tv Squawk Alley CNBC September 4, 2015 11:00am-12:01pm EDT
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he gets this golf shirt signed by the entire "squawk on the street" gang, including sara eisen before she left for her vacation, his twitter handle is jeffrey2313819. >> it is 8:00 a.m. at disney headquarters in burbank, california and 11:00 a.m. on wall street and "squawk alley" is live. ♪ ♪ good friday morning, welcome to "squawk alley," joining us from one market in san francisco, paul holland, general
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partner with foundation capital. with us at post 9, jon fortt and kayla tausche on a thinly traded friday before the labor day weekend. stocks falling this morning after the u.s. added 173,000 jobs in the month of august. right now dow is down 228, not quite to session lows. the unemployment rate falling to 5.1, the lowest it's been since april of 2008. although paul a lot of discussion about not just what the jobs number means for the future of investing, but what the fed will do two weeks from yesterday. is that a major topic on the minds of people where you are? >> i have to say it's really not. at the level of early-stage investing, start-ups, things like that, people are just building their businesses right now. so people are spending their time as investors, we're investing in new companies, start-up entrepreneurs are hiring people and building new product services and things like that. >> so a lot of the things we're
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seeing happening at the macro level, market level, reacting to a jobs report. as you know i was in beijing last week. had a good chat with you guys there. reacting to china, these are all things that are kind of extraneous to what's going on in the early-stage start-up world. where people, we're in a bit of a goldilocks moment here. it's not too hot. not too cold, it's going pretty well. >> we have seen over the past few years during this environment of zero interest rates, we've seen a lot of capital go into riskier asset classes. a lot of capital go into venture capital that hadn't been there before. do you see a reversal of that. do you see any patterns for capital flight that you're watching for? >> i think that's a terrific question. at the moment i would say no but here's what you should be looking for. there's going to be kind of a tale of two cities here, there's going to be the early stage and the early stage is fairly metro nomic, it's fairly steady. when we invest in a company, we're going to invest in a
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company. maybe the value of the company is $4 million, maybe $8 million, but it's not going to be $80 million. the later stage is a different storevy and the later stage has been very frothy. if you're an upstream investor, if you're a pension fund, endowment group or so on, you're looking at the marketplace and saying gee, do i want to be in a 2015 vintage for later-stage activity? early stage, no resistance, but later stage, i think we're going to start to see some push-back. >> it's interesting that you should say that one of the things i wondered when i saw blackberry's proposed deal for good technology this morning at $425 million. a few months ago you thought good would get more than that, based on the brand and it's got a number of customers who have been in the market for a while. you wonder could they not get the capital they needed to grow otherwise, what's your take on deal like that with a brand some might have thought would have been closer to unicorn
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territory. >> another good question. think what you're going to start to see happen with companies like a good and good is you know was a bit long in the tooth. it was out in the market for quite a long period of time. went through several iterations, ceo changes, things like that. i think they were going to have a tough time anyway in terms of pushing for a premium market value. i think you're going to start to see some of those companies now where the investors, the board members, management are going to start making sort of triage choices, making value choices versus pure growth or pure premium choices, in the case of the blackberry deal. my guess is the stakeholders around the table looked at it and made a rational decision. said this is the best deal we're going to get in any reasonable timeframe and this is the right thing to do with this particular company. >> interesting wrinkle there. it says a lot about where we are. >> next up, paul, shares of twitter we're watching as we await news on the company's management transition. barrett says dorsey will likely stay as ceo and square is
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searching for its next chief. barron's chief bastion colkocol. what would you expect the price effect to be on twitter? >> i think there's a clear precedent for a founder being a ceo at many other successful internet companies. we think it's a potential positive catalyst, certainly dorsey has the engineering background, as well as the legitimacy to make tough decisions that twitter really needs. more importantly it's i think the product map, product rollout schedule for the next two or three months, it will form likely the bigger catalyst for the stock. >> when you say tough decisions that dorsey can and would make, such as what? you don't, you're not of the school that he is too close to the history, too close to the past? >> i think someone at the top of twitter needs to be able to come in with a vision and with a
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focus. and i think where twit certificate from a cultural perspective, i think where twitter is from a product perspective, there's still a lot of tough decisions to be made. and that surrounds for example the core politician. twitter has done a great job in monetization. they focused on revenues. they have done relatively poor job in terms of the core product. that's where we think the tough core decisions need to be made. >> paul i'm interested in your take on this i don't know if jack dorsey is the right guy for twitter right now or not. but it's not that clean founder return story thaw got with steve jobs, returns from the wilderness, he's learned all this stuff. it's not larry page coming back, been there all along the. the board and management situation is clean and clear, either. it's something in between. and twitter hasn't been exactly clear about how they're making decisions, and what kind of leader they're looking for. does that concern you at all? >> yeah, i think -- >> one of the challenges for -- sorry. >> that's for paul.
