good morning, everybody. welcome to "squawk box" on cnbc. i'm becky quick along with andrew ross sorkin. joe is off today. and a little bit of a rough week for bono. he'll undergo surgery today after injuring his arm after a cycling accident. they were in new york after scheduled to do a stint on "the tonight show" starring jimmy fallon. this will be postponed just days after bono got a scare when the luggage compartment on his private plane fell off 15,000 feet above germany. nobody was injured but they lost luggage. and it's been a rough time. a big story in the market this morning, japan is officially slipping into a recession. this comes as a bit of surprise to investors. they are down by nearly 3%. we will be joined in just a moment with more on what this means for prime minister shinzo abe. first, andrew has the top

stories this morning. deal news dominating this morning. valeant ends the buyout deal for allergan. they made an unsolicited deal last spring. it looks like the soap opera could end, $210 is more than they expected. hackman and valeant are going to share the profits that ackman has reportedly made with the stock at 40%. >> this is a win-win situation because of the way he structured this. >> but valeant shareholders effectively split the profits with ackman. >> with the purchase there. >> that's pretty interesting. we will see what they can do. i think that $210 is sort of a

knockout blow. but because the expectation was that valeant could only go to $200 or $205. >> valeant's ceo said they were going to be getting great tax benefits out of the deal. >> so the question is, what does ackman get out of this? >> did you just say that the stock is at $213? >> i could be wrong. there could be a higher bid potentially. >> wow. there it is. look at you. always good to be right. well, i don't know. maybe there's more to be had here. i don't know how that can possibly be. >> it's a cash and stock deal, so part of it is stock. we have to figure out how much is stock and how the stocks trade on some of this. >> can we flip it around to see what actavis is trading at real quick? nonetheless, this is one of the -- >> actavis right now i have a

bid at 239.90 and yesterday it closed at 243.77. so it depends on where the stock opens as well. >> we will see what happens in this soap opera. it ain't over yet, it sounds like. and in other news, a renewed pfizer bid fors a tra zeneca looking less likely after they signed a major cancer deal with merck. the partnership is likely to reduce the need for immunotherapy drugs. and dreamworks and hasbro joint talks fade. disney is upset about this. this makes up 30% of hasbro's business through licenses like star wars and marvel characters and princesses.

and one other piece is that the hasbro people are furious because they felt that jeffrey and the dreamworks people floated a 35 million number which they were never planning to pay and thought to themselves, we are about to be in business with this company and now we don't trust these people. so i think there was a lot of issues there. >> but disney was a really good one. that's a very important line for hasbro. and the analyst said, wait a second, disney won't want to be in bed with a company that has a competing interest in other toys and potentially getting better placement on the shelves. >> but the fact they never thought of that beforehand seems crazy to me. i mean -- >> i've heard of other deals with people don't think -- >> of their own partners? >> yeah. >> did you ever understand putting the two companies together, how did that get you anything more than just doing really beneficial licensing deals? >> i think that was the point.

you're counting on dreamworks having to continue films. that's why you wanted hasbro to be there for the long haul to make sure that was going to continue to happen. anyway, back to the top market story of the morning. japan slipping into recession. so far it's not having a huge impact on the u.s. futures. take a look right now as you see we are in the red but dow futures only down 32 points below fair value. s&p futures off by 4.5 and the nasdaq down by close to 10 points. the chief international correspondent michelle carusa cabrera is on the set this morning. >> i'm not even supposed to be here, sorry. these are a huge miss. economists expected the japanese economy to grow by more than 2%. it declined 1.6%. this is after declining more than 7% the previous quarter. and then i show you the japanese growth rate going back to 2012. look how many negative quarters they have had. in fact, when you look at the japanese economy in yen, it's not bigger than it was back in

1997. >> still? >> yes, when you look in dollars it's different, so take in to account the exchange rates. but they have suffered so long and this was an economy supposed to be getter better. you highlighted the japanese index overnight that fell almost 3% and came off the lows because someone thought, maybe we'll get more stimulus, which they have been trying now for nearly two decades. april 1st is when they increased the sales tax from 5% to 8%. then it was supposed to go up again april of next year to 10%. exactly. that looks like it's probably going to get delayed, but the bigger question is, if you look at the price of oil this morning, for example, this was an economy that was supposed to be getting better, right? abenomics was throwing everything they could at this economy and so far it hasn't worked. remember we had a huge rally in the u.s. stock market just a few weeks ago when the japanese central bank came out to say they were doing quantitative easing to a greater scale. >> and last week the nikkei

closed at multi-year highs on the idea that the sales tax would be postponed. >> knowing that perhaps the numbers might disappoint slightly. but not to this degree. >> so there's some chatter now that abe is going to seek a vote on -- >> a snap election. >> he doesn't have to do that. >> no, he doesn't. it wouldn't have to necessarily be until next year, but he's got lawmaker who is very much wanting him to raise taxes because there are concerns about their long-term ability to pay their debt. and so how do you do is that? do you get the economy to grow more or tax it more? the same discussion that happens every year. >> i don't understand, why does he need to get the public to vote on this if he technical technically -- >> to put back those who want to raise the tax and the public doesn't want him to. >> even more so, even more than 10%? >> the population doesn't want the sales tax to go at all, exactly. they want to go to the 10%, absolutely. >> he puts them up for a

referendum and people get the vote on it. >> he makes it clear, exactly. >> you raise the question, does abenomics work or is this a situation where only the stimulus -- >> i think a lot of people look at this, look at them printing all the money and it still doesn't work. that could be part of the problem. the other part is a lot of the issues in japan are similar to europe, they were supposed to do labor reforms and all the things making it easier to hire and fire. guess what? 20 years on, nothing yet. right? i mean, they are making the italians look good at this point when it comes to reforms they need to do. that was the third arrow of economics that really never gets done. it's ease to raise taxes or to spend money but to actually do things to fight back against vested interesting all over the world, we see a struggle. >> abenomics is the idea of getting women into the workforce because in japan that's not smar on par with the u.s. and europe and other areas, and that's a

huge disvanadvantage. that takes a long time to change. >> also immigration. they have sections of the economy where they need more employment, but if you don't -- nursing, for example, their population is getting more elderly by the day. so within the nursing sector, it would be great to be able to import like we do here in the united states, it keeps prices lower, but if you don't do that, the cost of your health care keeps increasing over time. >> he really hasn't taken on the real sort of regulatory issues. >> right. and the stories of people sleeping at their desks in japan is legendary. >> until they fix that -- >> agreed. are you suggesting it should be easier to let people go? >> i am. >> we are getting somewhere. >> progress, progress is being made. as we go to europe for just a moment, hang around for a second. because europe reacted to the news out of japan this morning and seema mody is joining us from london with an early look

at trading. i see red behind you and think we'll see this anyway, but this is a different form of red. seema? >> you're right, andrew. not just europe that is facing growth problems, japan also showing signs of weakness as michelle was pointing out seeing two consecutive quarters of economic contraction. the european markets are responding negatively. remember, a lot of multi-nationals in europe including phrma and companies to do business in japan. and the depreciating yen has not boosted exports enough to help g gdp. taking a look at the xetra dax down .40%. the data from japan weighing on european markets, but tomorrow the attention will turn back to the health of the euro zone. we get some important data out of germany. the w report to give us a good gauge of investor sentiment. weak data out of germany is a concern with the most robust economy in europe. so that data will be something

to watch tomorrow and likely will move markets. guys, back to you. >> seema, thank you very much. back here in the u.s., stocks may have been on a steady climb so far this month, but could japan's major slowdown and a red hot u.s. equity market spell trouble ahead for investors? joining us is paul shats, president of heritage capital. and patrick from silver crest management. gentlemen, welcome to both of you. patrick, we'll start off talking about what happened in japan. how big of a concern is this and is there the potential for contage contagent? >> it is pretty unfortunate. the big question is has abenomics failed? it was all clear that qe was not going to be enough to get the japanese economy back on track. and you needed substantive reform. you talked about this before, the labor markets, immigration, trade, act cultural, and that just didn't happen. and in the meantime, they were

trying to walk the line with the fiscal situation. and i understand the need for fiscal consolidation in japan, but i never understood why if they were going to raise tax revenues why that would come from the cop assumptinsumption . if you are trying to boost consumption, why double the tax on it. you should be taxing the things you want to see less of and not those you want to see more of. i think it's good they are going to revisit this and i would say not just postpone, but i think they should get rid of this tax hike. >> get rid of the one that already went in. >> and look at other ways to raise revenue. >> we are not just talking about the second tier. you're talking about getting rid -- >> i don't know whether they are talking about that. certainly they are talking about postponing the second increase. and i think it makes a lot of sense now to ask. the question they should have been asking all along which is if we're going to raise tax revenue, why do it through tax

and consumption. we are trying to boost consumption in the economy. >> this does raise the question, not just on abenomics, but if japan is the fourth biggest economy in the world, is that something where if they get a cold there, we start to sneeze here as well? >> well, i think, listen, japan has been upset since 1989 really. is this a surprise? each day of abenomics is unlike draghi, he never said we'll do what it takes. this is the grandest fiscal experiment in the history of the world. they are going to keep going and going regarding the taxes and the ability to pay their debt. it's a long-term problem. and unless the bond vigilantes push back in the losing trade or inflation really gets going, which i think we all know is not dmoung to happen, they are going to keep printing, printing, printing until something negative happens.

they are going to depths nobody conceived before. and the bullish trend in japan down 3% overnight is still not over yet. and regarding the rest of the world -- >> what does that mean to the yen? because we did see the dollar rally to 117-plus yen briefly on the news before pulling back. but you think this is a long-term trade of where the dollar is trading against the yep? >> yes, it could go to 150 or 300. they are going to continue and continue and continue until something happens. that sounds so crazy for a western power, but they are a long, long way from over. and ultimately europe is going to start qe'ing and it's going to be more dollars and more currency in the system around the globe and it's going to further fuel the bull market in the united states because the dollar is going to continue to get stronger meaning multinationals do better and money is going to flow back in our system. >> but i see this as problematic

because abenomics was supposed to be about more than competitive evaluation. it was not supposed to be about competitive evaluation but about getting domestic demand back on track in japan as other places in the world. and to the extent that it just kind of comes down to qe and knocking down the yen and trying to get export, trying to get a larger part of this export market, which everybody wants, but it's not out there, i see that as very problematic for global growth. now, is it worse than -- look, we have been living with the japan slow growth story for 20 years or more. so i don't think it really changes the picture in a profoundly negative way but doesn't shift it in the right direction either. >> what would you tell people to do with stocks, buy u.s. stocks? >> well, we have been very positive about u.s. because it's not really driven. the u.s. economy is not really driven by a lot of places where we are seeing slower growth. the other thing people are concerned about is slower,

europe particularly grower growth out of germany and slower growth out of china. and these have not really been the drivers of u.s. growth. in fact, a lot of the growth we have seen in those markets has been problematic for u.s. growth or for growth as a whole because it is all about capacity expansion. and all about supplying more than global demand can in support. so slowing down growth in the wrong kind of growth in those economies is actually in many ways a good thing. so, you know, there's a lot of fear out there about slowing growth, global deflation, i think you have to unpack those things and say, some of the growths fall off that we're seeing globally is a good thing as part of the global rebalancing. obviously, japan, you know, has been a problem for a long time. i would like to see it move in the right direction and it's not. that's not good. >> but markets and economic growth are not always perfectly correlated like we're seeing now. japan was just at an incredible rally.

