good thursday morning. welcome to "squawk on the street." i'm carl quintanilla, jim cramer and david faber. q-1 is revised up much like what the fed signaled. free markets slightly weaker. ten years hanging just below 2.3. oil near 49 and shanghai did fall 2% overnight.

facebook results beating sales, profits, user growth higher than estimated. the stock is lower in the pre-market. the big story for cigna, david cordana ceo joins us whole foods des appointments for the second straight quarter. it is down double digits as earnings miss expectations the government's initial reading of second quarter gdp coming below consensus, 2.3%. stronger consumer spending a slowdown of imports and a hike in government spending driving those results. first quarter up to .6 from a previously reported contraction. construction not bad. >> it echos what yellen and the fed said moderate growth continues. >> i had sandy cutler on the ceo. he said, you look around we are

the best in the bad neighborhood, the globe. we are the best performing company. he is including china. he this is the numbers are completely phoney saying that this kind of growth is sustainable. it is not great growth. the rest of the world is on the decline. i understand what yellen and company did. frankly, you look at what this number is you say, anemic but better than everybody else. yes. claims back up 12 k to 267. last week was so bad. >> i think we are consistently higher. speaking to david steiner in waste management. here is a company they pick up the trash for everybody. a little bit more trash. >> more homes development. a little more nonresidential construction too. i look at these guys as metaphors for the economy. it is nonresidential construction is doing well. residential construction is improving.

black & decker this morning, you see that people are still spending money on their homes. autos are still good. then that's it. exports bad, oil and gas, bad. just general manufacturing, okay. travel and leisure, okay. restaurants, not bad. it is a mixed peck yur. >> auto is pretty good. >> auto is good and housing is a little better. is that enough to make it good? >> when i read these china numbers, i say to myself, go ahead, raise rates and really upset the world right now. the strong dollar is still the theme. >> there is always going to be something. there is always going to be a reason not to raise rates. at some point, they have to do it and they will. >> oh okay. there is. it is just each time -- i happen to think that this china story is a very bad story. in many ways it is turning out to be worse. china should be a focus. there is not a great deal of clarity. it doesn't matter who you talk

to. it is difficult to get clarity on the chinese economy and any impact of this fall in the stock market. remember, it is all over the place. >> so many people came in late in the game and suffered losses. yes, it bears watching but i don't know what conclusion to draw. >> i'm struck by the number of titans that are saying we are at the peak, dalio in china and bill gurlio and they say we are at the part of the cycle where people do stupid things to get rewarded for it. >> some of the private evaluations are ridiculous versus the public. 7% have beaten the estimates. you could make a strong case we could tighten right now. i think the problem with that again is the opaque nature of what's really happening in china. china was the marginal taker of

everything. now, they are full up. whether it be cell phones or iron ore or copper they are full up. they are full up oil. when you have this country that's been a major part of the growth of the world that is now really a drag on the world growth, you have to factor that in. >> carl points an interesting one. carl icon aicon. at mna market which is going gang busters but feels like it's getting a little -- >> the european numbers i have seen in the last two weeks are really pretty extraordinary. the comeback in europe now that greece is over. brazil horrendous. venezuela, we are beginning to see write offs finally. >> that sort of points to what some of the automakers have said.

thank goodness for europe. that's sort of where we are. >> europe is getting better. remember, 25% of china's exports go to europe. all i'm saying is that it is mixed. i don't buy this end of the world thesis. i don't buy the excitement thesis. it is a mixed picture. it has been mixed for all 2015. it is consistent. this is a consistently incon ses stent tent year. >> one thing that is consistent facebook. expenses, up 82% during last night's conference call. mark zuckerberg said facebook's results are a sign its spending is actually paying off. >> our business performance has grown with our community. this quarter, our total revenue is more than $4 billion for the first time. advertising revenue grew by 43% year over year. these results reflect the ongoing investments and improvements we made and the quality, performance and usefulness of our services.

continue to make progress remains our biggest priority. >> they do bring in and narrow the guidance on expenses to the low end of 55 to 65. >> i think you are going to hear a lot of mistakes about facebook. the expenses were very good much better than i thought. the ad sales, much better. they did want to be able to say underperform, overdeliver. here is what you need to know about facebook. first of all, it ran from 84 down to 77 after the last quarter. that's an 8% decline. that would yield an $89 price this time. it is very loved. i think it will have a similar decline it had last time. last time it didn't bounce back. it increased with amazon, netflix and google. i came up with a pie in the sky recommendation of $3.50 in 2017 when we bought the stock in the 20s for the charitable trust. people laughed. i think $3.50 for 2017 is going to be too low. i think it could easily earn

maybe $3.75. go sell it. go sell it. it should be down. the record said it was down 8%. the price target short-term should be 89. >> why is anybody selling the snok. >> because we foment things like the expenses. i took down 100. they have the best product. charles sandberg i said to the wife i can't take it anymore. they are so dam smarter than i. she said listen they are smarter than everybody. don't take it personally. >> sandberg making some claims that people are wondering where they are sourcing it. one out of every five minutes on a smartphone spent on facebook. that was a sandberg claim last night. >> it is true. my daughter comes back from teaching english in cambodia.

she befriends everyone in the class. you don't think cambodia is a hot bed of tech. i think this app is terrific. i think the dollars in facebook. the return on investment is incredible. this was an amazing quarter. you can find all sorts of holes in it. you want to stealth or take province, i understand the growth rate is spectacular. >> i marvel at the free tax profit margins. >> it is incredible. users self-generated. it doesn't cost them anything. this is going to be we're used to tax and now video and now 3-d video. i'm not going to mention twitter in the same sentence. that's unfair to zuckerberg. let's go to commercial. >> it is not fair to put twitter

or anyone else in this until we get a commercial break, including bud, which was disappointing. this was an amazing quarter. go sell. i'm urging people to just go sell it. just go sell it. go be an idiot and sell it. i prove, because the first amendment allows everyone to do things that are incredibly stupid. >> you don't have a problem with 15 buys on the street. >> i'm taking my price target up. i'm bound by the four walls of the earnings campus that give me the 3.75. it went down 8%. it will go down this time. people sell it. maybe there is a window that opens. they take profits. >> we'll be fair. it did move up a lot. >> we just had a run. think about the run we just had on this stock. >> 84-77.

up to the mid-90s. it is absolutely right everybody loves it. this company is so consumer focused. when you were on the yelp call. i apologize to facebook to mention yelp in the same break. when you were in the yelp call they destroyed the user experience. twitter doesn't have a user experience. google is fighting to maintain the user experience. amazon netflix, for me that has no life whatsoever rather than the recent marriage thing, maybe i minimized that the user experience of these are great. they are like vacation. i have said something wrong. >> you are good. you are okay. >> she doesn't watch the program. she doesn't watch the program. i'm cool. >> oh she doesn't watch the program. >> i'm okay right? i'm okay. >> they can tape this. >> it can live on. >> for better or for worse. >> i can cut that out.

