way to the world series for the first time in 15 years. everybody around here is jumping on the band wagon. new york sweeping the cubs to win the nlcs. it's thursday, october 22nd, sorry back to the future, cubs did not win the series. and squawk box begins right now. ♪ >> 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 kernen and andrew ross sorkin. it looks like the futures are indicated higher. dow futures up by 22 points. s&p futures up by 3.5. the nasdaq up by 13. markets were down yesterday. check out oil prices. they are hovering near a three

week low at this point. up by about 1%. it looked like they were headed back to 50 and that's been given up over the last couple of weeks. we do have a special line-up of guests ready to tackle all things energy. hess ceo john hess and christopher crane. plus the president and chief operator officer of royal caribbean cruises. and then later, southwest airlines chairman and ceo gary kelly. they're set to post quarterly results later this hour. we'll talk to him about the results and what he sees ahead with the energy picture as well. >> let's tell you about what's going on today. a couple of stories we're watching this morning. ecb meeting right now. policy decision due around 7:45 eastern time. that will be followed up by a news conference by president mario tr mario draghi. economists say it's likely the ecb will keep the door open for more monetary policy.

earnings once again the big focus is the market. before the bell we'll be hearing from caterpillar, mcdonald's, dow chemical and many others. then this afternoon we'll be watching for a tfrks at&t. now we say alphabet instead of google and amazon on deck as we do microsoft. another big report weekly jobless claims, existing home sales, leading economic indicators and the kansas city fed survey. so a lot going on. >> and in terms of stocks to watch today, andrew mentioned we'll all be watching, we're interested in earnings. at&t releasing quarterly results today. the company is saying the street's consensus revenue estimates are inflated.

>> you know. >> no surprise. >> and then all of a sudden you get blind sided. at&t suggests analysts aren't appropriately accounting for directtv which it acquired in july. >> one time issues i guess? >> for whatever reason but in this case it is directv which really watching how at&t advertises now that did transform the company because they're a major tv provider now. nfl games and everything else. >> why would you be wrong on the revenue side? you'd think on the earnings per share because of directv. are they overestimating what they're going to bring in in terms of revenue. >> i don't know. >> unless they were just assuming there was more revenue there than there really was. >> american express, we're going to watch. posting a nearly 16% drop in

profits. that missed wall street's mark. the credit card issuer hurt by higher expenses and a stronger dollar. >> ebay. >> american express. >> i'm saying he has been a fan of them for a long time and they have been the right call for a very long time and the question is will they be the right call for a continued long time. >> can i -- go ahead, finish that thought. >> company also raised it's full year profit view and texas instruments look to be a winner today. earnings and revenue coming in better than expected and it has nothing to do with orange juice. getting a boost from the services provider beating the street on the top and bottom line. >> back to at&t. just looking this up there is a good reason for why they're saying the directv revenue is inflated. analysts are including directv revenue for the whole month of

july and they only included it july 25th. there almost a whole extra month of revenue that was not part of the deal. clears things up. if you take a month of directv out of your earnings that's going to have an impact. also we should tell you cit group announcing that the ceo will retire in march. he was appointed five years ago to help turn around the lender after it's bankruptcy. he is young, right? >> he is young. it's already been five years. >> since he left morgan stanley. >> also kinder morgan shares under pressure. they need to maintain financial flexibility in a weak commodities market. executive changes at lululemon. the chief product officer is leaving after two years. the role will be eliminated and it will add a new creative director job. they have been dealing with margin issues and quality lapses

as well. the stock is down 1.4%. >> we're also watching shares of valeant today. it's been the big question mark over this stock. slammed by as much as 40% yesterday on the short seller report that suggests they may have fraudulently inflated revenue. they're accusing them of failing to disclose ties to specialty pharmacies which helped create phantom sales. in the meantime, hedge fund manager bill ackman is a big investor in valeant. tried to do a number of transactions. complicated transactions with them. taking advantage of the stock plunge buying another 2.1 million shares. that means it's now valeant's second largest. >> he owned a large stake before. >> and he was trying to -- now my memory left me.

