>> live from new york where business never sleeps, this is squawk box. >> good morning, everybody. welcome to squawk box here on cnbc. i'm becky quick with joe concerner and andrew ross sorkin and earnings season is in swing. a number of stocks on the move including jp morgan and intel. we'll break down the numbers in a minute and then among the companies set to have quarterly results today. bank of america, black rock, wells fargo and delta before the open and then the big momentum stocks reporting as well including netflix. it's not just about the corporate profits. at 8:30 eastern time we have retail sales and the producer price index. later it's august business inventories and the beige book. >> a couple of stories this morning, chinese inflation easing more than expected with consumer prices rising 1.6% over

a year earlier. china's producer price index dropped more than 6%. 43rd straight month of declines. delaying it's plan amid market volatility and four of the five companies that have gone public priced offerings below their expected range. two ipos to watch today. first data and super market chain are both scheduled to price this afternoon but of course already starting to see cracks in the ipo market. we'll see where those two go. shares of sandisk jumping this morning. the flash memory company hired a bank to explore a sale of micron technology and western digital said to be in talks with sandisk. >> merger is going through. we'll talk about that. but is it the end or the beginning? >> we're getting closer to the end. >> but it's frothey. >> these are 60 and $100 million deals too, right?

>> i would argue all being done by companies that have weak fundamentals and that's the scary part. the question though, they're slightly more rational than the deals at the real end of the bubble which is to say the pie in the sky crazy idea things that make no sense. >> worries. >> yeah. >> well, i don't, you know, who cares who makes miller light. >> i don't know how you get over some of the regulatory hurdles. >> that has to be rationalization. 90% of that. >> they're operators. they come through and know exactly how to strip out all the costs. >> i never thought i'd say it but i heard those companies are going to report and i say you know i'm interested. i'm interested in how the reports are going to be. i never thought -- but i am. we have been basing our view of the world on jobs and china.

it's going to be interesting to get a snapshot of what's going on. >> and to see if it confirms or concerns or companies are trading better than we think. >> multinationals, strong dollar, how are exports. how the economy over there? how's the economy domestically? i'm excited about earnings season. >> i talked to a few ceos and i won't say who but the ones i did talk to i did not get great outlooks. i didn't hear amounts of massive confidence or anything to shake this view that we have taken over the last couple of months. >> we're going to have harwood on. hillary is a good debater. >> she is. she's impressive. there was no contest from anybody on that stage. >> i read that she gave an impassioned defense of capitalism. >> yeah. >> and bernie and o'malley is big on --

>> did she go off message? who is the real hillary? i'd like her much more if i thought she really believed that about capitalism. >> she has been holding firm on not breaking up the banks for a long time. >> but it was capitalism saying we're a capitalist nation and we have to protect people but we are capitalist nation. >> what are the numbers going to be like 5 million. >> probably. >> that's pretty good if you're looking back a couple of years ago. >> it moved more quickly than i expected. the one thing the democrats have going for them and the republicans don't at this point is they seemed much less antagonistic toward each other. it was a more united front and they weren't really attacking each other where the republicans are still trying to make a name for themselves because it's such a big field that it gets more pointed and you have people

really going after each other. they tended to treat each other more respectfully and trying to attack the republicans versus each other. >> right. there was one other thing i was thinking. anyway, stocks to watch. we were out a little late. >> we were out a little late. >> just a little. >> for us. >> we were all home by 10:00 and for us, that is late. because we are lame. >> yes. >> jp morgan, thank you. it's always hard to do that. someone stole their slot or something? >> it was the columbus day holiday which messed everything up. it was a banking holiday on monday so it was a game of musical chairs and they lost out. >> falling short of estimates on the top and the bottom lines.

the bank was hit by weakness in it's trading division and revenues fell 15% and we'll have more on jp morgan from an analyst in just a minute. intels results were above expectations but below last year. weak demand for pc chips was offset in this case by strength in it's data center and internet of things and asml shares down this morning. the company is a major supplier. earnings fell short of estimates and new orders dropped more than expected. cxs posted better than expected earnings. cost cuttings and lower fuel costs. the company cautions it's significant coal head winds will continue into next year. >> let's get a check on the markets this morning. yesterday you saw the markets pull back slightly. it broke a seven day winning streak for the dow. this morning there's red arrows but these are modest declines. the dow futures down close to 16 points.

s&p futures down close to 3 and the nasdaq off by 7.5. if you take a look at early trading in the european markets there's red arrows across the board. biggest decliner seems to be the dax down by .9%. also overnight i asia you can see that the markets closed lower. >> let's get back to jp morgan. ceo jamie dimon is calling the results descent. joining us to talk about it is director of u.s. he equity research. thank you for coming in. i should say the headline is jp morgan is getting smaller and the first sentence goes on, really talks about how their decline in assets is down $160 billion. you'd think just on the headline alone it's a bad thing but most

analysts think it's a good thing. explain. >> the fed has these enhanced surcharges for the big nasty banks and so jp morgan is trying to work around that. all the components of the balance sheet that get treated poorly by the new rules so they're trying to adjust to the new reality to their credit. they went down one bucket in the new fed's proposal. from a 4.5% charge to a 4% charge so that was the silver lining. >> can that go even lower or no. >> interesting thing is it went up because the cash went down so you make no money on cash. so they are going to keep at it, right in but jamie was clear last night in saying it's going to take awhile.

you say okay for example they have the commodities business. >> we try to look through the business rationalizations, you know, all of that adjustment. the real trouble is outlook was weak and across several of the businesses. security services which is a global business, em concerns weighing that down, card, you have competition, right? what happened with amex and citi with the costco deal. all the partners trying to take bigger pieces of the economics. that's going to weigh on the card revenue. you have outlook fair markets revenue not to hot here in the near term to every chance that they had they put out a sober out look. >> do you look at this and say these folks are good for what's to come with other banks and the economy or do you say these are operation challenges at jp

morgan specific? >> the big banks are herd animals. they tend to move together. you're all surfing the same waves. the economic issues are going to impact them similarly to how they impacted jp morgan so it's going to be a difficult earnings season for the big banks. >> do you like any of these stocks? >> i like morgan stanley especially given the beat down the stock has taken. up 10% year over year. a lot have it and it was the big story in the first half of the year. people felt that was over given the volatility in asia we've seen here recently. jp morgan sending the message that's not over. morgan stanley has the most leverage to equities so when i'm thinking about read throughs and what i want to load up on this morning it's probably more fwan stanley. >> who would you sell this

morning? >> well, the market is going to sell jp morgan. the group will be put for sale broadly so if you're asking about how you pair up or what have you, you can almost take your pick and jp morgan is where you have the less basis risk because it's already out of the bag. >> central bank officials sound off. many calling for a move sooner rather than later. but now another top fed head is coming out in favor of a watch and wait approach. we'll kick off that debate, next. first as we head to a break, here's a look back at this date in history. ♪ hi watson. annabelle, your birthday is tomorrow. i'm turning seven. what did you ask for? a princess. and a pony. you like things that begin with p. i like pink frosting too. will you have a cake?

yeah. i was too sick to have one last year. the data your doctor shared shows you are healthy. are you a doctor? no. i help doctors identify cancer treatments. i want to be a doctor someday. i can help with that too. watson, i like you.

it's gotten squarer. over the years. brighter. bigger. it's gotten thinner.

even curvier. but what's next? for all binge watchers. movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. >> i ripped my pants. you shot a hole in my pants. >> can you give us a little peak mark? flash a little suspender? >> oh, man. i'm going to quit dieting and quit exercising. >> you don't have to now. >> you can hide it. >> i'm a fat guy in a little coat. >> fat guy in a little coat.

>> we celebrated a little bit last night and we want you to be a part of it. tomorrow, come and celebrate throw back thursday with us in the plaza right outside our studio from 7:00 to 8:00 a.m. eastern. andrew, becky and i will be joined by q. carl will be there. david faber and jim cramer all here tomorrow. they're working double duty and you get tickets. they're free but there's going to be scalpers. i know this. send an e-mail to squawk box-tbt@cnbc.com. wow. >> just read the screen. >> read it from there. >> and we did have a great celebration in the city last night. there's dick parsons. >> did you see him?

>> i did. we spoke about andrew and his youth again. he had never heard the story of what you were like as a 12-year-old and 14-year-old. >> who do we miss? there's cindy haynes. he came all the way from chicago and he missed the cups win but wow those are are pretty good shots. that person knew what she was doing with the camera or both of them did. i haven't seen these. >> that's the whole team. >> thank you for arranging. you helped with the monkey bar. >> you have juice. >> you have juice. >> we had fun. it was a good time. >> and we want to drop names? who was there? >> that's why we used pictures. >> steve schwartz.

nelson peltz. >> miller. >> ron barron. >> dan lobe. >> barry diller. >> yeah. >> apparently more pictures later. we have more pictures later i'm told. >> we do? >> yeah. so save yourself. >> all right. let's get down to business. it looks like traders may be betting on 2016. rates futures suggesting that the first fed hike since 2006 will take place at the march fomc meeting. right now let's bring in mark grant. he is managing director at hilltop securities hoe was also there last night. >> i was. >> and macro economics chief economist ian shepherdson. you weren't there. >> i got in too late for london. i really tried. >> all we were doing was getting all these fat cats in one room to grill them on income inequality. we weren't drinking. we were there to land journalistically based editorial

punches against all of these guys that are part of the problem. >> we were there to have fun last night. >> speak for yourself. >> i thought i was helping you express -- >> no, i was telling her to speak for herself. >> you were just looking at how these guys live. >> studying. research. >> just looking and saying boy, bernie sanders was right. look at these guys. >> hey, mark, you have been saying for a long time that you didn't think a fed rate hike would come but now the rest of the market has caught up to your expectations on this. do you think march is actually the time? >> it depends. we're getting very close to going into a recession. we have tremendous problems coming out of china. we saw deflation in my friend's country because of probably oil. i expect oil to do nothing but flat line around slightly above $40 so i don't think the fed --

the fed certainly concentrated more on global issues than i've ever seen it concentrate in the last two decades and i think this is going to be a big part of their decision making possess. >> do you agree with that assessment? >> respectfully not. i don't think we're anywhere near recession. unless you're in manufacturing. if you're in manufacturing and made a living out of selling things to china things are really tough. but most businesses don't do that. we're a domestic service sector economy and it's enjoying this huge wind fall from the drop in gas prices. it's very unbalanced. you can find pockets of real weakness but there's pockets of real strength. the macro is in the labor market and the unemployment rate is dropping like a stone and i think that probably they are going to move sooner rather than later. slowly. >> i'd agree with mark's assessment that they are looking at the global conditions more than i've ever considered and when you start thinking about the strong and whether or not

that creates a problem that's the one thing that could make it difficult for them to raise. >> it's a big problem if you're in the export business but 13% is export. 87% is domestic. most people are doing okay in service sector businesses which are enjoying that gas price wind fall so, you know, when you weigh it all up on balance you have to remember the service sector is 5.5 times bigger than the manufacturing sector and that's where the action is. it's a terrible time to be in a dollar sensitive manufacturing business, no doubt. but most companies in the u.s. aren't in that space. >> outside of services, housing seems to be doing better. >> at last. it's been a really hong haul but we're seeing real pick up in demand. afford blt is okay. credit standards, lending standards are finally getting easier. credit scores are falling for applications and loans are closing more quickly which is a really big change and it's becoming more competitive again. something has been hanging around for five or six years is becoming a more positive force and these are below the radar

screen at the moment because all the focus is on manufacturing. big names doing badly but that's not most of the economy. >> mark, you have been very right on interest rates for a long time. for awhile it made you positive about u.s. stock but lately you have not liked u.s. stocks. what do you think happens if your concern is that we're looking at a global recession potentially, that doesn't provide a lot of safety anywhere. >> that's correct. though i'm not, as andrew pointed out once in his new york times article such a bear about this, i do think there's good spaces we were discussing prior to coming on which are the taxable space. i would rather think it's much safer to get yield and 2 or 300 over versus the corporate bonds which have a lot more exposure to the, to international situati situation. they can raise rates.