look what's happening in the u.s. just because you have a global growth problem doesn't mean the markets are going to turn into bear markets overnight. it's going to take time. and money flows where it's treated best, it's treated best right now in the united states, large cap stocks. >> paul, thank you. patrick, thank you for coming in. >> thanks. we'll talk about the markets in china because the markets there are opening wider today. global investors now have access to chinese stocks from hong kong for the first time. eunice yu is bringing us the story this morning from shanghai. >> reporter: hi, andrew. a lot of excitement over what is called the shanghai-hong kong connect that allows investors in both the markets to invest in the other market directly. so a lot of people are excited about it because it really is seen as a way for foreign investors to get broader access to shanghai listed shares. in fact, the money that is allowed by the chinese government into the shanghai market hit its daily limit because investors were buying up

all sorts of mainly consumer-led stocks. which is a hard liquor company as well as general motors' partner here called saic. now overall the money flows are relatively restricted talking about the small numbers relative to the market size. but at the same time it is seen as a very significant move on the part of the government because it's seen as an parent step to try to open up china's financial system. china is the second largest economy in the world but a lot of people have seen the financial system as a lagger. the financial system as well as the capital markets have been largely sealed off, so this is seen as a broader part of the reform effort here in china. and one other part of that was quite interesting was that investors here in china, mainly high network individuals who have brokerage accounts, are looking forward to investing directly into hong kong's stocks and to be able to broaden their own investment portfolios and really have a larger say in the

global markets. guys? >> eunice, thank you. when we come back this morning, a big weekend at the box office. a hit from 20 years ago back again and making a lot of money. plus, brace yourself for another round of arctic cold. large parts of the east, midwest and south in an unseasonable freeze this morning. yeah, look out the window this morning, you might be in for a surprise. we have a live report coming up from the weather channel. "squawk box" will be right back. e financial noise financial noise financial noise financial noise

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welcome back to "squawk box." "dumb and dumber to" took in more than $38 million in its debut weekend. the comedy coming two decades after the 1994 original. the comedy beating disney's "big hero 6" bringing in 36 million in its second weekend. disney passed the $4 billion mark for the second strait year. and here's the weather forecast. keith carson is joining us from the weather channel. keith, it was a little chilly here this morning. >> yeah, and that's something a lot of the country is dealing with. and with that we've got snow as well through the ohio valley with winter storm warnings and advisories in effect. three to five inches of snowfall there. we'll also see more lake-effect snow as you look to the great lakes. 12 to 18 inches accumulation there. we'll get a northwest wind just

flowing around to give us most of the extra snowfall. 2 to 3 feet of snow out to buffalo. that's where we'll see the heaviest snowfall. there we are with the map, 8 to 12, 12 to 18 and locally higher amounts. when this lake-effect snow machine gets cranking this time of the year and the water temperature in the great lakes is in the 50s, you'll get buried. two-plus feet of snow, there's buffalo. 12 to 18. after 2 feet it doesn't matter how much snow, it will be a lot and the biggest snowfall in years. the cold is a wider spread story. here on tuesday morning each dot represents a spot where we think at the weather channel we'll get a record low temperature. so some of those in the northern plains but all the way down into the gulf coast states we'll see record lows on tuesday morning. a place like atlanta, likely to see cold macon, georgia, 26. next weekend looks warm for a lot of the country, so we'll go back in the right direction. >> wait a second, that sounds

like good news but until then we're sitting with these temperatures? >> i buried the lead there, yes. it's going to be cold until next weekend. >> keith, how warm are we talking, just so i know? >> depends where you are at. we'll see 50s to 60s up to the east coast. a change in the pattern from this arctic trough to back normal stuff. >> i like your glasses half full there. i'll take that. >> it's a week away. things can change in a week. that's nice. that's the problem. we'll talk about washington news for a moment. confirmation this morning that the graphic isis propaganda video surfacing this weekend is authent authentic. a third american hostage is beheaded. could this lead to ground troops in iraq? john harwick is joining us from washington and a lot more. what is your take? >> they could. general martin dempsey, the head of the joint chiefs has held open that possibility. the president on his trip to asia held that open as well.

saying there could be some circumstances. i wouldn't expect it. he very much wants to avoid that, but remember that horrific evil events of this kind is what caused the president to ramp up the fight against isis and cause the american people to support it in the first place. so can't rule it out. and i think it will partly depend on their assessment of how much progress they are making. >> what would have to happen? >> i don't think anything would have to happen other than a judgment that the only way to roll back the islamic state, not just in iraq but also in syria, involved ground troops. they haven't gotten there so far. the u.s. troops are, first of all, the u.s. is bombing, and the u.s. is providing support personnel on the ground both for spotting air strikes and calling in air strikes but also for

training the iraqi and some syrian opposition troops. i think congress would support the president if he decided to send ground troops. i don't think anyone is eager to do that. but the longer this stalemate goes on and the longer events like what happened yesterday continue, that possibility is going to be there and pressure will build for it. >> okay. we have rob portman on later on, i wanted to get your thoughts before we see him on the state of key stone. >> i think the state of keystone is that the house has passed their bill. they did at the end of last week. the senate seems to be very close to passage of a senate bill, although with the composition of the senate at this moment, it is not clear they will get the 60 votes they need to make that happen. dick durbin said on sunday shows yesterday mary landrieu pushing this who is in a runoff fight to

try to save her seat, uphill fight, was one vote short. if that passes, i would expect the president to veto the bill in justifying that by saying there's an ongoing process which still hasn't played out in nebraska to determine the citing. and he would invite republicans in the horse trading toward a potential keystone approval if republicans give the president some things that he wants. but they first have to get that 60th vote. and if they don't, it will pass in the next congress and we'll have or it has a good chance of passing in the next congress and then you have that negotiating point. >> what do you think is really going to happen on immigration? this could ignite a political firestorm? >> i think it would and that's exactly where we are headed. i think the president has been unequivocal that he intends to

act. the question is how broad is the scope of the action that he approves? there are various ways to define a set of people for whom you're going to defer deportation. he did the dreamers a couple years ago and you can build out from the dreamers by talking about relatives and parents of dreamers. and depending on how you define the six degrees of separation from that group and what sort of time in the united states requirement you impose, some people say only those who fit a certain category who have been here ten years. other people say, what about five years? so those particulars will determine whether it covers 3 million people or 4 million people or 5 million people, but in whatever shape it happens, it will be done by the president's authority, it will trigger outrage from republicans and we're going to have a big, big fight over this subject that's tricky for both sides. tricky for the president because

there's some people who think he's overstepping his authority even on the left. and for republicans because they need this annex going forward and the more they fight, the more difficult it is for them to repair some of the damage. so there's a lot of land mines here. >> what about the idea that elections have consequences? we have heard the president use that phrase himself in the past. how come this time around, what we have seen the last several presidents who have been in to lose midterm elections reach across the aisle to work with the other side. why not in this case? >> sometimes that happens and sometimes it doesn't. but remember, i think the president's determination is fueled by the fact that after he won re-election in 2012, there wasn't any acknowledgment of his victory and a compromise on behalf of the republicans. and in turn, both sides are identifying themselves with the different electorates that exist in presidential and midterm

elections. so the president says bigger electorate, the entire country, i won, they didn't compromise and they have won -- >> with this group of players on the two sides, there's no way the two sides will work together. >> yes, but in fairness to this particular group of players on both sides, the well has been poise upped in america politics far long time. we have a permanent war between the two parties. remember president bush after 2006 when he got whacked, yes, he got rid of don rumsfeld but then had the surge including many presidents including president obama and health care health care were opposed to. that turned out well for the president and calmed the situation, but now we are back in the soup again. so i think that presidents and legislative leaders act in what they consider consistent with their own philosophies and constituencies and they are both doing it in this case and it's a big collision course. >> we'll leave it there. john, thank you for that this morning. appreciate it. still to come this morning, it's been four years.

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good morning. welcome back to "squawk box." i'm andrew ross-sore kip along with becky quick. can we say where joe is today? he's at jury duty. i don't know if he wants to be selected or not. we'll see about that. anyway -- >> i think he's hoping to stay there for weeks on end. >> it would be interesting to have joe on my jury. bad news for chocolate lovers this morning. the treat becoming more and more expensive and now one report in the washington report suggests that global splice of chocolate are becoming increasingly scarce. two of the chocolate companies say by 2020 we are expected to eat more than a metric ton of cocoa than is produced. so a chocolate shortage looms and we'll watch to see if the

chocolate prices increase. >> start hording now, folks. in the headlines now, facebook is secretly working on a new website. it's said to be called facebook at work. the product will allow users to keep their personal profiles separate from their work profiles. the website will compete with linkedn, google and microsoft to let users chat with colleagues and collaborate over documents and maybe keep some of the pictures that you didn't want your employers to see a little more private. >> yeah. i don't know about those pictures because i don't have pictures like that. today marks the four-year anniversary of the gm ipo anniversary. more details from the death toll of the defective switch and gm is extending the deadline for compensation claims. can they move beyond the recalls? we'll get behind the wheel with

a buy rating on general motors. what do you think the stock is worth, collin? >> we have pa $48 price target so we see a pretty significant upside here for gm. as you highlighted since the ipo, gm has stepped through a lot of challenges around the world. and we think they are moving past them at this point. particularly most near-term is the recall. as we get these recall news and settlements passed, investors could start to focus on the fundamentals of the business that look wide good. the north american marges are about 200 basis points better when they ipo'd. >> has this impacted sales? those people thinking about buying a vehicle, have they thought, i'm not buying a gm vehicle this weekend because of the recalls or has that had zero impact so far?

