something about apple in an apparent open letter he wrote. it's thursday, october 8th, 2014. "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen. andrew is off today. let's get right to the markets. the latest fed minutes fueling a rally on washington street yesterday as stocks turn in their best day of the year. it was a broad surge. the yield of the ten-year t note falling to its lowest level since june 2013. take a look at where the u.s. stock futures are this morning. they are indicated higher once again. these are moderate advances.

but still, the dow futures look like they're up about 24 points above fair value. s&p futures up by 5 points and the nasdaq up by 11 1/2. among our guests today, we have lee cooperman joining uts at 8:00 a.m. wholesale trade and monthly same-store sales. as for earnings, we'll get results from pepsi before the bell. alcoa kick off earnings season last night. the company posting better than expected results. ceo clause clinefeld was on cnbc last night. >> on an absolute basis as well as on a margin basis, we saw an increase of profitability year over year of 45% in the mid

extreme. and the best quarter in the upextreme brings since the second half of '08 when it started to get weaker. >> shares of alcoa are up about 50% in year. in other corporate news, amd is replacing ceo rory reed. the market value is nearly halved since he took over in 2011. the chipmaker is trying to expand beyond its core pc market. lisa su will take the chief executive role. some annists were surprised by the timing announcement because the company is set to report quarterly results next week. let's talk about what's important, maybe. the way ta worked yesterday, the fed back en vogue. we were convinced that maybe the market -- or was bog to respond just to better economics. that's what it did, better

economic news and the fed was becoming less poet ept because we're really assuming the fed is going to become less involved in our lives. but that is not necessarily the case. those two guys telephonely graphed what was going to be in those minutes. but you read today in the journal, something telling the fed global growth is not going to be what they thought. maybe a 11% german bund. maybe that the eye tall yab ten-year with italy's finances, that ten-year is below our ten-year inspect. >> the market was not at all impressed or didn't like the news. i thought it was maybe that the market was thinking bad news was bad news. >> we were saying if it's one or two people -- remember? >> i thought it was an outlier. >> your question is what does yellen think? apparently the entire federal -- weakness.

>> i thought we were at the point where the market was going to look the a bad news being bad news. >> you're uncomfortable, you question the fundamentals, you're uncomfortable, but historically, it actually starts moving before you see any -- and i think it's not just the -- that the global economy is slow. we've got the dollar rising, which means it's going to continue. >> tougher and tougher to export. >> slow growth is going to continue here, but also with the strong dollar, when do you think inflation gets to 2%? 2018 before we get to 2%. that adds a whole not only not mid 2015, but that could go through 2016. he was dead wrong three years ago on thinking the bond market rally was over. hopefully we have -- we have

andreesen some time today? >> we do. it's coming up. this is another story, carl icahn promising some news today. he did this through a tweet. the activist investors tweeting that he's going to be sending an open letter to apple's ceo tim cook. icahn says he believes it will be interesting, in his words. since a year ago, the stock is up more than 50%. icahn himself is going to be on "fast money" halftime report. that's at noon eastern. you think this is somebody you would have a good working relationship at this point. tim cook has done a lot of things to try and meet his expectations. the way he thanks him for that is to tweet everybody and say hey, i'm going to send an open letter to him tomorrow. >> let's say i compose an open letter for some company. with regoing to lead with news on that company? what's the news on apple? carl icahn -- imy, i guess i

understand that it is. but -- b. >> he moves markets when he talks. >> he does. but i take -- as andrew loves to say, usually it's about inversions, but i take umbrage. i can't wait until langone is on today. i want to have appeared rue, i just -- just driving me crazy. this is just -- i wish he was here for langone today. >> andrew has missed langone the last few times he's been on, which is unfortunate. >> for everybody it's unfortunate. it really is. >> mark andreessen was saying you will not hear him sugar coat most things. this is what he had to say about icahn the. >> the good capittain kirk and e

evil captain kirk? it's one of toss things. and carl is just the exact opposite. he starts off throwing lies, makes stuff up, he slanders, gets the full like -- his inner 6-year-old comes out. >> he lies, he slappeders and he makes things up. >> and his inner 6-year-old comes out. >> what was mark's history with icahn? >> was this the -- paypal, wasn't it, where he said this is the worst corporate governance in the histories of the world? in that's right. he slammed andreessen. >> he did. no love loss there. during the interview, andreessen says he expects more tech companies will follow ebay's lead and split up. you see it there. >> i'm just looking here because i guess he had some harsh words for him back in if he february, too. i forgot about the paypal thing. big news on apple. he's made 50%. that's not -- that doesn't make him happy, either?

>> you can understand why ceos gt weary of activist invery fasters who they're supposedly supposed to be working with on the same side and the way you announce other deals is to tell the worth about it. i can imagine that would be a tough one to try and work out as a manager. the death of the first person diagnosed with ebola in the united states is urging all kinds of questions today. meg is back on set and joins us with more on this. >> that's right. the death of eric duncan is raising a lot of questions about u.s. prepared, in hospitals and about the hospital treatment itself. that was yesterday in philadelphia. we spoke to a lot of doctors who said any delay in treating a viral infection can create problems in treating. dr. tom frieden from the cdc earlier this week called the hospital's treatment a teachable moment. but we spoke with a doctor from emory university yesterday which

treated some ebola patients. he said hospitals around the world have some catching up to do in terms of emergency prepared ps. >> a lot of centered around the world are in a framing stage. we're likely to see additional patients slip through the cracks. there's a lot of question about what t u.s. is trying to do at first marmg u.s. airports. that accounts for 94% of the travelers coming in from these three affected countries. new york, jfk, wall-dulles, new york, chicago o'hare and atlanta will start to be implemented next week. >> those are only for flights coming in trektly from those countries? what about people who go through belgium or through some other countries? >> they're going to be checking passports and looking to see where people have been and if they have traveled through those countries or originated from

those countries, they'll be taken to a separate screening area. their temperatures will be taken, asked a lot of questions. if they have any other symptoms, they'll go through further. >> not a list that -- newark has never been on any list that you would want toe be on inspect. your honor. baggage, luggage. >> i have a lot of questions on that. number one, i understand you can bolster someone's ability to fight a virus. i don't think you can deal with the virus. we have no way of dealing with it, anyway, necessarily. but you would want someone hydrated, you would want them rested, you would want their immune system as healthy as it could probably be to stave off the virus. but this thing about this yesterday that is i think putting it into words that drove everything home is we think

you're going to come here to the united states. and once you get into that united states and you get into our icu that somehow that 70% mortality rate can going to come down to 30%. and it was a shock to see that even in the best hospitals in the world, we were unable to save this guy. that shook us all yesterday, does it not? >> i think that's absolutely right. i think a lot of people's expectations were he was getting the best possible care, even though we don't have drugs to treat ebola. he was auto a press operator, he was on dialysis. every time an organ fails, that means a 20% chance higher of mortality. >> i also was watching and it was like, all right, we didn't have to have this thing totally approved by the fda, but we know it has some efficacy. these guys are getting the right

care. >> he didn't get the drug until so long along. >> we had prime coverage. it was going by on the ticker and then it was down two or three after but then it came back. >> it's still being used. they already knew it worked in that way. >> yeah. originally the stock was on the data. >> i think another question is how prepared we are been yesterday there was the story that the sheriff's deputy who was in dlal dallas who had been exposed potentially, he showed up at an urgent care center with ebola-like symptoms, flu-like symptoms. and, of course, they had to take him and isolate everybody and

take him to the hospital. the urgent care center is not going to be able to help him. >> it's parent to note, also, none of those folks who had exposure to duncan have showed any signs of ebola. but yeah, there's a lot of questions about whether hospitals are prepared, not just in the united states, but overseas where we saw the first case contracted outside of west africa. so a lot of questions. and it could have been taking off protective gear. folks obviously need to be trained stringently on how to do this. >> what's the late ettest on the sheriff's deputy? he went into the -- >> the cdc is saying there's no evidence he had contact with the patient. >> but what if he had symptoms of? >> they said he had some symptoms. >> how long does it take to get the results back? >> he has to show definitive symptoms before the test would even be defenive. so it's not clear exactly what

symptoms he's showing right now. >> it won't be definitive unless you're showing the symptoms. >> yeah. if there's one, you should be able to see the zens. >> the rye russ doesn't proliferate. >> meg, we will see you back here in the next hour to talk a little bit more about this. but thank you for the update. >> thanks. we worried about all these things. you see isis is going the take that city and -- but at least the fed -- at least we still have -- that's what they tell us. another fed induced rally yesterday. i think it's one-day gains of the year after the fed minutes indicated an accommodative

stance would remain in place for a while. i can't believe traders needed to see it in print to figure it out. will the rally hold? here with us is ed keon. and tavidia from bank of america merrill lynch global research. and i just want to start with you, ed, because you're -- well, you're old and you've seen a lot of -- you've got a lot of the experience. we're gop going up 300 -- i said it couldn't happen again. we were down 300 and the next day up 300. you go home thinking, wow, i knew this market was weak. i knew it was starting. what is it doing? what does that tell you about traders' convictions and stock

prices right now? >> well, here we are, a few months to go and that's roughly the pace that we're on. so it was a day-to-day fluctuations have a lot to do with the dollar. i think the stronger dollar, people say to themselves, that means thaernings are going to be weaker, which is true. but that also means inflation is going to be lower. i think the fed statement today in context was basically acknowledgement that with the stronger dollar, the threat of inflation has receded and as a result the need to have more aggressive policy has been pushed back even further into the future. >> avida, i think that hit the nail on the head. that is all of a sudden we think about growth and we think about the fed's effectiveness in spurring the economy, whether it's been successful or not. but once you start talking about inflation not coming back until 2018 then you're back to where the fed might as well just do whatever it's doing, you know? if there's not going to be any inflation, even if you don't know that it's working, let them

stay in there, anyway. >> right. right, right. i don't think earnings are going to be all that bad this quarter. here is the thing. you've got the dollar strengthening. but that tends to be -- i mean, you know, so we calculated that a 5% move in the dollar takes off about a dollar's worth of s&p earnings. that's less than a percentage point of earnings. so earnings are going to be already this quarter. if you think about it, the dollar strength didn't come until late in the quarter. you're fought really going to see that big hit to earnings. >> i agree with you. i think it's not going to affect this quarter. i do wonder what the outlook will be for some of these companies and if they'll be more cautious because of what's happening out there. >> i think you're right. fourth quarter guide yaps, you could see some staving off of expectations. if the dollar holds at these

levels, i think multi nationals have sold off to aggressively, that they might have a little bit of a rally, which is what we saw some of yesterday. it doesn't look all that bad for me. >> the third quarter is about 6 and change. the actually number will be about eight. conseasonsus for the forty quarter of 11. it's a pretty good year for earnings. >> what did you say on a percentage basis that was? >> 1%. >> 1% or less of earnings. >> if we stay in a low interest rate environment, we can make that 1% up in the multiples, can't we? >> multiples don't contract. that's a dollar in s&p earnings is nothing compared to a multiple contraction that we get from -- >> the other way to think about it is the dividend yield on the s&p is around 2%. the ten-year is down around 2.3%. you're paying almost nothing for the capital gains potential, for the growth potential of u.s.

