you nuts? >> gentlemyes, we agree with yo early. >> i'm glad you are back. >> the week is not over. another day. >> thursday. >> zoe yesterday. >> jay leno. >> you missed the party. the party missed you. to divides. make sure you join us tomorrow. "squawk on the street" is next. good morning and welcome to "squawk on the street." i'm david faber along with jim cramer. the two of us are live from the new york stock exchange. carl quintanilla has the day off. we are looking for what would be a down open right now on the broader market and the dow joans and nasdaq as well. overnight in asia, you asked, what occurred. you can show us what has been

happening in the markets. the shanghai had a very good day and machine orders, not particularly strong, jim. may have pressured that mark down as much as 1%. ten-year note yield on all this news about selling by central banks around the world to a certain extent. it is hanging in there 2%. >> the chinese continue to do some selling. crude has been much of the story this week when it comes to our equity markets and even the high-yield market. it is creeping in there. that's some new highs. we haven't seen edging towards that $50 level in quite some time. >> let's get to our road map this morning. it starts with dell and private equity firms silver lake partners. they are in talks to buy data storage link company, emc. i will have details. a strongly worded response to miller's rejection of its latest offer. alibaba is out with a company

update. they are launching a site called alibaba defined, trying to clarify what's going on at the company for those that don't know it as well as they would like. it includes a long letter from the chairman. now, let's get to a potential deal that is being worked on that could be, i would rg argue would be one of the largest leverage buyouts at this time. emc and dell are in talks for a deal under which dell would acquire emc at a price above $27 a share. however, i don't have any more details on price, except it would be above $27 a share. it would be a purchase of the entire company. in other words, not a public -- not a way to use to get dell public again by issuing shares but essentially a leverage buy

kro buyout counting on them to purchase a huge stake of it. there would be more of a stub of that left out. it becomes difficult given the conversations i can have. i am not exactly sure how that would work. there is currently a 17% public stub of vm ware. i know that dell wants to maintain control of vm ware. it would not be a wholesale sale of the vm ware stake or a spin to shareholders. a key to why they want to own this is to own vmware. dell was a leverage buyout. still has an eye norm must amount of debt, $11 million on it's balance sheet. the cost of the lease to buy

emc, $50 billion. there is a lot of cash there. with we are talking about them having to access the debt market for somebody near $40 billion. you might be right to ask, how can they get that done? understanding it would not be just a high-yield offering. there is a way to do hybrid investment grade high yield. this is something that comes into play when they access that capital markets. they already are having those talks with banks about that financing. i am told this deal could be as little as one week away. although, the credit markets have to come into play here even with a hybrid structure. i'm not sure how that, would. investment grade and high yield. we are talking about a huge number. they borrow enormous amounts. they buy emc. they maintain control of vmware and that is the deal at least

above $27 a share. i'm told price is largely dealt with, i don't know what it is. >> the research is saying the deal is too big. this is against the grain of every piece of research i have read. no one thinks it can be done unless they sell vmware. the worth is very little versus vmware. this is a way for dell to boost its value if they can get it. >> it is no tt a way for dell t go public or a wholesale spin so they can dpet tget the storage business. >> david, it is so big. >> i am calling it an lpo. it is not necessarily by a private equity firm. it is by a private leverage company in dell. i have to admit. it is curious in some ways. they believe they can get it

done. they have been talking for months. this is not something that has just popped up. it was reported by "the wall street journal" and bloomberg, which brought it to our attention. we are giving you a lot more details. >> all the reports are sketchy. i have been saying, listen, until you have this story, i don't believe it. it is too big. >> it is enormous, jim. it does appear to be something they believe they can get done. >> it will change the valuations of both companies. >> it could be as little as a week away in terms of a deal. whether you get to the finish line and all the different things, there doesn't appear to be an interloper with emc. they had talks about hewlett-packard. they are occupied with their own split and can't do that deal i don't know if there are other names that come to mind. >> vmware has been terrific. being virtual software that's very high growth. emc being storage that is

literally being challenged by the company that came public yesterday. there is emc's disc. it is an old-fashioned technology. remember, it used to be the greatest growth company, challenged ibm, challenged hewlett-packard. we have admitted defeat. we can't grow. to get vmware, dell looks like a company that has much higher growth. listen to carly fiorina and this whole debate. dell was doing a little better than we thought. couldn't michael dell have a company that is much better off than we realized and it is private. we know that sales of pcs have been a struggle to a certain extent. everything i have heard about the performance has been extraordinarily positive. they have already taken a lot of money out. it is generating free cash flow or cash flow significantly.

so their investment, both dell and the server has gone up dramatically in value since they took it private, which means carl icahn was right. they got it too cheap. he tried fighting against it. it was two years ago that they had the shareholder vote an went tlon way. this would dramatically increase the size of dell. >> it would make it such a better company. vmware is such a fast growing company. it would be a huge tax hit. this is no tax hit. >> and emc strategy has been to keep it together and dell's would be as well. it might not be an 83% ownership that comes along with emc or that they maintain. they will maintain control is what i am told by people familiar with what is happening. >> great reporting, huge. no one knew. when i look at every single thing i read, it made me think the journal was wrong, bloomberg

was wrong. it makes a ton of sense if michael dell is doing much better. you and i both know from our sources, michael dell, it needed to be private to take the action he did. he is an honorable good man. he could not take the action as a public company. >> we'll see where it goes from here, jim. i do come back to those credit markets. >> there has been no deals. >> they have been uncooperative lately. this is a number that's incredible. it is not all high yield. how that works, again, i have to tell you, maybe some people out there who are listening will be able to explain how they are going to be there for this hybrid approach. that's the way it is explained to me. you couldn't get $40 billion done in high yield. not in this market. >> i did feel there had to be some end game for emc. >> and joe tucci, the ceo, who was supposed to step down and didn't and they haven't named a

replacement. >> fabulous reporting. >> thank you z. >> anheuser-busch was responding to sab miller's rejection of its $104 million takeover offer. the second largest brewer lacks credibility. in its response, they said, notwithstanding our good faith efforts, the board of sabmiller has refused to meaningfully engage with us. other proposal creates significant value for everybody. what are the keys here that needs to be said? yesterday, because there was so much going on, this he say it is 42.15. it really is not. 42% is an abi stock with a little bit of cash. all shareholders will have that available to them. that brings the overall value of the deal down. they keep wanting to somehow say it is 42.15. they expect most will ex foekt take the cash. the santo domingo family will