>> is he up still? >> he's probably still up. he's probably still up but the question is of course whether you think this is house of cards or the real thing. >> he's a well-known watcher of houses of card from herbal life. >> but he's on the other side of that. >> i know he is. so that would say something. if he sees something in herbal life and doesn't see it here, that is a conflict. >> he never really argued that herbal life is an accounting fraud. he's never argued herbal life is an accounting fraud. >> it's a big scheme. >> his argument is that the structure is illegal and fundamentally different than whether you can actually catch the accounting fraud. >> we'll talk more about valiant but a ton of political news this morning. we have the stage set for next

week's debate happening here on cnbc. joe biden saying he is not running for president and paul ryan closer to getting the job of house speaker. john harwood is here covering all of these stories. great to see you. >> good to be here. >> let's talk about the stage for the debate first. we now know who is going to be where. >> that's right. ben carson and donald trump in the middle which is the poll positions in the debate reflecting the fact that they're leading the polls. you flank out from there and carly fiorina on one side. marco rubio on the other. jeb bush who we thought was going to be in the poll position the entire race is on the flank from there and then you move on out to the ends and have got a crowded stage with ten people we have the earlier debate at 6:00. where you have four. so 14 candidates to talk to.

>> a lot of people say it's still early and anything can happen at this point. but four years ago at this point how many people are still in the race roughly. >> 8 or 9. >> so a pretty crowded field. >> the major drop out, rick perry dropped out early but the major drop outs didn't come until after we got through iowa and new hampshire and people started fading. >> so this is kind of the norm although maybe a little different too. >> well, 14 is extraordinary. that's a very large number but you get into the fall with a significant number of candidates. some running on fumes and don't have much money or much to show for. that's typical. scott walker was in the cnn debate. that was his last major event. >> that's really a piece of news

that we moved on quickly from but when you think about where people thought scott walker would end up in the race, pretty profound. >> biden announcing he thinks it was too late to run. you were right. you said that for awhile. >> john thinks like a democrat. you're so close to going -- >> well played. >> so close to the goings on in the democratic party that it was obvious to you all along. >> sourced is the way to think about it. >> honestly, it was so obvious all along that this was not going to be the right decision for him. couldn't beat her. it was late and his family had just been rocked by the loss of his son and he said openly that he didn't think he had the -- he wasn't sure that he was going to have the emotional wherewithal to put 100% of himself into this race. for somebody that isn't sure that means they don't have it and we knew it was getting to this place. >> when it looked like he might

there were certain democrats and the take was it's going to be good -- not really being tested by bernie sanders necessarily because nobody thinks that's likely at this point so maybe she gets toughened up by having put down joe biden. >> her poll numbers go up and it solidifies her chance of being the nominee. i never thought it really wasn't solidified. >> i agree with you. >> so it's good but we knew she was the presumptive nominee all along. >> biden. >> well, he could have been a spoiler. >> 70 million. she's already got how many delegates. >> and put bernie in a position of -- bernie sanders in a position of really stepping in. >> right. but no, i think, you know, there's some ways in which he would have made life harder for her. on the other hand, beating -- any time you beat somebody

people look at you as a winner. >> because policy positions were so similar he was going to have to go after her on ethics. >> he wouldn't do that. >> that's what i mean. how could he mount a challenge? that would have been difficult. >> ethics is a pretty weak read to go at within the democratic party that likes her so much. it's a general election argument for republicans. not much of a primary. >> we have a little testimony today. >> we do. >> and i think she'll probably two into that system in a little lighter mood than she has been before. the benghazi committee has taken a few hits. serious hits. joe biden news. her performance in the debate last week. >> don't do that what does it matter thing again where she raises her hand and goes what does it matter. did you pass that along to her people? >> game it out. what does it matter?

>> i just don't think at that point that not looking back to see if security could have been better or tightened saying that they're already gone what does it matter to talk about security now. >> that's not what she was saying what tuz it matter about. >> but the hearing itself. >> looks like they're not giving the actual endorsement. >> pitching it as a super majority. >> i mean from paul ryan's statement last night this is good enough for him to move forward but i have to tell you it's a pretty shaky vehicle he is driving into this speakership because you have the expressed reluctance of some of the members. people on the right, laura ingram and others hammering him about immigration and i think

the republican party still hasn't worked out some of the issues and we have a rough ride ahead and you mentioned the debt limit. that's going to be a challenge. i suspect john boehner is going to try to clean that up and get him through the 2016 election but that's kicking the can down the road. >> john. a lot to talk about. it's great to have you here and we'll be talking to you a lot in the next few weeks. >> in the meantime, let's get back to what's been happening in the energy sector. we showed you oil. obviously it's made things challenging for oil companies in this period. the price of crude falling sharply since 2014 and one of the most severe downturns in decades. plunging to a six year low in august of $38. u.s. rig counts delined as the industry adjusts to the sharp drop in demand. joining us to talk about the future of energy production is our special host today john hess. he is the ceo of hess corporation. he joined the company in 1977