equities. >> do either one of you think we go below 2% on the s&p in general? >> i think you could for a short period of time. it's a slow higher move in the treasury. i'm not a technician, but i think -- here is the missing link is growth. and we're starting to see u.s. growth accelerate. this is what nobody is talking about. i remember the last time i was on the show, we talked a little bit about cap ex. you're seeing companies spending money again. i think it's a bullish sign for the u.s. economy. so even though consumers might be slowsing down and the housing cycle might be slowing down, companies are starting to spend money again. they're hiring a little bit more. this is all good news for the u.s. economy. >> we're not japan, but how long has japan been under 1%? >> a long time. >> really? >> yeah. >> i can industrialized economy, the third -- >> you could be -- it used to be a third.

but we have deflation and a less than 1%. >> so frightening. thank you. and you're not old. >> you and i are roughly the same age. >> that's right. are you living near kendall square? >> love a bar near kendall square, yeah. >> is that when it all started? >> kendall square. >> remember the s&p diner? >> sure. we used to go there every day. up next, filling the gap. the ceo is leaving after the holiday rush. will there be a shift in strategy? plus, an exclusive interview with the chair woman and devicer. we'll show you a selfie oriented smartphone. "squawk box" will be right back. that sets you apart. it does? it does. you're type e*. and seeking another perspective is what type e*s do.

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courtney reagan joins us now with more on who is going to take over. the retail giant, the age of this gentleman? >> yopgs. he's only 52. >> so it wasn't age. >> is this typically when someone would, you know, in like mid october, you review -- >> well, if they want tight be an orderly transition, which they do because he's staying until the end of the fiscal year. >> house gap --

>> it's for the holidays at this point, anyway. >> have they been putting the right stuff in stores, do you think? >> they've been getting better. they have a couple new creative director. when they fist started, things were rough. and he's done a lot. this is part of why we saw the stock drop a lot. i spoke to both now the outgoing ceo and his executiver. both say it's the first order ler transition in 20 years. murphy toll me while the board wanted him to stay, i informed them he couldn't make another long-term commitment to the gap. he thinks the leader of strategy should be the one that architects it and he simply can't make that commitment. art is the current president of growth within innovation and digital. he works closely with murphy,

particularly on that strategy and execution. wall street goes to a lot of those retail conferences. he was just told last wee that he got the top job. murphy told me there was a global external and internet search for his candidate. shared sh jumped since murphy took over. when i asked art what his message was to shareholders, he said the transition signals nut by moving ahead. when it comes to murphy's next chapter, he told me he doesn't have any plans after january, but if the right opportunity comes along, he would certainly consider it adding, quote, i'm only 52. that's a lot older in the retail world. >> that's what i was saying. >> his words. >> i don't understand why the stock went down so much. >> because murphy did so much while he was there. shares have gained 160%.

i don't think he wants to stay through another seven year, eight years, whatever that terms is. >> he was making a lot of money, wasn't he? >> yeah. >> the new guy has the beard with fashion. >> but he's older. >> he's already inside. >> he's been there since 20 05. he's done a lot together. >> you talked for about a minute. and no one knew when you moved to the cell phone. we had very few people coming up. did you notice her? >> when team talking they go, that's right, joe. and i go, is that really the best you can come up with? >> nice move. >> thanks, guys. >> we were on break to say that, right? >> that takes away the smoothness. >> it sure does. >> no one said i was smooth. >> no. >> no.

>> htv is making moves to try to turn the company around. the mobile hand setmaker is rolling out two new products this week. a new selfie oriented smartphone and a new waterproof action camera that they are calling the read. it's coined of their version of the go pro. i talk to the company founder and here is what she had to say about staying competitive in china. >> china still consists of the biggest markets. the smartphone is just a device that you need. you need it. it's a personal device. i think a lot of people are limited. they are in the remote area. they can help their life better. >> so it's a recession proof product? >> i think so. i think it's growing still. >> she is one of the most

powerful women in wireless. we're going to have more on that sunday night. >> one of the things they come up with is this new camera. i'm struggling to try to make the wi-fi work in the building and it comes out pretty well. this tiny camera is their version of the gopro. put it anywhere, turn it on and it will send pictures and videos back to this. it's kind of like a school spy cam. i was thinking about putting it somewhere, going to the bathroom and see if i could catch you talking to me, but then i realized you say everything to my face. >> i do. i didn't know where you were going to go with that. you were going to take it to the bathroom. >> it is like the google glasses where you're not going to know somebody necessarily. >> oh, i dropped it again. sorry. and we hear what drives all

technological innovation. >> the tech industry? >> yeah. this could drive it again. it looks like a para scope, though. it's very elegant and light. >> i like it. going up against big competition. >> we're going up against very deep pockets with apple, with samsung who have the marketing muscle, who have the market shares. htc will have a hard time breaking into that. the mux themselves look interesting. there is video what has a new apps. you can make them work together. i was snapping pictures earlier. >> wow. >> you know? >> anyway, coming up, keeping corporate america in america. remember jeb henserling, chairman of the house financial

social security committee known by jim joins us in studio this morning with his plan on making the nation more competitive. and keeping the water flowing in the united states is expected to cost billions over the next 20 years. we're going to talk to the ceo of one of the largest publicly traded utilities in water about this giant instruct. as we head to break, here is a look at yesterday's winners and winners. ♪ when change is in the air you see things in a whole new way. it's in this spirit that ing u.s. is becoming a new kind of company. one that helps you think differently about what's ahead, and what's possible when you get things organized. ing u.s. is now voya. changing the way you think of retirement.

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good morning and welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick. art art got out of here so fast when langone was going to be on today. have you bought a red bull in the last ten years? if so, the company os you $10 or a free drink. themaker of the drink filed two class action lawsuits. the lawsuit alleged that the company's marketing efforts and statements such as red bull gives you wings misled customers and consumers about the benefits of drinking the beverage. >> because they thought that you actually got wings if you drank the -- >> it was like when people that are involved with the cloud, they need to come out and say

the cloud is not actually a cloud. remember when someone told us that? but who wants wings? >> i remember it was a cartoon guy who got the wings when he drank it. i remember those commerce. but partial consumers thought they might get wings? in our other headlines this morning, the hackers believed to be behind the data breach at jpmorgan, the ft says there are no signs that fidelity customer data was stolen. joe. >> your, becky? your turn. >> cnbc's results are ought out the finding 74% of americans have somewhat or no confidence at all in president obama's handling of the economy and very little faith in the u.s. congress. joining us now, republican congressman jeb hencerling. we call him chairman, right?

>> jeb works. that is a reference to -- you were giving him grief about something, the president, weren't you? >> who, me? only if he deserves it. >> at the time that it happen, was it an honest mistake? because i do that sometimes. >> i suspect so. i think the the the knows my name now and i certainly know his. >> i knew it now and i knew it before then. if you're in my face, i would go, okay, jim. >>. >> there's a call to call other people. >> mr. chairman, i would think that a lot of the poll results we've seen lately would embolden republicans except for the reason that most republicans in congress have a probably 50% approval rating of the president. so it's sort of across the board negativi negativity, isn't it? >> well, certainly and i

understand the numbers that you showed, i think that is the lowest approval rating that the president had on his income policies. and it's easy to understand. the average working american family, they're at this flat line, barely keeping up with inflation. they have less net worth. i think that's number one. most of them have decided they don't like obamacare and i think they're waking up to the fact that they don't like dodd frank which is frankly a lot responsible for the economic mess that we see today. pe promised us it would lift the economy in too big to fail. i think there's a growing consensus that it has not. pe put forward a number of pieces of v of las vegas that regrettably go over to the united states senate where all good ideas go to die. they never see the light of day.

i want why the american people are from you traited can congress. >> i just mentioned the income inequality, the low end hasn't participated even though the high end has. we talk about the fed and raising asset values. the holders of the assets not surprise going the people that own asset res the ones who have been doing better. but both sides have different ideas but b how to rectify that. >> i've been around the left for a while. >> and then on the right, you want to try to help the private sector and then the left comes back to you and says you're trying to help the people, the corporate fat cats that have the big pay chemical. so that's all we see in washington is two sides talking at each other with totally different ideas about how to fix things. >> regrettably, the american people are also quite divided.

i think the congress represents that. you try to lead by example. some might say the democratic mt. might represent idea logical bookends of the united states congress, but even we have found some common ground to work on. >> she's a piece of work. i like her a lot. >> i like her, too. we don't see high to eye on a number of issues. where we do, regulatory relief. we certainly having seen any leadership out of the white house. >> we've 2k3w09 a lot of places to go, so today in the journal says that the president is much closer to republicans on corporate tax reform. we could definitely do it in 2015. >> well, i don't know the answer to the question. >> but are you closer? is the republican contingent and

the white house anywhere near each other on -- >> joe, i've had sweet nothingings whispered into my ear from this administration before. at some point, it seemz to lose a little credibility. >> where do you see eye to eye with the administration? >> i don't know because i don't particularly know where they are at. >> where are you? >> when you say tax reform, i think it's broader including the cub chapter s, for example. >> so individual tax reform, you wouldn't be able to do it just on a corporate level? >> you know, again, it's divided government. i'll take what i can get. so i would hope either corporate or business entity tax reform might be on the table. ir mean, the president is talking tax inversions. i find it ironic that for 200 years, companies have wanted to come into corporate america and access our markets and economic policies they want to start to leave.