take the stock because of their need for a tax-free transaction. they could go up, jim. there is still room to make it really worth $42.15 on a blended value. the difference between the two is roughly 10%. abi's share prices moved up. we'll see where it goes from here. the abi side is trying to make it clear that they don't have that much money left. i can't figure out whether that's simply trying to scare investors and share hoholders o s.a.b. to pressure management. that's the game. everything they say is designed to get s.a.b. share holders to come to the management board and say, what are you guys doing? sell, sell, sell. this is the time. right now, they are saying no and the clock is ticking. >> let's overlay what constellation had to say. a fantastic call. constellation is the fastest growing beer company in the

world. they are talking about a stagnant category except for them. they are growing dramatically. this deal has to be done. these companies have no growth whatsoever. the only way they can do it is appeal to the shareholders. this is the way tobacco was at one point. i cannot believe how urgent this deal is for these companies this is a no growth category except for mexican beers. this deal has to get done. it will get done. >> if it does, it is going to have to go the way to make some progress to ask the panel to ex toned get more time to talk or they are going to have to reach a deal. >> it would be foolish not to do it. these are all very rich people. these are barrons. they need to do nothing. we can cut our cost away into

greater profit but we are not growing. no growth category. in the old days, these were good breakouts. >> in terms of the back and forth, alejandro santo domingo and the person making many of the decisions, they only almost 15% of sab, still a key, certainly a key in terms of which way they go. they have maintained their two spots on the board which supports and had their members recuse themselves from what's going on. >> it is going to be very interesting days. i could tell you, this is the beginning of earning season today. no offense to pepsico. there are a bunch of them. that's surprisingly good news in valuation. these stocks, the low multiple has been going up. this makes sense. i see sisco going down. my charitable trust owns cisco. the idea that they would want ems. chuck robins in a growth mode.

inconceivable. >> we are going to have more on emc and sab and this news from alibaba. what is jack mau saying. a rough start for domino's and shake shack. we are going to fill you in on why. volkswagen's u.s. chief who weeks ago said the automaker screwed up is heading to capitol hill to face a house panel at a hearing on the emissions scandal. we'll have that live in an hour. as we get closer to this thursday. a lot more "squawk on the street" right after this. (patrick 1) what's it like to be the boss of you? (patrick 2) pretty great. (patrick 1) how about a 10% raise? (patrick 2) how about 20? (patrick 1) how about done? (patrick 2) that's the kind of control i like... ...and that's what they give me at national car rental. i can choose any car in the aisle i want- without having to ask anyone. who better to be the boss of you... (patrick 1)than me. i mean, you...us.

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update on the company and it is also launching a site called alibaba defined designed to help audiences outside china understand the company. here is executive chairman, jack ma in his letter saying recently signals of china's economic slowdown have triggered widespread concern and overrea around the world. i firmly believe that for the future, the advantages of slowdown in china's economic progress outweigh the disadvantage. they are no longer in need of increasing their numbers but of

increasing their quality, jim. he has gone on to talk about something he has mentioned many times in the interviews we have done, which is ecology, which is a huge issue for him and china. this is something when you first read the letter. that's a bit of a mea culpa. this issue of ecology is something i talk a lot about with klaus kleinfeld. china is facing 1 million people dying every kreyear from respiratory illness. it is a lot about the manufacturing business. where i'm confused, china is switching to a service economy. why should that affect as much as the gdp should go to five. i find the note quizzical. i do believe the he can logical

concern. they haven't made the numbers. nike made the numbers, star buck has made the numbers. apple has made the numbers. i question the execution, anyone on the young conference call. that's an open rebellion conference call that. was a like a banana republic and a revolution against the analysts. when you don't make your numbers in china, i question. he is an earnest man, ma, he is earnest. >> he talks about that same middle class reaching half a billion people in the next ten years. many people have used alibaba as a simple way to play the growth of the middle class from china and the growth of consumers there. it is the simplest way to do so. stock at 120 a year ago may have been clearly overdone as the fervor of 1111 day set in and hit those highs. it has been cut roughly in half. >> i don't want to buy it after

i read this note. >> you don't? >> that's disappointing for me. it's a recognition that china has slowed. they came public at a good time. >> a lot of companies are not coming public. we had another one cancel today. yesterday, of course, pure storage. >> that was not well done at all. >> it is expensive stock. emc, so targeted by pure. it is very interesting to read the ma letter and come back with the conclusion of thanks for nothing. thank you for explaining why your stock is going down. what's the takeaway? >> volkswagen headquarters invaded by german police. there is a lot of international news that is positive for our company. maybe amazon is doing better than alibaba. gm and ford are going to pick up

sales. weir spoke yesterday. they are using an $18 billion unit business in the united states. voex w volkswagen is going to be losing shares. ma's letter says to me, maybe we are not doing as well. that's not what he is saying. it is the way i read the letter. >> i'll talk to you more about the consumer overall. we're going to take a break here. we also got your mad dash coming up as we count down to the opening bell. let's give you another look at futures. we are off the lows at least of the morning thus far. we'll see where we start, though. squawk in the street coming back. ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪

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some mad dash. we are going to talk domino's, let's get to it. >> one of the great stories of our era is the turn around of domino's pizza by patty doyle. he is on tonight on "mad money." i have real questions. the comparable score sales, 10.5% for the u.s. 7. 7.7% international. the supply chain revenues are 56% of the revenues of the parent. that's the money that the franchises pay to the parent. it wasn't as good as i expected. so we've got to learn here. this is one where if you sell it now, you haven't heard what patty doyle has to say.

>> that would be why the numbers would be less than anticipated. >> i hate to say to you, i've got to find out. sometimes it is better to say, you know what, i can't cuff it. i don't know the reason. that's why i want to speak to patty too. he has been most forthcoming. it is not what happened with pizza hut. pizza hut could keep people going. >> and big price cutting in china. this is a separate issue about the way the franchise structure works. there will be people that will short the stock and bet against it more heavily. >> i am not happy with what i read. i need more. >> pat doyle has been able to explain a lot to me. he will do it again. i don't want to bet against him until i hear. >> tonight, on "mad money," we will talk more domino's. we'll check in on so many other things we haven't gotten to. shake shack, that secondary, we'll see how that stock performs. by the way, the opening bell, a few minutes away.