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>> sorry about that. i think that's, when i look at something like twitter, which i think is a terrific company, know some great people who are there, i think their challenge all along to some extent has been they're neither fish nor foul. if you look at the other social you know, large companies that are out there, if you look at a face book, they've got a very, very strong identity, a very clear monetization path. they're killing it in terms of you know add revenue and product rollouts, new product releases, things like that. so they look like a machine and their stock has reflected that. linkedin is more the professional social network. they've got a clear vision, clear monetization and clear management. they've done quite well. the challenge with twitter is they're a little bit of a combo of some different things. i think it's going to be incumbent upon them and jack dorsey coming back in could be a positive sign for the company. they'll provide more clarity about the future of the business, the monetization
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strategy and how does the company enter the pantheon of the strong companies in the social domain. >> and colin, we're sort of dancing around the issue of whether or not they can do this revamp by themselves or whether in fact they have to do it under the auspices of a, a larger buyer. how much work have you put into doing, at what levels twitter would be accretive to a google or to a facebook? >> well there is no doubt tremendous value in the data that twitter is collecting as well as the real-time nature of its broadcast platform. i think that could be a good fit for a number of media or internet companies. and perhaps twitter is a better application being part of another platform. that said, think where investors often get into trouble with quitter is comparing it to facebook. twitter is not facebook. it's a smaller-scale business. and we think the stock needs to reflect that.
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>> well certainly it's done its part to get there. colin, our thanks to you. colin sebastian. we'll work on netflix. shares wra big loser at the open. the biggest loser on the s&p. it's been a rough week for the stock. shares down 15% since monday. that comes after increased competition from hulu. amazon and if you believe the rumors, apple. despite that, netflix still exactly 100% gainer for the year. paul, i, would you have a problem with the notion that it's become sort of the stock market's atm? it's where you go to sell when you need to sell something? >> that's an interesting point of view. i hadn't really thought about it from that perspective. if you go back in time, you know we funded netflix back in 1999, it was a very small company with just a phenomenal management team that's gone on to do great, great things. you know in 20 years of foundation capital's history, they're the only company we've ever funded that actually hit the level where they were 100
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times more valuable than they were the day they went public. and so it's a very, very strong company. the stock is a growth stock. it's a high visibility stock, i suppose these kind of stocks are going to go through some sort of fluctuation from time to time. if you believe in the scale of what's going on there, if you believe in what's going to happen globally with the business, it deserves to be one of the strongest stocks out there and it has proven that that's what it is. >> what happens, paul, when nielson or another company figures out how to measure the ratings and the viewership of netflix? will that change the story at all? >> i don't think so. because netflix is really moving to a place where they're going to become, if not the dominant media company, they're going to become one of the dominant media companies. if you look at their creation of new properties if you look at their creation of new shows and new forms of entertainment. they've gone beyond just simply being the distribution innovator. they're now the content innovator in terms of what
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they're doing. so i think you know they've shown that they've got the ability to innovate and stay a step ahead of the market. if you're a growth investor as i am when i go out into the mark, those are the kind of companies i'm looking for. i want the company has are going to be aggressive and stay a step ahead of the market. netflix has done that and over the years i've answered many, many question fwrs nay-sayers, amazon is going to put them out of business, walmart is going to put them out of business. lord knows, we've been in the business so long, blockbuster is going to put them out of business. it doesn't work that way. very strong company, strongest management team we've ever seen, they're very, very good. >> paul, thanks for that. i'm sure hastings is going to love that paul holland of foundation capital joining us today. when we come back for the first time since 2007, apple stock is down in the month before a new product announcement. is that a bad sign ahead of next week's event? plus blackberry in the green after making the acquisition for
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over $400 million. reaction from ceo john chen. one more look at the market here, dow is down 260, we've been in a tight range but consistently in the red and europe will finish off the week in about 19 minutes. we'll get that, when we come back. being a keen observer of the world has gotten you far, but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier. it's your idea powered by active trader pro. another way fidelity gives you a more powerful investing experience. call our specialists today to get up and running. you can't always see them. but it's our job to find them. the answers.