and became ceo in 1995. he is fluent in four languages. john, thank you for being here today. great to see you. >> great to be back. >> we have watched what happened with oil prices and it's been a stunning and dramatic decline. you think there's light at the end of the tunnel. why is that? >> it's a long tunnel but nothing cures a low price like a low price. the seeds have been planted for a slow recovery in oil price. what is the impact of the prices you talked about? first on investment. global investment and expiration production has gone from $700 billion last year to $550 billion this year and with the recent leg down in prices even further to the $45 investment will go down further next year. secondly, the industry itself is running huge deficits. if you assume $50 brent and right now we're at 48, 45 for

wti. after capital expenditures have been reduced as well as dividends for exxon, conoco, it's $100 billion. >> why does that matter? >> you don't have money to spend to grow production. >> they were planning on doing it anyway. they were slashing cap ex and not getting into it. >> they're slashing more. the impact of the deficit is going to slow it. the energy agency, iea is a big progre prognosticator, it will go down about 400,000 barrels a day. the one good piece of news in this is demand.

and even with a slight slow down demand should have up about 200 million barrels a day and nonopec going down 500,000 barrels a day there will be room for market share recovery. >> that sounds like wishful thinking when you start talking about demand in particular. we have looked at a severe slow down happening around the globe. questions about whether the fed will be able to raise interest rates at this point because they're so worried about what they see. >> just take china. china is about one third of oil demand growth. i was in beijing about four weeks ago and i can tell you they're bumper to bumper. from 7:00 a.m. to 7:00 p.m.. the traffic they have there dwarfs anything we have here or on the 101 in l.a. from the oil perspective china demand is strong. u.s. demand is up about 300,000 barrels a day year on year. saudi arabia is up 100,000 barrels a day. india is up about 200,000

barrels a day so the oil demand picture is pretty good. >> there is another company that thought the industry had seen the worst of the u.s. oil saying three months ago but now they're saying it looks like more like 2017 before recovery kicks in. the market is underestimating how long this period is going to take. he says they have a significant pending supply coming and that shows an increasing challenge. >> i think it's right. we are in a lower for longer period but we have been through these downturns before. 1986. 1998, and 2009 and it takes about two years for the market to rebalance and we're in the first year of that two year period. >> in terms of that, does that mean you're ready to invest more. >> the whole industry is waiting for a strong high signal and what people don't realize is when the strong price signal happens there's a lag effect for investment to happen and then a

lag effect for supply to recover so supply is going to go down next year and it will take several years for enough investment to go in for the future supply to keep up with demand. that should rebalance the market. >> we heard from others that this time may be a little bit different because technology has advanced and when you see the price pick up again for the united states it will be much easier for them to flip the switch and get back into it. is that not the case? >> that's an oversimplification. we're going to go down more next year and there's a lag effect from the time you decide to make the investment and probably 12 to 24 months before the production will come on. it takes time to get the planning. a lot of people have been put out of work. we have to get them back. >> that's an interesting argument. people thelss movmselves moved find other jobs.

what do you think it means for the oil price in the next 12 months. >> i do think that first of all nobody can predict oil prices or the stock market and i think the fact that it's gone down the second leg everybody has been surprised and we're sort of balancing along the bottom here but we think by the second half of next year supply and demand starts to come in and balance with the numbers that i talked about and you'll be seeing a price certainly north of $60 and to get any real price signal to get investment going again you're going to need a price of $70. where we operate as one of the leading producers or the gulf of mexico we're also a leading producer. >> john is going to be with us for the rest of the hour. we have a lot to talk about. >> coming up when we return, squawk box sales away. the president of royal caribbean joins us to talk about the health of the consumer and much, much more. but first take a look back at this date in history. ♪ you can move the world.

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welcome back this morning. we're talking about the future of energy this morning with a large consumer of fuel on the high seas. he is the president and ceo of royal caribbean cruises. he is in charge of the energy consumption for the fleet of 43 ships and our guest host for the hour is john hess. you guys use a lot of energy to

move these boats around. >> yes. >> ships. but the move over the last five years has really reduced the energy but how do you do that? so we understand. >> if you asked us 15 years ago are we trying to reduce energy usage we would have said of course but by today's standards we were in elementary school then so we're doing everything we can conceive of to use less energy to get from point a to point b. probably one of the most interesting things we have come up with is air bubbles. so air being projected out of hulls in our ships now. the newer ships which creates a mattress of air that produces the friction going through the water. >> so in terms of just total energy costs on a percentage basis -- i wouldn't call it a flight but a journey, a voyage