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you are watching cnbc "squawk on the street." we are live from the financial capital of the world. the opening bell is going to be rung in a minute from now. on these days, and it is just two of us, i would like to reminisce on all days together on "squawk box" where you would be the guest host and you would be sitting with mark haines. i would yell, what's the key to this market. i always like to do that on our day's together. i am always interested in what your answer is. so, the answer is, google. google is saying this is not doing anything for the company. it is going to clarify why they have all these great things. it is going to make you laugh and might be the next general electric from way back when ge was an advancing company and that analysis of google being an

inventor of new technologies is something people haven't thought about. i like it it makes a lot of sense. this is the one to watch. it has been under pressure along with the rest. >> there was the opening bell with this thursday. taking a look at that back at hq. probably going to be more red on that board than green when that fully composes itself. the nhl ringing the bell celebrating the start of the 2015/2016 hockey season. doing the honors, nhl's commissioner, gary bettman and the entrepreneur hip conference. i guess they are hip. >> they could be hip. we have so much, david, such an

interesting dichotomy in the retail business. victoria's secret looking for five. a question of where we are going to start seeing the benefit of the lower gasoline prices. steve liesman had a very good report. it has finally happened. >> that it is being spent and not saved. >> retail has been a strange sector to try to get a good read on. we know amazon is doing well and car sales are great. beyond that, in terms of the consumer, it is macy's. i can name any number of performers that were strong performers that haven't been for some time. it is hard to understand buying patterns in that world. >> the return of jcpenney has

hurt a lot of other companies. costco had a plus eight number. you have to back out gasoline. nordstrom is doing better. i keep thinking about amazon and the whole change, the flip of who you like in retail, it is kroger. albert sons comes next week. i don't know what you are hearing. >> we have two big ipos of older companies, not growth companies. first data and albert son's, both leverage buyouts that will be used as, i would assume, deleveraging. >> this market does not want any more stock. growth stories don't seem to have done that well with pure storage yesterday and no earnings at the same time. deleveraging stories and a market that doesn't seem to be as happy as initial public offerings may not go over that well. >> i think this is a market that is looking at certain segments and a rolling bear market.

we have a rolling bear market that attacked health care and biotech off of pricing. we had one that was attacking heavy machinery but off of china. people have to be a little concerned about china. the market opened up. the chinese market is up about 3%. the hong kong market was up 8%. the higher quality chinese stocks traded quite differently from the state-owned enterprises. so china was a disappointment for people. a lot of people were very confused. how about plus three percent last night. i expected a much bigger number from that stock market. be aware of china's grips on this market. what you should see is the reversion back to great growth here? the story of the heavy machinery, commodity rally could run its course here. there, we have to watch petro grass and glencore.

>> in canada, it is pronounced that way and made a sale of asset. when are we dpg to see sogoing sales in oil an grass. these companies are not just standing there and taking it. i do want to point out that people should not take any solace in the rally in china. when you merge that with the alibaba state of the state, you don't feel that china is going to go to 7% gdp. you feel it is going to go to 5%. >> alibaba is up slightly, about half a percent on thatter will. correspondents from jack ma. >> a pulse. that letter is regarded as having a pulse.

>> the key to this, i am surprised that oil holds in but a lot of that is news out of saudi arabia, that they are really strapped. we keep thinking, okay, guys, if you are totally strapped, kr don't you let the price of oil go higher, since they are producing at a rate that i understand from some of the sources, the amount they are producing is extraordinary. you would think they would let the lid lift because their finances are so strapped. do not forget the war they are waging in yet, no news coverage whatsoever. >> they have to keep their population happy. they have hit the capital markets as we pointed out, a number of times. not long ago was the first time in a long time. >> let's watch high growth come back into fashion after being under pressure for several days. let's watch oil to see if that can continue to be strong. at a certain price, we are going to say, i want to sell the

airlines, the southwest air load factors not up to snuff of what i was looking for. that group is hanging in. lots of moving parts. >> on the mad dash, we mentioned domino's. there are a couple of other companies in the same area. we should mention shake shack, for example. let's talk about that for a moment. that's the secondary that's pressuring the stock, up to 26.1 million shares for sale. that is the reason the stock is down 7%. shake shack has still been remarkable it is not going to come as a piece. >> are you surprised emc is only

up? >> i don't know price specifically. i only know it is above 27. if there are no other biders and the credit market is a key here and you are talking about raising an enormous amount of debt and time and everything else and frankly a lack of clarity from all the reports, including my own. i don't know. there is an identify kra that while they could include distributing some of the mwear shares to share holders as part of creating a premium as i said, dell wants to maintain control. you could get down to 51.1%. a stub will continue to be out there. >> the area that has been the strongest in the market has been

this low price with tech. hewlett-packard has had a very interesting move since we interviewed meg whitman. meanwhile, an excellent note. i usually don't talk about these kind of notes but there was an excellent note out this morning about sky work solutions which made that interesting bid for pmc sierra. talking about this multiple shrinkage. >> skyworks solution has brought from 25 times earnings to 15 times earnings. let's overlay that with pure. there is a reversion to buying companies that have lower multiples. that may be confusing to people at home. we are saying, i'm not paying a lot for the earnings up ahead. takeovers, sandisk in the news about whether they are being stalked by a chinese government

company, chinese controlled. sandisk sells at a very low multiple. think about it. my kro micron, sandisk. what's not working is all the high growth. we need to see that change to get leadership in the market. stay focused on that. >> i will make sure to stay focused on that. something people were very focused on yesterday was young. >> excellent piece on the conference call. if they want to understand what happens when you guide people to believing the numbers were better, they make a case the last few weeks were bad. the credibility of this company is on the line and the activists that were in there i think some of them have to be giving up. >> either giving up or pushing really hard.

like corvex. >> there is a lot of chatter about the spin krauf to china. >> i thought kentucky fried chicken was bad but pizza hut. i don't want any pieces of anything having to do with yum right now. the only one that is doing well is taco bell. i keep thinking about chipotle saying some of the other competitors has 80 different ingredients and chipotle has eight. what do you think those 80 ingredients are? it is questionable. why my daughter is a vegetarian. >> not a frequenter of that establishment. >> not even late night. >> not even late night. >> white castle, taco bell. those were the days, david.