they can raise taxes. they don't have a dollar issue. they don't have a china issue and i find that space quite attractive versus being in the equity market right now. >> what would have to happen in equities before you would say this is a place i'd like to play again? >> they go down another couple thousand points. >> couple thousand points. >> on the dow. not on the s&p. so you think the market is overpriced at this point? >> the market is overpriced. it doesn't take some complicated equation. your comments on the manufacturing sector were correct without question. but you're also looking at twitter cutting people. walmart is cutting people. macy's is cutting stores. caterpillar is in big trouble and you're looking around at a wide variety of companies indicating to me that there's real serious issues here. >> profit margins are going to be tougher to maintain and these aren't huge lay offs. these aren't recession type lay offs. these are trying to maintain profitability in what is a slow

growth. not necessarily a negative growth scenario. >> no but it's an indication. especially twitter. >> i'm picking out a few names it' giving me some pause. >> are you looking for the market to tank or to sort of live in this zombi land and wait for the real economy to catch up? >> i think zombie land and heading downward i think china has real problems. substantial problems. even the data under china this morning was not good. i think the banks in america are going through some substantial down sizing that's going to effect things and i have concerns in here plus the technicals on the market don't to me look very positive so i look around and say, okay. if it's a time not to get appreciation which is what we look for in the equity markets i'd rather get the yield and get

some stability and get 6% in a bbb or a rated taxable bond. >> tim agrees with you on the overall market but one point he made was the market has gone up onslow growth and sort of weak prospects for five years and now he thought the economy would get better and now we're back to slow growth and zero interest rates. we're back to what propelled the market all along. >> there's one thing you're not including in there. the market was propoelled by quantitative easing. >> hasn't stopped in europe. >> yeah and in europe the equity markets are down more than $600 billion while they did qe. >> 600 billion. what was that? >> shovel ready projects. >> mark, thanks for coming in. >> my pleasure. >> ian thank you for being here. >> thank you. >> we'll catch you at the next 20 year party.

>> 25 maybe. >> there we go. >> let's do 50. >> when we return the democrats running for the white house square off in las vegas. the highlights next. also donald trump wasn't on the stage but that didn't stop him from trying to steal the show. he live tweeted the debate writing story there's no star on the stage tonight. you'd be surprised how many followers he got after that. we're back in a moment.

♪ welcome back to squawk box. we're talking politics this

morning following the first democratic presidential debate. john harwood is in vegas for the presidential debate. >> i was there but i was not in the crowd. i was watching and it was a good night for hillary clinton. first of all she was surprisingly effective in going after bernie sanders her chief principle opponent on the issue of guns. >> secretary clinton, is bernie sanders tough enough on guns? >> no. not at all. we have to look at the fact that we lose 90 people a day on gun violence. it's time the entire country stood up against the nra. >> now hillary clinton also benefitted from two assists. one of them came from kevin mccarthy a few days ago when he acknowledged the political

nature of the benghazi committee in the house and the other came on stage from bernie sanders himself that dismissed the significance of the related e-mail inquiry. take a listen. >> but let's just take a minute here and point out that this committee is basically an arm of the republican national committee. it is a partisan vehicle as admitted by the house republican majority leader mr. mccarthy, to drive down my poll numbers, surprise. and that's what they have attempted to do. i am still standing. i am happy to be part of this debate. >> let me say something that may not be great politics. but i think the secretary is right. and that is that the american people are sick and tired of hearing about your e-mails. >> thank you. me too. me too. >> the middle class -- and let

me say something about the media as well. i go around the country and talk to a whole lot of people. middle class in this country is collapsing. we have 27 million people living in poverty. we have massive wealth and income inequality. our trade policies have cost us millions of descent jobs. the american people want to know whether we're going to have a democracy as a result of citizens united. enough of the e-mails. let's talk about the real issues facing america. [ applause ] >> thank you bernie. >> and that, in a nutshell, is why it was a very good night for hillary clinton. >> there are a couple of differences, john. i think she is a presumptive nominee. when the republicans gang up on trump, no one really believes he's going to be -- at least in their group believes he's going to be the presumptive nominee.

so they don't care if they damage him. jim webb and even bernie sanders know who is going to be the nominee of the democratic party so there's a little bit of -- i don't expect any of them to be too tough on secretary clinton. i guess the vast right wing conspiracy theory, how long ago when it was first used? >> 1998. >> it's evergreen. i guess it's evergreen because it's still working. clinton -- it's never self-inflicted. anyway, john, stay with us. let's bring in the ceo who was an advisor to president clinton and henry barber, republican strategist and partner at capital resources. henry, you're from mississippi, aren't you? >> yes, sir. mississippi. >> that's a pretty big name down

there. i actually had to check. nephew, is that correct? of haley. >> uncle haley, yeah. >> that's okay to mention that, right? we have had haley on many times. and you've been involved with a lot of stuff with your uncle over the years and with the republican party. was it a strong night for hillary clinton? >> well i will say cubs had a better night than hilary but hilary did win the debate but let's not get too excited. she's beating a socialist and three folks that just didn't belong on the stage so a good night for her as far as probably winning the primary. but i don't know that she did herself a lot of favors as far as trying to win the white house in a general election. >> it probably wasn't seen by as many people either but there is a pretty sharp contrast between the way that the republican candidates are treating each other an the way the democrats were treating each other.

and in the general election that's probably not a bad thing for the democrats. >> perhaps. perhaps. but, look, this was a night where it was plain her opponents didn't really want to take her on. a couple of times folks atented to but then they backed off pretty quickly. >> yeah. we're playing some sound from that. anyway, thank you. don, i guess you would say she had a great night. >> i thought it was a terrific night. you have to go all the way back to july 13th. three months the last time she had a good day and that was the day she gave her economic policy speech and she came out in favor of a growth and fairness economy and talked about what the issue is that we're facing in this country, that nobody in either party had a chance to talk about again until last night. and, you know, i think that instead of talking about how to

make america great again, it's how to make america grow again. that's the issue. so you begin to get more of that not just from hillary clinton but other people on the stage. let me say one thing about bernie sanders. everyone is focussing on the fact that he let her off the hook on the e-mail thing. which he did. but he got back to substance and the issues at hand and that debate among all of them was much more focused on a lot of the concerns that the country really has than any other public conversation has been throughout the entire campaign thus far. >> how can hillary say we want to return to growth when we're talking about seven careers of policies that she has just sort of doubling down on that have put us in the position for where we are with no growth right now? do more of the same? double down on what hasn't worked? >> wait, wait, hold on -- joe, are you talking about the economy that was collapsing when obama came into office?

>> wow, john. i thought don was here for the democratic side, john? >> well, i'm just saying -- >> i know you know it's the weakest recovery. we're still unable to raise interest rates seven years into a recovery. we have to stay at zero because we're not sure the economy is strong enough to with stand a quarter point increase in rates. 70% of the american republic think we're in the wrong direction. >> she was secretary of state. not secretary of treasury. >> we the strongest economy in the industrialized world. >> i see it. i see it. hey, henry, what do you think? you're hearing this too? >> clearly some of the losers last night were the american people who think the country is on the wrong track. if you want a third term of barrack obama, then last night was a great and exciting night

for you. but for folks that are worried about economic growth and jobs and securing the border, better sensible foreign policy, you were a loser. and hillary clinton, she may have lurched left of a socialist but that's not going to help her win the general election. it's not going to help get the country back on the right track. >> i think she looked like the most presidential person that's been on any of these stages thus far and as far as the republicans are concerned and i'm sorry to say it, there has been no growth agenda that's been articulated that anyone can point to yet. >> there are agendas that people on the left would say are zombie ideas. >> no one is hearing about them. >> what do you mean they're not hearing about them? >> the conversation is not going on. >> every one of them has a corporate tax reform that they talk about. >> it hasn't been talked about

substantially in the debates. >> there's a lot of stuff to talk about with foreign policy as well. was there any talk about isis last night or syria. >> i don't think isis came up. syria came up. syria came up. and again she takes a much more hawkish position than most, certainly there's other candidates up there and that a lot of other people in the democratic party. that's a point of principle for her. >> you found one. so it's syria. syria is the point of principle. >> you know that on many fronts she has been the person pushing for more american leadership in the world and again that came through loud and clear last night. >> you haven't seen sort of a pattern of moving from one -- really? i thought she spear headed tpp. >> she did not spear head tpp. >> she was for it before she was against it. >> she called it the gold standard three years ago. >> she has a new position on

ttp. i agree with that. >> hilary has lots of new positions and i think that's one of the things, these flip flops show her inauthenticity and while bernie sanders might not have had the greatest debate his passion and authenticity i think is going to give him more bump out of this debate than hillary. >> it will be interesting to see whether there's bigger crowds and sanders-like crowd with the presumptive nominee. it's been kind of weird where the challenge her the excitement and the big crowds and the presumptive nominee has not but we'll see. as don said, she's had one good day in about three months. we'll leave it there. henry barber, thank you. don, thank you and cnbc will host the next gop debate later this month at the university of colorado at boulder and hopefully there's not -- the entire town might be picketing against having all of those republicans -- i went to school

there. so i know what i'm talking about, andrew. but they're inclusive. they're open minded. we'll see. >> they might just tune it out. >> they're wasted. >> you know what's legal there. >> there's a chance some day the young don't just rubber stamp the progressive policies. >> wait a second when you were there you voted for jimmy carter, right? >> wow, that hurts becky. >> it's true. >> that really, really -- see, that's low. that's low to bring that up. it's really low to bring that up. i have a scarlet c on my shoulder. i do. it's an i for idiot which is what i was. >> we have to catch you up earnings. black rock earnings beating the street by 43 cents a share. revenue we should tell you did top estimates so you might see that stock pop in a little bit. we'll try to dig into those numbers as well. coming up red flags in the emerging markets world and the risk here at home.

we're back with that and more in a moment. ♪ actions. they speak louder. we like that. not just because we're doers. because we're changing. big things. small things. spur of the moment things.