>> and so the answer is, obviously, corporate tax reform. i served on the less than super super committee in and cochaired that along with senator patti murray. regrettably, we did not manage to agree on anything, i would say relatively speaking of all the issues that were before us. we came most closely to finding common ground on entity tax reform. you can't abandon hope. if you do, there's a lot of reason to be hopeless. the whole issue of tax inversions, that's the symptom. and we have to go to the root cause and the root cause is a very unfair, uncompetitive complex tax code. >> i saw last knife there's five or six states where the president's approval rating is no higher than 30% in the best place. so the latest figure i saw was

52 gop. 48. >> i'll take it. sold. >> what would that mean, though? how does that change anything for the last two years of his presidency? >> well, again, i don't spend a lot of quality time with the president. i don't know how he wants to spend the last two years of his administration. i would hope he would want to negotiate in good faith. >> would he be able to say to his base, look, there's nothing i can do. i have to move away from our idea onlial left here. >> yao, you're asking me to psycho analyze the president. i don't know. i can tell you the kinds of things republicans would like to achieve. but at the end of the day, most of us came to congress not just to make speeches, but to advance things. in the sector that i'm in, i would hope maybe there would be some common ground that dodd frank did not end too big to

fail. there seems to be a growing consensus around that. i would think we can get some conkensus for our community institutions grounding in this sea of ink and government red tape. i would hope for fundamental ground on housing reform, fannie and freddie. >> you can view it. >> indeed, but at least it's a difference. it's a momentum changer. at least we're moving forward. we're presenting the presidents with bills and then at least to some extent allows the american people to get educated about the issue. if the president chooses to veto a bill, hoefltly your network and others have to present both sides of the story. but ultimately, i think the american people are contacting that obama nomics is not working for americans much less those who would like a job. >> you didn't agree with the xm

bank. why take that on? what was your problem? capital groannyism? >> when you say take it on, i was happy to let it silently expired. xm is small relative to the economy, but directally, i think it is very, very important. i do not think you can make the case that the export/import bank creates net yox. >> america. if it helps boeing and ge, it hurts delta and volero energy. and the list goes on. acoring to the budget off the, if they used gapthing, fair value accounting, it would be losing for the taxpayer, not gaining. but but fought least, it's about mrig lending. it has a green mandate. frankly, yes, corporate welfare, crony im, i think most republicans -- and we're having this discussion within the

family -- believe that your success ought to depend upon how hard you work on main street and not who you know in washington, d.c. >> but what about when you're compete, airbus from a different nation that has lots of backing from its countries that it's supported by? when you're boeing and you're competing with airbus, who does get this help from the europeans, it puts you at a distinct disadvantage. >> well, i want to help level the playing field for our exporters and manufacturers, but i don't want to do it by putting in on the taxpayer balance sheet. for example, the naeshl association of manufacturers have offered the opinion 50% of our competitive disadvantage comes from our tax code. thus back to fundamental tax reform for corporations and other business entities. i don't quite have the number at my fingertips. but i think we have something

like 2.4 times as much liability exposure as our european competitors. so there is a number of ways we can make our manufacturers more competitive without adding to an unstainable balance sheet. >> coke or pepsi today? the company earned $1.36. didn't need any. >> i can't give a short answer. the pepty bottling plant is in my direct, but my father owns coca-cola stocks. >> i can't do carbon yaited. 17.22 billion in revenue. the estimate was 17.086. you can see it's immediately got the stock up, 1.06 versus a 93, 94. >> i knew that. >> yeah. it's already up above that. whenever i talk about pepsi, i

think i say that ends in toes, right? fritos, tostitos, they make you thirsty. >> going together? >> yeah. growth margin has expanded, 45 basis points targeting more than 7 billion in free catch flow in 2014. that is going to be a problem in terms of a strong dollar. that's going to cut a core currency. cut by earnings per share by 8%. oh, no, i'm sorry. had seen 2014 currency up 8%. now it's going to cut it by about 4%. >> the revenue growth by about 3%. and we knew this was going to be a problem with a lot of the big internationals. we had annen list earlier who said about 1% or less. obviously, it's going to be something we're watching with all the big international companies. >> you've got a pepsi plant but

your dad owns the stock. is that what you said? >> that's what i said. >> we keep them both in the fwrij. >> okay. chairman, thank you. and you know you can come here anytime you're back here. we love to argue, too. it would be better if you're here when andrew was here, too. >> is he more contentious? >> we know that, yeah. >> okay. we'll come back and arm wrestle. >> okay, good. >> thank you. when we come back, we'll have more on pepsi. stick around, squawk will be right back. health can change in a minute. so cvs health is changing healthcare. making it more accessible and affordable, with over 900 locations for walk-in medical care. and more on the way. minuteclinic. another innovation from cvs health. because health is everything. (shouting) location. here's the location that matters the most. here.

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a deal crossing the tape this morning. endo is acquiring auxijum pharmaceuticals. about $2.6 billion including

some debt. approved the deal to 55% premium to auxilium's public. the day it made public that it rejected the unsolicited bid. so it is indicated close to -- that's the close there. and it is now indicated 32.50 to 34.45. it is going to be trading higher. coming up, this special camel we have is on a mission. we're going to tell you exactly what this guy -- not an it. we'll tell you what this he or she camel. can you tell from a hump whether it's a he or she? >> i don't know. i can't. >> anyway. we'll talk about it in the next half hour of "squawk box."

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coming up. this morning, how will the markets stop the banner day? that will be one of the topics we'll talk about with ken langone. everything from his interest in starbucks to how the nation is handling the ebola threat. "squawk box" will be right back.

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the bulls roar back. stocks surge in one of the best days for the markets in all of 2014. how long can the fed keep scaring the bears away from wall street? carl icahn tweeting again. the billionaire investor picking at apple again with the promise of something interesting later today. the second hour of "squawk box" begins right now. good morning, everybody. welcome back to "squawk box" on cnbc. i'm becky quick along with joe kernen. arnold r andrew is off today. the bulls are hoping to rally.

if you add the last two sessions together, the dow is up a grand total of two points. >> up though. >> at least they made back their losses. the futures this morning have turned around a little bit. the dow futures now indicated lower. down by about 16 points below fair value. indicated up by about 23 points earlier this morning. the s&p futures still up by just about a point and a third. you've been watching the yields on the 10-year treasury. it is dropping. yeah. below 2.3% at this point. 2.291%. i get notes from mark grant every morning on this. he is waiting for it to fall below 2%. in our corporate headlines this hour, an upbeat quarter for pepsico. reported a profit of $1.36 a share. that was better than expected by seven cents. they raised their full year forecast. this all comes despite what the ceo is calling a challenged macroeconomic environment. you see that stock is up by just over 1%. >> that stock, it's in an

uptrend. did you see the 10-year yield? that was not in an uptrend. that has not -- >> no. >> the 2.9? >> it's been in a down trend. who are you? you're ken langone, aren't you? >> i am. i plead guilty. >> let's look at a one year of the 10-year note. there it is. >> i saw andrew last time. >> on the show right? he wasn't here last time you were on the show. >> oh, andrew sorkin. >> oh, i thought you were talking about andrew cuomo. every time i come he ducks. he wasn't here. i'm absolutely certain this guy is intimidated by me. >> ducking you? >> ducking me or whatever it is. >> it is hard to stand up to you. >> i think the reason he doesn't show up is because his arguments don't show up. >> he's actually at a conference. >> well, if he is it's

convenient. >> what kind of conference do you think andrew -- number one, what was the name of the conference and what city would it be in? vanity fair in san francisco. it's like a moth to a light. what? he was drawn out to that thing. anyway, i messed it all up. >> he claims he's an enlightened liberal. i think he can drop that. let's keep beating up on him. >> wild ride for wall street this week. the dow having its best day of the year after the fed minutes soothe investor fears. all of this coming after the 300-point loss the day before. which of theess big moves we saw sets the tone for stocks for the rest of the fall? let's get to our guest co-host this morning. ken langone chairman and president of invemed associates. the money that is dropping out of his pockets goes to a good cause. langone medical center and

education. you're a prime example of someone that not only created, i don't know, 100,000 jobs, all those tax dollars. >> a hundred? >> 360,000. >> all right. 360,000 jobs. i don't keep track of them. so that's one thing. all these people pay taxes that have the private sector jobs. that's another thing. then all the money that you made, you give a lot of it away too. >> well, let me just say this. thank you for the kind words. >> yeah. >> but elaine and i both feel and we believe this in the bottom of our heart. we've gotten so much more than we have given. this is the greatest country on earth. and if people like us don't reflect it, shame on us. >> that's right. >> okay? i appreciate your kind words and all those nice things. >> we need to say it, ken. because there is a -- there will be certain people that say we've created too many billionaires and millionaires and that some kind of zero sum game that somehow your gain is somebody else's loss. and if you just look at the actually facts and the jobs

you've created and what you do philanthropically, it's not true. it's a net positive for the entire world when people create wealth and have earned success. anyway, we also have this other guy, what has he done? no. >> he's got nice hair. >> jonathan gollup is somehow here with ken langone. i'm kidding, jonathan. you mad? >> no. you ask if the market is going up and i'm going to say yes. >> here's what i'm going to ask you and i'm going to reference a mutual acquaintance of ours. stan, one of the greatest investors of all time. we've talked about the fed and how they've had these emergency measures for much longer than tom people think they should have had them. yesterday here we are again. now i'm hearing if inflation doesn't come back 2018, we may stay like this for years and years. and the market still responded to it. why? >> first, the question is has the fed really driven this

market and the answer is probably no. i think they did a good job being a backstop. but if you look at the money printing that then is sitting in bank reserves, i'm not sure that's what's driving this. >> wait a second. if you keep rates at zero where there's nowhere else to go, they even sort of admitted that marking up asset values for the wealth effect and hopefully it helps the underlying -- that's been one of their motives for doing this. >> do we have a 2.3% yield because the fed is keeping it there or because of europe and frankly the u.s. economy has been growing at two and a quartquart er and can't get out of its own way? are we pushing on a string on this? or more importantly can the fed or government be the solution to that, probably not. and it's going to be a slow, slogging, but more importantly a long recovery. and i think that ultimately we would come out of this fine. >> i could almost make the

argument that's goldilocks for stocks. you're not going to overheat the economy. you're going to have 0% interest rates which make stocks attractive to allow people to borrow money. and you're not worried about inflation really. it's like goldilocks. just right. not too hot, not too cold. you think we go higher for the rest of this year and next year? >> if you look historically, bull runs continue until you get your next recession. and because this is such a weak recovery, i think this is a 9, 10, 11-year-old cycle. >> how old is it now? >> five and a half. i think we're looking at 12% per year return for the next three or four years on this because it is slower and steady and -- >> how you're building your money almost. >> look. i don't know about bulls. i know about companies. business is okay. but only okay. we still have to come to grips with the nation's finances.

