later today. what we do have is new insight into where more americans are moving and which cities are considered the most livable. who better than to ask than the moving companies? united van lines tallied the results of the busy summer moving season and found chicago, d.c., atlanta, boston and l.a. led the pack in the most popular moving destinations. interesting that d.c. also ranked the number one city people are leaving, but such is the nature of this town. granted, these are all big city markets. some millennials are looking for

mid size to smaller cities with great quality of life. which are these? madison, wisconsin, rochester, minnesota, arlington, virginia, boulder, colorado and palo alto, california. they round out the top five. liveability.com which looked at 2,000 cities and their ameni amenities. they came up with the top 100 cities and we will have a link to that on the realty check soon. why is all of this important? because millennials will drive the future of the housing market. while they may not be moving that much right now, investors should know where they are headed. >> wisconsin is the place to be, diana. >> i suppose so. it's cold but after a hot summer, it might be worth it. up next, what does the country's corner office think about the future of the economy? president of the business round table will join us live with a

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we talk a lot about cell phone these days. one chinese city is doing what a lot wish they could do. a city in southwestern china divided a sidewalk on one of its busiest streets into two lanes. one for cell phone users and ones without cell phones. there are warning signs painted in white. this is a popular tourist attraction in the city. a lot of commentary on twitter over the past couple of days, what will our children -- god help our children, this is what society has come to. you were talking about progress. i don't know if this is it either. >> as somebody who spends a great deal of time walking around manhattan which tends to be crowded, i think this is a great idea. >> you don't divide it into cell phone users and noncell phone

users. it's tourists and people who know where they are going. if you want to meander without any spacious awareness in your own little world, that is fine. this is the lane for people that have got to go to work at the new york stock exchange. >> or 30 rock or anywhere else. >> i agree. tourists, none tourists. then throw in the cell phone users. >> people used to physical exercise. >> be funny to watch them all banging into each other. >> base round table releasing third quarter outlook index. while it declined moderately from the second quarter, it showed ceos believe the u.s. economy will underperform over the next six months. joining us now is the former michigan governor and president of the business round table john engler. >> thank you. good to be back. the numbers reflect this ebb and flow, a little uncertainty. ceos were thinking tax extenders

would be done, maybe more positive trajectory. sales data wasn't so bad. about 70% see increase sales. there was a drop-off 5% there. hiring in the capex dropped a little bit. >> it's strange. if i think it really is. we asked i think another question i thought was really useful. we said what if comprehensive tax reform got down. cut the rate. fix the territorial system. 90% said that will lead to increased investment. they are waiting for a signal. you saw yesterday the tax foundation with dismal ranking of the u.s. 32nd on the competitiveness

index they put forward. we just haven't kept up simon. >> roam widen. the senate finance committee still thinks he can get a bill through at the end of the year to stop tax inversions. wold you supportive of that? >> well, you know, i think what our guys are saying the men and women at the round table, say look, no band aid, no patches. let's get things right fundamentally. >> governor, you know that is not possible. we can't comprehensive tax reform. so would support a bill solely on inversions, which is what i asked you. >> that clearly is understood pretty much for what it is. the inversions are the symptom of the big problem. . in 80s when the u.s. cut its rate to 45 percent. the global rate was 39%.

today the global rate is 25. we're still 35. everybody in the world is moving and we've been standing still. and our tax rate was last changed before we had an internet. so it has been in one place a long time. >> yeah. well the hope for comprehensive tax reform governor probably not till 2016 many would say. >> i would disagree with that. the president's said for it. we have the democrats and republicans in the congress for it. and we had -- in last week. i think there is an opportunity and i think the economics drive it. >> you may be right. >> i hope so. >> as a former executive and legislator. should by worried about that's numbers? it seems surprising, the economic numbers overall haven't changed over the last month. and the cap spending number in

particular coming down as, you know, a reflection of expectations from the guys and ladies who make the choices seems to be worrisome. >> wrel, i was a little surprised too. but because there's been a lot of, you know, attempt to dress things up and say they are pretty positive. but gdp is still limping around. we're coming in around 2%. but compared to past recoveries at this point, we are way below where we should be. workforce participation still way down and it is especially down when we look at younger workere workers. and 4 million jobs we can't fill because people don't have the skill. >> there is something else going on here, isn't there. 93% of your ceos expect their sales are going to be what they are six months down the line or if vast majority within that believe they will actually have improved. so 96% are upbeat on top line. but 20% of ceos still intend to

cut jobs. >> well, again i think when we look at specific industries there are some where clearly if you were making the investment you would be hiring. you would require that. you put on the other shift or building the new assembly line if you are in the manufacturing space. consumer demand on the retail side still isn't great. so we are going to hire a lot of people temporarily for the holidays but not sure if we look at the demand on durable goods that's never really come back where it should be. the car industry has been good. i would say it is a mixed bag up and down. so 20% isn't a huge number but enough to move our result and to give us a bit of a negative cast. >> going in the wrong direction for many. thank you governor for joining us. john engler there, the president of the business round table.

let's send it over to john fort so see what's on the agenda. >> a lot of great stuff. first off, apple's iphone 6 might be delayed in its launch in china. also misfit wearables. worried about battery life in the technology you wear you want do check out that next. and finally alibaba not just raising money in the u.s., spending a lot too. we'll have a start-up of two rounds coming up next. (shouting) location. here's the location that matters the most. here. or here. or here. it's wherever this is. to get customers to come here and stay here, you're going to need an app that connects to all your systems. so they can bank, shop, do what they need to do, and you gotta do it fast. before the competition does. it's tough out here; you better be on the right cloud. today there's a new way to work. and it's made with ibm.

welcome back to squawk on the street. check out humana, the stock moving higher after the healthcare company announced a new $2 million share buy back that extends through 2016. this replaces the previous program that still had $782 million remaining. that's trading up 2.5% currently. >> netflix after yesterday's falls down again today. 4% yesterday, i'm saying off the top of my head. down again today. the debate continues as to whether those that invest in

momentum stock, internet stocks are selling in order to purchase alibaba on friday. or whether it could mark a top in the market. it's interesting to note it's pricing below $70 a share in order to not be the biggest ipo ever on the new york stock exchange. perhaps of fear of maybe a bit too much swagger and become too important to the market. carl? >> almost 8:00 a.m. in the apple in california. sidewalk alley is live.

welcome to squawk alley. joining us this morning. jon steinberg. good to have you back. and a busy day. check out shares of apple this morning. the stock slipped below 100. 99.57. hugging that level on this new report to the chinese paper. it may not arrive until 2015. a breakdown in talks around network licensing is a big reason for the delay. the six hits stores here in the u.s. on friday and several other countries. do you think people freaking out about this need to rethink it? >> absolutely. once we saw the 4 million number on preorders we knew this was going to be a big u.s. launch. the question was were they going to have enough supply to successfully launch and supply demand here and overseas in china. if apple were intentionally holding back