they've come down how much? >> 30 or 40% compared to where they were a few years ago. >> but take out the actual price. >> yes, the efficiency. >> just on an efficiency basis. >> so since 2005 we're about 20 to 25 more efficient in the amount of fuel we use. >> how much of those being driven just by the bottom line and how much is being driven by concerns from passengers and sort of issues around global warming and things like that? >> it's the right thing to do from our shareholders and customers and the planet too but it's the volatility of what we and so many other companies and industries have experienced over the last ten years. sure we happen to be in a low oil price moment but as you were just discussing a couple of minutes ago the oil price goes up and the oil price goes down so what we have experienced in some of the spikes of the last few years is we need to do everything we can to minimize

oil price expenditures. >> in terms of looking forward to the future, how much more can you produce? >> we keep finding new and better ways. >> what's on the horizon. >> you know whether it's computer systems with which we drive the ship or the lighting, the air conditioning, the paint we use on the hulls we keep finding ways to shave margin points off of our energy use i don't think that's going to stop. computerization is letting us do things we couldn't have dreamed of. >> the way for you to move ships across water. if we could some day come up with something -- have you ever thought of that? >> wind can help on cargo runs repeatedly over thousands of miles. seriously. >> the kind that andrew would go on. he would never go on one with

4,000 other people. >> that's not true. >> you would go on with 80 people. >> yes i would do that too. you should try that. >> my wife gets motion sickness. it's very complicated to do a cruise. >> can we just talk about the health of the consumer in the travel business? what are you seeing right now? >> as it relates to energy what we've seep since the great depression is every time there's a big spike in oil prices there tends to be concurrent with the recession. we're happy that in a low oil price environment consumers are driving more and taking more vacations doing generally well. >> has that lead to an increase in your business? we keep thinking lower gas prices will mean consumers will go out and shop. that hasn't been the case. have they been taking more cruises? >> the ships are always full. that's the nature of the business and the only question over the years is what price are the ships filling up. so we find ways.

i can't can't that question but we fill the ships but it's hard to know exactly what the oil price effect is and you have people flying to ships. you have people driving to ships. there's a lot of choices people are making. >> just speak to one issue about the consumer, even on a cruise you guys really tried to differentiate multiple tiers on board. can you speak to just the high end luxury cruise consumer which i assume is doing great. what about everybody else? that's the question at the moment. >> well, our main brands are the sweet large spot of the market. so we have very little percentage of our business that's ultra luxury cruising. that's a very small percentage of the business generally speaking. so the experience that we're having which we'll talk about after our earnings call would be a very representative sample of

the big cruise marketplace. >> your stock was 40. went to 5 during the financial -- it can make a difference, the overall economy. right now you're back to new highs, right? >> yes. >> is business back in terms of -- you probably have more ships -- but in terms of -- >> is there a number or something like that. >> yeah, our equivalent is yield. the average revenue yield per guest per night. it's been coming up sequentially ever since the lehman brothers issues and we have recovered what we lost. >> and gotten even more back? it's even a better business. >> it's at par slightly above where it was before all things happened. >> how do you look at that volatility? it's a big risk and also the regulatory risks. >> we have been very consistent with our hedging program. we bought about 50 to 60% two years forward and we have been successful with that over the

years. believe in that in terms of managing the risk profile of the company and we expect to continue on that program. >> and is there anything regulatory on the horizon that you worry about? >> no, not really. we're an end cruiser of the product and we don't get caught up. it's happened without speculation in the marketplace. we needed to run the ships. it's pretty straightforward. >> in the very recent past it's the other way. we're not going to complain about lower oil prices. >> can you lock it up longer now. >> 60% forward and we also buy some further than that. >> talk to him about it. >> do you agree with him? >> 100%. >> thank you for being here this morning. >> good luck on friday. >> thank you. >> eli little hi hitting the tape. earnings beating the street. the ceo will join us at 7:15

eastern time. coming up the ceo of one of the country's largest providers chris crane will join us next.

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welcome back, everybody. our next guest runs one of the nation's largest energy providers. he's a 30 year veteran of the power industry. joining the company in 1998 he was named ceo in 2012. in 1995 he was the youngest person ever to oversee all operations of a u.s. nuclear power plant. we want to talk about the future of energy and where things are headed but you must have a good idea about the economy based on demand coming in.

what do you see now? >> it's flat in the areas that we provide energy it's low growth is in some areas negative. energy efficiency has a lot to do with that but we're not seeing a lot of it built in our industrial basis. >> it's what we think about the economy at this point too. in keeping with what we see. >> very slow growth. >> let's talk about how you get your energy. in your portfolio, you mention like 60% comes from nuclear energy. 35% from natural gas and the other is renewables. >> right. >> that's been a huge debate that people have been trying to figure out. what is the right way to go and your point has been that nuclear is a good way to go and you don't hear much talk about that from washington. >> it's highly reliable. look at a nuclear facility and load a reactor core for 18 to 24 months and it runs straight through. fuel is there. it can run. it's not disrupted based off of supply of gas coming in.