>> i wouldn't say zero but we would be surprised how low. in the last couple months, following the initial announcements the buying has dropped, but they are down year to date 30 basis points. they probably would have done better because they have a pretty good product cay dense this year, but it does seem that people are becoming a little more immune to all the headlines around recalls. and i don't think it's had a permanent impact, particularly since a lot of the vehicles that are at the heart of the recall issue are pretty old vehicles. and so i think people have already had a sense that gm is changing pretty dramatically going through bankruptcy. so i think that's actually helping to mitigate the problem. >> in terms of additional legal costs, are there any we don't know about? >> sorry, what was the question? >> there's no surprise coming in your mind in terms of legal costs? >> no, i think most investors are aware, you have already the

cost recall itself at 2.5 billion. you have another 400 to 600 million related to the victims' fund. and it will likely be a settlement with the department of justice if you look at the toyota recall at 2.2 billion. i expect that to be coming. >> if you had a dollar to put it to, ford or gm, which company would you buy in? >> we are more bullish on ford particularly around the launch of the new f-150. we have done extensive survey work on the f-150 and surveyed 800 pickup owners and found the demand for the new truck will exceed the supply that ford can produce. and we were particularly surprised how much they are willing to pay out for the new truck to bode well for ford's overall profitability. so given they have a bit stronger product cay dense into next year, we're much more

optimistic on ford. >> is there an upcoming product in the gm lineup to be watching for in the same vain as its f-150 everyone is talking about? >> well, i think it's important to realize the full size pickups are very important segments. so i think that is why we're a bit more bullish on ford, but clearly gm has launches coming that are very important. the chevy cruz, malibu, that's the majority of the car portfolio will be new next year. and so that's going to be clearly very important. and i just launched the mid-pickups, which are quite impressive products in the segment that has been shrinking as and opportunity for that segment to grow. >> help me tease, collin, we have ken fineberg coming in a little bit. if you had a question for him, what would it be? >> well -- i don't really have a question, i would say, but just ask how the progress is of the victims' separation fund? there's new it's been pushed out another 30 days. it would be curious to see if

that's going to be the end of it. >> colin, appreciate it. still to come, how barry diller plans to leave his mark on new york. he is working on a $170 futuristic park over the hudson. >> it looks awesome. >> it does look beautiful. right now, here's how stocks are trading in europe. red arrows after the nikkei dropped nearly 3% overnight following word japan has officially entered recession territory. "squawk box" will be right back. the holiday season is here, which means it's time for the volkswagen gn-then-drive event. for practically just your signature, you could drive home for the holidays in a german-engineered volkswagen. like the sporty, advanced new jetta... and the 2015 motor trend car of the year all-new golf. if you're wishing for a new volkswagen this season... just about all you need is a finely tuned... pen. hurry in and get zero due at signing,

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welcome back.

take a look at what happened in japan overnight. the nikkei closing down by close to 3%. this came on news that japan had officially moved into a recession territory. it's the second quarter in a row we have seen a drop in gdp and this time they were looking for a gape of about 2%. the drop was down by 1 president president 1.6%. that forced the nikkei down and has been playing around the globe with red arrows here in the united states and in europe. this morning the dow futures are down by 27 points. the s&p futures off by 4. we have breaking news to report. baker hughes merging with halliburton just now as we speak. the shareholders to receive 1.2 halliburton shares plus $19 in cash for each share they own. this coming across the wires literally just moments ago. just to put this transaction in cop text, this is a huge transaction, $34.6 billion.

total enterprise value of $38 billion. that's the equity value for baker hughes. >> there has been suspension this deal would go hostile. >> there was suspension because baker hughes had said we are not doing it. what happened last week was they were in talks and baker said no good. now we are back and this is is a friendly transaction. >> halliburton was trying to force out many members of the baker hughes board to do this anyway. >> here we are this monday morning. i'm surprised this got done as quickly as it did. i thought it was going to turn into a valeant-style soap apra, but nonetheless, a huge transaction in the oil services space. partially a defensive transaction. >> right. the stock market is just figuring this out because the value on this is $78.62 per share of baker hughes. that stock closed at $59.89. it was indicated earlier in the

$60 range. traders are just waking up to figure this out, up 21% with a gape of $13. getting up, the transaction is at $70.50 for baker hughes' share. >> this will combine the abilities to surpass -- i'm not going to go into the full-on advertisement, but it says our stockholders know our management team and what we will live up to in our commitments. we know how to create value. we expect the combination to yield annual cost synergies of $2 billion. this goes to the heart of what the transaction is about, they are competing against the number one player in this space in a very large way. and this puts them, given the drop in oil prices and the worries about what that would mean to this services industry in a better position to compete. the one question that we had about this transaction just a

week ago was how much -- what types of anti-trust issues might come up. there are certain businesses that these two are in where they up the market and whether they would end up having to spinoff or divest some of the assets. i'm looking through this right now, this release, to see what we're looking at. halliburton believes the investors required will be significantly less that some had expected. halliburton agreeing to divest business that is generate up to 7.5 billion in revenue, but they do think it's less. halliburton agreed to pay a fee of 3.5 billion if the transaction terminates due to a failure to obtain required anti-trust approval. so we'll continue to look through this. it may very well be, that is a relatively big fee in the grand scheme of breakup fees. so we'll continue to look through this. >> andrew said this is a friendly deal. the boards of both companies unanimously approved this. baker hughes shareholders were on 36% of the combined company

at the end. again, look at baker hughes' shares jumping on the news immediately. right now the stock is at $72. closed on friday at $59.89. halliburton shares also trading higher up about 1.8% up and that's unusual, too. maybe not so up usual this year, but to see the companies trading higher on the cash and stock deal. they get 1.12 halliburton shares plus $19 in cash for each share, a value of $78.62 for openers. >> we'll talk about this and get and analyst on the phone in the next hour as well. when we return, why federal drug enforcement agents showed up unannounced at multiple nfl games this weekend. we'll have the story when "squawk box" comes right back. you guys have misread the memo. this is the new lenovo yoga

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welcome back, everybody. federal drug enforcement agents went to nfl teams looking into prescription drugs. what the heck is going on? >> andrew was at the giants game yesterday. he didn't realize the dea was there as well. >> i wanted them to rush the field. it would have made the game more interesting. >> look, some say this is a raid. some say they were just meeting with trainers and doctors. this is related to a lawsuit filed by some 1200 players a year ago.

jim mcmahon being the head line saying they abused prescription drugs while they were playing. look, this is news to no one who knows the nfl. can i say it's going ton today? no, but they have been doing this for decades and decades. that's probably overprescribing prescription drugs to get players back on the field. a culture that's long been going on. one would -- >> perk scocpercocet. >> jim mcmahon said he was taking 100 percocet a month. >> and they were giving out ambien. >> the yes is were trainers doing this? it's illegal for trainers hold prescription drugs let alone prescribe them. that's why you saw the three teams they investigate, all road teams. did they bring these prescription pills on the road where they didn't have a licensed doctor? >> did they find anything? >> they did not say if they

found anything. presumably the teams have begun to clean this up. we've known for weeks that the dea is talking to team doctors. presumably they've begun to clean it up. i think it's like a the head injuries. part of the wild west culture that went on in the nfl that will begin to be cleaned up now that they know about the dangers. >> seattle seahawks, tampa bay buccaneers, and san francisco 49ers they went off. >> there were reports there were going to be six teams. those are the only three we confirmed they did meet with. >> do you think we would have heard if they had found something? >> this is the dea. i would not think we would know that just yet. i would think they'd want to keep that under wraps. again, i think there was some heads up that this was something they were looking into. you're looking at 1200 players, a potential class action lawsuit in the billions of dollars. so you would think they cleaned

up this problem ahead of time. >> adam silver, the whole idea we're going to legalized betting on professional sports. >> this is fantastic adam silver is saying let's approve sports gambling. is he kidding himself? he wants federal guidelines on sports gambling? we can't agree on immigration. we can't agree on anything and we're going to get gambling registrationlations? >> come up with a game plan and then we'll be in favor of it. >> we'll never get federal guidelines. i give silver credit for stepping up and being the leader. they can't really say we're in bed for fantasy leagues. >> okay. thank you. >> thank you guys. coming up we're going to talk about the deal of the morning. halliburton buying baker hughes. we've got details when we come back in just a moment. the conference call.

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trouble is tokyo. japan's economy unexpectedly falls into recession. stocks get slammed. will this trip up the bulls on wall street? tom lee gives us his forecast. general motors extending the deadline for ignition switch claims. gm compensation fund administrator kenneth feinberg will be our special guest. the hunting season economy. >> find the bird. come on. find the bird. >> nbc news tom brokaw takes us inside the opening day. the second hour of "squawk box" begins right now.

welcome back to "squawk box" right here on cnbc, first in business worldwide. i'm andrew ross sorkin with becky quick. joe kernen has the day off. a deal between hasbro and dreamworks animation turning into a nightmare. a big dip in the toy maker's shares. check out what else could have derailed -- we're going to check out what derailed those discussions in a couple of minutes. but we have a big announcement. halliburton striking to deal to buy baker hughes far total of $34.6 billion. they will get $19 per share in catch plus 1.2 stocks in exchange. the differences were apparently worked out over the weekend. told a little bit that some of that drama for was effect, if you will. joining us to break down the deal is kurt hallead. good morning to you.

>> good morning. >> are you surprised by this? >> it started coming out late last week and i was on your program friday to discuss elements of the transaction. i guess it's a little surprising it came together to quickly given a lot of the rhetoric over the weekend. but ultimately i think once the ball started rolling, there was no going back. >> you looked at the deal. good deal, bad deal? who's making off with -- who's winning here? >> you know what? i think it's one of these rare occasions where both sets of shareholders come out in pretty good position. we take the deal value somewhere between 75 to 80 in our varying forms of analysis. at that point it's to halliburton or net neutral to the halliburton shareholder. obviously keeps the combined company with a credit rating. so i think both actually kind of make out pretty well here. >> kurt, obviously the company

says this is worth $78 and change. right now baker hughes shares are only trading at $70. is there a significant number of people or reason this might not get done? >> we kind of thought the initial wrench to the deal not getting done was valuation. that started to play itself out over the weekend. but clearly halliburton upped their offer. we could run a number of different scenarios that potentially could get the deal price up to 90 and still work for both. but i never really thought that was a high probability. >> why do you think it's only $70 right now? is this just early trading before things get moving? >> becky, i would maybe suggest it's still just early trading and people are trying to digest this on an early monday morning. >> what do you make of the antitrust concerns? you talked about them a little bit last week. there's a reverse breakup fee in this transaction. also a pledge to sell up to $7 billion worth of assets, i

believe. >> yeah. that's roughly in line with how we thought it might fall out. we're a little bit lower than that. but we identified seven businesslines where there was a high concentration and the doj might step in. i think of those seven, there's four specifically where it's definitely going to result in some asset sales. so we factor that into our analysis as well to determine the price. >> do you believe the $2 billion number? >> that seems like a lot based on some discussions i've had with people over the weekend. that's not something that's going to happen on day one. that's going to take a few years to get through. so maybe a little high. but we thought maybe 1 billion was a good base to start. >> okay. thank you for joining us this morning. >> take care. >> appreciate it. we should tell you about other deal news this morning. activists near a deal to buy