and that's a scary thing. you know, i was with stan last night. he made a remark. he said they can keep this thing going another 20 years. >> you mean the fed with low interest rates? >> yeah. where we are. and you think about -- i always argue older people are taking advantage of younger people. this generational theft. think of the people retired. you're kind to me in a way. can you think of the number of people that are retired that are living on the income money they saved? >> 2.3% -- >> these people are being decimated. i mean, this is wrong. >> the only good news is that there's very, very little inflation. so the cost of living is not going up. but 2.3% on a 10-year bond is not -- is really not a reasonable number to help the economy. >> 60 years ago there was an economist at harvard who made a remark. had he said you need 2% or 3%

inflation a year for a dynamic economy. you ask anybody that knows numbers, they'd rather have inflation than deflation. okay? i'm very worried that we've set up an artificial platform here where we're going pay a hell of a price for it. you say let's not spoil the environment and so forth. we're doing the same thing economically right now. it's like gets drunk. when you're getting drunk, it feels good. but when you wake up in the morning, oh, my god why did i do that? this is my concern. we're set. >> i don't know how it ends. and stan said 20 years. see, i thought -- >> he said they could keep going. he put it in a nice way. he said they'll probably keep it going long after you've left. i've got to hang around to a hundred because i'm about to

become a grandfather. >> you were there when they said the 60 years. >> i want to live to see my grandchild graduate college. so i have to live to be a hundred. and i'll do it. >> jonathan, thank you. we're going higher. five and a half years out of nine or ten. 12% to 15% a year. i like that. >> well, i hope you're right. for me. >> and i think the surprising thing is, i'm not saying i think the economy will be great for the next three to four years, i think the market is going to do better than people think it will. >> i think you're right. but that's strictly because of supply. >> thanks. ken will be sticking around for the rest of the show. up next, how will the first ebola death on u.s. soil change the response from the government? and another case may have popped up in dallas. updates on that. plus dr. anthony fouji from the nih will be here right after

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welcome back, everybody. the death of a man in dallas yesterday from ebola has the country even more concerned about this deadly virus. meg tirrell joins us on set with an update. >> that's right. a lot of people are asking questions about drugs and vaccines given thomas eric duncan's death yesterday. of course seeing a blow to the

company chimerix. the camera man flown back to nebraska is also receiving their drug. they will consider all potential drugs. other companies are also working the space. we were talking to dr. scott gottlieb from the american enterprise institute that says africa needs a vaccine and the u.s. needs a drug. the nature of the outbreaks here are such we wouldn't need a vaccine unless it mutates. but drugs are important. but cdc officials have been emphasizes this is what we really need. >> stick around. we've got more to talk about with those changes from the response from the government after the death yesterday of that ebola patient. joining us right now is dr. anthony fauci. he's the director of the national institute of allergy

and infectious disease. also our guest host is ken langone. he's on the board of langone medical center. dr. fauci, thanks for joining us. >> good to be with you. >> we have questions about how to be perceiving all of this. the death of the gentleman in dallas raised concerns about whether our health care system is really going to be able to handle ebola cases if this is something that american hospitals on their own would be doing enough to change the outcome. what can you tell us about what we know and what we should be thinking? >> well, i think our hospital system is able to handle an ebola case. the fact that mr. duncan unfortunately died really is not relevant to how we're going to be able to handle it. ebola is a very serious disease with the current outbreak having about a 50% mortality and historically under some circumstances the mortality can be as high as 90%. so the very fact that he died, i

don't think has any change in any policy or the way we perceive things. our health care system in the united states is such that it is extraordinarily unlikely we would have an outbreak. the reason is we have the capability of doing b the type of isolation that was done with mr. duncan. obviously there was a misstep early on there. but the contract tracing to identify the people that he's come into contact, all of whom now are under observation for the 21-day period to make sure they don't have ebola. and if they do, to put them into the appropriate isolation. so that's where we stand right now. i don't think the fact that he died is going to change anything. because, in fact, it's a serious disease. >> what i can tell you, though, is we thought we were well prepared before any of this happened. that case shows a lot of lapses along the way. it's not he showed up in the emergency room and sent away for

three days. then we don't know what to do with the cleanup in his apartment. there have been missteps along the way. the head of the cdc says this is a learning experience. have we learned that lesson? >> i believe so. if you look at the two things you mentioned and you're quite correct. it's appropriate to bring them up. there were missteps. i think right now with the attention that has been paid to what one must do if someone comes to an emergency room or a clinic complaining of symptoms that are suggestive of ebola, you must ask a travel history. and that travel history has to be properly communicated to the clinical team that makes the decisions. i mean, that's very clear. the issue with the waste is obviously that was a glitch that the permits were not ready to be able to remove the waste. that was clearly a big wakeup call now. so cities and hospitals around the country are paying attention to how they would handle waste in the eventuality if there were another patient with ebola. you're right. there are things that are

lessoned learned. >> i feel like we're still learning these lessons. there was a sheriff's depth who had ebola symptoms that was in duncan's apartment who went to an urgent clinic yesterday displaying those symptoms. that's crazy to me. >> i'm sorry. go ahead, doc. >> i was just saying the fact he went to a clinic and they immediately recognized that he possibly could have ebola and you saw from the coverage he was immediately put under the proper protocol to evaluate. i don't think that's necessarily a misstep there. i don't think so. >> we have to understand we have the greatest health care system in the world in america. and this goes not just to the hospitals and the doctors and the nurses, but the ems people. every day routinely we have

secret shoppers. this is universal in the system. so we're always on our guard. think about infection generally, not just in the case of ebola. but people come into the hospital and you want make certain they go home healthier than when they came. the entire health care industry. we have to take it seriously. but i also think some people have to take a measure of comfort in knowing we do this every single day. whether it's ebola or whether it's sepsis, whatever it is. and i think our health care professionals deserve a lot of credit for this anticipation of crisis. so, look. we ought to be serious about it. i can go in our place and i know dr. davis was on the phone on the television the other morning when i listened to him. mt. sinai. we all do the same thing. that said, it's a serious situation and we have to sharpen our wits and make sure we don't take anything for granted. and i don't think we are.

>> dr. fauci, what can you tell us about potential drugs and vaccines? that was a huge question yesterday after the chimerix drug. we don't know that much about it. what can you tell us? >> virtually every drug right now you're hearing about is still under the experimental stage. the one that got a lot at first was zmapp. that one looked very good in an animal model and is being revved up to production. once production gets some more drugs, then we'll be obviously going into a clinical trial to determine the right dose and whether it worked. the one you just mentioned brynn si doff vir are being used in a compassionate way with mr. duncan and others. still no idea if it's going to work in humans.

they have good activity. some just in the test tube. with regard to a vaccine, we started a vaccine trial on september the 2nd here. phase one trial to see if it's safe. that will go until november or december. at that point we'll know if it's safe without any unexpected adverse events. then we'll go into a much larger trial to see if it works in west africa likely in liberia. >> doctor, do you do a cocktail to try to find similar with hiv trying to find the, i don't know, the point on the surface where the -- what cells do ebola infect initially? >> well, they infect a whole variety of cells. what they do is that as we know now from the clinical manifestations, they involve a breakdown of the mucusal

barrier. >> so you would -- we have the scientific at this point to rationally design something that would fix this. what would your mechanism be at this point? >> first of all, find a drug that has good activity and that's safe. for example, we know brincidofovir has been used in over a thousand people for other infectious diseases. there's a clinical trial looking at its activity. if it has anti-ebola activity, you prove that in a clinical trial and then you use it. if you can do it with one drug, that's terrific. you might need a combination of more than one drug, but you've got to sthhow that one at a tim works. that's why we've got to prove that it works. right now things are just given on a compassionate basis for obvious reasons because it's an emergent situation. but there is a pipeline of drugs

that hopefully ultimately will show one or more of them will work. >> dr. fauci, is there a way the u.s. can accelerate the testing of the drugs to understand if they work and have centralized decision making to focus in on the most promising ones and get them out to patients faster? >> that's going on right now. the difficulty we have in west africa where all of the disease is right now, i mean, we're focusing on cases in the united states. there's one imported case that came in inadvertently and a couple that were air evaced because they were infected in west africa. the way you prove a drug works is that you do a clinical trial. you compare it to someone who doesn't get a drug. the only difficulty is that the infrastructure over in west africa right now is very difficult to get a classical clinical trial going. we're going to do it, but it's not going to be very easy. i can assure you. because it's a desperate situation over there. and the very brave health care

workers are really struggling to just do fundamental basic care for people. >> dr. fauci, thank you very much for joining us today. >> good to be with you. coming up, carl icahn tweeting at apple -- not now. can you hear the music? can you hear it? take a deep breath in... and... exhale. aflac! and a gentle wavelike motion... aahhh- ahhhhhh. liberate your spine, ahhh-ahhhhhh aflac! and reach, toes blossoming... not that great at yoga. yeah, but when i slipped a disk he paid my claim in just four days. ahh! four days? yep. find out how fast aflac can pay you, at aflac.com.