wind blowing, sunshining so you need a mix of energy sources. >> and your point also is that when it comes to green technology this is one of the cleanest? >> it is. the nuclear generation by far is the cleanest low emitting carbon source that comes. >> chris, i think that much of the country was headed that direction and was thinking that until they saw fukushima and that changed a lot of people's minds. >> it wasn't as much fukushima as it is what we have been talking about this morning h already. the low commodity price. natural gas is hard to compete against. it's more the commodity price than the risk. >> what about regulatory issues? we heard that -- how long does it take to get a permit? it takes how long to build it? >> it's around 7 or 8 years. it's still a long time. >> to build one to get the regulatory approval and then build.

>> right from when you start to file your permit and go through the regulatory approval process. that can take three to four years and it can take five years or six years to build it but you're talking about a dual unit nuclear site. $16 billion over that period of time. huge capital investment. >> has there been any that are new in the last five years? >> no. >> not a single one. >> one that's about to in tennessee. two units are under construction in georgia and two in south carolina. they'll be in the 2020 to 2023 time frame. >> in terms of safety because that's the overhang on all of this, these new generation nuclear plants, how much safer do you think they are than what we see that's already been built? i know some other people are working on super gen next gen stuff but how far are we away from something game changing? >> the u.s. fleet today is the most robust and safe fleet in

the world. we have the standards. we have the design. we have the operations training so i feel very good about the base of the operating reactors. almost 100 right now. the new reactors, two in georgia and two in south carolina are the massive design reactors. it's the next iteration. it's an advancement that brings more margins of safety into the design. >> you talked about the impact of natural gas. what about the impact of renewableses on nuclear and the grid itself. >> that's a problem we have right now. we have technology versus outcome. the clean power plant has its pros and cons but it's pushing for an outcome versus having clean energy sources compete against themselves. in the competitive market it's very tough. there's subsidies that drive it

down. it's not sustainable. >> are you -- is plutonium still used or uranium. >> yeah. rich uranium. >> do you have to buy from russia? >> we do get some supply from russia. >> do we have in here? domestic producers? >> there's a few. probably the largest supplier for us is canada. >> they have great reserves in canada but we will buy it from australia, canada, russia. >> how much from russia? >> 10 or 15% of our supplies. >> the russian uranium deal. get some help going. all right. >> very reliable supplier. >> they are? >> they are. >> they're not the ukraine of natural gas. >> but for us it's been a good relationship. >> they aren't watching. relax. >> chris is going to stay with us and so is john hess. we have more to talk about when

it comes to energy. >> squawk box, southwest ceo gary kelly is going to join us when we return. ♪

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>> we are waiting for quarterly results for caterpillar and mcdonald's. we have weekly jobless claims, existing home sales, heeding economic indicators and the kansas city fed survey. also we're waiting for an ecb decision due around 7:45 eastern time so basically we're waiting,

waiting, waiting this morning. that's today's squawk planner. when we come back, southwest airlines beats the street. gary kelly will join us. stick around. we'll see you in just a minute. ♪ ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪

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>> southwest airlines leading estimates on the top and bottom line. joining us is gary kelly, chairman and ceo of southwest a airlin airlines. your whims are not subjected to forex and that's one of the good things about being more of a domestic company. you beat revenue and it's up year over year. >> yeah, we don't have any foreign exchange to deal with. it was a very steady performance and and aggressive year for us in terms of our expansion. a lot of things going on there and the big headline is cig any ant drop in fuel prices so that's what caused the surge in earnings year over year. >> you don't have any empty seats either but you typically never had very many empty seats. >> we typically lag the industry with our low factor because you're right. we're at record low factors. there's very few empty seats. our folks have done a great

skrjob over the years. we're hitting on all 8 cylinders here. >> i would lose sleep every night i think if i ran an airlinen and what was it? a software glitch? and the slightest thing happens you'll get bad press so it was earlier this month there were some software -- was it a software problem? >> yeah that was a couple of weeks ago and we're 24 by 7, 365 days a year. there's a lot of moving parts to running an airline. we had a very solid operation that day. long lines in some cities but our employees did a great job of getting our customers where they needed to be but there was a problem with the log in software and some of our employees literally could not get logged in and our technology guys jumped in and got it fixed and we were back to normal. >> you know, starbucks is now