we can cut that part out about the wife. >> when we come back we'll talk to the cigna's david cordani. his first television interview since anthem struck the deal to buy his company. we have to get proctor and cigna and stratus and time warner cable one more look. more squawk from the street in a moment. can a business have a mind? a subconscious. a knack for predicting the future. reflexes faster than the speed of thought. can a business have a spirit? can a business have a soul? can a business be...alive?

cigna reporting a better than expected profit. this on the heels offer the company selling to anthem that would create the largest health insurer by membership covering about 53 million people. joining us now at post 9 is cigna's president and ceo, david cordani. david, antitrust continues to be the question mark amongst investors. a long period is going to begin for this review. the simple point the critics make is that this interest rate consolidation, you, etna, humana even the centene deal is going to lead to higher prices

and less competition. >> the key is the two companies are quite complimentary. in general, we operate in different businesses. for example, about $20 billion or over half of our revenue are in businesses that anthem is not in. one is complimentary in nature. two, both organizations are focused on partnering with physicians and individuals to improve health quality and cost and the third point is today the way the market works is very different than half a dozen years ago. most employers are self-funded. if quality goes up and costs go down, employer and individual costs go down. lastly with the affordable care act with medical loss ratio thresholds. if medical costs perform below that, they get refunded and rebated. in the new more modern marketplace, when costs go down you have to improve quality to lower costs. that's good for everybody. the cost improvements go back to the employer the governmental entity and or the individual. we don't see that as a risk.

having said that highly complimentary transaction. we are confident that once the regulatory process is done it will be closed. >> you are talking about the 85% on the medical loss ratio. certainly, an important point. nonetheless, are you making progress already in these early days in speaking to both the states and the feds in terms of making those points. in these kind of situations you never know. >> sure. >> there can be a because of question mark and the deal could still be stopped. >> you articulated correctly. it is early days. there is going to be a long thorough regulatory process. we articulated that as a 12-18-month window. we willfully engage with state and federal leaders. we are used to dealing with i ain a transparent environment. health quality could improve and affordability will improve. krid cal critical to it is the way the country is evolving. it is mission critical. secretary of health and human

services burwell, declared that as a mandate for medicare. we are a leader in that space. this will help to further accelerate that. early conversations and a long thorough process will partner and do so in a transparent way. more choice will be brought to market. >> i have been schooled in this too. i initially thought it could raise prices. they pointed out the medical loss ratio. >> there was a decision from brent saunders to sell his generic business to teva. i have to believe that your company combined can finally have some pricing power against these generics in particular. do you think you can drive down the price of what has become a rapidly rising generic price range that has hurt all of us? >> two dimensions. first is absolutely. the level of critical mass is important. the bigger change is already today with some pharmaceutical manufacturers, we have what are called value-based or outcomrie

imbursement. the reimbursement level for a pharmaceutical is higher or is complete only when the medical outcomes are realized by the patient. that's the future. the future is not fighting over the discount or the cost per unit. the foote yir is aligning the incentives. everybody wants to improve the quality or the health outcome. we want to pay for the outcome that generates a positive result. >> yesterday, we saw some numbers from gilead for a hep-c cure. they are charging for a cure with the idea there is another product that could cost less and almost as good. how do you reconcile what to do for your customers? >> the important part of that is an independent view of clinical efficacy. a well-run health service company that is internal resource and an external review board. you are looking at clinical comparativeness. does an intervention have a superior outcome?

from a hep-c standpoint there is an affordability outcome. employers and payers and individuals are finding that. we will confront more as we go forward with specialty pharmaceuticals and innovation. the key is transparency understanding the outcomes to an individual and making sure the rewards align to the outcomes and not just volume of what's consumed. that's something cigna is quite passionate about. we are driving that in the marketplace today. our new partners are passionate about that and in the early stages of driving that as well. >> there are some poll numbers out today regarding obamacare. there has been a steady increase in people that approve of it. would you expect that to reverse if premiums go up? >> let's understand the number one driver of premiums going up. the number one driver is that costs are going up. 85% to david's point are based on the underlying medical costs. the most important thing we need to dos a country is get the

costs under control. the biggest opportunity we need to do there is engage individuals in terms of preventative care, wellness care chronic care management and deal with the accuse costs when they do transpire. that is the mission critical part. this partnership, value-based reimbursement is the way to move that forward. secondly, the cost will increase so long as we do old school insurance, which is paying for sickness. what we are seeing today is costs are at low single digit levels. physician partnerships are working well and individual engagement is working. we are in the very early innings, version 1.0. there is some success of .2 of expanding access. we are just getting out of the box to get individuals engaged in health care. that's where the promise of keeping costs affordable and improving quality of life. >> in the back and forth between you and anthem when they came with their bear hug, 32% or so was in stock. you questioned their growth

statgystat strategy and ended up taking more stock. why did you end up wanting more anthem stock as opposed to less. >> i'm pleased i gave you and certain others a lot of public fodder over a certain tichlt key to what we communicated in the market, one, as everybody knows, there was a long duration dialogue transpiring between both organizations. a shared view of a lot of value creation opportunity. two is there were certain risks we needed as fiduciaries, cigna management and board, to give visibility to and there wasn't a deal structure we could say yes until we got visibility to, which was the growth strategy and certain other governs risks. we kept our eye on the marketplace and over the ensuing four to six weeks, we were able to get comfort and visibility that make sense, so much so we were able to secure a transaction that gives legacy a meaningful ownership interest, a

third, struckture of the transaction that is tax-free for those that want to hold on to the stock and acknowledging it is a highly liquid asset. for those that don't want to hold the stock, they don't have to. we have given our share holders the benefit. being patient and keeping our eye on the marketplace helped us get to a better place. >> we will be patient as we watch the regulatory unfold. >> i appreciate your time. >> thanks. we'll get cramer's mad dash in just a moment. don't go away. g you have to wear this thing? ♪ ♪ can it tell the flight attendant to please not wake me this time? ♪ ♪ the answer is yes, it can. so, the question your customers are really asking is can your business deliver?