now, i come home and i have granola. carl quintanilla makes granola, he and his wife. that's what i have, after i have had a half a scotch. not cheap scotch. >> it is good scotch. >> i have a couple glasses of wine. that's about it for me at about 8:30 or so. >> the market is doing better than i thought if only i could come back to this emc news. >> substantially undervalued. that has also been oi drag on the tape. >> we haven't even started the volkswagen hearings yet. got that to look forward to. something else we have to look forward right now. mary thompson is on the floor with more with what is moving. >> the dow jones very close to the lows of the session. the modest losses so far, very modest on wall street. following a mixed session in asia overnight and continued weakness in europe after more disappointing economic data out

of germany today. the markets are waiting for release of the fed minutes at 2:00 p.m. this afternoon. they are continuing to look for clues of when they will raise rates. there are three other speakers today. the dow up 47 points. if it stays to the down side, that would be the first time in six sessions or five sessions that we would see the dow lowered. yesterday, finishing up for the fourth straight day. it is pulling back a little bit. taking a look at some of the sectors that are in play. we are seeing that strength in energy and materials in early trading or at least materials. energy was higher earlier. now, turning lower as crude oil is above 48.44 right now.

otherwise, a down market in today's session. next week, the big u.s. banks will be reporting their earnings. yesterday, surprise out of deutsche bank, a massive third quarter loss. huge charges of over $7 billion. cred credit suisse to have some sort of capital raise as they restructure investment banks and boost capital levels. taking a look at ge, we had nelson pulse taking a stake in general electric. s&p saying they are cutting their outlook for ge on concerns that it may follow through with the recommendation that the company take on additional debt to buy back stock. ge, as you can see, it has had a very good week right now.

later today, alcoa will be reporting its earnings. that announces the unofficial kickoff of earnings seasons. you can see it is down just about 1% ahead of that earlier this week as well. the company is saying it will be splitting itself in two. the dow is off just about 46 points. pretty much where we have been since the opening bell. david, back to you. >> let's head to the bond pits. rick santelli joins us from the c&e group in chicago. >> we have a 30-year auction at 1:00 eastern. i'll be covering that. last of supplies. a nice place to start. yields are down a bit. when you pair it with yesterday, close to unchanged. that 290 level is very important. this has been a bit stubborn. it said last kreeyear, 275.

we have spent very little time below that level since the end of april. look at the chart starting at the end of april. three sections, as you see on the right side there in august, it has been very buoyant off that level. if we contrast that with the same period with a two-year note on the short end, you could see a bit of difference as there is pressure on short maturities. nobody other than fed speak believes we will see normal zati normalization. this is really important with the dell emc deal. this is virt ului the lowest level since november, 2011. it has turned up a bit. if you look at barclays on the credit spread, a little high yield. the last chart, i know we see a lot of volatility in certain

markets. what's fascinating about the euro versus the dollar sense february, how closely that 1.12 level becomes home based. the volatility was much more aggressive a couple of months ago. something to pay attention to. rick santelli, thank you very much. still to come, roku with the new video streaming devices. we will talk about the company's founder and ceo, anthony wood. could be. keep it here.

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we've been trying to understand what's behind that decline. i followed that.

they are saying that ebay in september came in at 1.1. this is their view. a consider decrease from august's 3.4. amazon said 19.2, a decrease from 24.7. this is ecom's numbers. >> do you know whether they have a good track record in terms of predicting things. if ebay could come out and say that's a misread of the situation, i just want to point out it is not from the companies. it is something like a nielsen number, so to speak. they will say it is certainly better than that. >> interesting to note. >> specially in line of this letter from baba today which you feel is sort of. >> very defensive in tone. like hang in in tone. we screwed up. we didn't really screw up. china pollution. a little convoluted.

i don't see forrest gump in there anywhere. >> no mention of forrest gump. >> i always think that etsy is not our strongest suit in brooklyn. the toll brothers developments are the strongest suits and the gowanus where i have been stalking for property. >> they are going to clean it up. >> whole foods has cleaned up its section. i think they are undervalued not on the basis of the quarter but on the basis of square footage. walter rob would say, we are a little low on value but he is not a promotional man. >> i am talking about brooklyn and etsy and mayor bloomberg honored tonight. i went to hear him last night. >> miss him, huh? >> he is a great man. holy cow. >> bill ackman thinks he is going to run for president. it is stock trading with jim.

squad on t squak on the stre "squawk on the street" is coming right back.

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let's get to stock trading with jim in a deal we didn't get to this morning. >> it's funny. i'm watching macy's trade off. i keep thinking about the real estate value we heard about. that es a deis a deal to be abl buy that. this stock used to be higher. real estate investment index has gone from 79 to 73. that's the iyr. there is a lot of value in real estate. macy's is up. we were stunned that the $72-51 declined. here is someone, black stone being very smart. i know they are in the news for something else. >> black stone is the largest owner of real estate. that is the biggest part of the firm. >> you have a phenomenal relationship with the person. >> john gray. i know him well, very well. >> i am willing to sat smartest person in real estate in this

country. >> they step up and show no fear often. they are trying to step into an area that perhaps has been unfairly discounted. 23.75 is the number. you can see the stock trading not far below that. >> we have had rolling bear markets. i p trying to figure out whether we are in a bull market or a bear market. real estate has been in a bear market. the retayeilers seem to be comi out of the bear market. >> what do you have on "mad" tonight. >> we have the pipe business, klaus kleinfeld. this is prethe split and then let's talk to patty doyle as people short domino's and get all over it. patty doyle delivers just like domino's. if you give up on the stock, you are already down $2 from when i

said don't give up on it. i am worried. >> let's get the story from the ceo when the stock was at 9. >> sounds like a good idea. i love working with you, partner. >> me too. >> congratulations again on getting the emc deal. i wish people knew how important that is to get that deal. no one knew anything. your reporting amazes me. honored to work with you. >> thank you. coming up, we have the ceo of volkswagen about to be a house panel. we will have that hearing on the company's emissions stan dal moments from now.

good morning. welcome back to "squawk on the street." i'm david faber along with kayla taushe and simon hobbs. carl and sarah are both out today. >> we want to take you live to capitol hill where the volkswagen hearing is kicking off. the ceo of volkswagen north america will be answering questions from the house and conference committee. he said he is deeply sorry. we are live from washington. >> michael horn is going to be testifying here in a few minutes up on capitol hill.

we can expect a full-throated apology from the volkswagen ceo and president. he will say he never thought anything like this could happen at his company. he personally became aware of a potential emissions problem as early as spring of 2014. he will say that they are withdrawing volkswagen's application for certification or their 2016 model year vehicle. there is some news in this prepared testimony. this testimony that we have received early doesn't have a lot of, though, is any details on exactly what happened, exactly who was responsible at volkswagen. so you can expect some blistering treatment here of michael horn from the members of this committee who are going to want to know, what did he know, when did he know it and who was responsible? none of that was provided in advance from this testimony. >> we are going to expect the members will ask a lot of questions, guys.