supposedly a technology company but you must be too. you have to be. >> we have to be. absolutely. >> it was not material but it wasn't like a penny a share. nothing happened that day in terms of the bottom again, fort was a normal day, all flights completed an on-time performance was good that day. there were just some delays in some circumstances, and some people had problems getting through to make bookings, but the following week, we had a successful fall sale that we had pre-planned, and i don't expect any material effect from that at all. >> all right. you know, you're in a perfect storm so to speak in terms of oil prices, load, and everything else, but, you know, your comps, one of these days, will not be easy. where do you need to expand? what's that end tail? >> well, first of all, we have a lot of our current capacity jurn development, so we just finished

integration of air tran, and a lot of that capacity is new to southwest airlines. plus, we're expanding from dallas field, and opened in houston. next year, we won't be as aggressive, and a lot of the new markets will develop, and that provides nice tail wind to our revenues. we'll continue to grow, and we'll continue to work on opportunities to expand our margins and try to keep oil or jet fuel prices as steady as possible year to year. >> in the big picture, gary, do you say american consumers right now are benefitting from a competitive landscape in the airline industry or american consumers are being screwed by an ridiculous. >> ridiculous? okay. >> the demand is improving.

the capacity in which the airline industry offers is increasing to meet that demand. we're growing our capacity over 7% this year, and we'll be growing 5-6% next year. our -- if you look at average fairs year over year, they were down. it was a very competitive environment. i expect that to continue based on schedules we see. >> that was not meant for you gary at all here. >> there's the guy here to explain it to you. >> here's the question, gary. prices came down on major routes where there really is competition, and there's a number of routes, obviously, you compete against so many other airlines, but when you look at so many of the smaller cities in the united states that have lost traffic, lost routes, what do you think about that, and do you see a moment in time where either other airlines step into the fold because there is demand

that somehow changes the game, or there's smaller cities, hubs and small places that lose? >> well, hey, it's the good ol us of a. i think where there's opportunities for entrepreneurs to go in and create value in markets, that will happen. the biggest challenge in the airline industry that you all are forgetting over the past 15 years are soaring energy prices, and it put every major airline that existed 25 years ago into bankruptcy, and we're just now for the first time in a long time benefitting the other way where oil prices fall, so you have very healthy airlines for about two years. >> right. >> so our challenge is trying to anticipate what happens next, especially with energy prices, to a strong industry puts us in a better position, i think, to serve our customers, but the small markets, in particular, are very difficult for airlines, even for us to serve profitably because we can't get enough

traffic on an airplane to fill it up and pay for the cost of operating that flight. that is the challenge in the small markets. >> gary, your stock price performance over many years has been stunning. you've been recognized by jim collins in his research as a great company. there's very few. you're one of the most admired companies in america. what's the secret? >> well, i think the secret is two-fold at southwest airlines. we want to offer great service, and we want to be the low price. if we can do that, we'll win. if we can do that, we can take great care of our people making it a great place to work. we start with low prices. that's what gets customers to think of southwest airlines, but then we're beloved as a company because of our people and the great job they do in taking great care of our customers, and we try to take care of each other within southwest airlines. i don't think it's more

complicated than that. >> i don't know. i remember the good days when you served the public. you didn't need a make profits. there were no profits, but it was, like, you served the public. what do you do with the profits anyway? you don't need those. a lot of companies should be run like that from now on, gary, where profits -- a lot oversized at this point -- so, i'm kidding, gary, anyway, we got to go? 20 year period was better when you just didn't need all the profits. the consumers benefitted. >> well, but, you know, you remember that we're the only airline that has this record. we've had profits for 42 consecutive years, and that sort of provides stability. >> profit conjuring. if it's something you want to publicize, fine, but you made large profits, and i remember. anyway, thank you, appreciate it. >> great to be with y'all. >> before we go -- >> he didn't deny it. huge profits. making profits year after year. >> god bless him.

real quick because we have to go. $100 oil. are we getting back to that? >> long way off, but the important thing in the down turn is our company's going to be guide, and the industry by three principles, preserve the balance sheet, preserve the operating capabilities where innovation is driven, 13 million to 5 million, keep the capability, and most of all, preserve growth options. it's a long term business, and everybody's thinking short term. 100 is way off, but 70 to get invested again. >> takes awhile. we have to get rid of this. >> years? decades? >> i can't tell ya. >> what you talking here? >> there's such a glut right now. we're more focused on natural gas. if we get back to a $4 natural gas, that would be great. >> apply to and build a nuclear plant before we're back at 100. >> that is true. >> this is for the holidays. >> it's still here.