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time for a mad dash as we get close to the opening bell. we want to talk whole foods. >> this is a tough one. the quarter disappointing. the lowest comps in many years. you could say they mentioned .4 in the last two weeks. 1.3 comps. they bring out this new york weights and measures audit that they came in. that's the mislabeling way. they talked about that as being a broken trust and that it was nationwide. it resonated. >> even though it was a new york chart. >> they are claiming it had nationwide implications. they are giving you 365 by whole foods, this new, less expensive whole foods. there is somewhat of admission they charge a lot. this is a company that i don't want to say it is in crisis. they are making so much money per square foot. there are analysts that say, enough. morgan stanley, they can't take

it anymore. they are looking at kroger saying kroger is doing so well. >> there is competition. for a while, they were alone. now, they are not. >> everybody has that kind of food. we are talking about same-store sales. john maki says listen i know it is heresy but we want return on invested capital enterprise value. i have been taught if you don't look at same-store sales, you are going to mention the big picture. i am a conformist. whole foods is going to open at the lowest levels since january of 2012. they are celebrating the 225th anniversary. celebrating their ipo. i always think of tommy lee jones. >> what does he say right before

dr. richard kimble jumps? >> i don't care. >> taking a look at some not big cap names moving big. western dig, jim, they are going to be up 10% z. >> when you take their numbers down off of michron, you recognize they caught the shorts, not unlike sandisk. they caught the shorts. the number cuts were so aggressive. they could beat them no matter what. let's be careful. a coiled spring because of repeated number cuts. >> sounds like what rail expectations were. >> that's what happened with norfolk southern and union pacific. panera yesterday. we saw that with buffalo wild wings. they didn't do the number. the stock was still up well in the double digits. when you cut numbers, cut numbers, cut numbers, win and, boom. win does a number and we all

know steve. steve comes out and says we are at the bottom. guess what? you catch the shorts there too in the longer stays. chinese government trying to do a little hey, listen we'll go back to the gambling thing. there are stocks that were pushed too low. then, you get situations like corvo, not cuervo a different company. land research expectations got too low. they benefited from the implied materials. facebook got too high. you know i love facebook chbl the ones that are really jumping today are the ones where expectations got way too low. >> did want to hit shares of bud. a $200 billion market value. it is losing some of that today, almost 5%. we did start with what they say

is good momentum. total volume down 2.2. ebitda, up 4.6. $1.21 versus $1.60 in the second quarter of 2014. currency hurting them. one-time items. higher net finance. corona, which you serve a lot of 7.8%. >> we use constellation brands. >> that's good. >> brazil, down 8. >> here is something interesting. you know how we all think china is slowing. they said there was poor weather in china. 1.3 billion people. it is not that nice out. maybe they don't drink as much. i always felt that when your stock market was down you drank a lot. poor weather versus stock market down. >> i heard they drink a lot of budweiser in china. great performance in china. u.s. share position improving. you have to remember, the sin

synergies from the modela deal. they are also starting to roll off. >> yes they are. >> that always begs the question what is bud going to do next? do you like stella? i always felt it was a bit of a woman's beer. >> i am not a stella fan. >> up 4.9. >> i thought that was an interesting thing. what we are thinking is a shift. it is not a boutique brand itself. bud is not exactly a kraft beer. i don't know if you have noticed. that big newark plant next to the airport, that's not a craft brew. >> that's not a micro brewery? >> no. >> we do have some action in hotels. starwoods out. >> this is adam aaron. you have to pay attention to adam aaron. he owned the sixers for a while. he went to high school with jeff sonnenfeld down the block from me the galluping ghost along

with schwartzman and the secretary of defense is also one of us. >> really? >> wow. >> yes. there is a lot going on there. there are winners from when you have a neighboring high school. look, you have a lot of guys. that sanford townsend band that was next to you. >> ash carter went to ab inning abinnington. an interim ceo who is delivering numbers. he is a great operate tore schooled in the hotel business. >> consolidation continues to be a part of the potential story. all i can tell you is that the company tips to investigate its stand-alone plan. before it wants to consider if there are any offers for it, they told us this he might do that. they have to make sure they understand fully the stand-alone plan and how much value they can create from that. you may continue to hear rumors. everything i hear indicates very early in any process.

>> ad many a, ifam, if he is interim ceo and he does well. >> he may become permanent. >> one of the godfathers of the frequent flyer program as we know it. >> he is mr. frequent flyer. he pioneered it. stratus is the disaster du jour. it was down 20%. they pull their guidance for the full year. >> we should talk about that. people were looking for the next quarter. they were looking for 47 cents. they are going to do between 3 and 13 cents. i'm calling that disappointing. revenue, people looking for $270 million. 175, 190. the withdrawing of the guidance that is a take your breath away moment. buy dew. you got so lucky. mow, i'm making stratasys the worst.

>> worse than vaidu? >> yes. this 3-d is like 2-d. baidu? >> i have a winner. air products has seemingly raised their full year adjusted earnings guidance to a range of 6.50 to 6.60. previously, 6.35 to 6.55. stock had been down. a bit of a range after a big run-up. as you point out -- >> margins up 430 basis zoints are you saving timo for later? >> he is doing what i do every day watching cnbc and then he writes, check out t-mo's q-2 numbers and hand our competitors a tissue.

>> thank you you. carly and david faber, he has us all. >> $6.1 billion up. total revenues of $8.2 billion. they continue to take subscribers. where they are coming from of course when you hear from verizon or at&t not us, not us. as he likes to term them dumb and dumber. marcella clowry hasn't fired back yet. >> when you are looking at a 3.4, 3.9 million growth when i thought it is wa going to be 3.5, when john was sitting here as co-host, i would come up and say, there is someone who is losing like mad against these guys. i have to hand it to him. he plays in a feisty way. he does deliver e is the bill belichick with a smile. bill belichick with a human face. >> and actually who says something too. >> as opposed to belichick going

to his underground lair where he just -- i don't know what he does down there. >> these two guys are winners, belichick and ledger. >> absolutely. they are big winners. up this morning. almost 2.5 plus%. >> that's a great quarter. >> facebook was a great quarter. i expect people to sell on that. you want to distinguish yourself as being a moron. you should sell it right here. some people say put a 35 and more of a reason to sell. i am being facetious. >> finally, we shut hit procter & gamble. we talked about it of course, yesterday, after the announced change in leadership which will take place november 1st. david tailor taking over as ceo. a.j. lafley will remain as executive chairman. the stock down over 3% as they reported numbers on the call. lafley saying they had a challenging year due to unprecedented effects impact. stronger dollar. changing in grooming fashions and habits. i guess that also has to do with

beards. growth of online competitors. >> i mentioned twitter. a mistake. >> it comes off to a very good start. i spoke to lafley on tuesday. this is what he had to say overall about the strategy of the company he has been focused on over the last two years and getting leaner. >> are we leaner? yes, we are leaner. are we more productive? yes, we are more productive. are we more innovative? >> i believe you are beginning to see innovative new products coming in business category after business category. you will see more which i'm not going to talk about today for obvious reasons. you only have one choice in this world. you get better. >> there it is. this morning, the stock price not getting any better at least for those that own procter & gamble. >> sometimes you read twitter.

twitter is useless and everybody hates it. a guy tweeted me and said that they are looming for razor blades. i went to cartier to buy the wife the ring. >> you have to get the guard to come over and open up the thing for you. >> the ring and then those are the two things that set me back my blades in 2014. she turned me down the first time but that's another story. what i think is interesting about this is that the organic growth is just terrible. i'm not used to it. >> that's what he needs to be. he keeps talking about 3%-4%. they are not coming in there. that will be the challenge. do you guys shave with gillette? >> i do too. >> i went to shave club. it's not great either. sorry, guys.