allergan. this could end a lengthy pursuit by ackman and valeant. of course even if bill ackman and valeant lose allergan, they win because they have a huge stake in this. and now effectively valeant shares with bill ackman in the profits. that stock up at least 40% since they began this soap opera. >> heads you lose, tails i win. not bad at all. let's also talk about what happened in japan. the nikkei average tumbling by 3% overnight. that was the biggest one-day drop since august. it came on the news the country is officially in recession. that comes on top of a 7.3% slide in the quarter. that's put into the question about the economic policies of prime minister shinzo abe. so far the news doesn't appear

to be having a huge effect on the u.s. futures. dow futures down by about 35 points. s&p off by 5 and the nasdaq down by 11. let's get to it with our guest host for the next two hours. tom lee is the head at funds strat global advisers and jpmorgan chase. it's great to have you here. >> thanks. >> so japan first of all, in recession territory. what does this mean about abe-nomics? >> it obviously raises some questions. i think when you think about the root causes, it looks like it has more to do with the tax that was imposed earlier this year. markets are going to have to think about well they may delay the second hike which is good news. there are sort of bigger structural issues in the economy. ultimately what they're trying to achieve is create inflation

expectation. so, you know, it's a setback. but on the other hand i'd say the nikkei is at all time highs. and it's done pretty well this year. tells us maybe the news isn't all so bad. >> could be because they're expecting more stimulus to come. is that a correct assumption, do you think? >> yes. i mean, i think that this is a -- an all-out effort. and, you know, we've seen some success in the u.s. with sort of changing inflation expectations with monetary expansion. so let's, you know, we could be hopeful that it could work. >> and in terms of what it means for the u.s. stock market. so far they seem to be taking it in stride here. is that the right reaction? >> i think that's right. i think that some of the global weakness we saw earlier this year was because of the consumption tax hike. i think we're sort of coming out of the valley there. and if you think about the global economic outlook, i mean, i think we should be a little optimistic. the lower oil is stimulus for

all of the developed country. >> it's climbed and bounced back from the temporary dip. is looking at new highs. >> that's right. it's still very controversial. you know, when we talk to clients, they look back at october. and they think the market is still on shaky foundations. i think that's actually pretty bullish. i mean, you know, you want to be uncomfortable in a bull market. investors are skeptical right now. i do think oil's going to be -- lower oil is actually good for the u.s. over the next few quarters. i think people are underinvested. and i think talk about valuations too premature when you're in a bull market. >> how much do we really have to go here. also don't we have some funds that are going to start selling out in the next couple of weeks once they locked in the gains? what does december look like? >> well -- i mean, i don't think they're at that many funds with gains this year. >> enough gains. >> that's right. it's been a tough year for -- 75% are trailing the market. so i think more people are under the gun to catch up.

we're in a seasonally strong period. if people -- if in fact forecasts are right about global lift coming, i think everyone wants to be bullishly positioned. >> what would it look like? >> we originally thought the market could reach 2100 by the end of the year for the s&p. i think, you know, it's probably thinking more mid-2100s by end of the year. maybe as high as 2200 by april. so i think there's a lot of -- >> do you look at merger and acquisition as a trailing or leading indicator? >> it can be either. i mean, mnas is still a very bullish sign. because it's really corporate ceo and board confidence about it's usually an offensive maneuver. so it's bullish. in general it's bullish. >> all right. well, tom is our guest host today. he'll be with us for the next two hours.

we have much more to talk about with him. coming up, when rereturn, pipeline politics. we'll talk to rob portman. plus the gm ignition switch debacle has been linked to several deaths. kenneth feinberg has the latest on the claims process for the automaker. and later a special visit with nbc news legend tom brokaw. he's going to tell us about a business that many economies depend on during this time of the year. we have more squawk in just a moment. hey matt, what's up?

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built for business. welcome back to "squawk box," everyone. we've been watching the futures and thaifr been under a bit of pressure this morning. s&p futures off by five. the nasdaq off by ten. and check out shares of general motors. today is the fourth anniversary of the company going public again after the bailout. raising $20 billion after pricing it $33 a share. the stock right now 31.85. linked to the general motors faulty ignition switch, the late egs number of confirmed deaths up to 50. phil lebeau joins us with a special guest. >> thank you, andrew. let's bring in ken feinberg who is the gentleman running the gm ignition switch compensation fund. let's begin with the news your fund made late last night that

you're going to be extending the deadline for people to file claims now going until january 31st. why did you reach that decision and was there any discussion with general motors about extending that deadline? >> yes, general motors agreed to extend it because we're sending out this week over 800,000 new notices to new owners who bought cars since the last notice, corrected addresses. we found a couple hundred thousand addresses were returned. we want to make sure that everybody knows about this program. and out of an abundance of caution we'll extend the filing deadline one more month. i don't think there are many people out there, if any, that don't know about this program. >> well, let's talk about that, ken. there was the story that came out last week in "the new york times" where one of the 13 original victims that general

motors had known about for years, that family had never been notified by general motors, by anybody until they were contacted by a newspaper reporter who said, look, you're on the list of victims here and the family said nobody told us. this brings up the question how many people are out there that have no idea at all that they might have a family member who was injured or killed in one of these faulty vehicles? >> very unfortunate that that family wasn't notified. that's one example i'm aware of. are there others out there? there may be a few. there's going to be a notice program here between past and present notice, phil. over 6 million notices have gone out. the media's given it attention. of the 13 families that gm reck niced, 9 have already come into the program, 2 are in the verge of coming into the program and

we've reached the other 2. so i think the program is working, but providing an additional month to make sure that everybody who believes they may have an eligible claim, we want to do the right thing. we want to cover everybody. and that's the reason for the 30-day extension. >> and you've got new numbers today, am i correct? you're now up to 33 death claims and 2100 total claims have been filed with you at this point? >> that's correct. of those 2100 it bears noting that over half of them have no documentation whatsoever about the crash. they simply had lawyers send in a claim form. we'll work with them to try to find out whether it was the ignition switch that caused the accident. >> you've been at this long enough to know when somebody is out there looking for free money or if there's a legitimate claim. of those half where they have no doujs at all, how many of those do you look at and say i think eventually something is going to

be here? how many do you look at as though they're just looking for a free gift of money? >> no, no. i think people are -- i'll give them the benefit of the doubt. they may be collecting the information. i don't know. now, of course, some people send in a claim involving an ineligible vehicle or a gm truck or something. those claims are ineligible on their face. but most people provide the documentation, a police report, photos of the accident, maintenance records, insurance investigative reports. people are pretty good in trying to come up with whatever they have to document the claim, look at it. and as we've done with the death and injury claims, pay the claim. >> i know you've got some conversation basically every day and every week with general motors, some of their engineers, lawyers. how much pushback do they give you? has there been a point you say i

know you think this should be a claim, we disagree. >> no. gm has been extremely cooperative. i must say, remss that i've made, decisions that our team has made, gm has listened. gm has some time pushed back and said on this particular claim, are you sure. they're entitled to do that. but gm has lived up to the promise that once i make that decision on eligibility and value, gm has readily agreed. so there's been absolutely no tension there whatsoever. >> last question, ken. do you think that we're going to see these death claims eventually get close to a hundred? 75 to 100? or what's your expectation? >> i've said from the very beginning, i won't speculate. we look at them one at a time. we're up to 33. there's now until the end of january to file a claim. we shall see and i'll be glad to come back and at some point chat about the numbers.

right now it's pure speculation. >> ken feinberg who runs the gm victim compensation fund joining us today from washington. andrew, there you have it. 2100 claims have been filed and so far of those that have been approved, 39 injury claims approved. 33 death claims approved. >> thank you for that. ken, thank you for that. coming up when we return, they're not playing. why talks between toy maker hasbro and dreamworks animation broke down this weekend. there may be more than meets the eye. and "dumb & dumber to" winning the box office battle this weekend. raking in just over $38 million for universal. "squawk box" returns in just a moment.

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financial noise financial noise ♪ welcome back to "squawk box" this morning. talks between hasbro and dreamworks animation have officially ended. joining us to discuss what's happened and what's likely to happen next, technology anl is

at btig. so maybe you're clapping or applauding this decision. but what does happen next? >> you know, look. i think the reality is driemworks is a company that really struggled. you talked about "dream hero 6." you know, it's interesting. as you think about disney how many memorable movies, how many memorable songs, the ability to build ever lasting franchises. that's just something that dreamworks animation has struggled with. i think when we look at the earnings power of this company, it's just really struggled to make money. let alone earn a dollar consistently which it hasn't proven the ability to do. when you look at the valuation in the market, we found the stock to be incredibly overvalued for years. which is why we've had a multi-year sell rating on the stock. >> was there any industrial logic for hasbro to buy the

company? >> i think from the standpoint of dreamworks, having or building is important. look at disney. overall halloween, i think you all talked about this a couple times on air. how they sold 3 million-plus dresses ahead of halloween for "frozen." it's always been an important point of giving franchises life well beyond the movies themselves. i think the dreamworks it's hard. who's playing with turbo. who's walking around. the consumer products hasn't materialized in a meaningful way. and from that standpoint it's a little hard to see. then from a higher level, the idea that if you're hasbro and you're buying from all different parties so you're getting content from disney, could you imagine if jeffrey katzenberg was chairman of hasbro walking

into a meeting at the walt disney company about licensing toys for the next movie coming out. there seemed to be a wlot of fundamental challenges that would have been created by a transaction like that. but i think the bigger one is just dreamworks really hasn't made a lot of franchises that warrant a lot of sales. >> is that fixable? jeffrey katzenberg was to have a hot hand. are you suggesting he doesn't? >> when you say hot hand, what are you referring to? >> when you saw shrek and the success of so many different franchises at least early on, you -- we compare it to pixar. >> they went -- they got very successful and went public on the back of shrek 2. i think as you go past that, has there been madagascar, kung fu panda, absolutely. i don't want to say they haven't been successful. but i think when you look at the relative batting average of the company, it actually just hasn't been that good in building ever lasting franchise.

>> now that they've danced with hasbro and soft bank, does that mean this company is up for sale? what's going to happen next? >> it's funny. when i think about dreamworks from the day it went public the story is if it had a high enough batting average of success somebody would buy it. and it's talked about, you know westbound selling itself and being part of a larger entertainment company. i think the problem you run into now is they've basically shopped themselves all over the world and it appears as if people have just passed. and so the price value just isn't there. obviously there's a price for everything. and so if they either had tremendous success as you look out over the next 12 months which we don't see, but if that all of a sudden happened, that could change the story. but i think the challenge now is the price value relationship of what they think they're worth. obviously saw a lot of speculation that they wanted

$30-plus. that doesn't make sense when you look at the value they're creating on an earnings basis. >> rich, we have got to run. what's the price target for you? >> we've had 15.50. >> rich, appreciate it this morning. thank you. >> thank you. when we come back this morning, the politics of the keystone pipeline. the senate expected to veote on this hot button issue this week. but is it all for show at this point? we have senator rob portman joining us after this. (receptionist) gunderman group. gunderman group is growing. getting in a groove. growth is gratifying. goal is to grow.