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welcome back to "squawk box," everybody. among the stories that are front and center this morning, pc shipments falling nearly 2% in the third quarter compared to a year ago. that is the tenth straight quarter of declines. but it's still a smaller drop than expected. bank of england keeping its key interest rate unchanged. that was expected. and check out shares of pepsi.

stock rising after earnings and revenue both beat the street driven by a strong sales numbers for snacks. pepsi also raising its full year forecast. that stock up by about 1.6%. billionaire activist carl icahn tweeting yesterday he would be send bing an interesting open letter to apple some time today. joining us now to weigh in on the economy is brian blair. he's senior at rosenblat securities. whoo do you expect this letter to say? >> i think he's going to suggest that apple maybe break off this itunes side of the business along with beats and create a media platform. you know, we know he was a big investor in netflix back in 2012 and 2013. realizing a 400% gain on that. i think he's going to say take dr. dre, separate this itunes unit, and use your cash to really build out a media empire. start maybe acquiring content, using the radio and the other --

this beats streaming platform to create a business that can help apple grow maybe even into the tv business. >> you think that's a good plan? >> i do. i think it makes a lot of sense. itunes as a stand alone has been -- they have a large number of global users. but it's really been in decline in terms of usage was we've seen the growth of spotify radio and other platforms. i think this is the main reason they bought beats. so i think that icahn is likely to say split that off and let's build a media empire here. the it's not that, it could be related to payments. he obviously was spot on with ebay spinning off the paypal side of the business. so he has great views about increasing the value of company assets. he may have something to say there. something related to a payment business. but i really like the idea of splitting off itunes and beats

into a media company and building something from there. >> what do you think about the way icahn goes about doing this? with issuing opening letters. i guess tim cook will find out later what this is about after we've been speculating about it yesterday and today. >> look, it's worked. this is a guy in his 80s who's on twitter and using it in a really wonderful way. i was a little skeptical when he was pushing for the larger buyback pushing apple to increase their return of capital to investors a year and a half ago. but he was right. apple did it. they followed his guide even after he backed off in february. they did it. paypal obviously spun off from ebay. it's working. and i think the way he's doing it, he's been an activist and investor for a long time. now activism and investing has become a hot trend. there are a lot of hedge funds that have popped up that are

doing it now. this guy is still riding the playbook on the way to do it. >> ken, you know him well. >> i know him well and have a lot of respect for him. he's incredibly bright. he and his wife gail are committed to education and charter schools. i think what he's doing is constructive. >> you do? >> absolutely. i think any time we can force managements and boards to think about alternatives, which they should be doing anyway, is helpful. if you look at carl's record and some of the things he's suggested, every made out pretty well. >> let me ask you this. does it always have to be done in an open letter? does it have to be sort of a forced way of going at it? is there any way to make the companies work with you from the inside. >> let me say this to you. i'm for candor. anything i'd say to you privately i ought to be willing to have somebody say that. i think when you've got shareholders who are passive or feel disenfranchised for

something somethi somebody like carl or nelson -- the only managements that could be concerned are the ones protecting themselves or -- >> let me ask you. why not do this if you go to management and they're not responsive to your claims, why not do this first? >> they'll stone wall you. say get around to it. i'm not going to name a name. i'm not going to. i suggested a board member for a company and the chairman assured me he'd contact this fellow. he never did. that sent a signal to me, mind my business. my choice. the way i do it. i sell the stock and move or on i say you know what do i want to get active. i don't think there's anything wrong with carl's style or approach. i think he's out front about it. i think he gives everybody the benefit. apple, they now know he's sent in the first missile. let them come forward and say we

agree with you, disagree with you. count on us for our help or carl we're going to back away on this. that's fine. look, we all know full disclosure is the name of the game now. >> sure. >> so why shouldn't this be part of full disclosure? >> i understand that, but why not give them the benefit of the doubt. if you've had decent working relationship with someone. which i assumed -- maybe i'm wrong -- i assumed that was the case with icahn and tim cook. >> it does sometimes seem antagonistic to be doing it so openly. but that was a great point made earlier. why not do it to unlock value for them. >> are the shareholders in the same camp on this? i mean, i can understand why this would get more publicity, might get a bigger pot early on. >> what matters the most is the results though. and he is getting results through this. he has been right. companies are changing and following his suggestions. and i think that's really all

that matters. >> brian, why would carl -- now, let's go back over some of the things where he doesn't necessarily operate things. he didn't know how to run a cell phone business with motorola. i don't think he knew anything about via tech or biogen and it all worked out. i don't know whether it's best to use that cash to buyback stock or make an acquisition of something to allow them to thrive five years from now. how does carl icahn have any idea other than just financial eng b nearing, how does he have any idea what to do with apple? >> hold on. maybe he doesn't. but guess what, he's forcing them to think about it. >> i like shaking up. but he may not know as well as tim cook how to deploy apple's business. you fat cats think you know how to run the world.

>> guess what, i plead guilty to everything you just said. i've been poor. i've been rich. rich is better. >> but just because he's got money, he knows what to do with apple's cash? >> he's in his oles -- >> he thinks we're always in a bear market. always. >> but he has seen it all. he has seen everything. he may not know the best direction to take a tech product -- >> no idea. he has no idea. he just knows they're morons. >> he does know how to unlock value in an asset. and he does know how to return value to shareholders. those are his areas of strength. and that's all -- >> i'm not going to continue to hear a love fest for fat cats. andrew's not here, i'm trying. >> a couple of weeks ago nelson pelts went to dupont. when the word got out that nelson was doing this, the stock went up 10%. guess what. some creative lawyer some place

in washington can say, wait a minute. that's inside information. hold it. >> right. okay. >> this is scary stuff. so what does nelson peltz do? it's his information that created the activity. we have to be mindful of the world we live in today. >> that's right. >> i think the apple board ought to say this is what he says to do. let's give it serious consideration. when you come back and say it doesn't work, you go to icahn -- >> and that's exactly what's going to happen here today. everyone's going to be watching this because he has had a great track record. i mean, within tech. when he took a 9% stake in netflix, people were skeptical about it. but he had a 450% return. all the skeptics were gone. a lot of people didn't agree with the paypal spinoff. but they ended up doing it. the fact is he's shown an ability to direct big tech company management teams and boards about the right things to

do. they would not be following him if they did not think his ideas were ultimately accurate. and he's an incredibly relevant guy. i find it fascinating because of his age. you'd think he would be way outside of the tech sector, but he's not. >> brian, thank you for joining us today. ken is staying with us. >> got my twitter guys on my side. why should icahn be anointed an apple expert just because he's good at financial engineerengin? >> we worry about social issues. how about worrying about the business which is the reason people buy stock. >> you tell me. is apple's best use of its huge corporate cash used to buyback stocks? >> i don't know. >> you don't. neither does he. >> all i'm saying is he may not know either but at least say that's an al tender div -- >> but just go off yelling about tim cook's a moron and do this. >> i don't think carl said he's a moron.

>> but he said other people are. >> ebay. >> he goes half cocked on things. he's crazy. >> his investment style is not mine. >> or you walk away. >> the fact is objectively i honest to god believe he provides a great service and value. >> i'm not saying he doesn't. i'm just saying, you know, he doesn't know how to operate all these companies. and you think he does. >> i would plead guilty to another thing. i see this man in a philanthropic setting. he's a remarkably generous human being. he and his wife. they really care. they don't just write checks. they get involved. >> i know. i know carl. >> just like he gets involved with corporations, he gets involved with charities. >> we're going to get to hear from the man himself. quick programming note. carl icahn and two of his portfolio managers will be on "fast money" half-time report today. still to come this morning, hedge fund titan lee cooperman.

yeah, you've seen the picture. he's the chairman and ceo of omega advisers. but up next the runway is being hijacked. how celebrities are stealing the spotlight from fashion designers. "squawk box" will be right back. i'm type e.

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some executive changes in the news this morning. gap chief executive glen murphy is going to retire in february. he says art peck who is currently the head of gap's digital business is going to replace him. they've been doing well, people think. he's going to keep working. open other opportunities. knee jerk reaction is down. and advanced micro devices has replaced ceo. read had been on for just three years. and the market cap cut in half down to just over $2 billion at this point for amd. hijacking the runway. that is the title of a new book

about how celebrities are stealing the spotlight from fashion designers. the author of the book joins us right now. terri has 30 years of experience. it is great to have you here. >> glad to see you again. >> i am thrilled about this book. >> thank you. >> you're absolutely right. celebrities have been taking more and more and more space from the designers. how do you think that actually happened? >> you know, as i always tell people, don't think of this as a hostile takeover. more of like a tsunami. because it's, like, been a gradual thing. first celebrities were on the red carpet. and that was a big deal. and designers like georiorgio armani, they were the beneficiaries of that. then celebrities thought we have a lot of clout with consumers. and so let's now have our own brand. so many of them have gone there. in fashion and fragrance. >> that must drive designers

crazy. >> a lot of them are jealous. they have really hijacked the runway. jessica simpson has a $1 billion business. that's middle market products, but that takes away from all the other designers who could be having that business. >> you know, i understand the opportunity. i understand how we're obsessed with celebrities and they've gone along with that. i have to say, jessica simpson has comfortable shoes. i wear them. i think they let them in there because sometimes they're more comfortable. >> and the thing about jessica, she was smart because she partnered with one of the founders of nine west. you know, he started making shoes in brazil. he's really good at this. and he -- you know, shoes and handbags are the sweet spot in fashion. so now she's in 22 product categories. >> we still have designers out there that are like celebrity designers. like michael kors. >> michael kors is incredible in

particular. someone in business for 20 years, very kind of quiet. had clientele. then he sold 4,000 bags of michael kors every day. it's crazy. >> i'm confused about something. everybody's celebrity picture i see, they have jeans with a hole in the butt, shirt hanging out of their pocket, they need a shave. okay? and they're wearing these ugly sneakers. where's the style? >> well, the thing is, remember -- >> i haven't heard you complain about the rips in the jeans on female models? >> i didn't say boy or girl. >> you said they have to shave. you know what i'm saying though? >> i know what you mean. celebrities don't have to always be dolled up. i mean, we see them now going to the gym.

we see them -- i mean, that's why we relate to them. we see them as regular people. >> i guess i see them in their natural habitat. that's all. >> what does this mean for changing business fortunes teri? the designers are jealous about some of this. are they changing the way they play the game? >> it's one of those things if you can't beat them, join them. that's why people are trying to become like michael kors where you can figure how to expand their social media footprint and how to be just really relatable so people will really think of them not just as a designer but a person. >> you mentioned tori birch. she's on oush next list of people watching the next 25 years. what do you think of her? >> well, she's what they call a celebutaunte. because she had deep pockets to be able to actually start her home business, came up with a tunic top. but the main thing is she came

out with a ballerina slipper. the slipper we would all wear when we switch out of our stilettos. they sold some 15 million of those shoes. maybe five million. but we're thinking she might be the next ipo. who knows. >> it is great to see you. thank you for coming in today. >> yeah. thanks. >> the book again is called "hijacking the runway." thanks for coming in. >> great to be here. >> you're like a morning show host. i mean, you fit into this -- for you to do this was nothing, was it? i mean that chair is comfortable. you look good in it. >> you want to hire me? i'm out of work. i have no place to go. i'll come back. >> you've got nothing to prove at this point. >> i thought he was good. also i love his tie. >> thank you so much. you mean i'm not sharp any other days? >> this was the first time i've seen you, but you look really good.

>> you do too. >> thank you. >> and the smile. that says everything. >> we get nothing, beck. >> that's okay. >> good to see you. when we come back this morning, details on one of ken langone's newest investments. grab a cup of coffee while we take a commercial break. later, pot entrepreneurs with a new reality show. "squawk box" will be right back.