>> not least of course, who first told him there was a problem. did he learn it from someone or within his own company? a group of researchers at west virginia university that were doing the emissions tests that initially sparked off knowledge to the epa that there was a problem with volkswagen that now causes an international scandal. west virginia's attorney general has been the first to file a formal complaint. he joins us on the cnbc interview from wvu in morgantown. attorney general, patrick morissey. welcome to the program. >> it is good to be on, thank you. >> what exactly does the complaint that you filed say and what are you after? >> what we're alleging is that volkswagen in its effort to sell clean engine vehicles deliberately designed, manufactured, advertised and

sold vehicles that didn't live up to their promises. as many people know, the allegations in our complaint say that volkswagen inserted these defeat devices, which were really designed to cheat u.s. emission standards. not only is that not permitted under u.s. environmental laws, that's not appropriate under west virginia consumer protection laws. if you make a promise to a consumer in the state of west virginia or nationally, you need to honor t it is apparent from all the information we have through the west virginia university study and all of the other material that's coming forward that they violated west virginia laws. >> i see effectively, you are asking for $12,000 per customer. the extra that they had to pay to get a clean, diesel car plus $5,000 in civil penalties, given that we understand that the head of volkswagen usa is about to say he accepts the consequences of their acts providing a remedy

and beginning to restore trust around the world, is this an open and shut case for you? how long will it take to get a resolution here? >> it is always hard to predict how long litigation like this will take. obviously, we are seeking to ensure that consumers are held harmless for the damages that occurred to them. what we are asking for is to ensure that consumers who had no idea that this was happening, that we could make up the differential between the product or the car they had versus the vw car. the other issue is that we still have a lot of questions that have yet to be answered. what's going to be the miles per hour that you can get. the fuel efficiency for the cars after some of the repair work is done. what's going to happen to torque and horsepower? we don't know the answers to those questions. we also don't know why they are moving so much slower in the

u.s. compared to europe. >> that needs to be resolved. >> attorney general, as you will know, there is a widespread belief that fixing the cars is likely to result in lower performance and fuel economy despite the fact that they are spewing out 40 times the pollutant that they are supposed to. that raises the question as to whether states like you are able to force people who may not want to go through a recall and have their cars doctored are able to do that. i foe that california can. will you be able to do that in your state? >> the most important thing we can do is protect consumers that were subject to these promises that ultimately could never be met. if there is an individual that purchased a volkswagen product, relying on the promises that were made, there is no reason that person should have to continue to have that car. they should be able to get the car of their choice that meets up to their promises. >> attorney general, isn't the point of this scandal that the

environment is not being protected? there are cars out there that have excess pollutants according to the rules of the country. >> i don't know what you ask volkswagen to do. it is not just about protecting the consumer but about fixing pollutant cars. >> here, we are alleging that volkswagen did not. that allowed pollutants to be admitted into the atmosphere that were not appropriate under the clean air act. the real fundamental issue of this case is that every company that does business in the state of west virginia or across the country must adhere to the rule of law. from a west virginia perspective, the big issue is that there were unfair and deceptive practices and that promises were made and then they

weren't kept. that's the focus of our issue under west virginia law. there will undoubtedly be many other arguments that raise with respect to the notice of violations that came out of the epa. we are focusing on our state based issues in this case. >> what happens to volkswagen dealers in each state where this issue has come to a head? you have the consumers that now have these cars that are much less clean than they expected. they don't want to drive these cars. there are issues with that. there are thousands of people employed by dealers that are now not able to sell these cars. there is a tarnish on the brand of volkswagen. what justice do you need to seek for the dealers of volkswagen cars in the state of west virginia? >> well, we are certainly beginning to have a lot of discussions with dealers. we are knee-deep into this case. i think that a lot of people were put in positions that they shouldn't have been put on as a

result of what is installed. we are having those conversations because so many people were relying on the promises made by the manufacturer. we think there are a lot of dealers put in a very difficult place. we are going to be asking more of those questions going forward. part of what we are looking to do by filing this suit now is we are going to start that discovery process and we're going to evaluate these issues and then ultimately determine whether other entities need to be added and then whether the complaint will need to be amended so that we can obtain all the appropriate relief for all entities in west virginia and beyond. >> from the first state to sue volkswagen. thank you for your time. patrick morissy, the attorney general of west virginia. we'll have much more of volkswagen later on when the statement is read by the head of vw usa and he faces cross-examination. there are many, many questions here, not least what they knew when and why they decided to do

so little about it. late yesterday, reports first by "the wall street journal" and followed up by some other news organizations that emc and dell were in talks about a potential deal. although, this he said the deal remained unclear. this morning, we cleared up at least some of what may be going on here or i should say is going on here. which is that the deal under consideration would be one in which dell would buy emc for a price above 27 d$27 a share. while that price has largely been agreed upon, i cannot tell you what exactly it is, other than it is more than 27. it would be a cash deal. it would require dell to borrow enormous sums of money in the credit markets. perhaps as much as $40 billion or more in a hybrid high-yield investment grade debt race. the numbers are staggering in and of themselves. dell already leveraged buy with a good amount of debt.