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the market route could be the third wave of the financial crisis. joining us to talk about it is sam coming from investment strategist at pacific alternative asset management or pamco. >> pamco which has about $9 billion under management. what did you make of the report?

>> it's interesting. i think it lines up with sort of the view that we have which is that we have seen a big rally in ems over recent trading sessions in fx as well as in equities but that's probably more of a technical rally here than a more strategic repositioning and going out to the medium and longer term you'll see further depreciation in a lot of the emerging market currencies and probably weakness in the he equity indices as well. >> the weakness is going to be where? >> you know i think it's going to really -- the story is not about one particular emerging market. the story is about the dollar. it's long the dollar and not short the emerging markets and it's driven by a couple of different things. monetary policy, growth differentials and the other aspect is the big deleveraging that has to occur of all the dollar denominated debt issued before the crisis. >> what do you think of the u.s.

multinationals and how they will be impacted? >> two things. one is that for em multinationals they're going to be deleveraging their debt. we've already seen that in places like china and what they're doing is calling bonds early. they're exchanging the dollar denominated debt and going into local markets to fund that. that's going to be a continued effect of that and the low growth. the most important trading partner for em is em and most of em, a good portion of em is commodity linked and with commodity market weakness likely to persist i think you're likely to see more of a structural weakness across em for years to come. >> for years to come. okay. sad perspective but a good one to have i guess. thank you. i appreciate it. thank you for coming in. >> when we return today veteran fed watcher greg ip is here. he has a book out called

foolproof. we're glad he's here and he'll be joining us in just a molt. squawk box will be right back. ♪ excellent. researching a hunch, and making a decision. time for a change of menu. research and invest with e*trade's browser trading. e*trade. we've got trouble in tummy town.

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welcome back, everybody, the next guest challenges how we think about risk saying modern disasters from car crashes to football injuries and wildfires in the financial crisis as a result of our own success.

the chief economics commentator, the new book calmed "foolproof, why safety is dangerous and how danger makes us safe" available on store shelves this week. and thank you for being here. i love the concept of this, taking economics and behavior theory and kind of show us our own behavior and how this changes things. this nus have been fun to work on. >> it was a lot of fun, especially to discover parallels between the areas i spend life covering in the financial system and economy and other parts of the world. just to give a quick example, the federal reserve's 100th anniversary was a couple years ago. the fed was created in the progressive era at the same time of the forest service. the fed was created because of the panic in 1937, and forest was created because of fires in 1910. the as a result of actually getting rid of all of the financial panics was to encourage people to take on more risk and eventually give us a very big crisis in 2008.

if you want to know why we are having record wildfire years, that's because we have a warmer climate and also we cement a century suppressing forest fires leaving more fuel in denser forests. this is something that's hard for us to get our heads around, but many times when we want to impose stability and safety on the systems around us, we encourage risks to reemerge in some other way. >> fair to say you think the federal reserve made us less safe with financial upheaval? >> difficult to stay what the net effect is. the global financial crisis was a big cause of the great moderation. 25 years of low inflation, stable growth, mild recessions, right? because people said, well, since the fed repealed the business cycle, let's take risk. housing prices never go down, and we know where that led us to. what's the alternative? let's have more recessions so people don't get that attitude. one of the tough challenges

facing the people whether it's the forest managers or central bank is to decide where is the line. at what point do you impose more instability and more awareness of risk to prevent the complacency from accumulating. >> capitalistic system with winners and losers, try to minimize the pain in terms of layoffs and when recessions come, no onements to see, you know, food lines or any of that, so the fed 1 in a position to try to abbreviate what happens and as a result the system does not clear, and the next recovery is built on a foundation not as strong as if you let everything play out the way it should have played out, and that's just -- i immediately knew what you were talking about. if you don't clear out the brush by burning it, then, you know, you just set yourself up for more trouble. i still wonder if we've done that now because in dealing with 2008, we really -- it could have been much worse, and maybe it

deserved to be to clear out the system and get rid of the losers. >> yeah, i mean, after the dodd-frank financial regulatory reform act was signed, president obama said we must never have a crisis like that again. he can't promise we won't have another crisis. we will. second of all, he shouldn't promise no other crisises. crisis occur because people take risks, sometimes too many risks, but the alternative is no risks. one of the things i talk about in the book is the fact it's hard to know in advance what risks are worth taking. india and tie lan. they had a financial system with no financial crisis. thailand had a liberalized financial system, and they had a crisis. in the end, thailand still ended up the richer country than india because they could take retch. another example? >> sure. >> global warming, a problem we're all worried about. >> you lost him. >> totally lost me.

>> okay out, like, soot and other -- >> sure. unfortunately, the green lobby has blown its entire -- >> so, yeah, three mile island, right? after that, we make it very difficult to build another nuclear power plant because people are afraid there's a melt down that kills a lot of people. >> right. >> as a result, we built more gas and coal burning points pumping soot into the air. scientific evidence proves we kill more people as a result of that than nuclear power to be built. >> try c02, and seize yum does not go away for 600 years. particlat lupollution, half the world doesn't have clean water, there's so many useful incredible things done with the environmentalism, squandered on, you know, what is a phantom.

i don't know. >> i think one of the things i talk about in the book is we have to be adults about this and accept the fact that there are many good things that come about by risk taking and come up with ways to figure out where the border is. i mean, it can be simple as doing research. we know from, for example, a safety belts were installed in cars, people worried they caused us to drive faster and cause more accidents. it may alter behavior a bit, but not enough to justify set the benefit, and antilock brakes, study shows that antilock brakes do not reduce car accidents because people feel they can drive in a way they couldn't before. here's a follow-upny examples. snowstorms, all right. more people have accidents, but fewer fatalities because people are driving slowly and carefully. >> yet somehow we have big snowstorms because things are warmer too. >> that's change. >> that's right. i forgot. >> the book looks great. >> thank you for having fe. >> go out and get it. when we come back, walmart ceo

is in new york to talk to analystings today, but before he does that, he's with us sitting down with us here on set. stay tuned, you're watching "squawk box" here on cnbc, first in business worldwide. hello, ken jennings. i haven't seen you since that tv quiz show. hello, watson. you can see now? i can recognize people, analyze images and watch movies. well i wrote a few books, did a speaking tour, i... i've been helping people plan for retirement. and i help doctors identify cancer treatments. is that all? i recently learned japanese... yeah, i was being sarcastic. i haven't learned sarcasm yet. i can help with that.

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earnings alert, numbers and instant analysis. >> earnings from delta airline, richard anderson has a first cnbc interview. >> the walmart ceo in town to talk to analysts joining us on set first in an exclusive interview. the second hour of "squawk box" begins right now ♪

live from the beating heart of new york city, this is "squawk box." >> welcome back right here on cnbc, first in business worldwide, i'm andrew with joe and becky quick, and earnings in focus this morning, awaiting reports from bank of america and delta airlines. just crossing. go through them. >> 37, 4 cents ahead, revenue number 26.8 billion compared to what 20.769 so maybe that's a little bit -- stock is initially trading up a little bit because it's a 15 stock, it's up 1%, just 17 cents, but i like when we say we have earnings and instant animalyst so we'll try here. >> nail it. >> i'll give you instant analysis by reading what the

wire services put out at this point. the net chargeoffs, $932 million, analysts know whether they are pleased with that. revenue is 4.47 billion. provisions for credit loss is $806 million. global market revs, 4 billion, and global banking revenue 4.19 billion. nonincome 11.17. at this point, it's funds. do we have -- >> we have delta quickly too. delta airlines came in with an adjusted number of 1.74 a share, they looked for 1.71. looking at revenue coming in at 11.1 billion dollars, and that looks like it's just above expectations, so a slight beat on the revenue line. they are talking about how they are looking for fourth quarter passenger revenue to drop 2.5% to 4.5%. the fourth quarter rougher at

this point and see the capacity flat. to check out the stock now, it is trading higher because, again, that's beat by 3 cents a share, and in terms of the earnings per share. right now, that zstock's tradin $48.50 after closing at 47.53. we'll talk to the ceo at the bottom of the hour to talk about earnings. jp morgan out with earnings after yesterday's closing bell, falling short of the estimates on top and bottom lines, hit by weakness where revenue fell 15%. they call the results decent saying they were affected by a challenging global environment, and intel's results beat the street, demand offset by strength in its data center and internet of things businesses, and shares of sandisk jumped this morning on a bloomberg report. they hired a bank to explore a safe, and micron technologies and western digital are said to be in talks with sandisk. becky?

big changes underway in wall mat. the company's ceo committed to wage hikes, worker training, and heavily stocked she eed shelves. he's talking to us exclusively on "squawk box," he has the largest company in the world, employeeing more than anyone else than the department of defense and chinese army. i love those stats, doug. >> good morning. >> you have undertaken a big task in the year and a half at walmart. massive changes, you're changing the entire company in terms of what you pay workers, in terms of the stores you run, the risks you are willing to run, and so far, walmart is -- the street is not buying into what walmart's doing, but is this something where you are taking the short term pain for long term gain? when does it pay off? >> it's fun to drop all that change, a lot of moving parts in the company keeping us on the toes, but we're making progress, associates are buying in, and excited about what's going on.