>> there you go. >> one for each of the anchors. >> thank you. >> we'll be joined by john lechleiter. we'll be back with him. ey come s world ugly and messy. ideas are frightening because they threaten what is known. they are the natural born enemy of the way things are. yes, ideas are scary, and messy and fragile. but under the proper care, they become something beautiful.

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earnings alert, united airlines and more and caterpillar and 3m expected this hour. we have numbers and reaction from wall street straight ahead. >> elily out with quarterly numbers, and the ceo is joining us first on cnbc. >> paul ryan has a clear path to becoming the next house speaker, but the path to avoiding a government shut down is far from certain. former senator greg looms in on

the debt deadline as the second hour of "squawk box" begins right now. ♪ live from the beating heart of business, new york city, this is "squawk box." welcome back to "squawk box," everybody, cnbc, first in business worldwide. i'm becky quick, and it is a busy hour for earnings, expecting results from united airlines and dow components caterpillar and 3m. at the top of the hour, mcdonalds set to report, and after the bell, reports from google parent alphabet, and amazon, microsoft, and at&t. at&t warned yesterday that analys analysts' estimates were inflated differing from the company's accounting. the complication comes because of the acquisition of directv in

july. they are taking that entire month of july assuming the revenue from directv is included. the company is only including from july 25th, why you see the stock unchanged, although the company warns revenue will not be what analysts are expecting. >> all right. dow chemical results just now hitting the tape, dow beating estimates by 13 cents, earnings of 82 stcents a share, above expectations of what did i say, beating my how much? 13 cents. expectations were probably 69 cents. quickly deduced that. revenue missed slightly, and i bet you we can get an idea of 4x. we are interested in every company's results are influenced by foreign exchange. i don't see it right out of that here, but revenue at least as far as analysts' expectations below estimates. now that --

>> looks like there's a new office the chairman as ceo of the company. the company is going to be announcing. a leadership kind of shakeup a little bit. looks like andrew liveress, chairman and ceo right know, and fiderring, the cfo, added to the vice chairman post, and he's named vice chairman and chief operating officer. looks like they are shoring up the leadership and elevating those two to create what they are calling a leadership office of the chairman. >> and that profit enounumber i 1% in terms of year over year. partly due to higher margins, guess what, raw material costs, down across the board. we know they use a lot of petrol based products, but that's not helped as many companies, at least to the tune, it's down,

justi offset by weaker currencies, vis-à-vis the dollar hurting the multinationals. >> said sales down. year over year. >> were they involved? >> dan lobe was involved in the company for a while. there's been a number of reports, which we have not talked about on the set that much from reuters, and they had a lot of spending that andrew accused of, paying the company back enormous amounts of money, showing him going to super bowl parties, and the wife working on the hotel, local hotel on the company dime, and it's created a lot of complications locally where nay are. >> probably why you are seeing the shift in the leadership positions here. >> right. >> i don't know that, but i'm guessing based on what reports indicated. >> remember when andrew used to talk about the jv in kuwait too? saying they are beginning to optimize their ownership. that means --

>> buying somebody out? >> i don't know whether they are or someone is buying them october. restructured participation in the ventures with the object of optimizing its investment. in expanding relationship with greater equate on the u.s. gulf coast. this would require -- selling stuffing right? requires any global fortotal equi equity consideration, and dow receives 1.5 billion in proceeds. optimization? >> i don't know. >> hard to know what that means. >> well, whatever it is, it's the optimal thing to do with it. >> you can only hope. >> according to the company. stock's up for some reason. that's a big beat, 13 cents, but good reaction. >> we'll dig through the numbers. in the meantime, the other stories that are getting our attention at this hour. the ecb is meeting right now, a policy decision due at 7:45 eastern time, followed by a news

conference by draghi 45 minutes later. they are expected to keep rates and asset purchases up changed, but economists say it's likely to keep the door open for more monetary stimulus in the future. stocks rebounding in china, shanghai gained 1.5%, led by small caps, which was a big drag on the market in the prior days' selloff. we can show you what's going on here in the united states from the asian markets, there it is. the dow looks to open higher at 32 points, nasdaq up 15 points, and s&p 500 up 4.5 points. eli lily beat the street, and they are raising the full year jeer. john lechleiter is joining us. >> that stock is sharply higher too. we'll talk about that at 7:15. yesterday was a chaotic day as