emc has a lot of cash and owns 80% of vmware. that would include dell retaining control of vmware. some reports have speculated there would be a spin of that stake. that is not the case according to people close to the situation. there might be a distribution of more of vmware's stock to emc's shareholders under the deal that is under consideration. the talks have been going on for months and there is an expect thags that they could reach a deal as soon as within a week. that being said, there is no shortage of perhaps doubt that they will get there even though they do seem to have agreed, as i have said, to many of the business terms involved here. for dell, it would increase the size of the company in both storage and importantly in vmware's key product area. that i'm told is a really important part of why dell is interested. there has been a lot of conversation from analysts

saying they are very much focused on the so-called private cloud. for emc, it would solve a potential succession issue. the current ceo, joe tucci, was scheduled to step down and no successor has been named and he has continued as ceo. we will have more on this continuing, evolving deal. >> what did you think about the timing of this? as recently as a couple months ago, we were talking about a potential vmware led takeover of emc being one possibility. is their future that much in question? >> i don't know. this certainly seems to be something that's been talked about by the two sides for some time. as you know, there had been talks sometime back with hewlett-packard. prior to them announcing the plan to split that company in

two. right now, this does appear to be option number one. dell simply buying emc and borrowing enormous amounts of the money to do it. if you look at the cash flow, it conceivably could support that. >> it's going to be above $20 a share. >> the sticker price on some of the deals we are talking about right now is gigantic. >> one of the largest lefrverag buyouts of all time. coming up, ralph nader will join us live to give us his take on volkswagen. be sure to tune into "squawk alley." steve liesman will have an interview with new york fed president, bill dudley. "squawk on the street" will be right back. ve management can tap global insights.

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welcome back to "squawk on the street." you are looking at a live shot of capitol hill. the volkswagen hearing is ongoing. opening statements still happening. we will bring you any headlines from that hearing as they

happen. the markets are slightly higher. here to chat with us is tom matt dignet. i must have just butchered your last night. i apologize. >> from tausche, i can feel your pain there. talk about what we are looking for in the markets today. the last week, everyone has said, you can't find a pattern in the market with china closed. china opened, up 3%. that wasn't enough. >> china was catching up. we have had a nice run in the market. a short time period since the difficulties in the third quarter. if anything, the opportunity that was created during all that volatility is still there. there is still opportunity in the market. >> where is the opportunity? if we are hearing from hsbc that the u.s. tenure is going to be 1.5% by the end of next year, the market is stumbling.

where do you go? >> i don't know if i would bet on the 1.5. where else do you go but equities. if this is our normal interest rate environment, equities are probably much lower and stocks look really cheap. i don't think that's necessarily the case. if you are looking for 7%, 8% return, that's a really high return. >> do you have to be able to predict the direction of oil to predict that the market will go up? from the earnings of the u.s., the u.s. economy benefits from lower oil prices. right now, if we stay in the current realm, that's pretty low relative to where we were a year or two ago. >> there is a report suggesting that consumers are spending all of what they have saved from lower gasoline prices and still, arguably, the consumer is nowhere near as strong as you might expect it to be given

that? >> it depends on what metric you are looking at. if you work at g.m. or ford, you think the consumer is pretty strong. if you are at pple, you think i the consumer is pretty strong. you go to the malls. they are not as crowded. people are moving to more online shopping. it is a different type of consumer i don't think the consumer is weak. they are stronger. >> minutes of the last fed meeting, which will tell us how close they came to raising interest rates. is that capable of spooking the market. weak jobs report, weak trade data and everybody has pushed back their expectations. >> i don't know what's going to be in the minutes. if they were close, that was their chance to move in. with the employment report last week, they probably push them off again. whether or not they raise in december or march, if we are at 100 basis points, fed fund rate a year from now, we are still at a very accommodating fed.

>> if they miss their chance in september, when does that chance represent itself? >> from janet yellen as perspective, she pays a lot of attention to the lower energy prices. no harm, no foul, we will just go lower for longer. >> we'll see what those minutes say out at 2:00 p.m. today. >> thomas, we appreciate your time this morning ahead on the show, volkswagen ceo, michael horn, getting ready to give his testimony on capitol hill. he will start with a statement and cross-examination which could give us some fundamental answers of what went wrong at vw. hungry equals overshopping.

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wow! you are looking at live pictures from capitol hill where michael horn, is getting ready to testify before the house investigative committee. of course, he has already sent in a prepared statement released last night that he knew that volkswagen might be breaking emission rules 18 months ago as we await that swearing in. we are joined by the auto expert and reuters managing editor paul ingracia.

paul, you looked over at the statement. what are you looking at from the head of vw america? >> well, i think this will actually follow a pattern that will be apologies, there will be some legal proceedings. hopefully, from volkswagen's point of view, a couple years from now they will come out of this. the real question is, how much is it going to cost? one of my colleagues for reuters breaking views did some numbers crunching. he calculated that volkswagen saved about $4 billion by cheating on its diesel emissions. ubs has come out saying the cost of fixing all of this, penalties, lawsuits, fines, recalls, repairs, will be $40 billion. so the wages of sin are pretty tall tri in this case. >> what we have to determine is whether there is a criminal liability. working away at this statement,

there are two fundamental questions. one that he says he might have known 18 months ago that they were, in fact, breaking emissions standards. who, actually, told him that, whether vw told him that internally or as a result of the work that the west virginia researchers have been doing going to the californians or the epa, saying there is a problem with the cars and that was the first time that michael horn learned that there was a problem from the regulators, perhaps not from within vw. he doesn't say where he learned they had a problem. >> not at all. it is possible that all he got was a conflicting set of data that said, hey, our data is not what we are really telling the regulatory authorities. it is possible he was looking at data. it is possible someone told him something. it is possible someone in the company told him. it is also possible these

external groups, the west virginia researchers and that sort of thing, unof many, many unanswered questions. >> he said he thought there might be an emissions prob lep. he said it was only in the last several weeks he knew there might be a device. they were going through a recall in california on a missions despite the fact that the rest of the organization hadn't told him of the do he feet device. >> we advise you under the rules of the house and committee, you are entitled to be advised by counsel. do you desire to be advised by counsel during your testimony? would you please raise your right hand and i will swear you in? do you swear that the testimony you are about to give is the truth, the whole truth, and

nothing but the truth? >> thank you. >> we show the witness answered yes. you are now under oath and subject to the penalties set forth in title 18, section 1, 001 of the united states code. we now give a five-minute summary of your written statement. if you will please make sure your microphone is on and pulled close to you so we can hear you. >> press the button. is it on? >> michael horn, the head of vwusa is now going to read the statement read to the press yesterday afternoon. let's pick up or counsel ver sayings with paul ingrassia. he said he didn't know, according to the statement he is about to read, about the defeat devices until the last few weeks. in the spring of this year, volkswagen was being through a recall. either they didn't tell him there were defeat devices in the