>> i bought schick for the first time. i don't know. it is like that thing that you were talking about with teva and milan. >> the schick-dick. >> for the first time since my dad taught me to buy gillette i wasn't embarrassed. nobody said well maybe cramer is doing badly. no one made a judgment. >> they are a fortune. i would love a black friday for blades. >> it is too expensive. they use too much packaging and you need a blow torch to open it. i know that is from larry david. there is more packaging in a bunch of blades than there is in the packaging they use for a hydrogen bomb which is very secure. >> p&g is the worst dow component. almost a 52-year low.

let's get to bob pisani on the floor defensive names leading the way to the down side. health care is a bit of an issue. we are a lot more stable in the lag guards. remember, a lot of concerns about energy materials, transports even. they have all been doing pretty well. this is at the open here. not reflected in the last few minutes. a lot more stability this week in groups that have been down a lot. a lot better earnings too. stanley black & decker was terrific following on horton and massco. all the building and home improvement guys have been great. we have a historic high on stanley black & decker. not only did they beat but they put a chart up there and raised their full year guidance as the profit margins expanded nicely. what matters withstandly black & decker is the tools division. 60% of the revenues. i'm talking about the organic growth. 11%, that's terrific for a company this big. that's kind of automotive repair tools. that's a small part of the

business. that's up. security is a bit of a lag guard, up 1.5%. a great number. another group that's surprised this morning esnumber is energy. >> royal dutch trades in london and had better than expected numbers. con ico was down. their numbers were very good. they increased production above the expectations. they are now going to start dropping very quickly. the company came out and said we are going to start dropping production beginning with this quarter and into the fourth quarter. look at capital expenditures for conoco. do the math here. a 40% reduction in capital expenditures. it's finally going to happen. i know it has taken a long time. six months we have been waiting. all the companies are saying they are going to start cutting their production at this point.

the one thing they are not cutting is the dividends. they have made it clear they are going to protect their dividends. bp 6% shell, 5.6. exxon wants to know if they are going to cut the dividend. forget it. nobody has any real power or influence thinking they are going to cut the dividend. conoco just increased it a few cents a few day ago. that's their priority protecting the dividend. let's move on to china. we are down in china, the shenzhen and the shanghai. 3700 on the shanghai. 3500 is where the government started buying. that's the line in the sand. we'll see if the government responds in some way. by the way baidu did something very few chinese companies do. they announced a $1 billion buyback, a $60 billion company. they haven't done that in a long time. not many chinese companies do.

sg. >> you know how bad things are in brazil. bungee is very big in edible oils. they came out with a miss but said the oil company is way down. people were switching to cheaper products because of the recession environment. we are talking coconut oil. that's a major sign of problems. right now, the dow is down 85 points. carl back to you. >> bob, thank you very much. big day for data. let's get to the bond pits. rick santelli at the c&e. good morning, rick. >> good morning, krafl. if we look at lineup after gdp, it pretty much tells you boatloads about what's going on in the market place. two-year notes are up 1. 5s are up 2 and 30s are down a handful at 295. they rounded out a settlement at

3% really 2.999%. most of what you see on the long end, let's get to the charts. look at a two day of 2s. it is hard to imagine we had a less aggressive gdp. the atlanta gdp nailed it virtually. go to the long end and look at a two-day of 30s. a different picture. once again we are back to this interpretation, more art than science. you raise the bridge you lower the river. we see the curve has flattened. the dynamic, the aggressive side of the flattening really seems to be the weaker growth pushing long-end rates down. that's key. look at the two-day bunds. their pattern is a little different. they were breaking out of the range. it seems to be getting back on track if the yields float up. the dollar index, once again. a fed normal zationization is going

to bring more. it is about when but more about the path once it begins. carl back to you. >> rick santelli thank you you very much. on a day full of news in the hotel sector la keen ta following. p&g, the worst performing component. we'll get more on a lot of this when we come right back.

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time for cramer in stock trading. >> i was watching ben van bur, the ceo of royal dutch. he had been bull shall to think oil was going to stop dwggoing down. he is canceling projects left and right. his stock rallies. the sign of a bottom not a top

in the oil stocks. when the biggest bull capitulates. there is a stock called skechers. i wear them to the club. people like them. they comment on my footwear. amazing numbers. doubling business in china. gross margins going higher. they will be on "mad money." we have liked them for 50 months. >> they were part of candy's? >> it should have been. deckers is part of it. deckers was wrong and skechers was right. i managed to pivot. i don't know whether you wear skechers. i wash sneakers for casual wear. they have joe montana and now they have a couple of people. they have sugar ray leonard. people love sugar ray around the world. okay? >> what's on mad tonight? >> i got the skechers.

ppg. my age and he is retiring. david duwold fire eye, cybersecurity. chuck was the leader. everyone else has been the follower. david dewalt. when you see someone like that who rebuilt that company and he is retiring it just makes you feel as old as the hills. >> you are not. you are not, believe me. >> now, i have a second career. >> the marshall service rang the bell and came up and took a picture with the story in the break and now showed a camera. >> sam girard cramer. i never thought kimball was guilty. a drug company i'm never going to recommend. what's our drug company? >> devlin mcgregor. sell sell sell. david mcgregor.

that drug never worked. the phase 3 trials were all bogus. devlin mcgregor, sell sell sell. >> we'll see you tonight. rbc's mark mchanie does he think investors are reacting with the dow down. don't go away.