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welcome back to "squawk box," everyone. let's take a look at some of the morning's top stories. stocks in japan plummeting overnight. this comes after new gdp fiktures there showed the world's third largest economy slipped into recession. halliburton is buying baker hughes for $79 a share in cash and stock. talks between the two had stalled on friday, but their differences miraculously disappeared over the weekend. both boards voted unanimously to go ahead with the deal. and in other deal news, ackman

and valeant for allergan. the two had teamed up to make an unsolicited mark last spring. it has been a bitter mating dance since that time, but as andrew pointed out, valeant and ackman look to win anyway. they're going to be splitting the profits. also we should point out open enrollment is underway. health and human services says there were more than 100,000 applications on the first day of open enrollment. but today not free from issues. brokers in various states had difficulties logging into and setting up accounts. washington state had to take its website offline. government funding for research facing pressure in washington. so michael millican is holding a conference in new york working to bring them together. meg tirrell joins us from there. >> reporter: we're here at

milken's conference where they're bringing stake holders together to try to accelerate research to bring medicines to people to help them now. mike milken known for the work he's done in prostate cancer. but the goal is to translate that into other diseases. of course on everybody's mind right now is ebola. we do have another patient who's been flown to the united states from west africa for treatment. although the u.s. has contained all of the cases that originated in dallas. this man dr. salia has been flown to nebraska medical center which has treated two other patients. they say, however, that he's in extremely critical condition and may have a tougher fight than the others they treated. he's receiving every treatment available possible. we expect to get more updates on that as they come. but later today we'll be talking both with mike milken and dr. francis collins about medical research funding and how to fight public health crisis like

ebola. back to you. >> thanks, meg tirrell. we'll check in with her later today. our guest host today is tom lee. tom, i was just noticing there's a list of 14 people the business insider asked earlier about their predictions for the s&p for the year. this came out on january 2nd. you came the closest. 2,075. kudos to you. that sounded incredibly bullish at that point. wow. he's looking for 2,075 at this point. that's a tricky thing to do coming up with numbers like that. >> yeah. or it's a lucky exercise, right? >> although we were talking off camera, what is it four out of five years at jpmorgan you were within 1% of the prediction? >> that's right. so we had a -- >> that sounds like more than luck, tom. >> yeah, maybe. i think this bull market has been fairly textbook in the sense that once you establish the low in the market path it's

been pretty classic. in a way what's helped us is we looked back to get a feel for where we are in the cycle. >> if that's the case, where do you think we stand right now? what do you think for the rest of this year and how do you come up with a prediction for next year? >> i know this is going to sound too optimistic. but i think there's so much pent up demand in the economy. we're thinking a trillion dollars per year type levels. investment spending that could surge. i think we're only at mid-cycle. i think the s&p has three maybe five more years of, you know, double digit gains ahead of it. i think next year we don't have a full forecast yet but i think it's going to be solid. i think the s&p peaks closer to 500, 4,000. >> what is the thing that would change your bullish outlook? what would make you say wait a second, this is long in the tooth. this is not what i expected. let me reassess. >> i think there's really two things that could happen. one is that the suppression of

demand which has been taking place is so severe that the economy structurally falls into deflation. what that hinges most on is policies out of washington. i think that's why the midterms were such a big thing for the economy. and i think the other is the opposite end of the spectrum. growth ignites but with so little express capacity, maybe not enough workers and not enough commodities. i think the probably of that is much lower. >> all right. tom again is our guest host this morning. he talks about washington. speaking of washington -- >> we are going to talk about washington now because the senate expected to vote on the keystone pipeline this week. senator rob portman joins us now. good morning to you. >> good morning, how are you? >> i'm good. i think we all want to understand what's going to happen to keystone this week one way or the other. and if it does move forward, the president ultimately tries to veto it. >> i agree with that your guest

just said which is getting the majority helps in terms of economic growth. i think that will help not just the market but help wages. it'll help us become more energy dependent as a northern american koun tru. i think what we've learned in the last week is that the democrats realize it's going to happen at some point. i do think it happens over the next several days by the senate passing it or it will happen when the republicans get the majority. the votes now are uncertain. i think we're at 59. we need 60. we'll see that 60th vote has been elusive. but i do think it will happen eventually. >> what about the president? what about the idea of him vetoing it? he said last week -- this is when he was in australia. i won't hide my opinion about this. one major determinant about whether we should ship to world markets not the united states is does it contribute to the greenhouse gases that are

causing climate change. you have to imagine he's going to bring that issue up again. >> well, he might. and i'd love to debate that with him. in fact, it does take not just from others but north dakota. right now that oil is moving. it's moving by truck and train. the emissions are far higher as a result. it's also not nearly as safe as it would be. so it's more efficient in terms of the movement of oil being less expensive but also better for the economy and safer. i don't know if he'll veto it or not. he might. but i think it's going to be harder for him to veto it in january. with these new republican senators we have all of whom are supportive of it, there's a good chance we could get to the 2/3 which is the majority override. >> are you surprised he hasn't changed his rhetoric on this at all? >> i am. what he ought to be saying after the second strait department report, i think that gave him an opportunity. he had a chance there to say, look, let's move ahead with

this. one thing the state department said was that oils are going to be used. in terms of the overall impact in terms of the environment and whether the oils will be actually utilized somewhere, their conclusion was you will see this oil being used. so it's better to be using it through our refineries and some will be used in the united states and it will have an impact on the cost of energy as well. so it's jobs, energy independence which is great for our national security. all of which i would hope the president could get behind. >> talk about the president behind something and rhetoric at the same time that i imagine you disagree with, but i'd love to know if there's a way to find common ground on immigration. is there a way to make this work? >> of course there's a way to make it work. how ironic we have this wave election and you have so many americans saying let's figure out a way to work better together. one of the great messages of this election. here you have the president right after this saying i'm going to go around to the

american people. i think it's a big mistake for him to use executive action. but i think you ought to put congress on the spot by saying i could do things by executive action, i believe. i'm not going to with the understanding that you will work with us. >> what's the compromise position that puts a smile on everyone's face? >> well, the smile that everybody needs on their faces is to have a system that works. and that will require enforcement. i mean, i think it's crazy to think you have an immigration system now where people don't come forward. they're working in the shadows because there's not adequate enforcement. we have to have more enforcement in place. it's not just along the border. it has to be at the work place, the entry/exit program. 43% come legally with a visa. we need to tighten up on the enforcement side. i think the president acknowledges that. then we need to legalize people who are here but there's lots of ways to do that. speaker boehner has put forward some ideas. he has indicated his strong interest in moving forward with

immigration reform. a bill is already passed the senate. it will require the president not to poison the well. >> we're going to leave it there. senator rob portman, thank you for joining us. >> thank you. >> we'll see what happens with keystone this week. when we return, we have a legend of the news business. tom brokaw, the author of the greatest generation will be our special guest. he's going to talk to us about a big business that means so much to many states. "squawk box" will be right back. see things in a whole new way. it's in this spirit that ing u.s. is becoming a new kind of company. ing u.s. is now voya. changing the way you think of retirement. ♪ there's confidence... then there's trusting your vehicle maintenance to ford service confidence.

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welcome back, everybody. the start of hunting season is a sacred holiday in many parts of the country. it also means big business for a number of economies across america. tom brokaw has a special airing wednesday called opening day and it's about the pheasant hunting season in south dakota. that's where tom's from. joining us now is the man himself. tom brokaw, special correspondent for nbc news. tom, it's great to see you this morning. >> always great to see you becky. i always like to look at my hair

history when you go back into those archives. >> hey, tom, i know you're from south dakota. this is a big, big deal there. why don't you tell us a little bit about just the inspiration of where you came up with this? >> a couple years ago i was talking to friends who were sports minded as well. what's overlooked in much of america is the economy and culture of all the opening days. that led to the south dakota pheasant hunting season. in south dakota it's a $200 million a year industry. think about that for just a moment. they've done an amazing job of raising pheasant there. they have lodges, all restaurants are involved. not just america but from other parts of the world as well. and there i am with a couple of my friends out on an annual family hunt. and so we wanted to do everything from a father/son experns to cabela's have been their tan blaze christmas. tan familiar to the hunters everywhere. and we think we can make this

into something else. you can talk about duck hunting in arkansas. bass fishing in the american southeast. you can talk about state fairs in the midwest. opening days are hugely important to this country in so many ways. >> it's a deep part of the culture. what's changed since you grew up? >> it's changed a lot. it's now much more organized. it's much more part of the economy. when i was growing up, you put a handful of shotgun shells in a jacket and drive down the road until you saw a pheasant and then shoot it. then around thanksgiving you have a pheasant feed. now they have lodges everywhere. and the expense of the license has not gone up that much, but the big sportings good stores like cabela's and scheel's they count on this as their pre-christmas. and all of the organizations around them, the restaurants, hotels, farmers leasing their land now for a lot of money. for a time that put pressure on

the locals. they now opened the pheasant season a week earlier for those people who live in the state so they can get out and get a crack at it without having to write the big check. we went to nelson's farm which is lot of people believe in south dakota is the finest pheasant hunting farm in america. on the other hand we got a father and son out hunting. the son learning the legacy of growing up. that's my dog red. he was squirrely at the beginning. >> pretty dog. >> yeah, he's a good dog. he caught on right away. he even pointed at the end of this field as i remember with some pheasants. here he comes back. >> hey, tom. this brings up the question of gun ownership in this country. it's a sticky issue and it's because there's so many people where this is a way of life. hunting is something people have been doing their whole life. then you have the anti-gun

lobbyists who have fought so much against guns. do you think there's any middle ground in this country? do you think there's any way to get to any resolution? >> i would hope so. i owned guns all my life. i have a closet full of them in the east and some out there as well. at the same time as a urban dweller and someone who feels the same pain that a lot of others do when we have these mass shootings, we need to have a discussion in the middle. we just can't be a polarized country when it coms to guns. we have the first amendment as well as the second amendment. first amendment says, however, that you can't yell fire in a crowded theater. i think when it comes to a debate, we're now in a crowded theater. we need to have a way of talking sensibly about it. when i was growing up, we didn't have all the semiautomatics and the sniper rifles. and a lot of people i know on the american west will say the same thing. we don't need to have access to all of that. there's got to be a middle

ground of some kind. but we have not been able to have a reasonable debate. >> i wish more people could see it like you do, tom. that is a very reasonable starting point for how we get to something, to some sort of solution. while we're on the subject, it seems like washington has been a place where there's not a lot of room for reasonable debate on any issue. we just got through the midterm elections. i wonder what you think about the chance for more civility returning to washington? >> whatever you think of the nra, they're well organized and well financed. and they land immediately on anyone who raises any issue about changing the gun laws. and they put enormous pressure on the lawmakers. we've had spirited dialogues about all this. he also knows i'm a hunter. when the connecticut tragedy happened, there were some reasonable bills in the congress and they got shot down using it metaphorically almost immediately. and we need to have as much o after dialogue about that as we will about immigration, as we will about the keystone pipeline