cars as he went through the recall or he is not telling the whole truth here. what do you come down on that? the company has hired a top-drawer u.s. law firm to do an external investigation. i'm sure that is one of the big questions jones day will want to get at here. it is unclear who dreamt up the idea of the defeat devices or cheat devices, shall we say. it is unclear who actually developed them, unclear who ordered the installation and when. there are very many fundamental questions. look. in a large company like volkswagen, it is not unheard of for the right hand or the left hand not to know what each other is doing. te it is entirely possible michael horn didn't know what was going on. >> we are going to fix a commercial break here. we want to get back to the

cross-examination and learn what we can. stay with us if you would, sir up next, the ceo of volkswagen set to answer questions from the house energy and commerce committee. that will happen moments from now. plus, former presidential candidate, ralph nader, weighs in on volkswagen and what this means for the auto industry. "squawk on the street" will be right back.

volkswagen america's ceo, michael horn, testifying on

capitol hill. joining us on the phone, consumer advocate, ralph nader. it is great to have you this morning. >> thank you. how exactly should we expect this fact-finding mission to go today considering this is a company who has up until now allegedly been deliberately of few skating the facts themselves? >> the key word is deliberately. there has to be a penalty. that's the big hole in the air quality act. without criminal penalties to be imposed on culpable corporate officials such as the ones who are responsible for the vw debackle. you are not going to get deturndeturn deturnts or respect for the air

quality. >> how do we go about quantifying the damage? it is so broad. we need some real numbers and facts at the heart of it. given the scope of this, it seems nearly impossible to quantify exactly what damage has been done to our environment to calculate what that penalty is, what the punishment for this company slu be. all they can work on is how much the nitrous oxygen pouring into the air and people's lungs is causing. then, there is the vw recall challenge. what's the fix that vw is going to come up with? they have three categories of diesel engines here and about half a million of these cars in the u.s. that hasn't been determined. that will be subject to the house hearing, i'm sure.

what's the incentive for vw diesel engine owners to take their cars back. they like the power and the torque and the gas mileage. they know any fix is going to likely reduce those levels, which is the reason they bought the car. this is unlike any other defect recall situation that you have covered. the vw owners are going to have to have a social conscious. they are going to have to say, we are going to bring it back because it will reduce pollution in the air. it will reduce the performance of our vehicles. vw has to provide a monetary incentive. $500 or more, just to bring back the vehicle for the fix. >> i think there is a $2000 loyalty reward option on the table for people that would like to trade in. the point that you are making surely is that in most states in

this country, registration renewals are not with held if people haven't gone through a recall. we had the west virginia attorney general on the program about 20 minutes ago. he was concerned about doing right for people that had bought cars and were misled. forcing those people to a recall. you put your finger on it. it is going down to a state level. the way to force the defect recall to work is to say to vw owners, even though it is not your fault, folks, you are not going to get reregistered in the coming year unless you can demonstrate you have sent your car back to be fixed at the volkswagen dealer.

giving them $2000 for trading in their vehicle, that's not going to cover the waterfront. i think vw is trying to get away on the cheap here. there is too much media pressure, increasing congressional pressure. the states are getting into it. the owners themselves are upset. the key is, criminal prosecution proceedings have to be instituted. that's the only thing that's going to get the attention of these corporate executives. this software problem is way beyond vw. drivers are losing control of their car as these cars become computers on wheels with very sophisticated software that can be hacked or manipulated. >> speaking of that congressional pressure you have raised, let's take a minute to listen in to michael horn. >> then there was this communication that the epa or

ae agencies could check on their own for auxiliary devices, including defeat devices. at that point of time, i had no understanding what a defeat device and i had no indication whatsoever that a defeat device could have been in our cars. >> so let me go back. mr. horn, the new chief executive of volkswagen, mr. mueller, has been quoted in media reports saying that only a few people were involved in the deception. i have to say that i don't take much comfort in that specially knowing that volkswagen has been known for superb engineers and mechanics. i wonder, shouldn't they have picked up on this. isn't it true the technology was installed at least initially, because the cars could not meet the new more stringent admission standards for diesel engines? >> yes, to your last question, this appears to be this way and to newspaper articles about possible quotes of mr. mueller, i don't want to quote.

as i said, the investigations are preliminary. one week, our group did the investigation from september 22nd to october 1st. the entire investigation is turned over to an expert agency law firm, which is now going through the systems outside advice. >> what we find amazing, the university discovered this. >> you are listening to the cross-examination beginning on capitol hill. michael horn, the ceo of volkswagen. >> mr. nader, your reaction to this question and answer session. >> you can see that volkswagen is trying to engage in invasion in order to protect higher-level executives. if they didn't know, they shupt have been on the job.

this invofls 11 million vehicles worldwide. they are trying to say they didn't know at the top. what the testimony reminds me of is that this problem had its source not only in john dingell making sure there was not in the quality act. he was the congressman from michigan now retired but there is a flaw in the law where the testing for vehicles, for fuel efficiency and air plaguollutio done by private laps, not the epa, private labs in germany and the united states. these should be done by public lab bra torres held accountable to the public under the rule of law. >> we did just hear the head of vpusa admit that the defeat devices were put in deliberately, because the cars did not meet tougher diesel emission standards.

surely, you are able under present law to get criminal prosecutions here if this type of revelation continues. you don't need to change the environmental, do you? >> yes. the only way they can get criminal penalties is under title 18 to say if a company lies to the government and its reporting process, it can be prosecuted. that's what general motors was exposed to, that title 18 under the ignition switch defect. that got away with it with a sweetheart settlement with the justice department recently. if it isn't title 18, there is nothing in the air pollution act, even willful admission that you just alluded to, that they knew about and was done deliberately to evade the federal air pollution laws and spew forth nitrogen oxide into the air. only lying to the government

under title 18 that's left for the public to hold these executives accountable. >> there is a criminal inquiry on going. we will continue to monitor the hearing on capitol hill. ralph nader, we appreciate your time this morning. >> thank you very much, all of you. on a more sobering note, i don't know if this will bring you any headlines from the q and a as they happen. finance and scentral bank membes are gathering. our very own jeff cutmore is live in lima, peru. >> hi, jeff. the message is directed firmly as the u.s. federal reserve and global banks. what they are warning about is a failed normal zation process. at the dressed this up with three key issues, top of the list here, emerging markets and corporates that have binged on this low credit.