to summarize it, there's a stores business with investment, and the investments we made in people, training, and in stock, faster checkouts, those are paying off. >> on line too? >> that's another big bucket, but in the stores, we've got fast, clean stores measured from customer, seen them go from 16% favorable to 67% today, so our customers are telling us it's working, and the storage business, a big part of the business, we generate profits, so we have to have those supercenters in the u.s. for a long and successful life. that's priority number one, and at the same time, building a digital company within walmart is a task at hand. we have great talent and making progress as well, and ultimately the way to winks talking with analysts today is the strategy of bringing them together. >> was this is massive underinvestment by the predecesso predecessors? >> we were focused on productivity and leverage we took it too far. the competition changed, world

changed, wage rates moved in the market despite what we had done. it's a combination of things that got us to this place. what we do about it is what matters. >> how frustrating is it that amazon runs a no market business, and market rewards it. you have to run a margin business, bigger, or the market kills you. >> yeah. that's a market issue to get sorted out. we're not responsible for that. i think what we've got to do is make sure that as we think about our level of profitability, we have to position ourselves so that we can win overtime. so that's one of the things that puts pressure on us, not just from them, but everybody. >> nice to have the bricks and mortar and expand to the digital stuff. i don't want to go the other way, be all digital and build what walmart has around the country and around the world. that's the good problem to have. have you seen the ge commercials, i'll do software, i'm jet engines, and another guy is designing a stupid, like, you

know, game on -- you know all the friends don't want to talk about ge, but a stupid millennial sort of a silicon valley job. same here. i'll take walmart over -- >> yeah, think of the supply chain in relation to that. we have the infrastructure built out, the supplier relationships, all the stores we can use in the back end to help us get inventory in the right place. as retail moves from being what's been a push system, we push inventory in stores, ask you to get it, to a pull system, on a mobile app, you say what you want, our accuracy access is transportation and handling, but mark downs can come down so as we anticipate where to put it, use the stores and distribution centers behind them to win. >> i have not seen any negative stuff about walmart recently. you've -- the positive story that you have to tell, you have guys that can do it now, but in

terms of influence on cpi keeping rates this low, how much money americans saved if you add it up. just being sam walton, arkansas, how it can be looked at in -- i mean, there's people that hate walmart and think that it's, like, the devil almost, and that's the kind of world that we live in right now. that's why you need to -- and your people, you know, need to tell the true story. this is an american success story that's enriched, you know, millions of shareholders, how many jobs are you providing now? >> 2.2 million around the world. >> second to the chinese army. >> you have to work hard to make this a negative story for society, don't you? >> we think so. we have to keep it going. >> right. there's been periods like, what's going on here? really? walmart is a negative, you know, for society? >> yeah. this purpose we talk about, people living better, that's

real for us trying to take the 52-year-old company, now this size and position it to be able to provide that mission you describe going forward. >> 52 years, he saw this happening while he was alive, inedible to do. >> older than "squawk box." >> there you go. >> twice as old. doug, the problem you have is wall street is not buying in at this point. it's a good message. i understand the long term goals on this, but walmart is the second worst dow component of the year. what's the disconnect? >> that's the issue. people will buy the long term story and others will not. the question is how long is long? we'll do a better job of answering the question today. >> how long is long? >> normally we provide guidance for a year, but we'll talk three years out today. that will help. >> what do you see three years out? that's the problem. people look at estimates for fiscal 2017 starting next year, they looked at earnings of more

than $7 as recently as the beginning of this year. those numbers have come down drastic ily. >> we'll share the numbers today, not getting into that, but talking about projections, what we need in capital, and then they can judge for themselves as to whether or not the strategy is a winning strategy. >> harder to outline growth. the markets always want to reward growth. >> sometimes when we release earnings, you talk about the size of the company. that's one of the things we tried to keep in mind. if we're going to grow in a year, you know, 10-20 billion $s, that's a big number. we'll keep in in context. we can be a growth company, just a large growth company. >> you talked about the, and you think that's a big benefit to walmart, but i forget the international operations. >> today, we're in 28 countries, a third of the revenue and fourth of the profit coming from outside the united states, so in

terms of revenue this year, the forecast is it'll have a negative impact on the top line by $15 billion. >> with a b. amazing. >> does that explain the stock price, doug, since the beginning of the year in a nutshell? >> currency underplayed, impact on earnings. >> what else? what's the main thing? >> numbers for the earnings. >> why? >> two issues going on. the long term investments, which are in e-commerce and big wage investment. and don't underestimate the size of the wage investment this year and next year. >> a billion dollars this year? >> probably more like 1.2 billion this year, and next year we committed to the associates we take the minimum start rate to $10, but the average start rates go up ark weap moved on staffing, added back 8,000 department managers in june. got another 3,000 department managers that we're adding for pickup in the u.s. now because we want a great pickup experience for the customers this holiday, so we got a combination of long term investments to make and short term pressures in the second

quarter which were disappointing. >> on the e-commerce side, what's happening is kcompetitor between amazon and what happens to uber, how do you think of delivery? some of the guys now try to deliver packages within an hour in new york city and people wonder if that's supposed to be a model and how you think about that. >> we have a business in the u.k. doing home delivery for 15 years as well as the brand name and do grocery delivery as well as pickup. we started pickup later interestingly enough in the u.k. here, there's a pilot going on in denver for a while now, and we are expanding pickup, so when you hear us say we want a seamless relationship with customers, what we mean is through mobile, data, the connection we have with you as you shop in the stores, you get to a point as a customer where you can find anything on walmart. on line, 7 million headed to 10 million items, a great asso

assortment of supercementer. them you can decide, pick up in store, pick it up in the parking lot of the store, and sometimes there's offsite pickup, and other cases you want it delivered. like everybody else, fedex and ups delivered non-food orders today, the food tests in denver we are learning from, and the data from u.k. delivery, and in the united states, we want to do delivery over time, but the opportunity, as joe said, leveraging stores for pickup is huge. what we are doing now is announcing 11 markets now, up to to markets in the u.s. by the enof the year, come to the parking lot and pick up what you ordered earlier that day, and moms love it. we have done stand alone locations, but they like the store pickup. it's not convenient milking eggs on the front step when you get home. that doesn't work. you swing by the normal pattern, come in quickly, we pop open the

trunk, and you're gone. i was in alabama weeks ago talking to customers, and they are ecstatic about it. there's a kid in the car seat, they don't have to get out, walmart prices, we fill the order well, and the customer was picking up the back-to-school order at the same time. you get a list, the first day of school, it's long, and every mom in town or dad is going to pick it up, and you place the order in the mobile app, come through, pick up the grocery order and back to school order, you don't have to get out of the car. they love that. >> i can't believe we talked for 12 minutes at this point and have not asked about the u.s. economy. that used to be the first question to ask. what do you see in terms of the u.s. economy and around the globe? there's bad reports from just about every corner. >> yeah, the u.s., steady. it's okay. back to school was good, halloween started off well, families are taking care of the seasonal events. christmas will be fine. it'll be fine. gas prices help people some. i think generally the u.s. is in good shape.

china's tougher. >> talking 2% gdp? >> yeah, something like that, yeah. >> china's tougher? >> tougher, but we're growing market share with the supercenters there, the sam's clubs doing great, e-commerce business we own 100% of. it's growing. china is not a one year endeavor, but consumption opportunity is enormous. >> why not gas prices a bigger opportunity for retailers? we thought it would be money straight back in the stores, but it's not played out that way. >> debt to address, just balancing in the way they manage budgets. it's helped some. post crisis, people went basic. they were buying opening price point items, food, and consumables, but last year, strong apparel merchandising business, and you see in automobile purchasing, people shifted where they put the money because they held off on bigger ticket items in the period of

pressure. >> doug, walmart decided in august to stop selling assault rifles and semiautomatic shotguns. at the time, the store said it was because of demand, but did it have anything to do with the pressure that's come up from around the globe or around the united states, i should say, with big assaults and the media attention that's garnered? >> yeah. at walmart we want everybody to feel comfortable coming in the store and believe in the brand, and we want to serve families. in the case of sporting goods, we've certained hunters, spor sportsmen and women. that's all we want to do. zero in on that opportunity, and there was upside in that market, so we wanted to expand space. that's how we did it. >> that was the reason? not the media? >> it's a secondary benefit and what we do for hunters. >> arkansas. >> i know. >> bernie sanders can't even trash guns. >> vermont is a rural constituency. he said that last night. you have to come to the table on

both sides. >> exactly. forks don't cause obeitobesity, they? hey, so you got good people, i think, with your pr stuff. doesn't mean you can't, you know, get bit by other people, right? >> you got time. >> mcmillon is not spelled like you spell it? >> l-l-o-n? >> put one i in there and make it doug mcmillion. did you see the movie -- metta world peace changed his name, but just one letter makes you -- >> my grandparents would not be happy about that, i don't think. but the person who suggested that to me also was donald trump. >> honestly? >> he called me that. >> for branding. superman movie, they called him mclovin. he's not good looking, but mcmillion. >> why not add a b while you're

at it? why be a mcmillion when you can be a mcbillion? we can do that. >> i'm just going to go with mcmillon. >> i got a down, all right, you're right. you're walmart. maybe if you need a markup you do the doug mcmillion. just a thought. >> he's an everyday day guy. >> like, oh, boy, that's the worst idea i ever heard. >> you know who else told him? donald trump. [ laughter ] >> great minds. great minds. >> look. >> yours looks nice. >> similarities there. >> doug, thank you so much for joining us today, a pleasure having you here. >> thanks for letting me stop by. >> hope to see you soon. >> nice to see you, my apologies. >> i kill you when you apologize to me. >> i can't apologize. >> love means never having to say you're sorry. >> that's true. >> embrace the love.

>> good. >> thank you. coming up, a company that's doubling down on oil transportation projects despite the low price of crude. we have the details next. kate moore from jp morgan private banks say how investors prepare for third quarter earnings report, and delta out with their results, earnings and revenue beat wall street's forecast, and we have richard anderson to join us in a first time cnbc interview in a moment. sure, tv has evolved over the years.

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welcome back to "squawk box." billion. change two letters for the price of one. futures right now are indicated slightly lower. in europe i saw anywhere from .8 to 1 point down. tough to get traction on the open. yesterday, we were indicated lower all day long, and we were vacillating throughout the session, but now we key on something other than every macro economic indicator we get because we get earnings from now on for the next three weeks and bank of america reports today, 4 cents above forecast.

different revenue numbers to look at. the -- by the way, bottom line held by increase in investment banking fees and substantial drop in legal expenses. oil prices remain below $50 a barrel, but refiner, desoro is building out oil transportation infrastructure on the west coast, and morgan brennan joining us now from vancouver, washington. good morgan. i think we should always say that. >> reporter: i concur. i like that. good morning, good evening, it's still dark out. this is a new tank car delivered from the factory, one of more than 2 00 that tesoro ordered in 2014 well ahead of the oil train rules issued by regulators to year.

compared to older tank cars, this has a thicker shell, jacket, a thermal shell, not puncturing or heating up, and thicker heads at the ends of the car that should withstand impact better and fortifications where crude oil is loaded and unloaded. these start hauling crude oil, much from the box end before the year's end making them some of the very first next rep jags tank cars to hit the tracks. this is part of the bigger infrastructure play to bring more crude to the refineries. they are operating at full capacity, no plans to build out new ones meaning rail is the only way to increase. that's why according to the eia, crude by rail to the west coast soared from an average of 23,000 barrels a day in 2012 to 157,000 barrels in 2014. what tesoro and savage companies are looking to do is looking to build an oil terminal here at

the port of vancouver, and that's really where the tank cars come into place because sturdier cars are key to ensuring safety, especially for a project like this, which will be one of the largest of the kinds in the country as that goes through approval. joe? >> okay. morgan, thank you. how long -- all day long? >> reporter: i'm going to do this -- i'm in for the long haul, and as far as -- there's not a story unless there's a hard hat. this will be a good one. talking more about this terminal throughout the day, and there's a lot to talk about. a lot of infrastructure being dr or billions of dollars of infrastructure proposed for this area to get more of the american crude here. a lot of people don't realize that imports to the west coast refineries soared in recent years because of production from alaska and california came off, even in places have surged. >> it's not a bad look for you. you should not wear helmets.