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on announcement days. walt paisak is an analyst with btig. one way to look at this is that there's a lot of pessimism about apple's potential to come out with a new product. >> when there's not a lot of expectations going in and maybe there's something that encourages investors, that's something they look for. but there hasn't been any great patterns as far as where the stock has run up or how much in front of the quarter to determine how the thing is going to perform. the day they announce or the day after. a and as you pointed out that gereman over at 9 to 5 mac has done a good job of pointing out the details, that it's hard to surprise investors.
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>> they should just change cupertino to germantino. >> or they should just hire him to silence him. give him a great job so he'll stop leaking this. >> knowing what we know from mark. what is the headline for next week? the headline is going to be the new phone is out and we move on to the next catalyst which is trying to predict how many phones they're going to sell. the whole issue is whether they can grow on the massive number from the december quarter of last year of 74.5 million. tomorrow like it typically is, is probably anticlimactic as far as the movement in the stock, up plus 2% ever. the only time it had a massive move, the very first iphone, it was up over 8% in 2007. >> walter, why are we having a conversation about whether apple can grow over last year? every holiday quarter there's
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supply constrained, not demand constraint. but nobody seems to be talking about is it possible for them to make enough. they could have sold more last year if they could have made enough. if they planned to make more this year, even if demand it flat. they will sell more. plus all these trends seem to be going in their direction, they're gaining market share over android and over samsung. there's a significant percentage of the ios user base that doesn't have a 6 or 6 plus. why are we even talking about that? >> i guess we would call it a biannual event where people refresh the concept of smartphone fatigue. they've gotten the last phone and they feel like the next phone doesn't have nust improvements, the 5 s and the 4 s, is the touch i.d. really that meaningful or is siri going to have enough reason for people to buy the phones. the issue is someone who has a 5 s or lower, 70% of the customers has a phone that's cracked or
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the memory is full because they've loaded so many apps and they need to upgrade to a higher memory or get refresh components. as far as how they're using product. and the issue is going to be whether that person is able to upgrade their phone, so a lot of the issues that actually matter as far as iphone sales are getting ignored for this biannual kind of if that's the right word, hey, the 5 s -- >> like the mid-term elections. >> is there enough new to get me to buy the phone. because i'm the guy that bought the 6. but it's not the guy that bought the 6. or the 6 plus, it's git that bought the 5 s. or the 5 or even the 4 s. >> i know a lot of people like that. >> and this concept that replacement cycles are extended that i'm seeing in some of these reports is based in no fact at all. if you talk to the actual wireless operators, they're talking about replacement cycles coming in because of the payment plans that will let people upgrade their phones. >> how many 3 gss do you see
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around? if people are extending their phones, where are all the old iphones that exist for people that never upgrade? >> one of the narrative that's been writ thn week is that the ibm partnership plus tim at the cisco event plus an ipad pro equals some big new enterprise story for this company. is that what, are you buying on that? should we buy on that? >> i think we should be primarily focused on the december quarter and whether they can actually grow units or not. and china is a major input on that the upgrade cycle on the developed markets is an input on that. if they can get through and the stock can recover to where it should be valued, when you look at 2016, the number of products and opportunities they have is massive. enterprise is one. maybe the apple tv evolves into something. maybe they do something. this is a multi-year story, right? with cook in that there are all these great things we can think about as far as incremental opportunities. now they have to deliver on them
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and show that revenue growth. which is not going to determine whether the company grows or doesn't grow. but it's going to give us the extra couple hundred basis points of growth that investors are looking for. >> we'll be covering the action next week. walt paisik from btig. let's check the markets, we've been negative all morning. the dow down by as much as 282 points, we're about 40 points away, still down 1.5%. all 10 s&p sectors are down 1% or more. that index down 1.33% overall. the nasdaq is holding in there. but it's still down about 1%. of course leading the trading all week, the price of oil. and the european close has also been a driver. we'll get that in just a few moments. plus a huge interview coming up on tuesday morning rather. a first on cnbc interview with the oracle of omaha, warren buffett, live here in "squawk alley." care of my heart.