they point to $3 trillion worth of risk as far as emerging market companies are concerned and failures in that sector. they say there is a lack of liquidity across a number of different asset classes. they point to asset managers as a potential risk here. finally, they discuss the idea that we could be headed for global financial crisis, 2.0. they are urging international bodies and central banks to work together on policy to make sure we don't have a misstep. coming back to where i started here, as far as the imf is concerned and christine lagarde, who is on her feet at the moment. that misstep would be the fed lifting off too soon on interest rates. this he used the opportunity a couple of days in lima to send a message to the federal reserve about interest rate policy. back to you. >> thanks very much.

jeff cutmore reporting live. roku out with a new set top box competing with apple and google. the ceo will join "squawk alley" live. we are back after this break. at baird, we approach your wealth management strategy the same way to create a financial plan built to last from generation to generation. we'll listen. we'll talk. we'll plan. baird.

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over to rick santelli for this morning's exchange. if it is alcoa's earnings in the afternoon, it is rebecca corbin in the morning. thank you for being my guest today. >> thank you for having me. >> listen, your respondents are international for your surveys, you do them every quarter. last quarter, it didn't seem to me that we were expecting the type of slowdown we have seen. the survey respondants seemed to

be moved by the market. why were they so blindsided as many were? >> i wouldn't consider them blindsided. there was a slight uptick from two quarters of increasingly bear sentiment. however, when i came on last quarter, i did say there is wa a major concern regarding china. >> china was the right spot. let's dig in with china. what information and how much anxiety is there in china? is it systemic? is it trade? how much is it going to influence investment perception? >> when we saw the market volatility, there was some question whether it was fundamental or more trading rated. i would say investors and management teams are much more concerned. 95% are moderately concerned. those on the ground are very

concerned relative to the northern european counterparts. >> everybody was in the same camp. the majority were looking for september and now the majority seem to be looking towards next year which is a bit of a die ver generals and december seems to continually crop up. >> last quarter, we surveyed them. they were focuseden o the fourth quarter. here we are. 57% are focused on the fourth quarter. the fed is like a girlfriend who keeps leading us on. hopefully, we will get lucky in december. >> even though there is a lot of bearishness, that doesn't mean there isn't a place for people's money. what are the popular sectors? >> people are looking for organic growth. in the absence, we have seen a lot of rotation in technology which gets me a little bit concerned. we have an influx. indicated some concern about top line growth. epa should be okay. >> why do you think it is with the health care side of the equation getting slammed, is it

surprising that technology offers when there is anxiety, technology is the beneficiary. are there any nuances? >> technology is the beneficiary of all the money rolling in. my concern is evaluations are pretty frothy right now. >> it is going to be like the 30s. this big calamity in the equity market. the u.s. is one of the bright spots. >> absolutely. it remains a bright spot. we're excited for what's going on with earnings season this quarter. >> rebecca, thank you. when the industrial survey comes out, we will look at that. >> rebecca corbin, thank you. we'll have more details on what u.s. chief, michael horn, i telling congress right after this.

volkswagen america's ceo is undergoing questioning. worth pointing out that german prosecutors have this morning

rated the office of vw. more information. >> it was wired to us on october 1st. i don't want to call out the number, but significant amount of money. >> to put the money where they think it would be fit. now when i come out of this congressional hearing on friday, we look at the next programs in order how can we help the dealers with the cash flow with the cash position because one thing is very, very clear, and i'm sincere about this. the dealer profitability is my first objective. i said this on january 1st, and i continue to say this.

that will be the first scenarios on the table. the full committee, mr. mroom are for five minutes. >> thank you, mr. chairman. you say that it can't be fixed by a software only solution. you don't have the necessary timetable as to when the fix is going to begin. have you been given enough information to determine how you can make informed judgments on whether the fix will actually work? how do we know that what you are proposing to do is actually going to work? >> whatever i tell you here today is agreed and is coming from the technical engineering department in swrerm anne, and along side our actions in wrurp, we have to have our actions in the u.s., and the technical -- >> no, i understand, but the thing is is it fair to say that

you really don't know whether you can fix these vehicles to meet emissions standards. >> we know we can fix these vehicles to meet emissions standards. so what happens with regard to other things, like fuel economy engine performance? people bought these vehicles thinking they were going to have -- meet the emissions standards. they were going to have good fuel economy. they were going to have 2k3w50d engine perform wrans. snoo that's volkswagen, michael horn, telling a congressional panel, we know we can fix these vehicles to emissions standards. we will bring you more headlines a little bit later on. elsewhere in washington, news today, hillary clinton.

>> we have a democratic debate coming up. bernie sanders and martin o'malley, and other opponents for the democratic nomination, and ahead of that debate she's coming out with some new proposals today. low profile way. doing it by paper and not with a speech, with new regulatory provisions related to wall street. >> she would also eliminate some funds to do risk where i things that the banks themselves are not allowed to do. she would revive the swaps push-out rule which was stricken. it was part of dodd frank and stricken in the last budget deal. finally, she would sfoex on prosecution of individual executives. not just firms themselves for wall street wrong doing. now, you might wonder whether this is going to satisfy the democratic left that's opposing

her. absolutely not. martin o'malley, the governor of maryland, is out with a statement saying secretary clinton's plans will fall short. martin o'malley is calling for the reinstitution of glass sea gull which was done away with during bill clinton's administration. this is simply teeing up the debate in las vegas on tuesday, but hillary clinton is trying to take a step to protect her left flank as she did yesterday by coming out against the partnership, guys. trump is not as hostile to wall street as swreny on the democratic side.

>> let's check out what we can enjoy on cnbc for the next 60 minutes. take it away. >> thanks, simon. we're going to continue to follow the dell emc combination possibly and walk through what that would mean. also, the ipo window, is it closing? certainly looks like it might be. finally, that vw hearing, we'll continue to track it. all that and more coming up on "squawk alley."

good morning. it is 10:00 a.m. at dell headquarters in round rock, texas. 11:00 a.m. on wall street. it's "sidewalk alley" live. ♪ ♪