i shouldn't. >> i'm done with the helmets. >> michael should not have worn that helmet, but morgan can pull it off. i don't know what it means other than she's a roughneck in training? >> combination of reflection on her or you? >> remember when you put the fire hat on? you looked in the monitor, and you tack it off really quickly. remember that? you thought it was fine for a while. >> my kids all. to be firemen, the boys want to be, and they wanted me to wear the helmet. >> kyle is taking it to school today as show and tell. >> it's heavy. >> it's already there, hopefully none of the classmates are watching. when we come back, set the dvr, donald trump returns to "snl," details next. time now for today's aflac tref ya question. which pro sports team attempted to draft edward m. kennedy in

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now the answer to today's trivia question. which pro sports team attempted

to draft future senator edward m. kennedy in 1955? the answer? the green bay packers. >> welcome back, everyone. this is cnbc, first in business worldwide. among the stories that are front and center this morning, bank of america posting better than expected earnings and revenue. the company got a boost from an increase in investment banking fees with a drop in the legal expenses. that stock looks to be up 1.6%. also, delta topping estimates on top and bottom lines, and shares up on the news as well. the airlines' ceo is joining us in 10 minutes. asml shares down this morning. the company is a major supplier to semiconductor makes, short of estimates, and new orders dropped more than expected. >> gop presidential candidate donald trump is breaking from the campaign trail for "saturday night live," announcing trump will host the november 7th

episode, second hosting gig for trump, last on in april of 2004. >> wow, the skits obviously totally different then, but self-deprecating at the time o too. >> taking a week off for if? >> it is a lot of rehearsal. >> i don't know if it's a week, but several days. >> you know, he got a lot of -- as you know, as you can tell, in debates and everything else, he said on-camera experience from the apprentice is invaluable. >> hilarious with fallon. >> i bet you -- i wonder if the ratings will be okay that night? >> you wonder? >> wow. i mean, you go, you go lauren michaels, incredible. xnba star odom hospitalized after found unresponsive in a nevada brothel. he was stabilized by emergency responders and driven to the las vegas hospital. the sheriff's office say he would have been air lifted to the hospital, but the stature

made it impossible to actually transport him by helicopter. he played 14 subpoenas in the nba and ex-husband of reality tv personality khloe kardashian. put forth without comment. in nevada, there are legal counties, right? so, but that's not probably the place where you want to be found for news. >> probably. >> news purposes or headlines, found unresponsive, but we wish, you know, obviously, we hope that he comes through this. i don't know -- i have not seen any morning -- >> i have not seen it was any -- last report i heard it was not illegal drug related, that there were other -- >> things? >> yeah. >> what can you say? >> nutritional sort of -- >> nutritional? really? >> seriously.

taken in excess. >> herbal vie ag gra. >> that was blamed for it. >> interesting. >> yes. >> let's wish him well. >> yeah. >> left at that. going to break, kate moore from jp morgan private bank is telling us what to expect from the third quarter earnings season. we'll be right back. (vo) what does the world run on? it runs on optimism. it's what sparks ideas. moves the world forward.

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markets gearing up for a flood of third quarter earnings, and the next guest thinking about the earnings season, says it's challenging. here's kate moore, chief investment strategist at jp morgan private bank with more than a trillion dollars under management. welcome. >> thank you. good morning. >> thank you for being here. overall, we've all heard that energy related stocks could move

us in negative comparisons for a year ago? >> right. >> at the same time, since everybody knows that, well, we'll look at stocks or companies that are positive, are we not? is that what you wiare talking about? it's down or flat? >> unlikely to be highly positive, i think. looking at the oil impact, it's not just on overall aggregate earnings, but multiclass investors, looking on oil impact on high yield, direct kmotdties, and oil impact is important on cap x and companies talking about investing in the future because energy and energy related cap x is a big part of the expenditure for the last couple years, and what we need to see for the next leg of the u.s. economic recovery is a broader base, i think, of companies willing to spend. >> cap x has already been something that is glaringly lacking, and even when way did have was fracking and horizontal drilling, worse than what was indicated by the numbers.

>> yeah. i think that's right. i think we've seen, you know, companies really hold off on spending. look, we saw a long time -- a long time before companies hired again, post the financial crisis, and they started hiring, but they've only been hiring people that they really, really need, getting to the last inch before they made the commitment to spend. and i think that's happening again when it comes to overall capital investment as well, and what we want to see is companies feel more confident and with they speak to us about their earnings for third quarter, not just looking back at what happened in the three months, look forward over the next couple quarters saying we feel good enough about the state of the u.s. economy we are willing to spend. >> engaging the stuff you talked about, you have a positive view on earnings and the surprise will be positive from -- hearing good things? >> a couple key sectors, they are taking down estimates aggressively, but the demand trends are not deteriorated. health care demands are a notable sector. health care in the u.s., good

shape, not awesome, but pretty good shape, and there's parts of tech spending, consumer tech spending, that look to be really on track, so, you know, some of the estimates for the aggregate sectors look low, but the potential in the high quality, secular growth stories for beats are okay. look, we're not talking about a quarter that's going to be outstanding, but, you know, we're hopeful it's better than the aggregate estimates downright now 4% year over year. >> it's bottoms up and you have to buy the right things? >> i think so. we've been in the market five or six years, which you know well, it's been about macro and policy driven stimulus, and everyone's been watching policy makes for word or indication they can take risk, but now we're moving in a phase where incremental policy stimulus is not having that same kind of impact on risk appetite and investing and have to be focused on specific stories, sectors, industries, and companies that haves potential to grow in the late stage.

>> all right. you said health care, and it's coming down a little bit. >> yep. >> and what were the other two? i can come up with them, but it's easier to ask. >> health care and tech are the areas to watch closely and financials as everyone moved expectations for when the fed e is lifting off. >> do you delve into individual names or too important for names? >> hardly important, but we try. >> you got a trillion dollars. if you said individual names and acted on those, that's not fair. >> this is a very top down investment process for us. we look at sectors and industries, but when specific companies are big part of the market cap of any industry or sector, we, obviously, pay attention to what's driving the company and impact on the market. >> right. >> okay. thank you. >> thank you. >> and maybe next time for the party, you know? i don't know what we need to do. >> blew us off. >> yeah yeah. did we have to enclose a coupon or something? how can we get you there next

time? >> coupon? discount shopper. >> the drinks were free. there was sliders -- >> looking for sort of -- like, a little pigs in a ket. >> if i knew ahead of time, i would have been in. be -- >> now you are saying you need to shop. i don't know. >> it's tougher. >> coming up, we'll get you a free plane ticket. delta airlines with quarterly results earlier this hour, and the ceo, richard anderson, the company's ceo is joining us next to talk about it. headed to break, look at shares. >> you don't realize what you said. >> i'm scared. ♪ today, we're seeing new technologies make healthcare more personal with patient-centric, digital innovations; from self-monitoring devices that can interpret personal data and enable targeted care, to cloud platforms that invite providers

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welcome back, delta reported results earlier this hour, beating the street on top and bottom lines despite being down for the year, the stock is up 12% over the past six months, and on track to have its best month since last november. joining us now to add color to the quarter is richard anderson, the ceo of delta airlines. good morning to you, richard. >> good morning to all of you.

>> great to see you. let's walk through this both, what happened in the last quarter, but more importantly, what you see coming up next quarter and sort of looking out a year ahead. >> well, you know, record quarter across the board for delta. 21% out margin, eps up 45%. we're tracking a full year, free crash flow of over $4 billion, putting us in the top 10% of the s&p industrials, so phenomenal year. as we look out in four q, we expect another record quarter, 16-18% margin, and as we get into 2016, we'll be lapping higher fuel prices, and right now in the s&p 500, i think if you look at analysts forward estimates, we probably have some of the top pes growth expected by the street in 016. >> on the fuel price issue, your fuel price is the lowest in

years. 1.80 a gallop, is that right, compared to 2.90 a year earlier? >> correct, correct. >> what's that going to look like 12 months out? >> well, it's always difficult to predict fuel price. as a matter of fact, from our budgeting purposes and business planning purposes for 2016, we assume a price higher than the forward curve, but we left the hedge book relatively open, so we're really takiing market fue prices right now planning conservatively for 2016, but we think overall the economy in the u.s. is very strong. the economy in western europe is doing well, and mexico, the caribbean, central america, and china, and we take the conglomerate of all of this and the bottom line is we're setting up for an even stronger 2016. >> what's going to happen to ticket prices? >> well, ticket prices, you know, our unit revenues this

quarter were down 4.9%, so if you look at overall unit revenues for the industry, overall unit revenues for the industry have been declining slightly, just as ours did in the quarter, and our focus really is on putting the fuel savings to the bottom line for our owners. >> richard, i saw some of what you're expecting in terms of the fourth quarter and terms of passenger load, but never thought of the strong dollar being a huge issue for the airlines, but what has the strong dollar meant? >> well, the strong dollar affects airlines just the way it affects procter & gamble or other multinational consumer good companies in the u.s., and when you have the weak brazil, a weak yen, these really do have an effect, significant effect on the top line, so when you see the -- our top line year on year, it's roughly flat. we came in ahead of street, but

you see the effect in the top line revenues from places like brazil, venezuela, japan, and that's reflected in our top line the same way it is in any other international consumer goods company. >> how much of delta's revenue and then income actually is international versus domestic? >> well, we're about 40% national and 60% domestic. >> it terms of revenue? >> yep. >> okay. >> and so you have effects both from fuel surcharges running off internationally and from weak currencies. >> and what's the mix between business class these days versus economy? >> well, economy, obviously, is the much, much larger cabin, but what we're doing in delta is moving to three classes, which is business class, economy plus, and economy. the economy portion of the airplane is probably 90-95% of

the total capacity of the airplane. >> right. but i mean, are you seeing more people trying to move up to the front of the bus, if you will, or front of the plane? >> where we're really seeing that phenomena is into the economy plus. so what we've done on the airplanes is we've actually moved to four classes in the u.s. and three classes internationally. we do see people buying up from the basic, what we call basic economy into economy plus, comfort plus, and into business class. >> all right. >> so overall, that's actually been -- that product differentiation because, you know, our challenge is that we have to differentiate our product on the same airplane across all different segments of purchasers, and it's been quite successful. >> there's been a report out earlier this month that you're going to be removing some seats, two or three seats from about 179 different airplanes, and i thought maybe that meant better leg room, but as i read into the story, you're trying to make and create more room for the flight

attendan attendants? what's that about? >> well, no, actually, we probably didn't cast that right initially. it actually helps and adds more pitch in the coach sections of the airplane, and that creates more reclining seats, so it's purpose across the board was to make the -- get rid of the seats on the airplane that didn't have enough recline and make sure that all the seats on the airplane had 31 inches of pitch. so that was really what our effort is. it has a corollary benefit of assisting our -- making the rear gally in the airplane easier for customers to access the laboratory and give great service. >> harder to use the miles than ever before, am i wrong? >> wrong about that because we've changed the miles to much more of the bank model where we have become more and more

agnostic as between dollars or miles in terms of redemptions. when you look at the total number of rpms that we allocate to mile redemption, we're still running about 9% of our airplanes, our dedicated miles. >> i can't get as far as on those miles as i used to. it costs me more miles. >> actually you can because you're a premium flier. what we did was evolve theed model to make sure our reward program rewards the most loyal business customers, and for those customers it's a huge benefit. >> a premium traveler, trashes the industry, ought to drop the fares the minute oil prices are down, complains about not getting the baggage on flights, he hates kids, and anyone under 14 in first class he wants off the plane. why is he premium?