and the future of the economy. because wear gun tolding nation. the people you saw on the screen there who will be on the nbc sports channel at 11:00 on wednesday night, those are hunters. they've got a clod et full of shotguns. they're not people that will go out and commit a mass murder. they don't have a closet full of other automatic weapons. what they want to do is pursue something that's been important to their lives and their culture. and it's an important part of their economy as well. you know, i just can't imagine the idea that the government's going to come in and grab all my guns out of the closet. that's not going to happen. >> before we let you go, i can't let you go without asking about the 25 anniversary. 25-year anniversary last week of the fall of the berlin wall. you were the first one there. you were the first one reporting on this. i wonder how you think we've come from there and how we've succeeded and failed? >> i went back for the

anniversary with kissinger and baker. and in germany itself, the new generation is stunned by what their parents went through that their country was so deeply divided. and then in this country since we put those reports on the air, i've had more man on the street reaction to it than i would have imagined. i think in part because putin has risen up out of the rubble of the berlin wall to reinstate, if you will, some of the nationalism we used to worry about with russia. and dr. kissinger and jim baker we are saying the same thing. we could have done a better job managing the transition to a democratic russia than we did at the time. but it's a lesson in history again about how swiftly things can change and how the consequences can be unintended and difficult to deal with. >> i want to thank you for your time today. it's a pleasure hearing from you. we're looking forward to this hour-long special. >> 11:00 sports channel

wednesday night. >> 11:00 p.m. wednesday night we'll be watching. tom, thank you. okay. when we come back, coming up an update on the deals of the morning. plus a "squawk" exclusive. jerome powell is going to join us for the future of interest rates. the market needs to listen up. "squawk box" returns with that and a lot more in just a moment. ♪ for tapping into a wealth of experience... for access to one of the top wealth management firms in the country... for a team of financial professionals who provide customized solutions... for all of your wealth management and retirement goals, discover how pnc wealth management can help you achieve. visit pnc.com/wealthsolutions to find out more.

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billionaire and media mogul making his mark on manhattan. to build a $170 million futuristic park. take a look at this. this is pretty cool. saying i have always loved public spaces. we will fail in our ambition outsized or whatever it may be if this doesn't feel completely like a park and completely like a performance space. i believe they're going to call this pier 54, pier 55. it will replace one of the piers. a beautiful new space. he's contributing about $130 million of the plan money. the city providing the rest of it. but it is a very cool idea. of course, he is one of the big backers. we should also say of not hudson yards. but what is now -- >> the highline. >> yeah. thank you. >> these are the pictures in the new york post today. apple's own isle paradise.

looks cool. when we come back this morning, a stock that keeps going and going. apple's market cap topping $168 billion. that's bigger than the gdp of a million dollars. is the sky the limit for this high flier? and will the lower prices of gas fire up holiday sales? 'tis the season to shop. get this. only 37 days until christmas. a lot to get done between now and then. "squawk box" will be right back.

retail earnings. the consumer and the fed take center stage this week. can this market continue to climb? we preview the data and talk investments. connecting with uber. spotify making a deal that allows uber to stream their play lists. details ahead. when will the fed start hiking rates? an interview with jerome powell. the final hour of "squawk box" begins right now. welcome back to "squawk box" here on cnbc, first in business worldwide. i'm becky quick along with

andrew ross sorkin, joe is out today. the dea making a surprise visit to nfl teams yesterday. looking at medical staffs as part of the investigation into prescription drug abuse alleged in the league. those inspections which entailed bag searches and questions of team officials were based on the suspicion that teams dispense drugs illegally to keep players off the field and is a violation of the controlled substances act. the 49ers, the seahawks, and the tampa bay bucs were among the teams inspected. this was all started because of a class action lawsuit brought by almost 1300 former nfl players alleging these practices had taken place over years. >> unclear if it was a raid or not. we're whale watching this morning after some of the biggest investors filed their 13 fs heading into the weekend. kayla tausche joins us with a roundup of those whales. >> requested personal meetings

with alibaba executives in september, it wasn't just showmanship. hedge funds taking stakes and in some cases large stakes in alibaba ahead of what became the largest ipo ever. among the biggest stakes, third point with 7.2 million shares. john paulson had 1.9 million shares. and julian robertson with 1.2 million. other positions appeared relatively now. would have been valid at about 7 $67 million. now remember these disclosures represent positions through the end of september. and some clear whether they've been riding the full 7% rise in alibaba's stock. but one stock that may have hurt

some investors, herbalife. icahn and perry are hanging on however. we call these stocks battle ground stocks because when we get these disclosures, it appears there's some people on one side of a trade, others on the other side of the trade sort of squaring off. at least in terms of alibaba, everyone appears in the third quarter they were on one side. back to you. >> okay. thank you for that. surprising only because you always hear these guys only want to buy sort of after ipos so people don't buy really as an investment. anyway. >> little different. tells you about what people think of alibaba too. >> well, the question is going to be also how long they hang onto the stock too. >> good point. we do have some other news happening this morning. halliburton buying baker hughes for about $34.6 billion in cash and stock. joining us now on the "squawk" newsline is jeff tillery.

thank you for joining us this morning, jeff. what do you think of the deal? >> you know, overall we like it. ultimately there's a significant prize to go after. larger competitor has an inherit advantage. takes advantage both on the cost side. but also just leveraging higher revenue base. so with their combination, they have a chance to benefit from that. to the extent they can execute well on the integration, at a meaningful premium. that's another opportunity that the companies can go after through time as well. >> jeff, just this weekend it seemed as if this deal which we just heard about last week was going to fall apart. it sounded like they couldn't reach an agreement. the boards were bickering back

and forth. in fact, halliburton's board was talking about removing members of baker hughes' board. what happened to make this all of a sudden seem like a great deal with both boards voting unanimously for it? >> it's a great question. i was sitting on the couch nerding out reading this. something like that is we've seen that type of a soap opera before. the background discussions obviously will be an interesting read. >> there was a big breakup fee that's been put into this. $3.5 billion that halliburton's agreed to pay to baker hughes if this doesn't go through for regulatory reasons. those are concerns and questions that were brought up. i'm surprised by the stock action today because this deal is one that the company says is valuing baker hughes shares. both boards have voted unanimously and yet the stock this morning at this point is

only trading at 69.44. do you think there are people who think this doesn't get done? >> that's certainly a risk as we look at the individual product line. there is significant overlap. but the devil will be in the details as you line up the business line by business line and product line by product line. ultima ultimately, halliburton still allowing room for roughly 30% of the baker hughes revenue base to be through and the deals go forward. as we look at the overlapping businesses, we think that's reasonable and we think it's likely that you come in under that gap. but this is a deal that's going to take a long time to come to a close. it's not going to close until the second half of next year. so a greater discount to the implied merger value does make sense to me. >> we should point out that halliburton shares earlier this morning were trading higher on this news.

at this point they're down about 4%. jeff, thank you for joining us today. >> thank you. the market normally reflects how investors feel about the economy. but not driving the markets and there's a big disconnect, our guest says. awarded a five star rating. and still with us our guest host tom lee. who i believe disagrees with charles. you think things are not so rosy. >> there's an old story on wall street that people's iq goes up at the same rate of their market rate of holdings. everybody on wall street has become very smart over the last five years. therefore the economy has to be

e growing faster than it is. so it's really -- you know, and if you look at the numbers, we're not growing jobs any faster than we have. the incomes are not growing. they're less full-time jobs now than before obama took office. we have missed several million and a half more jobs. but it's all part-time. >> where do you think the markets should be? >> i think the market should be where it is. because number shares outstanding keep going down. >> buyback effect. >> yeah. and companies keep -- have nothing else to do with their money because there's no demand to spend. >> but you're arguing that things aren't as good as they look and yet you're also arguing that the market is in the right place?

what does one have to do with the other? >> there should be a connection. you're making funny eyes as my children would say. you're making funny eyes. >> i mean, i think you're making some good points, but valuation really should be -- >> when did it predict the market at all? when did earnings ever predict what the market was going to do? >> i think you're probably supporting my point. i think at 15 times we could argue the market's not demanding a high valuation where it sits today. >> if the number of shares keeps going down and the money available to buy those shares held by institutions keeps going up, stock prices are going to go up regardless of the pe. regardless of anything else. >> i mean, i guess i'm getting confused. i'd say if you thought the market was expensive, you'd have to say you're paying more to own a stock than a bond. that's always happened. >> what does value have to do with price? >> again, i think --

>> where is the relationship? >> i think i'm just getting confused by what you're saying. if you're saying it's not about valuation, what makes you think the market is ahead of itself or expensive? >> i didn't say that. i said stock price wills keep going up as long as the number of shares keeps going down. even though the economy is not growing. japan -- >> maybe you're just bullish but for different reasons then. >> you're bullish. but it sounds like for technical reasons. >> i'm bullish because -- look -- >> when i say technical reasons, the buyback effect, the fact that money is flowing in. >> i've talked to a lot of hard money groups recently. and they all see that this doesn't make sense. how do you grow an economy by just printing money and giving money away? you know, all of a sudden -- >> but all of that would discuss that all of this is going to end badly. >> yes. >> but you told me the stock market is going up. >> but i don't know when. see -- >> we all know it's going to end badly at some point. >> yes. bull markets become bear markets. i agree with that. >> the point is -- >> but you're here to tell us

when that's going to happen. >> no. i'm saying there's a tremendous disconnect that stock prices are going to keep going up as long as the share cow keeps going down. and the one thing that will wreck that game is higher interest rates. the market will tank and there would be no growth in the economy because the only meager growth there is -- >> and you believe interest rates are going to rise when? >> when the fed raises them. >> and the market's going to tank at that moment? >> higher interest rates will mean less flow. >> assuming you believe that if the fed is going to raise interest rates -- >> i don't believe that. >> you don't believe they're going to raise interest rates. >> i said if as in when they do. i don't think they can. there is no -- they will not be able to raise interest rates because it will wreck whatever growth we have. we're in this fantasy world of if you keep -- central banks keep giving money to buy financial assets, that will resolve all the problems. >> we're running a banner under

your name saying biedermann's market reality. i don't understand that reality. there's a thought interest rates are going to go up. probably in june. >> yes. because everybody thinks if they've made so much money in the stock market, that has to mean the economy is doing better. beginning of this year they thought it would be going up by now. all economists surveyed in january said interest rates had to go up this year and they haven't. >> you know, i think you're making an interesting comment about the fed. we looked at 14 fed cycles earlier this year, all 14 fed cycles. if the fed tightens because it's an inflation signal meaning, hey, companies better start spending on cap x because it's going up, that historically has been bullish for stocks. and so i think it's not a fore gone conclusion that fed

tightens, market goes down. there's many instances where it was accompanied by a big rally in the stock market. again, it's because it's an inflation signal. reflation is good. this economy is growing by 30 million people every ten years. >> since obama took office, the population has grown by over 15 million people. and we have 1.3 million new jobs since obama took office. so less than 10% of the population growth has gotten jobs. from 60 to 2,000. >> that's probably because they were just born. you can't give an infant a job. >> from 60 to 2000 we had -- and 75% of those people got job. >> i think this is all pent up demand. >> all right. >> i wouldn't say it is a deflation -- >> spoken like someone talking your book. nothing personal.