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good thursday morning. welcome back to "squawk on the street." i'm carl quintanilla along with simon hobbs and sarah and david faber. we continue to look at what yellen and the fed said yesterday. gdp did come in a little bit bellow estimates. we are watching crude down about .10 of a percent. >> facebook falling for the second quarter. we will talk about what investors should be doing now. >> higher consumer spending fueling the latest reading for gdp. are we on track for a september interest rate hike? >> cme executive chairman terry

duffy, will join us live to talk about quarterly results. >> the ceo of la quinta joins us for an exclusive interview. they are lowering their guidance after the rest of the year after rough wet ner inather in texas. we want to take a look at some of the earning maneuvers. facebook getting hit 5% on the back of what was, carl generally considered a pretty good quarter. i know we are going to talk to mark mchanie about it in a bit. 55% ad revenue growth without foreign exchange. where else are you seeing that. >> investors arguably focusing on spending. up 82%. operating margin from 60 to 55. his argument is sell it here. you can prove yourself to be a moron. those were his words. >> i also want to spotlight mondolez. a food company that continues to

impress investors. they are starting to see organic revenue growth up 4% unlike p&g. >> unlike anheuser-busch or budweiser who is having a rough go. another company, of course, very much focused on costs, being a part of the 3-g family if you will. >> and dealing with the strong dollar. >> let's get some analysis on facebook. the stock is continuing to fall as costs for the company climb higher. during last night's conference call ceo mark zuckerberg addressed spending. take a listen. >> our business performance is grown with our community. this quarter, our total revenue is more than $4 billion for the first time. advertising grew by 43% year

over year. the quality performance and usefulness of our services. continuing to make progress remains our biggest priority. >> let's bring in mark mahaney. costs are at 2.7 billion. do you trust zuckerberg to spend that money? >> the bigger mistake would be underinvesting, not overinvesting. they seem to be a little more careful unlike google. they deserve the credibility they have gotten. >> if you look at whether the stock has traded so far this year, up 22%, $50 billion of shareholder value added during that period alone, is it a juggernaut that seems to keep on going. usually, they slow down and people can take some losses at

some stage. are we beginning to see that crack in your view albeit temporarily, perhaps. >> it does depend on whether these instagram, modernization, video ads, whether they can monetize those and maybe this occulous riff. you should see a pretty solid decelebration and consistent and modest in the growth rate. if that's what happens, you are going to have close to $4 in earnings in 2017. the stock is going to go higher. we may retrace. fundamentals are about as strong as you can find in the sector. valuation is still reasonable. >> that's something they can make money with doing the type of business that they do.

oculous is clearly a break at the moment in a way that google has broken so many times. surely, that's where there might be some danger. >> there may be some danger there. this is so similar to me having covered this internet sector for almost two decades looking at the investments that google made early on when they made risky bets and bought youtube. >> it is kind of like facebook buying instagram, whether it is google trying to develop self--drivingself-- self-driving cars and facebook developing headsets. they have the ability and the need to continue to fund new growth areas. i think these investments so far seem to be very well managed, slightly better than what google has done over the years. we think valuation is reasonable. i am not pausing. we like facebook and facebook stock here. >> you mentioned instagram. what did you learn about the monty zation monetization. how do you fit that into your

model? >> sarah, that was one of have the key takes with he were trying to get from the quarter. no numbers disclosed. they have seen as much reaccept accept hit. it tells you that over time we think instagram can monetize just as well as facebook can. that incremental anecdotal data seems to support that is bullish for facebook. >> as the earning season plows on, we enter the big online travel agencies. i know you cover expedia. price line august the 5th. how should people position for those in your view. those are among our top five picks. am amazon, facebook linked in and particularly price line. it is almost like concerns over

margins and revenue growth. the set krup is somewhat similar to what happened with google two weeks ago. i like price line. we like expedia. more of a buy. price line going into the print. >> good to see you. early start. mark mahaney joining us there. >> the overall market is lower. 2.3 print in second quarter gdp came up short. black rock chief investment strategist for fixed income. jeffrey rosen burg good to see you again. i guess the take is it is not great. is it good enough for the federal reserve to raise interest rates in september. >> there are a lot of cross currents. you have the current data and also you have the revisions s they came in a little bit weaker than many were expecting.

you are seeing it in the market where the short end of the yield curve is reacting to the current data. the back end is rallying significantly. in fixed income that's reflecting a little bit lower, longer run projections for growth. a little bit of cross current coming out of the gdp. >> the bond market is not there, not pricing in a september rate hike. a 40% chance. the ten-year has fallin in july. what happens to this market if the fed does raise interest rates in september. >> the market is pricing in about 50% probability of september rate hike. so what does that say? it means half the market might be surprised and the other half is not surprised. i'm not sure the september rate hike is really going to be that big of an issue for the market. you are seeing some movement.

the trend recently the two-year reflecting a little bit of consensus or the overall view. the odds maybe have gone up a little bit. you said it with our theme being all about that pace. it is not really so much about whether it is in september or december but what is the environment in which the fed is raising interest rates. how are they communicating? they have been very clear. once they start measuring rates this will be gradual and measured pace for the market to anticipate going forward. >> you get the feeling you want people to think they are behind the curve? >> lloyd said yesterday in contrast, that the first rate hike might be jarring. what sympathy do you have for the argument? >> what do you think they project happening? >> i don't think it is the rate hike that is jarring.

i don't think that's the focus. what are the unappreciated or spillover consequences of the rate hike? a lot of people go back and think of 2013 the taper tantrum. that was a surprise. the market was very much surprised at the end of q.e. the signaling there. no one should be surprised about a change in interest rate. what are the other spillover effects. what are we not anticipating over here. that's a reasonable source of concern about what we might not appreciate or understand about what it means toot rest of the market when the fed raises interest rates. i think it will be very hard for people to take a september increase as a surprise. the fed is signaling they plan to raise interest rates. if they did move in september. if they did move in december, what would be your expectations for the most natural follow-through.

>> the most natural follow-through is to look at what they are saying in terms of that face or the path of total increases. the market looks at the statement of economic projections where they provide these paths. if you look inside you see the various participants. it is a very shallow path of rate increases. the mark market is anticipating after the first liftoff, there might be one raise following every other meeting for about 25 basis points. over the course of the year about a 1% increase in fed funds over a 12-month horizon. >> do you buy yellen when she testified the other day that the longer they wait the more rapid that pace is going to have to be. i think she articulated a critical point. she led credibility to the view that her plan the most important voice, is sooner but slower. i think that really raises the

odds in my expectation, our expectation, that september is definitively on the table here. they want to start earlier so that the whole path of normal zation normalzation can be shallower and less disruptive. i think that's where they want to go and where we are going to see. >> to zero in tepid seems to be the moment. we have a 2.1% annual growth target. why are we stuck in such a tepid recovery? do you see it changing in the next few quarters or the next few years? >> that is a very big question. why haven't we had a bigger growth response? the weakest recovery from a recession. that answer takes a lot more. certainly, a lot of answers for

that. traditional monetary policy doesn't work when you are talking about the balance. we have had fiscal contribution to the slowdown in the growth recovery fiscal policy marginal tax rates. a demographic story on labor force participation rates and a global environment, what we are talking about, a slowdown coming out of china. we have been buffeted by significant global risks coming out of europe over the years. all of which have hampered business confidence and investment. all of those reasons are why you have had this weak growth environment. a lot to talk about going forward. thank you for weighing in. jeff rosenberg of black rock. >> when we come back whole foods trading near its lowest levels in three years. we'll find out what the ceo had to say about restoring trust with customers. dow is down 78 points.