can anybody be premium no matter what they do? >> it's the value of the ticket he purchases, but, you know we carry 175 million people on delta. >> richard, richard, richard. >> you said that. i'm not going to say that. >> okay, richard, great to talk to you. appreciate it as always. >> always good to talk to you. >> we hope to see you soon in studio. that plane behind you, real quick, what is that plane? >> shiny. >> that's an original dc-3 delta airlines, in the museum in atlanta, georgia, in the original hanger delta started in in atlanta in 1943. it's now a museum, and that's one of the retired airplanes. >> okay. >> looks like indiana jones, that's the plane he took out flying. >> looks like that. >> i think it is. i think it is the airplane indiana jones took. >> that's a wrap on delta, buying used planes, put that thing back in service, i mean --

>> no, we actually have on order right now about 150 new airplanes for beaus and air bus. we really use a mix of airplanes. >> hey, airplanes are not like cars. you do the structural inspections on them, an they are just as flight worthy as ever. >> you bet. >> anyway, okay, thanks, richard. coming up, big movers, premium, you got a premium card or something? (friends gasp) the app where you put fruit hats on animals? i love that! guys, i'll be writing code that helps machines communicate. (interrupting) i just zazzied you. (phone vibrates) look at it! (friends giggle) i can do dogs, hamsters, guinea pigs... you name it. i'm going to transform the way the world works. (proudly) i programmed that hat. and i can do casaba melons. i'll be helping turbines power cities. i put a turbine on a cat. (friends ooh and ahh) i can make hospitals run more efficiently... this isn't a competition!

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we have the program announcing they received 3,000 applications from students in 135 countries for its first class. now, they are competing for 100 spots. remember, this is a fully funded one year masters program at university of beijing, and people compared this to the road scholarship. this is incredible, 3,000 people. >> i talked with him last night about this, pointing out that that's an acceptance rebates of 3%, harvard's got a 6% acceptance rate, so they are looking at this, expanding to 200 slots next year, but it's really high quality program they are trying to push through. >> that's cool. >> pleased with the turnout. >> connecting here with china. there you have it. >> when we come back -- >> oh, i thought it was you. oh, it is you. not joe testify. >> me, i'm it.

when we come back, celebrating the 20th anniversary of squawk box and looking ahead at the next 20 years of investing, and joining us in the next hour, we have leg mason founder, bill miller, and trowe price chairman rogers. stick around. we'll be right back.

at ally bank no branches equals great rates. it's a fact. kind of like mute buttons equal danger. ...that sound good? not being on this phone call sounds good. it's not muted. was that you jason? it was geoffrey! it was jason. it could've been brenda.

20 years of power, money, and mayhem. >> thank you. ♪ >> 20 years of up precedented access. >> i know things. >> oh, you know things? >> i know things. >> 20 years of bringing wall street to main street. >> 0. can you get a mortgage and borrow at 0. >> now it's time for the next 0. >> this morning, it's about investing for today and tomorrow from the rise of the machines and high frequency trading to the defense financial engineering and china's ripple effects around the world. two storied money managers here to tackle it all bringing decades of experiences and a lifetime of financial wisdom, lmn chair bill miller and t. roe price chairman, brian rogers, and the special edition of "squawk box," conversations for the next 20 years, starts right now. ♪

live from the most powerful city in the world, new york, this is "squawk box." welcome back to cnbc, first in business word wide. less than 90 minutes away from the opening bell on wall street. look at futures now, down marginally, and s&p 500 will open close to unchanged now, and nasdaq off 3 points, markets in europe at this hour as we flip the board around, looking at red arrows across the board, but, again, putting it all in marginal territory. >> okay. looking at the earnings out from wells fargo, and it looks like the numbers are better than expected. the company came in with earnings of 1.05 versus 1.04 than expected, a penny better, and revenue is better, 21.8 billion, looking for 21.7

billion. if you look through the metrics, they will be return on equity, 12.62%, average return deposits, 1.2 trillion dollars, and that's up 6%. a little time to dig through it more, but a quick look, the stock is up 1% today. let's get to the other stories that investors are talking about this morning. intel's revenues and earnings top estimates, weak demands for pc chips offset by the strength of the data center and internet of things businesses, however, check it out. technology stock down 1.6%. bank of america getting a boost this morning. earnings and revenue better than expected, legal expenses decreased substantially, and investment banking fees and home loan origin nagts fees jumped, up by more than 20%. jp mori began, shares fell short of estimates on top and bottom lines hit by weakness in the

tradi trading division. ub analysts broke down the numbers this morning. >> real trouble is outlook was weak, right? across several of the businesses. you got outlook for markets revenue not so hot here in the near term. and so every chance that they had, they put out a sober outlook. >> check out jp morgan shares, down by 1.4%, and bren nan said they are issues he thinks hit every one of the banks the same. it's not a jp morgan specific issue, but expects that we'll hit this and hear it from many of the big banks. >> in today's squawk conversation the next 20 years, takes us to the future of investing in the biggest challenges facing your markets and money, and anybody that really doesn't sit up and notice and set the dvr with these two guys, we talk about what to do, exactly what to do and prospects are. bill miller, chairman and chief investment officer of lmn lemg dare, not an overused word.

you have a track record, beat the s&p 500 index for is a 15 consecutive year, and morningstar named him fund manager of the decade and named barron's all-century investment team and on squawk box. that supersedes everything. brian rogers, chairman and chief investment officer of t.rowe price group for 32 years, close to $800 billion in assets under management and he's owned xom, honeywell, and express, owned them all since squawk box started in 1995. >> that's a long term investor. >> it's a long time. >> famous 1982 graduating class of harvard business school including jamie dimon and most importantly and most successful and best looking person in the

group, nbc universal ceo, steve best of my recollection. welcome. that is a good class. >> it is. >> i think you'd agree with my analysis of the -- >> on the looks department, yes. >> and smarts department -- >> all the departments. >> you guys are pathetic. >> pretty much. >> did you have a boss? >> oh, absolutely, yeah. i know what you're doing. >> long, long time ago. >> never engauged in this? above this? >> yeah. >> all right. i have to start with you, bill, because i think it's looking at some of the notes, just in your view, in the history of the world, there are not always such incredible things happening, and probably should sink up with investing in terms of how optimistic we have to be, the time it takes for great discovery as getting shorter and short e and people's lives improving more than ever before. any reason to be overall bearish or negative at this point in time in the world in. >> no. >> we don't need to say anything else probably.

>> making your case to some extent, right? u.s. equities, the united states and stocks, if you want to build for the future -- >> joe, that's interesting, if you were to dial up andstractly perfect environment for equities might be. say, okay, we want the economy growing, but not too fast. we want inflation low, interest rates low, not competitive with stock prices. we'd like earnings to be growing, but, again, not too fast. we want return equity high, profit margins high, gdp all time high, but we want people to take money out of stocks because they hate them so they are cheap. that's the environment we're in today. >> wow. that's the most optimistic view i've heard from anybody who came on in quite a while. >> joe, i'm very simp thet ympa bill's view. investors see the alternatives, you earn a point, ten on the ten

year treasury, and there's a lot of really high quality companies selling a good valuations, good dividend dividend yields, not particularly expensive in today's world, but investors are frightened based orphan the global financial crisis. there's hangover from that. ultimately, the risk tolerance picks up and comes back in, but it takes time. >> that was -- the world only ends once. we have that going for us, right? people that think it's ending every couple years, that's not true, but it almost -- i don't know if it almost ended, but that was a serious break we had in 2008, and when the streak is broken, it's got to be broken by something like that because it -- any other time, you say long, you stick to the guns, and it's going to work out. will you will able to discern the next time there's that much trouble ahead, and is there a chance that it could beat, you know, not 50 years from now, could be two, three, five years from now? >> always a chance of -- >> is it likely?

>> it's not likely at all because the type of stuff that happens that caused the financial crisis, it takes a long time for that to build up, and generationally, it takes awhile for people to forget about things so i think that you mentioned, joe, the fact people are scarred by that. there was a tweet the other day called we're all depression babies now about a paper written about people scarred by the depression, changing their financial behavior for the entire career, and you are seeing that today. if you look at the s&p 500 yields more than the 10 year treasury. that headaches no sense. the dividends grow in the s&p 500. individual stocks, buy the market, and so that's the case where, again, people are just still terrified because of the great recession. >> you know, the crowd mentality, though, there's an impact on whether the markets can rise. if anybody's afraid to buy in as brian mentioned, you go a long time before you see the markets picking up. if this generation, let's say the millennials are scarred by

this at this point because it's the only market they've seen or lived through, does that keep them from buying stocks over 50 years, and will that, in return, keep the markets from going up as we've seen in the past? >> what i'm worried about is not that, but the exact opposite. the great bond bull market that began in 1981 is over. that ended in 2012 at 138 on the ten year, and now we're in a benign bond bear market that's lower rates than a year ago, but go back to when we had the taper tantrum and rates went from 160 to 320 in four monthsment what happened that year? only time since the financial crisis that money flowed out of bonds and into stocks. the stock went up 30% that year when earnings were up 6%. my concern is that when the bond bear market gets going and people start losing money in bonds, they yank the money out, 275 is the break point on excess money going into bonds since the

crisis my concern is the target go goes up 20-30% a year like in the late 1990s, and then after two years, you can't make money in anything. i'm worried about that more than the stock market not going up. there was a piece called the rational thing is for people, the target to go down your entire career until you retire, then it goes up. buy all the stocks the whole time and have them go up after you quit. >> i think there's a question, can we predict another catastrophe like 2008 and 2009? i don't think we can. we have a 10% drop in stock from may to early september. you can lose money in the short term, but it doesn't feel preconditions are in place for a really dramatic down move. leverage is down. bank capital's up, the market's under control, consumers reliqu reliquided. doesn't mean stocks can't go down. >> we talked in the 6:00 hour about m&a, and i look at deals, indicator of something. say it's a lagging indicator,

but you look at the kind of m&a we see now, and that's usually the end or marks closer than the end than the beginning by a long shot. >> historically, that's true. >> not this time? >> the m&a boom is situation specific now based on cheap rate of capital. borrow on low rates, equity, health care, low rates are, using arguably inflated equity, but the overall market, i don't see the overall inflated levels of evaluation. >> you don't look at deals as ra rationalization deals? the sabmiller transaction are just two companies struggling trying to rationalize? look at dell, emc, two companies struggling, trying to rationalize and transform themselves? that's not from a position of strength? >> well, i think the companies would disagree with you. >> i'm sure they would. i'm sure they would. >> i think in both cases cheap