>> again -- >> real quick, talk your book for one second. are you doing with your money? >> actually, this week sort of cautious. traditionally the market is weak before thanksgiving. more offerings hit the market sucking money out. then the market typically goes up after that. so for my gambling money, i'm probably going to go long on friday. >> we will take that. that's charles' reality. thank you. >> should point out, tom's been right. >> i think we're still going higher too. but i think people believe because the market's going higher it has to mean a stronger economy. i'm saying it doesn't mean that. it means that there's more money chasing fewer shares. regardless of the economy. japan, there's huge flows into japan when they started printing money. japanese stocks went to the moon. japanese government said they were buying stocks. what does that -- and the economy is tanking.

so you have -- why is that different than here? >> but talking your book and putting your money where your mouth is could be two sides of the same coin. >> i'm sorry. i apologize for that comment. >> i didn't write a book either. >> thank you, guys. >> we agree to disagree. you have very different views. we'll see where it plays out. thank you. when we return, we'll talk about streaming your spotify play list to your uber car. it's about to become a reality. plus apple's market gap continuing to climb. and at $668 billion, it's about 10,000 times the net worth of kim kardashian. there's a comparison. a closer look next. and later after the fifth warmest october on record, bone chilling cold gripping the retailers. are they counting on a boost in sales ahead of the holiday rush? we're going to talk retail earnings and a preview of the holiday shopping season. ole new.

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welcome back, everybody. a big weekend at the box office for jim carrey and jeff daniels. "dumb & dumber to" was the

biggest live action opener for bruce since bruce almighty. daniel's highest opening ever. disney's "big hero 6" finished in second place. with that take, that pushing the film over the $100 million mark to about $112 million in total. and good news for uber users this morning. reports say the alternative taxi service set to team up with spotify. here's how it's going to work. if you are a spotify user and you hop in an uber car, you can listen to your favorite play list. announcement expected later this morning. jump in, listen to your own tunes. so much better than listening to the tunes potentially of the driver. i don't know how that's going to work though. i'm assuming they're going to have to have their phone hooked into the stereo system. >> might speak to the type-a users. i'm not sure i would take advantage of the spotify but they must have young, hip --

>> are you a spotify user? >> are yi have a spotify accoun. i'm more of pandora. >> let's talk about another technology stock. hitting a new record high for apple. market caps of $668 billion. that reinforces its place as the largest in the world. how big is that? it's about 10,000 times the net worth of kim kardashian. and 20,000 times the most expensive car ever sold. joining us right now is more on apple taking over the world is daniel ernst. have you been surprised by apple soaring to new heights? >> not really. because it all just was an outgrowth of the earnings growth. when earnings fell two years ago, the stock fell and earning's been on a rebound the last two years. and that drove the stock back up. even though at all-time highs it's still relatively cheap.

but at 14.8 times earnings, the market's what? 15.9, 16 times earnings. it's still relatively cheap. and it's growing faster. it's growing faster than the economy. it's justifying that growth. the funny thing is moat big cap tech companies traded these multiples like facebook or twitter at 150 times ebita on the hope of opportunity. that they have all this opportunity in front of them. well, apple has a demonstrated track record in entering new markets and never gets credit for any of that opportunity. near term we have the watch coming up. we have their payment system coming up. mack is killing it. i've had a bit of an air pocket here. but we don't think it's done. i think you can put to to -- the

company is hitting on all cylinders. >> our guest host today is tom lee. you point out it's good to have a technology stock leading the way. >> that's right. if you think about what's very american centrist sector, what should be the biggest stock in the u.s. stock market? i think it should be a tech company. 75% of all tech is traded in the u.s. and i agree with the commentator's point. the valuation -- >> i got you. >> -- is low. the category leading stocks and other indexes trade at premium. maybe we should be talking 20 pe. >> i would understand why you wouldn't necessarily want a bank to be leading ways. i understand why you wouldn't want an oil company necessarily at number one. that probably says something about the price of the commodity underlying all of that. why not an industrial company? >> industrials are tougher in the sense that there's a lot

more global competition for an industrial company. for every ge there is in the u.s. there's an equivalent large conglomerate in europe. how many other apples are there in the world or how many other social media companies? i mean, it's a pretty small universe. >> dan, we want to thank you for joining us today. i know $668 billion is nothing to sneeze at. you think apple will be the first trillion-dollar company? >> i think tech has always been about earnings growth. if you're not innovating, then your earnings aren't growing. as long as they keep doing what they're doing, it's on that path. >> dan, thank you. okay. before we go to break, we have some sad news to report. the third patient -- the third ebola patient to be treated at the nebraska medical center has passed away. this morning dr. martin salia had been brought back. he's a sierra leone citizen, however he spent a lot of time

and was living in maryland. came back in a very bad state unfortunately on saturday and they were not able to save him. >> nebraska has had two patients that -- >> who they have lost. >> no who they treated and released. >> this is the third patient. >> the first two were treated successfully in nebraska. >> so there we have some news unfortunately. >> meg tirrell joined us earlier and talked about how he had been much sicker than the other patients that came back. it's something he had been fighting for quite a while at this point. obviously lost that battle today. when we come back this morning, new details regarding compensation claims for gm's faulty ignition switch. and later, an exclusive interview with federal reserve governor jerome powell. check out the futures at this hour. still some red arrows but not much. dow futures down 24 points below

fair value. s&p futures off by about 4 points. this all comes after we're hearing from japan about it being officially in recession territory. at this point they seem to be shaking off those concerns. "squawk box" will be right back. (vo) rush hour around here

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that's why we've built powerful technology to alert you to your next opportunity. because at scottrade, our passion is to power yours. welcome back, everybody. the deadline to file claims under general motors faulty

ignition switch is extended to january 31st of 2015. the notice has been sent to 4.5 million current and prior owners of the eligible vehicles. the director ken feinberg joined us in the last hour. >> we want to make sure that everybody knows about this program. and out of an abundance of caution will extend the filing deadline one more month. i don't think there are many people out there, if any, that don't know about this program. >> so far the program has received 1,851 claims for deaths and serious injuries linked to that switch. okay. coming up, we've got an exclusive interview with federal reserve board governor jerome powell. and later retailers betting that colder weather will boost sales. we're going to talk about that sector and key earnings coming out this week. then former saks chairman and ceo going to be our guest.

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welcome back to "squawk box," everyone. here's what's making headlines this morning. halliburton will be buying baker hughes. bake you are hughes shareholders will get $19 in cash and a share. activist said on the verge of a deal with allergan. that is a big number. also it's less likely that pfizer will buy astrazeneca. and kate kelly joins us now with the top five picks of funds for the quarter. >> as we look what positions some have taken as well as which ones they sold out of, one company has taken and

interesting approach. a research firm that analyzes crunched the numbers for over 1,000 hedge funds to show their only positions. and found interesting takeaways. they rank as a stock picker performing to the subindex those were in showing that while some can pick a gem out of a troubled sector, others are advantaged by across the board gains in health care or technology or whatever index that stock may be a part of. take a look at some of the top performers so far this quarter. if we assume that the fund holdings are still in those managers portfolios. about 64% of the time those are capped at this point in the quarter. number one is yahoo!. benefitting holders like passport capital and star board value. number two, a popular name much of this year, allergan. now subject to a possible deal.

number three, office depot which again is held by star board value. and finally l brands and alibaba. which we saw many funds pile into. and again we can assume based on historical studies that they continue to hold it. >> yeah. we were just trying to figure out just taking a look at shares of baker hughes. that stock now looks like it's trading at about $68.78. the deal is valued at about $10 more than that. it's weird to see a stock still trading ten bucks below. a deal that both sides have unanimously approved. >> no, i want to hear your thoughts. i'm wondering whether this was already sort of baked in because the market had a full day and then the weekend to digest it. >> i think it's possible. i mean, one, we've seen some

deals actually see the target price trade above and this not happening here. i think this may speak to either, one, the size of the transaction because it's $34 billion but also the fact the risks that have been big deal breaks this year. but 10%, it's trading at more than a 10% discount. >> the $3.5 billion broker fee, you would think that would give some semblance of certainty. they talk about the assets with revenu revenues. >> i agree it has been really bruised since the issues that came up with shire. but this is not a tax inversion deal. and you're right. the justice department is always a concern. there's no evidence that they're going to go light on anybody.

on the other hand, obviously dispositions are part of this deal framework. so maybe people are jittery about it. >> maybe an opportunity. >> absolutely. >> right this minute. >> look forward to talking to some hedge fund managers about it today. >> we will look forward to that. in the meantime, a big day for the fire department. several speeches from board members. the minutes will be released on monday. let's get to steve leisman, he's got a special guest for us. >> thanks very much. i'm here in new york with federal reserve governor j. powell. thanks for joining us. >> thanks. >> you're in new york for specific reasons. one is to fix and create an alternative. you're meeting with major banks to tell them it's not going to work long-term. which will make liable much more difficult to manipulate.

the piece is we have convened the 15 largest dealers and their national regulators from around the world and we're going to start the process of choosing a risk-free rate. and the idea is over time we can move new derivatives to the risk free rate. it will be in a deep and liquid market. >> tell us what some possibilities could be that could replace it? >> these are risk-free rates. libor itself will be fixed and working better. >> the problem of getting on the moves. there's $12 trillion of derivatives based on libor. >> it is a crucial part of the financial infrastructure. so the public really needs to understand and believe it needs to be true that liobor is honest and can't be manipulated. there's three buckets of risk free. one would be treasury rates. the other would be our policy

rates. and the third would be repo rates. we don't come with this to the decision it has been to be this or that. we're going to work through this with dealers and market participants other than the dealers and select a rate. >> let's move on to the economy. news this morning japan is in recession after two quarters of negative growth. how concerning is that to you? >> so, i did see that. japan had a negative third quarter i'm sure connected to the increase in the sales tax back in april. and japan has a very challenging situation. there's no question about it. the issue for us really is global growth is weakening in a number of jurisdictions. europe is weak. china has weakened. japan is weak. we haven't felt that here in the united states yet. but the risk really is that we will begin to feel through a trade channel or other channels. but again, we don't feel it yet. >> what kind of impact on your outlook and on policy does a weak global situation have for you? >> you know, it -- honestly,

it's hard to estimate. the u.s. economy has a smaller trade component than typical european economies. so there would be an effect if clearly there would be a negative effect if europe were to buy less of our product. there's a imaginal effect but it's meaningful. >> the market consensus right now is that some time next year middle of 2015 the federal reserve starts raising interest rates. we don't get to talk to governors very much about their outlook. so could you give us your sense of the timing for raising interest rates next year? >> sure. i guess i would just say it's totally dependent on the progress of the economy toward full employment and getting inflation back up to 2%. on the economy, i'd say i'm cautiously optimistic. if the current pace keeps up for the year. inflation is a little bit below

target. but i would expect that it will go back up to our 2% target as slack comes out of the company. to raise rates sometimes during 2015 perhaps in the middle of 2015. i would not predict a date. i just don't see any reason to do that. but i think the time to raise rates is coming. it's not here yet. >> so you don't feel like the fed right now is behind the curve. >> no, i really don't. where is it? do we -- inflation is below target. unemployment is above target. both of those suggest a need for continues accommodation. i'd love to be paul revere on that, but i can't make the case. >> explain what that means. >> the british are coming. i would like to see inflation coming first. energy prices are low here. that's going to feed into inflation here in the united states for awhile. so inflation is likely to remain low for some time. >> energy prices are low.