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a tale of two food stocks. whole foods tumbling, disappointing the street and cutting its forecast. it was the same store sales that disappointed. the stock down about 12%. same store sales rose 1.3% in

the quarter. analysts were looking for a number double that. the ceo, walter rob, blamed some of the bad publicity about overcharging the customers for products. have a listen. >> we are taking all the steps. a trust that is broken has to be rebuilt a step at a time through solid, solid execution, day in and day out. there is no magic bullet for restoring whatever trust was lost other than us being transparent about what it is. make sure you put this in context, something that every supermarket has. when you've taken the steps and we continue to convince our customers that we're doing the right thing by them each and every day. >> the problem for whole foods it already had the perception of whole paycheck. the company struggling to fight off the competition, like kroger, and appealing to value

conscious millennial customers. we will see what the new rollout of the smaller concept, 365 looks like next year. on the flip side. mondelez is hitting record highs, the snack giant behind oreos and triscuits. margins continued to climb along with profitability. it is starting to see underlying organic growth. 4%. predicting 3% for the second half of the year. this is a company that gets 80% of its sales outside of north america. that was a nearly 14% hit to sales. wall street likes this story. it has been up. double digits the opposite of whole foods. this consumer world where tastes are changing. international pressure is weighing. cost cuts are the name of the game and so is pricing. mondelez continues to be a standout. i don't know if you got your kids the new oreos thins.

>> something should not be reduced to anything. >> that is a $1 billion brand. specially overseas. really popular in china. >> good old china. >> i saw something like 60% growth in oreo over the last five or six years. >> they are going to continue to innovate. that also is an example of the brand that does well with marketing and social media. that continues to fuel. up next the executive chairman, the president of the cme group, terry duffy, will be joining us live. his reaction to his thoughts on competition between exchanges and the nyfc trading.

the cme group reporting a stronger than second quarter. increased trade volume. joining us first, terry duffy. cme's president and executive chairman. thanks for joining us. >> thank you for having me. >> good-looking quarter. organic revenue up 12. expenses down. operating margin down.

is a lot of this due to the closure of some of the futures trading pits? >> it really isn't. that was a small portion of that. we won't recognize all of that through the balance of the year. so that was just a small portion of it. it was really the movement that we saw in our energy products and the movement that we saw in our foreign exchange products? >> obviously, yeah. people are having to manage those things as volatile as they are. whether it is energy, whether it is ag whether it is 4 dxx, do you see this volatility continuing? >> volatility is a component of what we do. it is one of things even though when it goes down when we have historical levels in rates or historical high levels whether it is in equities that can create the perception of future volatility, which does create trade for people to manage the risk. >> i wonder how you are looking at the first federal reserve interest rate increase since

2006 and what would happen in trading like foreign exchange and interest rates when that happens. >> interest rates affect all products. everything we do there is some kind of borrowing cost against everything. the rate movement no matter what it is will have an impact dramatically specially when you are coming off these lower rates. the next rate movement up obviously. nobody knows where it is going to end from there. then you have potential debt ceiling conversations, government spending conversations. what does that do to treasury auctions, things of that nature that could have a major impact on rates from these levels? >> it has been a few weeks since we had you on from washington on breaking news the trading halt here at the nyc, which lasted, as everybody knows by now, for hours. any lessons you have taken from that? >> well, you know carl from my standpoint, i focus on what's going on here at cme group. we invest billions of dollars into our systems and we will

continue to do so. i really don't want to speak on behalf of what happened at the nyse. i think it is a difficult issue they had to deal with. as we talked about on that day, the perception of the american public is,this is where capital formation happens. it was closed. so you know i think communication is always at the forefront when something like that happens. >> at the same time, mr. duffy, the reality is that we have a proliferation of flat forms, many of whom are paying brokers in order to get volume. a lot of exchanges aren't that profitable and frankly don't have the money like the other might have to invest. i want to know whether you think this needs to be looked at fundamentally to insure the structure we have is strong and profitable and probably smaller? >> well i mean simon, i think that any time you look at market structure, including payment, is

always something that should be evaluated at the fcc. it is looked at in our world all the time when we have incentive programs that we have in the future industry. yes. i do believe that should always be analyzed looked at and decide what is in the best interest of the american public. so far, i believe that the system has served itself very very well. the spreads have been tighter. the liquidity has been exceptionally well in these low volatility teams that we have seen. that's really a good sign. we will have to wait and see before we start criticizing it. >> your connection to hillary clinton is in the news again. she sent you a nice e-mail saying she was story she hadn't gotten back to you in so long you were a supporting in 2008. despite the fact that you are a republican. where are you now with hillary clinton, particularly in the way in which she kicked off her run with this swipe of billionaires

and hedge fund managers in what many see as a broad attack on capital gains moving forward? >> i will say this about former secretary clinton. i think she did a great job as senator from new york and a great job as secretary of state. what her platform is going to be as president, you know we are only seeing bits and pieces of it so far, simon. i think we have to wait and see what her total platform is going to be. think she supports. i'm not going to speak for her but i think she supports the financial market. she understands how important they are to the strategic benefits they bring to the united states of america. i done think she would put roadblocks to prohibit the growth of that business. >> when you said as president, was that a slip of the tongue or do you believe she will be? >> i said if. i'm sorry if i said as president. sorry, simon. >> terry, good to talk to you. terry duffy joining us today straight ahead, facebook lower after second quarter

results last night. down a little over 4%. the stock is still up 20% in the last three months. hear what the company's cfo had to say about some of the challenges it is facing about costs straight ahead. need to hire fast? go to ziprecruiter.com and post your job to over one hundred of the web's leading job boards with a single click. then simply select the best candidates from one easy to review list. and now you can use zip recruiter for free. go to ziprecruiter.com.

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year at this time. it is above the five-year average. what's happening with the natural gas trade. it is all based on the weather. i will concede, we are in the middle of a heat wave. demand is picking up for natural gas. total stocks that's what traders are watching. still 22% over where they were last year. supplies are in good shape. in terms of pricing, we are looking at 2.81 before this. we are pretty much staying flat on the day. net gas has been a tough trade. flat on the month. we don't see a surge or increase in demand that exceeds expectations. we are probably going to stay in this area. i will see lower prices are good for consumersers. not necessarily sure the companies are passing this along. certainly, something to watch. sue herera back over to you with the news headlines. >> here is your cnbc news update at this hour. >> a u.s. judge has ordered the nfl players union transferred to