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shh. watch how i do this. ken, we want to get your thoughts on some stocks. would that be okay? >> wonderful. >> starting with starbucks. you have a new investment in the company. when did you get in? >> last couple of weeks. >> really? >> yes. >> could you be more vague? could you expound on this a little more? >> it's gone down a little bit. >> we went in around 75. it was 73 yesterday. it shows a businessman. they've got a fabulous franchise. they're infusing technology. for example, they're going to have an app where you can go in ahead so when you get there, your coffee is waiting for you. >> we've seen that. >> they need that. >> that's right. i don't know why people would waste three bucks to buy a cup of coffee and then wait.

>> you don't own dunkin'. >> you asked me what i own, not what i don't. >> that's why i'm pushing back on you. dunkin', there's never a line. it's cheaper. it's good coffee. why didn't you buy it at 30? it's up to 80. >> i love dunkin' donuts' coffee. for years i've loved it. he's got a great cash flow. >> who's this howard? >> howard. i think 30% payout. and aggressive buyback in the terms of the percentage. and you want my model, look at what frank lake and the team have done at home depot. from 2.5 billion shares. home depot needs fewer dollars to pay the 88 than the 90 cents. shultz has got a great franchise. ubiquitous. it's a great product.

it's got great brand loyalty. and more importantly, he's a sensible guy. it's almost a new economy play because he's been able to tab into the entire crowd that has all the tracks. they all hang out at starbucks. >> they have new items on the menu as well. >> he's still young. not even 60 years old yet. >> i don't know any brand that's gotten such acceptance so quickly. >> why now? did you suddenly meet him? did you suddenly see something -- >> it's a combination of two things. if you have money to invest, where do we invest it? i'm not going to buy 10-year treasuries at 2.92%. because i'm going to lose money down the road. he is a great company and balance sheet. everything is working. look at what he's done. remember when he left and came back? he did it. >> and the stock -- the company had lost its way.

and he came back almost like jobs came back and totally transformed it again. >> a couple weeks ago in seattle i had a chance to meet jim senegal. it was no interest to me why they're a fabulous company. it's about the people. >> we'll have lee cooperman joining us in just a bit. stick around. "squawk box" will be right back. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.

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the scary days of october. we go inside the numbers as we head towards the heart of earnings season. >> plus omega adviser ceo lee cooperman tells us about what's ahead. and the budding business of marijuana. >> have you heard the news? there's a new doctor in town. >> new show about pot-preneurs. as the final hour of "squawk box" begins right now. ♪ >> has nothing to do with marijuana.

>> "rocky mountain high"? >> yeah. >> i know. it's about a young man showing up in colorado for the first time. >> right. welcome back to "squawk box" here on cnbc, first in business worldwide. joe kernen here with becky quick. we're going to talk about hank greenburg because you're involved with everything. >> not everything. some things. >> a lot of things. futures at this hour. yesterday was amazing. it was up 25 earlier. now it's down 74. we are seeing one thing missing recently and it's volatility. >> so buckle your seat belt and get used to it. it might be here for awhile. >> i'm not convinced anything had to happen from up 25 to down 75. >> i'm not either. it has to do with what people

are thinking if they're going to stay in. i haven't seen any spectacularly bad news this morning. >> normally it would be europe or hong kong or something like that. >> they've been following us with all our swings. we do have a number of stocks on the move this morning. pepsi shares jumping this morning on an upbeat quarter. earnings and revenue beating the street. company also raising its full year from ft. that comes despite what the ceo called a challenging macroeconomic environment. results helped by higher aluminum prices. that stock up about 1.8%. and endo is acquiring auxilium pharmaceuticals. auxilium quit its bid with canada as a result. >> i would not have said anything. >> auxilium.

i knew it earlier, but you see it in the prompter sometimes and it looks silly. carl icahn promising some news today. the investor tweeting he will be sending out an open letter to tim cook. icahn says he thinks it will be, quote, interesting. apple shares rising after that tease from icahn. icahn disclosed a large position about a year ago. since then the stock is up more than 50%. often the case with carl. he's got winners on these things. don't miss icahn. he will be on "fast money" half-time report at 12:00 noon eastern time. not everyone is singing the activist investor's praises today. ma marc andressen sitting down with andrew yesterday. >> remember the evil and goodcap tin kirk? like carl, it's the exact opposite. he lies like he just makes stuff

up. he slanders like it's the full, like -- like his inner 6-year-old comes out. >> i've heard of star warz. never of star trek. he also said he expects more tech companies will follow ebay's lead and split up. tim geithner will be back for more at the aig bailout trial today. also former fed chairman ben bernanke is on deck. mary thompson is going to talk to us now with a preview of today's proceedings. and you know who's sitting across from me, someone who knows a little bit about this as well. ken langone is here as well. >> hi, mary. >> that's right. and as i understand it, mr. langone, hello to you, actually took a stake i guess it would say in what would be the payout. mr. greenburg being the former ceo of aig. mr. geithner is back for his

third and what is expected to be his final day of testimony in the aig bailout trial. as he completes his testimony, former federal chairman ben bernanke is expected to take the stand. david boyce pressed geithner about comments he made saying forces or losses were forced on aig shareholders. geithner replying we forced losses on shareholders proportional to the mistakes of the firms. but then it got testy. boyce asking if shareholders of banks who also received government aid suffered losses similar to those of aig. geithner said yes in part because there was dilution to those who had to go out and raise capital. shareholders allege in this lawsuit that's seeking $50 billion worth of damages that they were treated unfairly in the government's $185 billion bailout. one in which the government took a 92% stake in the firm.

geithner's testimony basically suggested along with former treasury secretary that aig had no other options at the time save for the government to rescue the firm. and also he points out during his cross yesterday that aig agreed to all the terms that was by the government including interest rates on loans that were described in one e-mail presented yesterday as crazily high. as we mentioned earlier, bernanke will follow geithner on the stand today. he has to leave early swob he's going to leave probably at 3:30. that's bernanke. and as a result we expect his testimony will spill into friday. so again, court opens at 9:30. we'll be here with updates throughout the day. >> who's going to leave early, mary? >> bernanke has to leave at 3:30 today. >> what's he got to do? where does he have to be? seriously? what does he got to do? >> i'm sure he has prior

engagements. >> -- a $250,000 paycheck from a speech. no doubt. >> i think he has an appointment with a mortgage broker. still trying to refinance that mortgage of his. >> it's only worth about $150,000 over the last ten years. anyway, thanks mary. ken langone is one of the big wall street titans. >> hardly. >> it said it. >> they can say what they want. i still go to work every day. >> you are bank rolling hank greenburg's -- >> i'm not bank rolling. i bought a piece because i believe -- >> tell us, because we heard -- wrote the column in "new york times" that this company are evil doers. they were going bankrupt anyway and they should be lucky to even -- >> first of all, i don't want to get too far into the details because frankly i think i'd be short sided and admitting i don't understand it all. the fact of the matter is simple. take guantanamo. the american people would never say it's okay to torture them to

get names of people so we can stop some of our kids from getting killed. their rationalization now is the country was so bad and somebody had to be punished and we had to consider the politics. >> wait a second. i think that's a stretch. let's just look at the facts. >> you're going to be on "huffington post." >> the reality is we have a constitution. >> these are terms that aig agreed to. they said, okay, we'll agree to the terms of the deal. didn't change anything after the fact. the company would have gone bankrupt. the shareholders would have gotten nothing. >> hold it. first of all, i don't believe all that. bernanke said we knew we had them on a good loan. they had $192 billion in loans. they had a trillion dollars in safe assets because of the insurance laws -- >> but if the government didn't step in, what would have happened the next day? >> what would have happened to goldman sachs or -- >> general electric. >> why did aig agree to the

terms? >> i have no idea, but you've confiscated thes s assets of pee who weren't there. 92%. guess what, the constitution the fifth amendment makes it very clear. look, you know the good thing about this, we have a judge. we don't have a jury. we have a judge and he'll make a decision. we're going to present a forceful argument. david boyce, there's nobody better. obviously the government thought a lot of him. >> my point with andrew and he was taking the side that these guys did some horrible things and that they needed to be actually punished. that there should have been punitive measures. my point was that number one it was probably 300 guys in connecticut. it wasn't a hundred thousand that were at aig that did the derivatives. and number two, it wasn't a solvency issue. >> absolutely. >> it was a liquidity issue. like with general electric.

not everybody should have been punished and maybe congress should have been punished. maybe fannie and freddie. >> but did aig do something wrong? there were the guys who did this. i mean, they had -- >> you want to know who did something wrong? >> he said he would have shut it down. but the ceo didn't. >> eliot spitzer. >> but the ceo didn't shut it down. i understand it wasn't hank at the time. . >> the fact of the matter is we have a constitution. we're a nation of laws. first of all, i plead guilty. anything hank greenburg does, i want to be part of. he's a great american. i love what he stands for. he built a huge fabulously successful company that was stolen from him by a guy i don't want to get into spitzer, but you know i don't think nice things about him. he got that board that hank had,

that coward board to vote hank out. if hank was there, this never would have happened. >> if hank was there, that definitely suggests there was something wrong that aig was doing. i understand him wanting to keep the company and make sure people keep their jobs. >> how about paulsen saying to goldman sachs, to wells fargo, and to jpmorgan, you don't need the money. >> you think they were wrong with lehman letting them go under? >> i didn't mention them. paulsen said you need to take the money. >> we've heard it from wells fargo a lot. >> these guys were fast and loose as far as i'm concerned. >> i think they were fast and loose. i think they would admit that too. they were making this up as they went along trying to save worse things from happening. >> but not preserving anything against the derivatives and by selling all -- that's what aig did. this is the thing where i do agree to some extent what the other side is.

aig sort of was almost a linchpin in allowing a lot of the stuff to happen. because it allowed everyone else to have cover on the aaa. on the idea you could put total junk, subprime junk. but if you had the derivative covering the loss, then all of a sudden moody's could say it's aaa. it's guaranteed by aig. this $180 billion company and they didn't reserve any of the credit. so the whole house of cards sort of was being held up by aig. >> all good but e-mails have come out with counterparties. if you bet right, you shouldn't be punished. the counterparties got 100 cents on the dollar. where'd the money come sfrom? the u.s. government. >> the thing paulsen said the other day that shocked me was about politics. >> let me give another analogy

that works. the stock exchange. paulsen was part of this. carol barts wanted to know what dick did wrong. he gave us the money. we voted on it, everybody. and she said you guys -- on a conference, she said you guys are wusses. we should quit. instead they fired grasso. and when frank was deposed, he was asked how good was he. he was the best, great ceo. and then put his wife down and said mr. paulsen, i'm going to read you back the questions i asked you and your answers. he said tell me something, you believe in those answers? yes, i agree with them. then why'd you fire him? to punish him? for money he didn't ask for? he said thank god i'm blessed. same thing. look. as i say i'm emotional. i love hank greenburg. 19-year-old kid runs on the

beach june 6, 1944. comes back home, starts at the bottom as a clerk. goes to law school building one of the great corporations in america. you're damn right i think this case deserves -- what's good about it? >> i'm not going to disagree with the spitzer problem. but not that the taxpayer needs to bail out the shareholder in this case. >> you've got -- >> they agreed to the terms. >> if you have a gun at my head and you're saying to me, tell me what you think of spitzer. and i know if i say he's a bad guy you're going to pull the trigger, but if i say he's the most wonderful man on earth and i'm going to live, guess what i'm going to say. >> i don't think you could say that even with the gun. >> probably not. but wonderful thing about this, it's being aired. we're going to find out -- >> this is true. >> i love these guys having to show up. >> and they worked like hell to

prevent that from happening. >> it has been fun watching. when we come back, we'll have lee cooperman. we'll find it where he's putting his money to work. plus his defense of hedge funds that are under fire right now. will that be all, sir?