i'd like to know what your thoughts on what the effect on the economy would be for that. but the dollar has appreciated and energy prices are low. it looks like all the focus on inflation are to the downside. could you see the federal raises rates. >> i think we need to see progress toward that 2% target. and that's the way i think about it. but you're right. interest rates are low. stock prices are high. and energy prices are low. and all of those things are supportive of consumer activity. consumer confidence hit a seven-year high on friday. if you look at the guts of the michigan survey, it seems very, very positive. >> how concerned are you and this last question because we're going to go. how concerned are you that low federal reserve policy, zero interest rates have created excesses in the financial system that could come back to haunt us. >> that's something as a former market person, i worked in the financial markets, it's

something we work and things are fully priced out there but i don't see bubble territory. we don't see leverage building up. something we watch carefully, but i can't make a case that we're at risk of significant financial stability. >> federal reserve governor steve powell. thanks. >> thank you. >> steve, thank you. when come back this morning, some of the biggest retailers in the nation get ready to report. and steve sadove will join us to talk about holiday sales and the weather impact and more. we'll also talk more about baker hughes and halliburton. interesting things. stick around. "squawk box" will be right back.

welcome back, everybody. take a look at shares of halliburton and baker hughes. earlier today we heard that halliburton has agreed to buy baker hughes. both of these companies have signed off on this deal. it's a deal valued at $34.6 billion. if you look at halliburton's closing share price on november 12th, they get to $78.62 a share. halliburton's closing price on november 12th which is the number they were using for this was $53.20. but this morning baker hughes trading at anlonly 68.70. >> a couple of issues going on

here. one is based on halliburton stock price, the total value of the transaction is closer to something like $77, maybe $76. >> because of the declining price. >> because of the declining price of halliburton. there's concerns that the $2 billion in synergies that have been announced, they won't achieve. which means that halliburton shares again might not have the value that they would expect. and then the last piece is this transaction doesn't close for an entire year. there's a bit of the time value of money going on here. tom was crunching the numbers. you said time value money is worth about 3 zl$3 there. >> it doesn't close for a year too. you're looking at stock prices that have been severely depressed. you might -- the cash portion might look chincy. if it's cheap stock paying for cheap stock, then both would go up over time. but if it's the cash aspect of

it, maybe that looks like a not great premium in terms of the cash that won't increase even if oil prices go up. >> you say it's about a $5 gap. >> that's right. $5 x the cost of money. >> a lot of factors are playing into that. >> we will see where it goes as the day progresses. in the meantime, let's talk retail. 'tis the season for the consumer with lower gas prices and seasonal jobs available. the consumer is shopping and spending. what does it mean for the holiday season? joe feldman is assistant director of research for the advisory group. good morning to you. >> good morning. >> so help us through this. what's going to happen here? who do you love, who do you hate? >> we're optimistic about the holiday season. we're looking for an up 4%, 4.5% for the season overall. and for some of the tail winds you just talked about. you know, the consumer's coming up against lower gas prices a bit. and there was a cut in s.n.a.p. last season.

then there was the affordable care act was launching. and you also had the government shutdown in october. so those things are not here this year. and that should help a little bit. >> joe, help us with some names. who do you like? >> oh, sorry. yeah. i think best buy is set up pretty well. gamestop is set up well. the electronics should do well. with smartphones and tablets and hd tvs. i think the big discounters like walmart and target will have a decent holiday season as well. >> what about the world of apparel and clothing? >> yeah, the apparel and clothing side has been a little bit tougher. we feel like the consumer just keeps looking for gadgets and electronics, really. and it seems like the apparel side has been losing some share. i know it'll be interesting to see what urban outfitters says tonight after the close. we think limited brands is going to have a good holiday season as well. >> what about jcpenney?

>> yeah. penney, i think the whole discount space has been under. you lay on tjx and ross stores. it's a tough competitive space. i think those guys will do better coming out of the holiday season and maybe save the traditional department stores. macy's will do well. they always do. >> well, we will see how everybody does this holiday season. thank you. joining us with more on what retailers are expecting is steve sadove. he's also the former chairman of ceo of saks fifth avenue. it's great to see you. >> good to hear from you, becky. >> we were talking about the potential problems retailers are facing. particularly apparel retailers. they have cold weather going in their favor this year. what do you expect? >> absolutely. i think weather is a

favorable -- look how cold it is out there right now. you have a better calendar this year than last year. i'm optimistic. the nrf is looking at 4% growth this season which is better than last year. >> have you raised the expectation once we saw oil prices come down and kind of stay there for awhile at this point? >> i think you've got a little bit of positive wind behind you. the oil prices are helping. i just feel that momentum in the u.s. economy, the inventories are well placed. you certainly have the electronics with the iphones that are helping. so overall i think you have a relatively good environment. >> what are things that you worry about being a former retailer yourself you have to have a list of things that you constantly have on your mind. >> i'm a little bit worried about the port situation on the west coast because you've got a lot of goods that are coming in right now for the holidays. so we really do need to have the goods flowing. i do worry a little bit about the promotional environment. we'll get the sales. it's probably going to be a little bit more promotional. you certainly are going to see a

blending of cyber monday and black friday. and it's going to be a stream of discounting. but i believe the retailers have planned for that in terms of their buying. so i think it's going to be a good promotional environment for the consumer. but the brands i think are going to see the traffic. >> you know, you mentioned that promotional environment. walmart already warned they are expecting a promotional holiday season. when walmart sees that, they're going to be playing in that game. is that a tough one for other retailers to compete with? >> i think everyone is going to be playing in the game. it's a fact of life. the consumer wants value. they want the price discounts and the deals. and i think that the retailers have planned on that in their buys. >> is there ever a way to shake the consumer from those expectations? it seems like it's gotten worse and worse over the last 15, 20 years. >> it's a tough one. you know, the way that you do it is with differentiated product. that's why you see so many of the brands going toward unique product. that's why the technology

investments are so important to get to personalization and customization of what that individual customer wants. but value is going to be a watch word for a long time. >> forget about black friday. it doesn't happen like that anymore. now it's black wednesday the day before thanksgiving. the day before thanksgivingen any end in sight to the constantly spreading holiday sales season. >> i don't think so because the internet has changed it. everything's merging. you have black friday, cyber monday, because of the internet, you've got the price transparency and deals are out there, and you've got to plan for that. >> thank you for joining us. >> coming up, when we return, jim cramer on what he's watch in markets i'm want to talk about the halliburton deal. offer you can't refuse from the godfather but come with a suitcase full of cash. we've got that story when we return. for tapping into a wealth of experience...

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i'm just looking over the company bills.up? is that what we pay for internet? yup. dsl is about 90 bucks a month. that's funny, for that price with comcast business, i think you get like 50 megabits. wow that's fast. personally, i prefer a slow internet. there is something about the sweet meditative glow of a loading website. don't listen to the naysayer. switch to comcast business today and get 50 megabits per second for $89.95. comcast business. built for business. welcome back, everybody. the estate the "godfather" is for sale. the listing price $2.89 million but make them an offer they can

refuse. exer exer exterior was used in the oscar-winning film "the godfather" during the filming, the backyard of the wedding was held and where vido core leo, played by marlin brandon, died of a heart attack. >> a man who has a suitcase full of cash, on the new york stock exchange, mr. jim cramer. >> good to see you. >> what do you make of the halliburton deal? >> i think that on friday i was skeptical because i didn't think think could divest enough to make it past muster in the justice department. willing to invest $7.5 billion of business plus $3.5 billion termination fee, determined to get it done, they have good lawyers. baker hughes has good lawyers. with this amount of divestitures it's going to work. surprising to see so much

willing to be divested, surprising to see the breakup fee. i have to be impressed, halliburton shareholders might want to reconsider before they start selling. >> jim, one of the things we've been trying to make sense of, though, the massive stred of the transacti transaction. it takes a year to close, there are questions whether the $2 billion will be achieved. there seems a lot of money to be made. would you be buying the deal effectively? >> at this spread, i'm tempted to do so. you say jim you didn't like it in the 50s. there's a lot of new information that halliburton has come out with this weekend that i thought was kind of -- geez, they're do everything that i think the justice department would like. this is a major, major decision by halliburton to cut back, businesses in order to be able to get it. i think they'll get the deal done. and i think that by the way, they could argue, listen, give schlumberger a run for the money. i always thought the oil companies love to pit baker hughes against hal, i think that's true.

they will come bayne. but the deal with what news has come out this morning is likely to pass than i thought on friday. >> what would you do with dreamworks now? >> i never liked. i was surprised. >> we'll hear more from jim in a couple of minutes in "squawk on the street" thanks. next, one more piece of investing advice from tom lee. tomorrow, don't miss our exclusive interview with ceo of united airlines on the squawk set. first, passing of a wall street legend. jim lebenthal passed away. he suffered a heart attack. in her words, he lived an amazing life and loved every minute. thoughts go out to his family and our friend, alexandria. jim lebenthal was 86. ...for the year. hi. sorry.

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our guest host today has been tom lee. we've spend the morning talking about this, but for people just tuning in you've been bullish for the last six years. you continue to be for next year. >> that's right. i think the message i'd give people is you need to think of this as a buy and hold market. employ longer time horizons and

bet on recovery in the u.s. and everyone should be fine. >> thank you so much for joining us. >> thanks for having me. >> so calm about things, i love. thank you. appreciate it very, very much. make sure you all join us tom. "squawk on the street" begins right now. good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange, big week getting started with a major m&a deal, halliburton/baker hughes. on the lookout for more. futures are down, perhaps on this miserable japan gdp number, down 1.6 for the quarter, back in recession. nikkei down 3%. crude oil around 75, even as the dollar does rally this morning against the yen. road map begins with concerns about the global economy as japan dips into recession. oil, equities slipping lower this morning there on t