new york from minnesota. it seeks to overturn tom brady's four-game sus spepgs. the union wants it to be heard in minnesota where they have won numerous victories. malaysia's prime minister says debris from the aircraft found on the french island of la reunion will be sent to france. it cob the first trace of malaysia flight 370 which vanisheded nearly 18 months ago new developments in the killing of cecil the lyon the u.s. embassy says it has not received any requests to extradite minnesota dentist, walter james palmer who is in sec collusion. demonstrators gathered outside his office in minnesota to protest his killing of the much beloved lion in zimbabwe. more than 300 firefighters tried to get a handle on a fast-growing wild fire. the rocky fire is burning in lake county. month are than 500 people have been forced from their homes. 3,000 acheers have been burned so far. that is your cnbc news update

for this hour. back to "squawk on the street" now. the first reading of second quarter gdp coming in at 2.3%. the first quarter was actually revised higher into positive territory. 0.6 from an earlier negative read. our senior xhix reporter steve liesman has been degreeing through the numbers. he joins us with with more details. the big question is, how the fed is going to think about these numbers? >> for the fed, that is the big question. first, we got a little physics lesson from gdp. the less you fall the less you bounce back. we didn't get a huge bounce back in the second quarter, not as much as expected. we found out we didn't fall as much as we thought either in the first quarter. overall, growth was a bit higher over the two quarter average of this year than initially estimated. is it enough for the fed to hike? first, the numbers, please.

q-2, against an estimate of 2.7. it had been negative. now, it's positive. 1.45 versus 1.25 would have been the average. the gdp came along with more inflation. stronger growth than originally forecast and more inflation. that looks to be nearly enough for a lot of economists to seal the deal for a september rate hike from the fed. >> we have a strong number next friday, i think september is looking increasingly likely. i thought the statement we saw yesterday showed the fed opening the door to september. all we need to get through that door is two good jobs numbers for july and august. >> remember the big square we had in the first quarter of 2014 when growth plunged and everyone including many at the fed, thought they were afraid something was amiss in the economy, like maybe a recession. the data was amiss. they are announcing the regular,

annual three-year revision and how it seasonally adjusts the data following a story raising questions about the gdp reports. overall down in 2014 by a modest .3 of a percent with a sharp reduction in 2013. you can see right there, that's the middle one, yellow to blue. thats that was the biggest reason for the overall decline. they took the first steps to the way they calculate to account for anomalies in the quarterly pattern of growth emphasizing changes to sectors and some inflation adjustments. here are the big quarterly revisions. q-2, 2014 not as negative up by 1.2% in the revision there. q-3, 2012 and 2013, got big revisions, downward. still, more work to do. this is a revision to the past three years. cnbc found huge q-1 differences

over the past six and over the past 30 years. bea says this is just first of three phases of looking at how it calculates the data. simon? >> it is awfully good of them. you wondered where interest rates would be if the dashboard was working correctly. >> i think people would not have been as anxious about the track of growth if these numbers had originally been reported. you wouldn't have had as high highs or as low lows. steve leaseman there. the corporate level, facebook beating on the top and bottom line. it shows trading lower on concerns about currency head winds. massively rising costs. who else to ask the question of but julia borson who joins us on set. i talked to the ceo david wayner and he says it has been a

giant growth for facebook. it is having an impact with 40% more videos being shown. he said all those videos are driving use of facebook as well as revenue. >> we are seeing people engage with billions of videos each day. we know video is a great creative canvas for our advertisers. we see advertisers like agocura to launch their new tx model. we are very excited. it is really maeking a contribution this quarter. the next leg of growth will come from instagram ads. they plan to launch more ads for instagram in more countries. calling instagram a great revenue opportunity. the company's biggest challenge, foreign exchange rates. >> you will see in our results that we are facing currency head winds in those markets. that's going to be the biggest story. you have the euro down nearly 20% year over year. that's a big head wind.

that's going to be affecting us. you have the diversity of the types of countries in the different regions in terms of their gdp. the mix is going to have an impact. >> wehner warned thats a function those currency head winds as well as tough comparisons, the company's revenue growth rate will decline in the third and fourth quarter. >> it is a reminder of how international facebook has come. now, they are getting hit on the currency side. >> opportunity in the u.s. and overseas. the fact that they do have 1.5 billion users is a sign of just how much they are. >> taking another look at shares of whole foods down sharply this morning. double digits. there is the intraday chart down 11% after another disappointing quarter. joining us on the phone, meredith adler, cutting her

price. thanks for jumping on the phone. >> my pleasure. you asked the question on the call that led to that admission that the executives at whole foods said they lost consumers trust during the quarter. how hard is that going to be to gain back? >> we think it will be difficult to gain back even though there doesn't seem to be a huge amount of substance to what the concerns are. once you lose a consumer's trust, it is just hard to get it back. the fact that they are very expensive stores probably doesn't help. >> what else probably doesn't help is that the competition is so fierce around whole foods, main organic and sort of healthy product. if you look at what kroegers is doing. how has whole foods tried to combat the competition? why don't they seem to be making any headway sf. >> the stores are expensive. they have been making an effort to finally to focus on produce, which is a really important category for most consumers and

they are lowering prices in that area. it takes a long time once you lower prices to get unit volume to go up to offset the lower prices. they are beginning to see that. they are going to do more stores next year. you will continue to see pressure on the sales. >> and on margins. i was asking to ask the same store sales pretty disappointing, a little over 1%. do you see those going negative? >> it is pretty clear that traffic is negative. i'm going to guess that it doesn't dpet thatget that low. it doesn't go negative. traffic being negative is not a good thing. >> i wonder what the broader lesson is here for ceos in the consumer space. you said what happened in new york with the problems over the weight produce was perhaps not as substantial as people might think. they believe it has had a huge effect on the good well. isn't good well something that a wise ceo will invest and invest and sink and sink and sink again

so that when something does go wrong, they are better able to weather it. do you think that arguably whole foods hasn't done this here and what would be a strategy for others to adopt? >> i would say they have taken for granted for a long time that everybody understands their values and believes that they are a good company with the right focus. maybe they have taken that for granted a little bit too much. i also think that the issue is being gouged because the weights are wrong and you are already high priced, that makes it that much more challenging. did they do the wrong thing? it is not their fault it went viral. probably, they have to do more to win customer trust back. >> very quickly, meredith. the stock is going cheaper by the moment. does it become a takeover target? >> now, that's a really good question. i don't think so but i haven't

thought about it too much at this point. not a cheap stock yet at this point. >> all right. >> i think we'll leave it there, hence you lowering your target to $35 a share. thanks for joining us. meredith adler on whole foods from barclays. still ahead, henry blodgett will be joining facebook live on his take on the takeover. we'll be back after a quick break. ♪ take advantage of our summer offers. lease select cts models in stock the longest for around 399 per month. the gillette mach 3 turbo

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the brazilian stock market is down. according to some now is the time to buy. there is plenty more "squawk on the street" coming right up.

so you're a small business expert from at&t? yeah, give me a problem and i've got the solution. well, we have 30 years of customer records. our cloud can keep them safe and accessible anywhere. my drivers don't have time to fill out forms. tablets. keep them all digital. we're looking to double our deliveries. our fleet apps will find the fastest route. oh, and your boysenberyy apple scones smell about done. ahh, you're good. i like to bake. with at&t get up to $400 dollars in total savings on tools to manage your business. welcome back to "squawk on the street." rick santelli live. welcoming my first guest, peter bookfar. thank you for taking the time.