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hi, everybody, i'm sue herera with breaking news. nissan is going to recall 300,000 cars, because of concerns of acceleration. nissan said friday it will recall 300,000 cars in the united states, they're doing this under government pressure. because of unintended acceleration risks linked to what's called a trim panel. safety officials wanted them to do this earlier. they've resisted recalling the 2012 through 2015 versa and versa note cars, even though the national highway traffic safety administration opened and investigation foo this unintended acceleration issue back in 2014. separately, the nhtsa said it's upgrading an investigation of almost a million nissan 2013 and 2014 vehicles, because they may misclassify adult front passenger occupants and turn off the air bags.
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a lot of news concern nissan right now. back to you. >> very important news. shares of blackberry up 1.2%. announcing that its acquiring long-time competitor global technology in a $425 million cash deal. i spoke to john chen, the ceo of blackberry this morning. some interesting insights i think on the rationale behind this. good technology has been stronger in managing ios devices and john chen is trying to steer blackberry in the direction of not just being about blackberry devices but managing android and iphones as well. they're going to pick up on a number of customers, more than 6,000 customers along with good technology. 64% of the customers that good brought on board last quarter were on ios. that's good for them. >> the letter from good's ceo
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says good and blackberry have a long history. which obviously is the nice way to put it. to say they were bitter rivals is maybe even an understatement. they were taking out ad space in newspapers to slam the other company. just a few short years ago. >> i think there were lawsuits and what-not, too. but at the same time john chen very pragmatic here, he said he's been looking at this for about six months, talked to a small number of good customers to make sure that this deal would be the right one for them. i asked him whether the good brand would survive. i think a lot of people when they think blackberry, they just think blackberry devices, i wonder if that's been an issue for them trying to expand into managing android. and it pits them against vm's air watch which has been growing a lot in this area. he said of good, they haven't been managing the financials as well as they could be. that tells me that maybe there will be some sgna cuts. we'll see. he's an efficient guy, john
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chen. >> if you can't beat them, join them. >> the stock is down 30% in six months, thinly traded, but pressure remains on chen. let's get simon hobbs here and close out europe's week, which is going to be down anywhere 1% to 3%. >> this is a brutal session in europe. it's clooer that european investors, people invested in europe fear what's happening in emerging markets and the rest of the world more than the benefit of qe, any extension from mario draghi. we fell in 2.5% in germany. we were down from the beginning and went lower on the employment report here on the united states. let's track where we've gone for now. five weeks in europe since the beginning of august. we're down the best part of almost 11%. this is the track from the beginning of august, heading back down towards those lows that we had earlier. it's a very broad-based sell-off today. but the basic resources are down with the biggest price action and some of the oil majors,
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statoil and bp down 5%. you see the miners about the debt level. a lot of the exporting stocks are also in negative territory today. l'oreal, airbus, kering, there's a sell recommendation coming from goldman, saying that the estimates that people have for, they're not going to make them and they're fearful that gucci has overextended itself as arguably prada has, you see that's down 6% today. as far as the national markets, you saw the selling on germany again today. germany is in correction mode. but still not back in bear market territory. down 19% from the april highs. for more importance perhaps going into the weekend if you're in germany and investing locally. a lot will be made of the fact that they invented the death cross, the much-feared death cross, where the 50-day moving
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average falls below the 200-day moving average. the market is down here. an indication of a loss of momentum that many people will talk about. we'll see if that knocks back as we start next week. meantime a lot of the banks are lower in europe. it's notable that the italian banks are are lower. there was a cut from jp morgan on unit credit. that stock down 5%. a lot of the other italian banks are are lower. don't make a mistake about the italian market. because it's much more domestically focused. is one of the best performing markets, not only in europe, but around the world. it's still up 12% for the year. whereas europe overall is not up as much. a good outperform 9% as they focus domestically and the raempls of their young prime minister. guys, back to you. when we come back, kara swisher on what you don't know about yesterday's twitter board meeting, she'll join us live. and shares of disney down this morning, in correction territory
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i'm sue herera with your cnbc news update. great britain announcing it will take in 1,000 more refugees fleeing conflicts in syria. the prime minister david cameron speaking in portugal wants to provide those migrants with a safer and more direct route. u.s. lawmakers planning to grill more members of hillary clinton's inner circle today. in connection with the deadly benghazi attacks. a house committee is looking for insight into how the state department maintained its presence in libya prior to the 2012 attack. three new crew members getting settled aboard the international space station. a russian soyuz spacecraft docked this morning there are now nine astronauts on board the international space station. from outer space to the nevada desert. a series of dust devils rolling through, causing problems at the annual burning man music festival. and more dust devils are expected this weekend. good luck, wow, that's kind of scary. that's your cnbc news update. let's get back to squawk alley.