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it is october. a cruel month in the past at times for the stock market. you've been hearing it can be pretty scary. also part of halloween. and it's not just because of 1929 or 1987 or pick your crash. our dominic chu is here to take us in the numbers of this frightening month. >> frightening not just because of the downside but also some of the upside moves. so howard silverblat put together a list of all the times the market has gone up or down by at least 6%. can you imagine there have been 91 of those occurrences. a lot of them happened the month of october. first of all, speak to your point, joe. if you go back to all the big downside days, check out october of 2008. october of 1937. all these big down moves you can see here even during the great depression, 1929. all of these massive downside

moves including black monday down 21%. look at the other side of the equation. some other names we want to talk more about. take a look at the overall picture. 25% of the 6% moves have been in october. both to the up and downside. so 91 times it's happened, 25% of the times those moves happened in the month of october. but also the big upside gains happened as well. a lot of time they lead to upside triggers as well. including the biggest gain of all of them in 1929. that was right after one of the worst days ever in the overall market. so if you take a look at these pictures, yes. green is a good one as well. also if you look at the big stats to keep an eye on, october has some market catalysts. you've got columbus day coming up here. you see action happening there. fed meeting on the 28th and 29th of this month. also q3 advantage reads on gdp. that's in addition to all of the earnings reports that are going to happen this time around.

so this is the interesting part, becky, joe, ken. if you look at the 91 times it's happened, all of these occurrences have been positive and negative. but on balance, 49 of them have been positive. big upside swings. 42 have been negative. the big upsize gains have a little bit more prevalence in october. >> the downside was 20 in '87 and then upside was 9. >> i'm trying to -- i wanted to accentuate the positive. >> do the numbers on 17,000. 10% moves, 1,700 points. a 20% move would be 3,400 points in one day. i don't want to see that. >> nobody wants to see that. october on average is not one of the most volatile months, but it's when you have these big outside occurrences. >> i was there for -- 20%, that will get your attention. >> great opportunity. >> the phone would ring and go,

no one here by that name. no. joe? no. yeah, your clients -- it's not true. we answered all of our phones. the people saying -- dom, thanks. but the growth worries have been reignited. that's what cause the futures to sell off. >> growth worries in the united states? >> in europe. i think it had already been up after that number was already out. then people looked at it again. german exports or whatever. >> all right. when we come back today, we are going to talk jobless claims data. plus a show that brings venture capitalists into the world of marijuana. but up next we have breaking news. red bull does not give you wings. guess what. we'll give you the details after the break. what if there was a credit card where the reward was that new car smell and the freedom of the open road? a card that gave you that "i'm 16 and just got my first car" feeling. presenting the buypower card from capital one.

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thought it would give them wings, they're idiots. second, how do i prove i bought one in the last 12 years? >> every time you hear a bell ring, someone gets its wings. but i've never even -- have you had a red bull? >> it tastes like a red cream soda. >> but there's a lot of caffeine. >> yeah. i think it's a club drink. i didn't drink it at a club. i drank it out of a can. i think the kids drink it with vodka. so you can dance all night long. >> okay. >> that's what i'm told. >> right. >> no, i don't have any personal experience with that. you know my life. my big night out is back to school night. >> well, there was a time. coming up, we've got jobless claims. also lee cooperman. "squawk box" will be right back.

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welcome back, everybody. we've been promising to have him here. lee cooperman is joining us right now. he is the chairman and ceo of omega advisers. lee, we want to thank you so much for joining us today. we know we've had troubles with the studio, but we are thrilled

to have here with us. the reason we originally booked you was to talk about the hedge fund industry. i do want to talk about that. obviously it's com under fire. you've been vocal in defending it. you're here on a day we've seen so much volatility over the last week or so. i'd love to get your thoughts on the markets and see what you think about these massive swings. are you worried at this point? >> you know, you got to get used to the fact that 35% of daily trading volume has nothing to do with -- you've got to ignore it and hopefully are smart enough to capitalize on it. i was on the program in i think december and then three month ago. i said the entire debate determining the outlook for the stock market is a function with what you think is the appropriate multiple for earnings. because earnings are growing very slowly. so the real leverage is in the

multiple. i was saying for a year now that a 16 multiple is a reasonable multiple for earnings. that's 19.04. we're now late in the year. so it will start to discount next year. add about 6% to that number. it gives me a target a little over 2,018 to show you how stupid i am in terms of being precise. the market was 2,000 a couple weeks ago. i think it really was fully valued and has been fully valued for awhile. not over valued, not priced to perfection. but no longer cheap. so would not be surprised to see volatility when the market's in a fair value. >> we've been debating the fed's role in all of this. you're looking at earnings and what happens. but if the fed continues to keep interest rates at zero because after these fed minutes we're kind of expecting it might be longer than we had originally thought, if that's the case, does that change the multiple?

does it make stocks more valuable in comparison with other asset classes? >> it might encourage people to speculate. at the end of the day, i don't think one should dismiss the significance of zero short-term interest rates and 2.3% 10-year bond rates. it's an indication of what's going on in the economy. were to have significance for the returns you earn in equities. last year, for example, i think the 10-year government average, 2.3 for the year. inflation rate was 1.6. profits rose 6. s&p up 30. you're just not going to see that continue. the market's got itself into a zone of fair valuation. if interest rates are where they are today, a year from today, the stock market is not going to like that. because basically it has some implications what's going on in the economy. >> lee? >> yes, sir, ken. >> lee wrote a very thoughtful

piece. was it yesterday or the day before we talked? i forgot. he wrote for "the wall street journal." >> on the hedge funds, right? >> hedge funds. the other thing is, i think we're focusing a lot on numbers. i think one of the things we have to worry about is what excess regulation is doing to our economy and our companies. and i think there's not enough said about it. but we're paying a -- go ahead. >> i agree 100%. you're going to get to see a bank loan you more money when you owe them 15 million a month? it's crazy. >> a lot are made on the fico ratings. why would i want to make a loan to somebody who may have a problem and if i invoke my rights, i'm a heavy. that's where we are today. >> apparently mr. bernanke couldn't get a loan. >> that's poetic justice as far as i'm concerned. >> but, lee, that's why people

say the economy would be doing better if there was demand and we always talk about the chicken and egg. we wouldn't need the fed in full bore if we didn't have all the regulations and if we didn't have the uncertainty about tax policy and if we didn't have obama. if we didn't have all those things, the entire recovery would have been more robust and internally generated instead of orchestrated by central bankers. >> i tend to agree with that. i've made my views known about that when i wrote an open letter to the president three years ago. i think mr. bernanke did what he had to do. but we have not had the leadership on the fiscal side to match up against the monetary side. so the entire burden of this economic recovery has been carried by the fed. in the process they've destroyed savers in this country. you're a working man. i don't know what you accumulate over a lifetime. if you're lucky, a million, two

million. how do you retire? so it's a conundrum. >> lee, a portfolio question. i'm a long-term investor. i've got a five-year point of view. where do i have greater risk? in the bond market or stock market? >> i would say unequivocally in the bond market. historically the 10-year u.s. government bond in normal times has yielded in line with nominal gdp. nominal gdp is real growth plus inflation. if you say you're in a world of two to three real growth and two to three inflation, that's four to six nominal. so when the world straightens itself out, it's not hard to see they go from 4% or 6%. if you look at those numbers, you'll have a capital loss. i think you're playing with dynamite. buying a bond at 2.3, keep in mind inflation over time benefits a company. over time. because the inflation in a

company's costs gets incorporated in their selling prices. that lifts the nominal level of revenue and earnings. the way to adjust is to rise the price. i think we're at an unusual time, rates are unusually low. in two of three years' time they'll be much higher than they are now. it'll take a couple years for that to happen. i think you have a capital loss in the bond. as of yesterday, 30% of the s&p 500 yielded more bonds. i think you're going to find plenty of stocks with a growing 5%, 6%, 8%, yielding 4% of a package. and i would say much more attractive to me than a bond. keep in mind, economic policy in this country, it has to be tilted towards providing economic growth. one of the great problems society is facing around the globe, there's 75 million youth unemployed. >> right. >> unless we give these youngsters a better future, a better sense of opportunity,

we're going to be going down a very bad path. and so if you have the labor force grow in .7, .8 a year and productivity is growing 1.2% a year, you need something to keep it flat. >> lee, you just hit a button. we have got to get these kids educated. income inequality relates very directly with inequality in education. >> and opportunity. >> and opportunity. i think this is where the other side wants to protect itself. we need to get these kids with a good education. we need technicians. we need plumbers. we need electricians. you make a good living as a plumber. >> better now than when my father was working. >> me too. >> listen. i'm a great believer in creating equal opportunity. my family just did something very major in new jersey to create the cooperman college scholars. it's about giving back. you're a leader in this area,

ken. i don't have to say it. everyone knows your generosity. but i think we basically have to give these kids an opportunity. because if not, we're going the have tremendous social unrest. when you see kids in america joining isis, it's because they see a bleak future. so they become radicalized. i'm very sympathetic to this issue. i think we have to create equal opportunities knowing we cannot create equal outcomes. have to create equal opportunity. >> keep saying it, lee. >> yeah. going back, becky, on the market. while i think it's in a zone of fair valuation, bull markets don't die of old age. they die from excesses. and, you know, most -- the most relevant cause of bear markets basically is recessions. and there's no recession horizon. you know, we have kind of what we call an economic stress list. inflation is generally accelerating prior to recession. employment is declining.