>> thank you, rick. >> let's start at the top on a chronological basis. what were your thoughts on today's gdp and the internals of that data set? >> more of the same. mediocrity. the first half is averaging at 1.5% type growth. even if we see 3% growth in the second half, we are still looking at 2ish type percent growth. we can't seem to get out of this what i want to call mala'ise. there is no sign of any increase within the data. >> maybe the malaise is the middle of the bell curve. this is it. this is the type of growth we have with the policies we have in place whether it is government or fed policy. >> now, from this point, let's look at yesterday with regard to the fed. did you see any surprises? >> the only thing i took of note was the slight upgrade on the comments about the labor market.

the fed is itching to raise rates. they want an excuse to raise rates. i think the exchange in the labor market commentary is one step towards them rationalizing to themselves they need to raise rates. >> the world is a different place. the market is a different place. markets like many things have been experimented on. sometimes when you experiment on things you change them. so at this point, given the world the way it is, you have been a big believer there are unintended consequences. cow could you quickly highlight the big ones? >> free money creates massive malinvests and misallocation to capital. it punishes savers. we have destroyed the savings class. we have created excess in asset prices which always mean revert. it creates too much leverage. it encourages people to take on debt. we don't have enough income or profits to service that debt

over a long period of time. >> the remaining 45 seconds we have two issues we want to cover. should the fed in your opinion, will they, i'm sorry, raise in september? >> i'm at 75% if i were to give the odds for it. >> now, the bigger argument and you have been writing about this is the path after the first normal zation. finish up in the last quarter of a minute telling me what that path will be and what the new theme will be once we embark on it. >> considering my thought that the fed is completely winging policy, they have no path. it is day by day. i think they should stop day trading the data and take a long-term view of where monetary policy should be and react more to that than every single data point they see in the short-term. >> i gotcha. peter, thank you for taking the time. not a very easy topic to get our arms around. let the markets speak for themselves. the two-year note yield flirting

with levels on a closing basis we haven't seen since 2011. >> sarah, back to you. >> thanks for the time and conversation, rick santelli. >> a stream of hotel chains trimming expectations for the full year everyone from marriott to starwoods to la quinta. the ceo will be joining us for an exclusive here on cnbc when "squawk on the street" comes right back. hat was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this. want bladder leak underwear that moves like you do? try always discreet underwear and move, groove, wiggle giggle, swerve, curve. lift, shift, ride, glide hit your stride.

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because we should fit into your life. not the other way around. separately this morning, ceos from marriott starwood and la quinta are edging down guidance. some are questioning whether the hotel upswing may be coming it an end. joining us now is la quinta ceo. you're up 30%. but in general, are we beginning to see softness in the lodging cycle in this country in. >> well what i would tell you is and i can speak for my business we believe the fundamentals are very strong. if you look at the economy, the consumer confidence, you look at all of the consumer and economic measures they seem to be improving. that bodes well for our

business. supply and demand fundamentals demand continues to outpace supply. we, we look at the inside in our business, we've had in the second quarter, we had some transitory type issues and things that we've identified as short-term impacts on our business, that's the reason we made the decision we did, listening to the lead-in about others and i can't speak for them, i can tell you for us we believe the business is still fundamental. we have a strong growing, healthy business. >> you had a transition to a new call center in the quarter which is significant. but also you have 25% of the business in texas. we saw the huge floods that went on and on and the area is heavily eggs posed to the oil and gas industry which is why yesterday hilton was saying its figures are slightly depressed. can you give us some color on the kwaer and the physical efforts had you to face? >> sure the biggest challenges in the quarter we laid out and

identified in our call yesterday was the weather across the southwest. we saw massive amounts of rain. we had hotels you couldn't get to. we had a particular hotel that actually flooded. so we did have some significant impacts on demand based on the weather. that is the bulk of the challenge that we had. and again, it's if you think about that it is it is a one-time type event. we're not going 0 get that kind of rain. we haven't seen it the good news is it has stopped raining in texas. >> yesterday, hilton said they were going to launch a new brand just below hampton. that's where 40% of hotel room nights are and for their part hilton isn't addressing that. is this kind of the area you're in in the scale of things? jp morgan said overnight given your single brand scaleable growth, free cash flow and soon-to-be low balance sheet leverage. they couldn't work out why you're not a takeover target. do you see yourself as a takeover target in. >> we're focused on growing our

business. >> come on that's a cop-out answer, you know that. >> we're focused on driving value for our shareholders. we'll look at anything that's opportunistic, i can tell thaw we're not focused on doing anything -- >> are there talks like that going on continuously now? how would you characterize the industry overall? >> we're not having talks with anyone. i can tell thaw we're very focused on driving long-term shareholder value for all of our shareholders. as far as you know a new brand in the select service mid-scale or upper mid-scale, we operate in the upper mid-scale and mid-scale categories, i've always been a true believer that competition makes us better. and what i would say is that that announcement, if anything could potentially kind of put pressure on some of the weaker competitors. and actually, if you look at us and you look at the fact that we have scaled today, 887 hotels 219 in our pipeline i believe

that if it puts pressure on some of our weaker competitors, that it could become a two, three-horse race and i would bet on our field position on that. >> very briefly if you would. we've got to be out in 30 seconds. what about distribution? people talk a lot about airbnb. you saw trip adviser doing a deal with marriott. what steps do you take to better distribute what you've got? >> we make sure that we're available wherever the consumer may be. we want to make sure that we're available for that consumer and when they come stay with us at that point we own that consumer. we're able to then target them and try to target them to book direct. whether it's lq.com or one of our proprietary channels. >> so no change then? >> no. >> international demand healthy? >> 12% of our pipeline is international. with the bulk of that in mexico and central and south america. today we have seven hotels open in mexico and central america with the honduras capital the

latest. let's send it to jon fortt with look at "squawk alley." >> a day after facebook earnings, the stock is down 4%. but they beat on the top and bottom line. what gives? we'll tell you. and some sung results, more color on what's going on with the galaxy s 6 and s 6 edge. not as bat as you might think. and the nfl is getting into virtual reality. all of that and more coming up.

it's 8:00 a.m. at facebook headquarters in menlo park california, it's 11:00 a.m. on wall street, "squawk alley" is live. ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ welcome to "squawk alley" for a thursday joining us henry blodgett the founder, editor ceo over at "business insider." and julia boorstin joins us