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>> as you know by now, twitter's board meeting was yesterday and kara swisher of re/code, the co-executive editor has details of what went down at the meeting, she joins us on the phone. what do you know? >> i think you just had an update of the candidates, some of which, some of the names publicly are not being considered. but there's been updates of where they are and i think they'll probably as has been, everyone keeps saying it's immeant for the past six weeks, it's not imminent. i think they'll make a decision sometime after labor day. after the holidays and everyone is back and thinking about it and deciding. obviously jack dorsey has been having his on-the-job training. he's running the company like he's going to run it. so we'll see. >> just to be clear, you believe there was no decision yesterday. it's not like they decided and now they're just waiting on how
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to announce it? >> no. i think they're trying to do, you know it's interesting, it's pressure on them and the stock is down. i'm not sure what the pressure is at this point. you know they've got a lot of things going on. i have been very hrd, i like the twitter board, but this is an important decision, so they should take time to pick the right ceo unless they're going to do something like sell it they deserve a little more time to make sure that the internal candidates are the right one. the top one of which is jack dorsey. >> it's a tough job to pick the right person. >> i think if they don't get a star, which they're not getting or one name that was out there, i suspect jack dorsey is the one to beat in this race. >> kara, there don't seem to have been a lot of realistic names floated that are actually product people. a lot of kind of managerial types. at least not social media
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software product people. managerial big company enterprise-y silicon valley companies. what kind of sense are you getting on the diversity of candidates in terms of their experience, maybe product division that twitter might be looking at? >> the one thing i have, a lot of the names aren't true. it's just made up by reporters. they hear a name and they slap it up on a website. >> i think the internal candidates have been the strongest ones that said i'm sure they'd love to get a sundar pachai. he's got a big job with google. that's the kind of person. someone whose product engineering and is a great executive. it's hard. you want someone who has creative vision. all their issues around product, how to get the product out in marketing. product marketing, advertising and they've got a strong executive in adam bain in advertising.
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so i would guess they're going to pick a product person and they should. i think everybody feels like that's what they're going to do or they're going to sell the company. i don't think there's anything growing immediately. but obviously google, i've said this a million times, i think it's a question of sundar pachi who is running google -- >> you've been the first to wonder whether this is an eventual sales candidate i wonder what you put the odds at they found a ceo to run the company or whether the route they choose is a sale. >> i think if they get a big star, a big name, a big star, but a very qualified star. they can't get a name like, they can't get something like that a lot of executives surprise you and do a great job running a company. but you know, they really, they do have a very good product person in jack dorsey and so the question is he up to the
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challenge? can he deal with his issues around square and things like that? you know i suspect as a board they don't want to look idiotic and choose the guy that everyone thought they were going to choose, they have to look like they've taken some time and there will be a number. we talked to 59 people and we came back to jack dorsey in the end. they have to look like they did it it's a public company. so i think they take it rather seriously. >> it's a tough board. >> is your point, kara that you go through these motions with the search committee and spencer studen stewart. to avoid any questions down the road? >> i think it's a sincere effort. it's a tough job. anyone really big, would you want to take on that job? it's a tough job. you have the founders and the board, they've got a lot of founders on that board. a lot of ex-ceos on that board. it's a tough challenge in a market where facebook and google are just killing it.
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it's a really hard job and last night i was with a bunch of silicon people and people were saying they could make more money elsewhere without all the grief. it's a tough job. so the person who takes it is going to have to really love this company and will it to the turn-around it needs to have. it's a fantastic brand. so it's a tough job. >> kara, that leads to my second question, which is, does the board need an overhaul as much as twitter needs a new ceo? there's already been the suggestion that dick costolo won't stick around as he said -- >> he won't stick around. i'm going to tell you that definitively. he's not sticking around. >> even then, this is a board that has a history, if you believe the narratives that have been written, stabbing people in the back. changing its mind about various things. with a company that's in vision turn-around mode as this is, it could be argued that the ceo needs to, have a board that he
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or she has more influence over than this board has shown the tendency to be influenced in the past. so what happens to this board? honestly, most boards are terrible. let's just say that because they don't have this much trouble. i think it comes out, most boards are problematic and most boards don't run companies. they drop in from 30,000 feet. they aren't in charge of running the company. the problem with this company, this board is a little more meddlesome than others, they've gotten their hands in the machinery and i think that most boards don't do this. and again, you know, google's board, everyone's board has got issues, they don't have to deal with big issues right now because they've got an effective management team. probably yeah, probably maybe they shouldn't have so many vps, maybe they need more advertising people on the board. maybe they don't, maybe it's hard to have three ceoed, and obviously dick is coming off, there's two founders on the board and a lot of people think that's good.