capital is one of the drivers. >> you keep saying that. that's what the bears keep pointing to is that it is so cheap that it's causing people to do things they would not normally do, and that they moved out taking on more risks, doing deals that do not make sense, buybacks do not make sense at multiples this high, not investing in plant equipment, all this financial engineering, savers don't have anything. bill, in your heart of hearts, you don't think that there's any negative consequences of the fed over the past policy, not raising rates in nine years? does that come home to roost? any imbalances or it's a free lunch? >> pretty much a free lunch. >> is it? zp no. that's facetious, but no one five or six years ago would have predicted the environment we have today. that $4 trillion inflation high

balance sheet -- >> asset inflation, there's not that kind of inflation, but maybe asset inflation that we don't know how to measure? >> well, multiples are not high in the united states. look at something like -- >> the bond market. >> look at, you know, how much is the fed helped facebook or amazon? 0. you know, and what's the most intersensitive part of the economy? housing. how's that doing? 57,000 in 2005 and 23,000 last year. housing is not inflated by low interest rates. >> looking for prices of inflation is the private market. companies are private, not public as early because there's so much more liquidity out there than people anticipated before. do you worry about that, stuff not in the public markets yet, or is that enough money? >> i don't think it's enough money to matter in the overall size of the equity market. >> i think that's right. >> i think there's some companies richly valued, but small in aggregate. >> there are times when it's the

hole in demand is so great, then the fed really does need shock and awe and can actually just be a temporary support and can't be a negative thing? maybe that's possible. >> i mean, a lot of thins could happen, joe. a classical economist say after all the stimulus for so many years, ultimately, it's inflation their. >> what about assets? >> we don't see it. >> is there a bond bubble globally, we added to not necessarily private debt, but sompb debt around the world is exploded, hasn't it? who bails them out eventually? >> you know, one could argue -- i won't make the argument, but one could argue that the growth of government and debt, if government debt had not grown, the global economy would be in depression because that's at least demand. governments that borrow at really, really low rates ought to borrow at the rates especially if they are negative real rates and invest in the

long term in the country. >> the housing bubble built up over all those years built up such a systemic problem that it needed this much stimulus to avert a global recession? it was that big a deal prior to 2008 that everything we've done is just to satisfy how much we screwed it up before then? >> pretty much, yeah. >> sure we're not going to do that again? >> translates into all the sectors. >> policymakers. >> the qualifiers, the house flippers, mortgage brokers, just a society. >> a lot of leverage. >> housing is the biggest asset for most people in the country. it was also collateral for most of the debt that we hadding and it was mortgage backs, the collateral for it, various tranches of the backed security. >> the fed took extraordinary

steps because it had to. >> fear replaced by greed now. [ laughter ] when we come back, i want to find out how i can really make a killing in the stock market. >> well, don't buy what brian's buying, that's for sure. >> oh! >> good to have you, friend. >> talking about that and more, and when we come back, the future of investing and what worries them, apparently nothing, and what to buy to stay ahead of the game. we'll share thoughts in a bit as we head into break, look at oil prices this morning. we return in a moment.

we are celebrating the 20th anniversary of squawk box, and we want you to be a part of it, tomorrow, celebrate with us right here in the plaza outside the studio from 7:00 to 8:00 a.m. eastern time. joe, becky, and i joined by carl, david, and jim. get the free tickets by e-ma e-mailing us, and those are some pretty -- i forgot about that stuff. >> more fun than i realize and bigger idiots than i realized. >> gale is working frantically on the makeup. >> remember that? >> like, oh, my god. she did what she could. >> it was -- >> did you see that? urgency in the -- >> i will always remember that day. >> you don't need to love it. >> no, but that day was the one day that e overslept and i came -- remember that? >> that was scary. >> and you guys in morning tv, that's a terrible, terrible thing, and you guys played --

you had the camera waiting for me playing "call me maybe." hot song of the summer. >> i think these guys will be able to confirm what i said, so this morning i said it for 3:50 p.m. i messed up. >> oh, no. >> but when you are awake at 5: 3:54, like, why isn't that going off? you're going to be up for some reason, right? whether we're awake or -- >> to feed the ducks. >> actually, not that. >> oh, geez. [ flushing toilet ] >> moving along. >> thank you for that, brian. moving along, when we come back -- >> support, i know you know what i'm talking about! i know you know what i'm talking about! unless you, you know, you pop those whatever they are. >> we got special guests in town from the windy city, breaking information on the consumer, and washington to wall street, special squawk conversation with

bill miller an brian rogers continues with the topic of impact of washington on wall street, how political decisions affect where investors put their money. we'll be back in a moment. you're watching "squawk box" on cnbc, first in business worldwide. hi watson. annabelle, your birthday is tomorrow. i'm turning seven. what did you ask for? a princess. and a pony. you like things that begin with p. i like pink frosting too. will you have a cake? yeah. i was too sick to have one last year. the data your doctor shared shows you are healthy. are you a doctor? no. i help doctors identify cancer treatments. i want to be a doctor someday. i can help with that too. watson, i like you.

welcome back, everybody.

apple could face over 800 million in damages after a jury found the company used technology in their iphones and ipads without permission. a jury found that the tech giant used chips own by the university of wisconsin madison's licensing department. that trial will move on to determine how much apple is ordered to pay in damages. a warning to airline passengers this morning. the federal aviation administration advises passengers not to pack spare lithium baggages in checked luggage. the fear is they can ignite and start fires in baggage areas. >> i thought that was already the case? maybe it was just on carry-on before? >> i guess so. when they say extra, i don't know what that means. >> like a spare, i used to carry one around. >> what about an c extra charge? >> i used to travel, and e found out i thought it was not a good idea. >> up next, breaking economic news, reactions from the special guests when we return in a moment.

♪ congratulations on 20 great years. >> i want to wish a happy 20th anniversary to squawk box. >> happy birthday, on 20 very successful, very entertaining, very informative years. >> please don't show photos of me back in 1995 because no one will recognize the hair. propery is that you can create wealth through capital appreciation, and this has been denied to many south africans for generations. this is an opportunity to right that wrong. the idea was to bring capital into the affordable housing space in south africa, with a fund that offers families of modest income safe and good accommodation. citi got involved very early on and showed an enormous commitment. and that gave other investors confidence. citi's really unique, because they bring deep understanding of what's happening in africa.

i really believe we only live once, and so you need to take an idea that you have and go for it. you have the opportunity to say, "i've been part of the creation of over 27,000 units of housing," and to replicate this across the entire african continent.

we have september retail sales in a minute's time. guess who is right here in set with us? that's rick santelli, usually in chicago, but congrats on the cubs win. >> oh, my god! i can't imagine what it look like last night, somewhat like the bond pit after the september 17th nondecision. >> waiting and waiting and waiting for a long time coming with this. >> oh, yeah, no. the fed's the only entity that could break the record of the cubs with regard to a w. >> just enjoy the cubs for a second before we move on. >> that's true. >> in "back to the future," the

betting list, you know when the cubs win the world series? >> 2015. >> amazing. >> wow. >> weird. >> prophetic. >> that's weird. >> five seconds. >> we have data, and, jim is here with all the numbers we need to here, and, jim, go ahead. >> a week and a half since meaty data, a lot today. okay, the retail sales number comes out as plus.1, expected plus .2, the last time .2 was revised down to 0, so that was not very good. we expected minus.1 auto, coming out minus .3. so far, no good. the other point, bpi final demand expected down .2, but down .5. energy, down .3. across the board, it's disappointing. the zbresing thing to me is the initial reaction in the stocks was to lose three handles. remember a week and a half ago,

crummy data, the stock market skyrocketed because we believed the fed was out of the picture, and now it's just crummy data. ten year yield into this was 2 preponderate o 4, and now it's 2.019. the reaction in the stock market is bad and rates are lower. back to you guys. >> jim, jim, rick santelli here, quickly, did you did get control number on retail sales? >> i did not. control group is minus .1. we were expected plus.3. like i said, at this point, everywhere, revision there, plus .4 revised to .2. i see nothing good unless you see something that i don't. >> what about year over year food energy, core on ppi. >> ppi we were expected 1 preponderate 2, but got plus .8 in the same pattern. everything crummy. >> wow. that's the definition of crummy,

i don't know, friends like buying cheap products coming from china. they like cheap tvs. >> sure. >> cheap phones, only people who don't like falling prices are janet yellen and company. >> it's funny because the gold market told me everything i needed to know over the last week, and that's the fed can't raise rates because what we're worried about -- i mean, deflation seems to be more important than inflation. >> come on. we'll have a deflation problem like the cub wins too many world series. >> did you miss the charts on every commodity over the last year? the fed looked and said -- >> wait a minute. >> yeah? >> did you say prices are somewhat stable but soft? >> well, no -- yeah, the last two weeks prices are stable but soft. over the last year, prices are -- >> stable prices? the whole 2% thing, it's just a number. my contention is we should have

3-4% growth. we have 1-2 m%. it's half. slice expectations in half too. going down the road of economics, growth and pricing prices are holding hands when they skip along. >> yes. rick, here's what we disagree. you want raised rates, but keeping rates this low, although they are expensive long term -- >> jim, when you walk in the in the morning, do they tell you where it's closing? >> no, they don't. >> i will tell you thises ten year, give me two years, bid and offer, right? >> yes. >> that's snap ticks here. >> numbers do up and down, raise, lower, break the market. >> yes, yes. we said the same thing. i said let rates go higher because we both agree that rates are being depressed by the fed. if we go to your world and release and let buyer meet seller, rates would be higher, correct? >> yes.

jim, i have to turn it back. i'm the desk clog here this morning. >> see you guys. >> how quickly can we get liesman in here? i see him in the corner going, not me, not me. he's not coming in. >> darn it. >> singing in the yellow brick road, and now i'm singing that song and lollipop gang. thank you. >> they are not that mixed. listen, you know, i think that when it comes to fed policy, really, guys, and ladies, it's not difficult. it really is not difficult. they made it difficult because they want to get rid of recessions, under the current regime of central planner, rid the business cycle, and when you push something in that needs to explode, eventually, the champagne cork's going to go and there's nothing to do about it. >> yeah.