leading indicators are declining. we don't see that. we see the economy growing. and basically it's growing at a subpar rate, but it's growing. valuations are reasonable. you know, on an up day, people tell me 16 times earnings is too low. on a down day, they want to say the 16 times is too high. corporate america has never been more liquid in their history. and i think the next crisis is going to come out of public sector finance, the government's balance sheet unless they get their act together. >> let me ask you about why we had you on to begin with. the hedge funds and calpers. you sent a letter saying in part over typical market cycles rather than extended trended bull markets, hedge funds have materially outperformed the broader market on a net of fees basis. having calpers decide it's not going to use any hedge funds. i know your hedge fund has done very well.

the question becomes when you have over 8,000 hedge funds can you really hold them up as an exclusive class anymore. i just wonder if we can get into this is little. >> i never held myself or the hedge fund industry in an exclusive class. >> we have. >> well, you created the publicity in a sense. let me say this. the american dream, you know, somebody wants to be the next julia robinson, david tepper, michael steinhart. there are 12,000 hedge funds happy to manage money and 10,000 mutual funds. if you had a choice you'd rather work for 2 and 20 manager than 1% manager. i think the best people have been attracted to the industry. but generally what happens is a shakeout. and a lot of people have come to the industry looking for a pot of gold. they've underperformed and there's a high fatality rate.

but i would not light any candles. i would not lose any sleep over these masters of the universe. they're all over paid, myself included. but i will tell you i have a very, very high regard for carol loumis. if you go back to the archives, you'll see an interesting article calling the demise of the hedge fund industry. at that time the hedge fund was managing $50 million. >> lee -- i'm sorry. we cut you off because icahn's letter to apple to tim cook is out. basically what is it? the market misunderstands and misvalues apple. and i think he once again though is not calling for -- we would meaningfully increase a magnitude of share repurchases. what do you make of the whole -- >> by the way you own about 1.2 million shares of apple, don't

you? >> yeah. we bought at much lower prices. it's very complicated. we think the stock's about 20% undervalued. we like it. we still own it. this magic of this buying back stock and retiring stock in a high-technology business where things are subject to change. my first job out of college i worked for xerox corporation as a quality control engineer. i noticed how xerox put american photocopy out of business. and recently samsung and apple did damage to blackberry. technology is a double edged sword. how much leverage they should have and stock to buy back? i'll defer to management. there's nothing on the horizon nearly as profitable as the iphone. i think they have to reinvest to the future. carl is a to be admired and respected. he's got a great track record. but i'll let the management do

the heavy lifting and i'll go along with what they want to do in this particular company. >> i don't see much new here. he's basically saying the conclusion, this is not intended as a criticism of you as a ceo nor is it intended to be critical of anything you or your team are doing from an operational perspective. we couldn't be more supportive of you and your time and the excellent work being done at apple as you continue to change the world through innovation. but given the earnings growth we forecast, we continue to think the market misunderstands and dramatically undervalues apple and the excess liquidity that the company continues to hold on its balance sheet gives it -- affords the company an amazing opportunity to take further advantage of the valuation disconnect by accelerating the repurchase of shares. it seems like he's just more of the same. isn't it? >> all i will point out -- and this is nothing to do with apple. the record repurchase year was

2007. and in 2008 when the stock market was dramatically undervalued, nobody was buying back stock. and the smartest guy i ever dealt with in my entire business career was dr. henry singleton who retired 90% of his market capitalization. nobody understood what he was doing. in 1982, business week had him on the cover of e the magazine in a very negative article. and now all of a sudden -- and he told me before he died the fact everybody is buying back stock, there must be something wrong with it. he told me that before 2008. >> he goes on to say, lee, while we recognize and applaud the company's previously increased share purchase, we ask you to consider our advice once again to accelerate it via a tender offer. valuation tells us that apple should trade at $203 a share today. we believe the disconnect between that price and today's price reflects an undervaluation anomaly. >> his last line is interesting. the strength of the earnings

growth we materialize to correct this mistake only to find themselves competing in the market to do so. de facto short squeeze may occur and we can only hope the company has repurchased all the shares it can before that. wouldn't you rather buy it after? >> by the time, you'd be buying at $200. yeah. >> my goodness. >> it says it's trading at half the s&p 500 earnings multiple and he says it's going to see eps rising in fiscal 2015. and revenue rising 25% on 2015. >> do you agree with this? >> i own the stock, so i'm not going to get debating him about the attraction, but the market is not capitalizing one year's earnings. the market is basically making a judgment that they don't see what's behind the iphone to perpetuate the growth. and whether this becomes more of a commodity. now, we agree with him. we're both long b. he has a much higher price

objective than we do. i hope he's right. >> the stock read all of this and decided to go up four cents. >> i also by the way -- again, we don't have enough hours in the day, you know, i don't know about all this public communication. you know? he's terrific. okay? but maybe he was on with scott and they got into a tiff and scott was asking me a question and carl says i want to talk about what i want to talk about not what you want to talk about. you know, i kind of believe he should have a private communication with the company. what's the reason for a public communication? you know? but anyway, he's terrific. he's successful. >> the only thing -- and you've seen it as well as i have. the number of corporations that over the years have stone walled their owners not to the best interest of the owners. you know -- >> absolutely. >> there's a happy balance some place, but overall i think that to the extent we hold management accountable as owners, we're doing a good thing.

>> yeah. i would say there's no question on balance. it's a plus. and on the other hand, something inside of my head says, you know, for $5 billion hedge funds to put $50 billion companies into play as a regular occurrence, we have to worry about it a little bit. we have to make sure it doesn't get carried to an excess. >> i agree with that. apple's hardly in play though. >> right. absolutely. but getting back to the hedge fund universe -- i didn't quite finish the point, but as i said carol loumis negative view of hedge funds in 1970. today the industry is $3 trillion. i think what is important for the investor to understand is the value proposition the manager presents. and if the manager does not live up to the value proposition he or she presented, they should suffer redemption. conversely, if the client

changes their objectives, you know, they could terminate the manager. but don't blame the manager. so i've been in business now 21 years, 25 years before that i was with goldman. when i started the business, the first page of my pitch book, it was the same first page today, these are my objectives. if my objectives don't resonate with you, don't match up what your looking for, don't invest because we're going to have a flawed relationship. so my objectives and by the way i've not met them every year. i've met them over the cycle. i don't want to lose your money. number two i want to beat the s&p net of my fees. number three, given my view of the world and i don't use leverage 10% to 14% returns. and less volatility of the market. so that's my value proposition. >> lee, i'm a happy client. >> thank you, ken. thank you for your support. >> lee, thank you so much for joining us. >> okay. we got to straighten out the studio next time. >> okay. coming up, one of president

obama's right hand men on the economy. jason furman will join us. in a world that's changing faster than ever, we believe outshining the competition tomorrow quires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. 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. (receptionist) gunderman group is growing. getting in a groove. growth is gratifying. goal is to grow. gotta get greater growth. i just talked to ups. they got expert advise, special discounts, new technologies. like smart pick ups. they'll only show up when you print a label and it's automatic. we save time and money. time? money? time and money. awesome. awesome! awesome! awesome! awesome! (all) awesome!

i love logistics. we can work with this guy, jason. the council of economic advisors releasing a report on the health of the millennium generation. a true capitalist? that's what i tell people.

we want the private sector going. i think you push that every day. >> as does the president. >> okay. convince us. what's the latest coming from this report? >> we took a look at the millennial generation, that's a group that is the largest and most diverse generation in american history. it's the most educated and skilled. it's also a group that came of age right when the worst recession since the great depression hit. that's created a lot of challenges for them. we tried to look at the interplay of that in terms of what it means for their work, their education, their housing and even their broader attitudes. >> we've been talking about it today again. we are all aware of people being left behind. you probably met ken before. he does a lot with education. we are all talking from different places about how to equalize the opportunity and how to stack the deck so that everybody can have a fair shot at what is still probably the

greatest place in the world to try to earn your own success. what are the answers? >> education and skills is the most important determinant of your income. if you have a college education -- young people have higher unemployment rates overall. if you went to college, you have a low unemployment rate even in the tough economy people faced in the years after the recession. that's one really important thing. of course, with that goes a lot of student debt, which is the second highest category consumer debt right now. helping people manage that debt, making sure they are getting high quality education that enable them to pay it back. if they don't get the earnings income that caps the amount they have to repay, all those steps are central for this generation. >> jason, how are you today? >> i'm good. >> nixon was the most unlikely president ever to make an effort to develop relations with china.

the same could be said for our current president and regulation. i think that washington needs, and i'm hoping your group gives this a look, how much a price our economy is paying for regulations that really aren't necessary. >> fast answer. >> absolutely agree. the president had their financial regulators in earlier this week. one thing he was pressing them on was exactly that. take a look at some of their past regulations and see if there are ways to do them more efficiency. >> come up again and sit on the set. we appreciate that. you're object to something here. thank you. >> we'll be right back. new york state is jump-starting business with startup-ny. an unprecedented program that partners businesses with universities across the state. for better access to talent, cutting edge research, and state of the art facilities. and you pay no taxes for ten years. from biotech in brooklyn, to next gen energy in binghamton,

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let's get down to jim cramer at the new york stock exchange. dying to hear what you think about the icahn letter to apple. >> research firm on steroids. $250 price target, tender offer that causes a de facto short squeeze in the largest company on earth? all i can say is tim cook has done a great job. there's another 49 companies

that can get this treatment. let tim run the company. nice thoughts here, period. >> similar thoughts from lee cooperman. thank you. see you in a few minutes. the world bank president on "squawk on the street." you probably know xerox as the company that's all about printing. but did you know we also support hospitals using electronic health records for more than 30 million patients? or that our software helps over 20 million smartphone users remotely configure e-mail every month? or how about processing nearly $5 billion in electronic toll payments a year? in fact, today's xerox is working in surprising ways

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ken, thank you for being here. you are a walk being "huffington post" article. >> thank you for having me. i will try to live true to that reputation. >> "squawk on the street" is next. good thursday morning, i'm carl quintanilla with jim cramer and david faber. futures have been all over the map. currently in the red. earnings out from pepsi. got icahn's letter to apple. check out the ten-year down to 2.27 this morning. that is the lowest since well over a year. our road map begins with carl icahn sending his open