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it's a really thorny situation for a product that i think is a terrific product. and the question is where will it shine the most? and who can do that? i think it's going to be in the end, jack dorsey and unless someone really big comes out of it. >> i'm thinking back to krs we've had on this show, probably a year ago, where you suggested the company would eventually be dressed up for sale. does that, is that intact? >> you know i've heard, i've heard from people pretty close, just i've heard from a lot of people that they are surprised that google hasn't made a very aggressive effort to buy them. >> people who can invest in it i am, too. it's an interesting question, google just recently you know, did the deal with them and obviously that's working out well. we wrote a story on why google wouldn't buy them. because of all kinds of reasons, they have gotten what they wanted in the deal. to me google seems to be a perfect purchaser. the question is it they want to spend all that money, it's expensive.
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even at these low rates, it's an expensive company to buy. >> we ran out of time to talk about your unbelievable re/code decode with andreessen this week. everyone should take a listen. great weekend to you kara, thank you. >> thank you so much. >> kara swisher of re/code. we appreciate her time. coming up, make sure you tune in to this program on tuesday morning. huge first on cnbc interview. becky quick sitting down with the oracle of omaha, warren buffett. for now, rick santelli, what are you watching today? >> well we're going to drill down on all the market turbulence, i can't put that on, i'll mess my hair. we're going to drill down on market turbulence, and who caused it. field of dreams in chicago, we're building pits and traders are still here. coming up after the break. s on . but you're armed with a roomy new jansport backpack,
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owned by the fid, we're calling this piece the fed turbo tax and i'll tell you why. it's a chicken-and-egg argument. is the fed or other central bankers going to modify their strategies because of market volatility? i think they've caused the market volatility. okay? recalibration isn't going to be easy, you've heard me use that word many times. but i think whether it's the timing of the liberalization in the markets by china, what's going on with mario draghi, all of that, sorry it's a turbulence tax, that is the fed. they own it. it's them, they're at the epicenter of this. which makes it interesting. many of you might be saying i don't agree with you. well, maybe there will be a way we will tell. because i feel pretty certain that a week from thursday if the fed doesn't normalize rates at
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all, if i'm correct, what you're going to see is one wild ride to the upside in the stock market. there was a by-gone age where inflation was more normalized and central bankers were relegated to nudging. when they raised rates inflation would move down. well what's going on is they talk about raising rates. what's going down? anybody? anybody? financial assets, maybe? well, it's that's the area. that's the difference this time. what we pumped up was a little bit different. it's never the same twice. and the operative word in chicago and indeed in all of illinois, for about the last eight weeks has been baloney. and i'll tell you the context, a lot of ba loany. if you win a lotto in this state, your winnings, anything $25,000 or more, you have to wait before they cut you a check because the lotto pay-outs have gotten caught up in the war going on between the governor
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and the government veto. no government since july 1st. you keep collecting money and you never have to pay anything out. only in illinois. could that be the case. back to you. thanks, rick santelli in chicago. up next, markets are hovering about 1.5% down for the dow, s&p down 1.33%. the nasdaq is faring the best, but still down just shy of 1%. we'll bring you the biggest movers. ♪ every auto insurance policy has a number. but not every insurance company understands the life behind it. those who have served our nation. have earned the very best service in return.
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following this morning's jobs report. stocks immediately dropped, bond yields spiked, but we've seen both of those asset classes chipping away at earlier losses. it did follow a jobs report for august showing 173,000 jobs added for that month. below expectation, let's bring in chad morganlander, portfolio manager at stifel for more context. good to see you. 173,000 jobs, but you couple that with the lowest unemployment rate in seven years and some pretty strong revisions for june and july what do you make of it? >> i think it was a very good report. the underemployment rate, the one that i follow is still
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steadily going lower. yes, there is labor slack within the overall jobs market. and when it comes to the increase of income, we're starting to see a very, very slow comeback there. so this bodes well for the u.s. economy. but nonetheless, we don't believe the federal reserve will move in september. due in part because of external issues, not internal issues. when credit default swaps widen out within emerging markets and there's instability in the credit markets in the united states, that puts them on hold. that's what we believe until at least december or early part of 2016. >> so when you hear companies like capital economics say you can't possibly have an economy that's growing 3% with unemployment where it is, and look for zero interest rate in the eye and do nothing. what do you say to that, chad? well they have a point. but we're not growing at 3%.