>> the cubs last night. >> oh, god, yeah. we can't get ahead of the curve. i was there when they looked like it was a done deal. >> take it one step at a time. >> rick, this is the song in my head for the next three days, thank you for that. >> when we return, alice and wonderland might have been better. a race for the white house heating up, and trump was not on stage, he stole the show. how much politics should play in the investment decisions in futures at this hour are down about 12 on the dow this morning, down 15 --.9 on s&p. we'll be right back. before earning enough cash back from bank of america

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welcome back, first presidential democratic debate was last night in vegas. hillary clinton, bernie sanders, and three other presidential candidates remaining nameless squaring off. among the topics -- no, that's not fair. mark o'malley and they discussed the keystone pipeline, syria, forp investments, and trumps not there, but with app assist with twitter, may have stole the show. he said, sorry, there's no star on stage tonight among other

things. >> tweeting this is a very boring debate. >> fans disagree. you know, everyone was set up to say hillary clinton had a great night, i think. >> honestly, i watch eed 40 minutes of it, and -- >> well received by the media. >> you didn't watch it. don't weigh in. >> i saw harwood -- >> 60 seconds of it. >> harwood played the best part of the debate, and i saw that. we got that in, didn't we? >> you read the op ed page too. >> that was a long sound bite. >> obviously, we have other stuff to talk about here too because of the great guests on set with us. back with the special guests cometing the discussion on the future of investing over the next 20 years, bill miller, chief investment officer of lmn, and brian rogers is the chief investment of t.rowe price

group. gentlemen, you laid out you are positive about the target right now, optimistic on the investments. bill, earlier this morning, we had delta airline's ceo on, and you were the first to say, looking airlines are a place to invest again. i see you still have two airlines, including delta -- >> three. >> what are they? american? >> delta, united. >> okay. what's happened here? why do you still love them, and those who have fallen out of favor, what do you say? >> the airlines are down 15-20% this year, up 18% the last three years, average cost is $7, and delta is reporting 20% operating mar gyps today, and the key on delta is 13% free cash flow yield. if delta was a junk bond, that's double the current price. junk yes are 6, 6.5. the airlines, i mean, you know, the other side of the airlines

is 100 years of terrible economics, and three years of good economics, people are not convinced yet, but berkshire traded for 20 years too. takes awhile for the market to change, but i believe the industry, you know, before the consolidation, the largest market share of the u.s. carrier was 12%, and i will not enumerate bad things about airlines airlines, but that was a recipe for bankruptcies. >> are you now convinced, in fact, the railroads at one appointment, but convinced no one can enter the market? no new crazy interest to ruin the party all over again? >> spirit. spirit has 1% market share, very low fares. it has not really disrupting the business. when you have the top three airlines controlling, you know, southwest, controlling and southwest, you got -- >> don't feed him that information. please, no, no. >> it's an -- >> no! >> you used the word.

>> that doesn't worry you depending on the way the winds blow in washington? >> what's washington have to do with this exactly? >> andrew -- >> has to do with the slots. >> there's entry. always is. capital loves airlines. new airlines attract capital. >> people flip out at capacity growth. capacity grows at 2-3% ayear, but it's growing at .9%. we are flying -- capacity was what it was in 1982. the economy is bigger, population, and so the airlines -- they have a long period of time prosperity. >> we saw the 20-year period where no one made money, and we saw all the negative ram a ramifications of what happened when airlines could not make money. now they are making money. are they making money now at what society should look at as unreasonable profit level? i'm having trouble saying the

words, but at this point, is the system rigged because it's an al gop my because of the profits so outsized that something should be done about it? >> just outsized compared to what other industries make. >> you think an industry that's not going in and out of bankruptcy -- >> probably good. >> probably good for people that don't want to drive with kids in the backseat for 18 hours. >> the thing about airline profit abo profitability is they compete on service for the first time. >> be still my heart. >> you'll have more -- a better flying experience in the next few years because they the have money to compete. >> please, please, please let that be true. >> there could be child sections, crying rooms if you will. flying crying rooms. >> what we did not discuss here is the consumer who is in really

good shape, so leisure travel is up. business travel is way up. a strong consumer ought to help airlines. now, we're seeing something interesting. southwest, which owns baltimore, is becoming a really big airline now. so i think the challenge for someone like southwest, and we're a big investor in southwest is to keep that service quality high and not to turn it into a regular airline, what i call regular airline. >> a legacy airline? >> yeah. that's the challenges, routes are longer, and -- >> ryan, talk about the other stocks you like because you really look at this, even though we're talking big macro, you look at it as individual stocks, and what you mentioned is the headlines an awful lot lately, dupont, why do you like their shares right now? >> well, dupont has a lot going on. there was nelson pelts -- >> saw him last night. >> there was an embattled board,

ceo fighting for her life, and a company, arguably undermanaged from a cost standpoint, and now what happened is we have a new ceo, ellen coleman resigning, and we have a new interim ceo, ed breen. >> did you like it before or after the ceo stepped down? >> before and after the subsequent decline this year. not a great investment this year. you have a new great interim ceo, tremendous pressure on the board. odds of another proxy battle if things do not improve, increased chance that the company's split, divisions sold, increased focus on cost control, and i just view it as a lot of -- there's a lot of ways to win here. it's not particularly exceptive, particularly after the 20% decline, and there's a lot of pressure on the company to improve performance which is important. >> talking about the companies you held for 20 years, is this the stock you map to hold for 20 years or longer or once you see

restructuring, you get out? >> becky, brian is leaving his money management job in two weeks, not going to forecast out 20 years. >> that's true. >> i have my own money, i can open things for 20 years, but they tend to be more cyclical, like an auto company, metal, mining company. the companies we talk about that i owned for 20 years are quasi growth company, even exxon i argue was that. those of a different ilk. dupont is a one to three year turn around. >> bill -- >> i want to join in. >> sure, go ahead. >> ed breen, largest share of waste management -- a great ceo, and he's a john malone clone. i would expect they will break up dupont, use the cash flow aggressively for shareholders, and so i think that's -- he's -- i'll be surprised if he's just staying interim but may be the real deal. >> the company breaks up how

quickly? >> as soon as ed breaks it up. he broke up tyco quickly working out well. >> are you a shareholder? >> i'm not. >> this is your cup of tea. >> stock up 10%, like, darn. >> just missed it. >> you heard what he said. >> yeah, yeah. >> trash talk. >> good point, yeah. >> the other stuff you own, top 11 holdings, three airlines, two housing stocks, and an automobile company. >> and biotech. >> from those, you are betting on a real turn in the economy, right? these were all the stocks hit very hard, or is that not why you have those? >> no. it's company by company. i mean, there are -- on a portfolio basis, there's probably some kind of a macro bet there, but it's all about the price. >> by the way, to mention three airlines we talked about, but the companies are lenar and the lennar. >> the biotech company as well.

>> okay. you also have netflix as a big winner too? >> we own netflix the first time around at 8, sol at 32. i thought that was good, then went to 300. >> oh. >> we bought it back actually at 55-60 on the old stock. we're up ten times in three years on that one. still the market cap's $40 billion for a company that completely dominates space. >> how much do you think it moves up still? >> hbo now is 14-15 a month. they got a million subscribers in the first month. net fleck is 95. >> time warner undervalued? >> yeah, moderately. >> based on the netflix multiple. >> jeff does a great job at time warner. >> you own it? >> i don't own it personally in the fund. >> it's a great value right now. >> okay. we'll continue this conversation in just a moment. >> okay. when we come back, jim cramer from the new york stock exchange, and then, tonight, don't miss the second episode of

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let's get down to the new

york stock exchange. jim cramer joins us now. i know you followed bill miller for a long time. you want to do the interviewing here instead of me asking you a question? >> i want to ask him about intrexon, the phase two breast or breast cancer drugs, the food business or the energy business and whether we'll see anything good in 2016 this could be an amazing company. >> they cloned two litters of kittens the other day, did you see that on the news? >> yes. this is like netflix of biotech. if it works, it's huge, right? >> i think you did a nice analysis of it a few weeks ago. you know, it's highly speculative. it's not like dupont. but it has the potential to be one of the great stocks of the next 5, 10 years. >> i'm so glad you mentioned that, a lot of individuals have to recognize that the risk is there, but the reward could be dramatic. when i listen to a man who

called the bottom in airlines, who understood netflix would be an amazing stock and amazon, i feel better. i don't get it. >> cloning kittens? i can get as many kittens as i want at an animal shelter. brilliant. thanks, bill. thanks, jim. cloning kittens. they're free! people don't know what to do with them. when we come backs, we'll wrap up our special conversation, and later today, the chair man of allianz. i earn unlimited 2% cash back on everything i buy for my studio. ♪ and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business... that's huge for my bottom line.

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. we're wrapping up our conversation about the future of investing with bill miller and brian rodgers. good morning -- i don't need to say good morning again. here's the question. you said you liked netflix last time, and i wanted to talk about amazon. i think of you guys as value guys. i find it hard to connect the word amazon and value except as a prime customer, but not necessarily as a shareholder if you're going to own this for 20 years. am i crazy? >> yeah. >> tell me why.

>> when amazon became public, a $400 million market cap, $250 billion market cap now. it hasn't sold additional shares. yet people said it never makes money. how did it go from 400 million to 250 billion and not make money? the answer is when john malone was the ceo of tci, if you bought tci when he became ceo and you sold it when he sold att, $1 was $900, and they didn't report profits. there's a difference between creating nick value and reporting gap accounting profits. as long as people say amazon doesn't make any money, i will know it's misunderstood and probably mispriced. right now the story -- aws is an $8 billion business growing 80% to 100% a year if it was independently traded, it would trade at ten time revs. it is two, three years ahead of google, microsoft, ibm and the cloud business.

it can be as big as the retail business, which is currently around 90 billion. i think if you look at amazon, you have a global company which has a dominant position, no competition as far as the eye can see. so i think it's good. >> what could it the multimatel worth? >> more. >> i get that. you buy stuff that you think will be 50% more -- >> no, 100%. >> so it's a $500 billion company? >> apple is is $700 billion company. so easily. >> not anymore. >> apple has gap earnings. >> are you the same place as he is. >> i'm not a big amazon fan. i like to see them make money. >> he likes to see them report -- >> i like to see them report money. i think t. rowe sprays a bpricur

of amazon. >> you like lowe's, you don't -- >> you like home depot? >> he's talking about a different lowe's. >> the tisch company. you can put value on all four businesses and cash, and you come up with a $50 stock, and it's 36. >> why? >> the pipeline business weighed on them, the hotel business drives it. smart people. gre >> you like emerson. >> high-yield stock, 4% yield. high quality, again report gap earnings and cash flow. a very easy way to win. >> okay. gentlemen, thank you. >> thanks. >> thank you for coming last night. thanks for hanging out this morning.

>> thank you for making us smarter. been great having you two. >> congratulations on 20 years. >> thank you very much that does it for us today. we've had an excellent week so far and it's only wednesday. >> come to the plaza tomorrow morning. >> throwback thursday we have all the guys coming back joining us. you can see them right now on "squawk on the street." we can't wait. good wednesday morning. welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. earnings season now at full blast as the banks roll in, the pre-market unimpressed with weak inflation data out of china and now the u.s., retail sales were nothing to write home about. ten years barely holding on to a two handle. this mo