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the gdp number has been around 2.5%. the underemployment rate is still above 10. and back before the great recession it was 8%. more importantly, mortgage credit in the united states has been lackluster at best. let me give you an understanding of what that means. mortgage credit typically gross 6% in times when we're expanding, in a recession it grows 3% and it's flat to up 1%. we're not at escape velocity within this economy and everyone knows that. >> talk about being overweight u.s. stay close to home, stay domestic. is the russell's action encouraging to you? in light of that strategy? >> yeah, it is. our expectation over the next 12-18 months is if the u.s. economy is going to grow at a rate far above what other developed nations are, especially within the eurozone. and as well, the federal reserve will start to incrementally move so the u.s. dollar will continue to strengthen.
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for that matter, we would be overweight u.s. dollar equity as well as fixed income. underweight the eurozone as well as underweight the emerging markets for the time being. as this disruption, this dislocation within the market starts to heighten, it's going to open up seams of opportunity. we would be looking at other avenues like high yield if we start to see additional selling pressure. >> you think high yield is safe to go into, chad, going into september 16th? >> no, not yet. i don't believe that to be the case. but if you start to see credit default swaps start to widen out if there's additional selling pressure within the s&p 500. our range is between 1700 on the s&p and 2200 over the course of next 18 months. then as the s&p goes lower, i would be moving down the quality spectrum and looking for better returns. but at this juncture, i want to make it very clear, we're still
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in an environment where it's a low-return environment. our s&p forecast over the next seven years for a total return is roughly about 5%. >> of course when china is open next week, we could be having a very different conversation. we'll see. chad morganlander from stifel. have a great weekend. >> don't miss the oracle of omaha, warren buffett live on this program tuesday in a first on cnbc interview with becky quick. we can't wait for that. disney stock still in correction territory. but you've got things like bb8 walking the floor of the nyse, you can see the must that will disney is bringing to lucas film. how will it affect the stock? et, you're certainly not alone. fortunately, many have found a different kind of medicine that lowers blood sugar. imagine what it would be like to love your numbers. discover once-daily invokana®. it's the #1 prescribed in the newest class
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you left this on the bus... get it at the place with the experts to get you the right gear. office depot officemax. gear up for school. gear up for great. today has been dubbed force friday, this is the year of making up holidays. this is the day where some of the first new toys from the new "star wars" film hits stores. one that's already proved to be one of the hottest? this bb 8 droid, which has been running around here on the nyse floor, as an example of the rate at which new "star wars"-relate i'd tems are being snatched up. bb8 is sold by a company called
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sphero, sphero says it's variable or will be in 14,000 locations worldwide, but amazon and disney.com have both already sold out. the company itself adds it sold 1,000 units in a matter of hours. force friday, the first real test of disney's multibillion-dollar deal to acquire the "star wars" franchise and licensing and merchandise, a key piece, that separates disney from the rest here. that's what "star wars" makes money off. >> we should know hasbro has the licensing for this. the stock up 39% this year. another way some traders are playing this. >> it's going to be a big story for disney stores. for walmart, for amazon, for target, for toys 'r' us, all the retailers who are going to try to grab a piece of the action as we head into the holidays. the "washington post" with a great piece today arguing that people are even looking at the toys not because they want the toy, but because they want any insight into the plot of the film.
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which doesn't debut until december 18th. >> who is going to admit wanting the toys, carl, you don't want that thing, do you? >> i do. >> i still have time to see all six movies. >> good weekend, guys and good weekend to you, we'll see you tuesday, let's get to the judge and the half. welcome to the halftime show, let's meet the starting lineup. jim lebenthal along with josh brown, stephanie link and jon najarian. our own steve liesman is courtside today. chubby chipotle, a snarky new ad picking a food fight with the fast casual company. our own experts debate the stock's next move. giant killer, the one stock in the nasdaq 100 over the past nine years that has better returns than apple, netflix and google. the name and the trades from our panel coming up. we begin with stocks reacting to today's jobs report, a touch weaker than
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