valeant stock plummeted 40% at one point. it rebounded after analysts expressed support for the stock, and bill ackman bought 2 million shares, telling scott that. meg is joining us now with more. >> so, actually, it's interesting, talking about analysts giving support because just now bmo came out and downgraded the company, saying they can't support this specialty pharmacy structure, so what happened yesterday was -- >> siding with -- >> not just the short sellers, but saying in practice, there's not enough understood about it. there's a lot of doubts about its viability, kind of what's going forward, and it was very interesting to see -- >> by the way, the stock's down 20%. >> exactly. all right. >> yeah, so what happened yesterday was the short seller puts out this note saying, essentially, that valeant

controls special di pharmafarty. this is a way to get around a higher co-pay you have for expensive drugs. citroen said the use of these and use and control of these specialty pharmacies meant that it was doing accounting fraud and wake babaking in fake sales. i don't know how they made the jump, but it spooked people a lot sending valeant shares down 40%, halted twice, and they said they were buying 2 million shares of the company, saying he was confident in its prospects. with that, the stock rallied to close down about 19%. valeant said yesterday, took awhile to respond, issued two separate statements. the second one stronger than the first, saying they categorically deny allegations, false, misleading, designed to drive down stock price, saying that it

thinksing t accounting is in li with what they need to be doing. >> in line with the two pharmaceuticals -- they are owned, aren't they owned by the same people? >> citroen alleges they are the same company, and it makes this allegation because it says they have the same phone number, same language on the website, and valeant said yesterday, the pharmacy they work with provides cull center support to rno, another specialty pharmacy. interestingly, valeant said that it does not own any part of it, so they acquired app option to buy -- >> any other? >> oh, what about the other one? >> putting out a statement saying they do not own rno, but it does, however, have app option to and quire rno. there's questions about crimion. >> there's more there. >> there's list prices and what they sell for too, and depends on booking the revenue, right?

>> that's another interesting question here. bm ork bmo's note said, why didn't we know about the specialty companies? >> the bank of montreal too. >> yeah. why didn't we know before this week? why is it just coming up? what else don't we know? bmo is a defender of valeant through this until the downgrade, that surprised seeing it this morning. >> as an analyst, it's hard to stay with the stock, if it's 20% lower -- >> if you like the stock, that should be -- there's a ron -- >> a lot of people see a buying opportunity -- >> unless you have questions you can't get answers. >> meg, in the commercial break in the 6:00 hour, we were talking about bill and about how he's on one side of herbal life and on the other side of this. i was making the argument, maybe incorrectly, that in the herbal life instance, he says it's a pyramid scheme, sales are real even if you don't believe --

there's real money going back and forth that you may not like the construct of what could be a pyramid scheme or not, but this is a different situation. this could be realing taccounti. is that the difference? i'm trying to make the distinction. >> i don't know if there's a distinction. herbal life just selling to people, but they don't have customers -- >> one may be easier to prove. >> pyramid schemes crash eventually. >> eventually, because they are not selling to an end user, right? >> crash eventually because sellers can't sell it so they eat the product themselves or whatever. this is different. >> valeant is channelling stuffing, but it seems like -- >> reaction with no -- >> definitive one way or the other. seem like this is something to get an answer to. confusing now, but we'll get an answer, i would guess.

>> i hope so. we are working on trying to figure it out. you know, part of the question here is how valeant books revenue, so when it districts its drug through these specialty pharmacie pharmacies, it says that it doesn't book revenue until the specialty pharmacy or until the drug's been dispensed to the party and filled the prescription. they go back to get reimbursed for the drug. it's interesting. you're not getting reimbursed at the time the drug is dispensed. that's a separate thing. they have to get that and make sure they get the revenue, and so they could end up not getting that money at some point, and that needs to be accounted for as well. what citroen is alleging -- >> arguing at the same level that they -- >> right. mite not be the same level of reimbursement, but they go for whatever they can get. the drugs are highly priced, and insurers want -- >> for a pyramid scheme model, by definition, i think, that the numbers are not real and there's bad accounting, i don't think it's the structure, but

everything's hunky dory in producing a product, selling it, revenues, making the profit. i don't think that's true. sooner or later it comes home to roost. >> in a pyramid scheme the waybill is assessing this, he's saying the fda -- not the fda, rather the ftc has to decide it's a pyramid scheme to effectively take the company down. it's not the accounting itself. >> sooner or later it would. remember the original ponzi scheme, which should be a madoff scheme because he out did ponzi by a thousand, but if it works, why would it be illegal? >> what i want to see, though, is to come out, be explicit how it's accounting fraud. just because there's shadowy -- >> disprove it faster. you can't have these relationships. >> you remember the senate, how did they do it?

c cosmo and friends, they did it some way, book k with revenue, it was not real, but it was kind of real, but not real, booking numbers that were not -- >> that was true accounting fraud as was -- >> it was -- there were no, revenues were totally false. >> correct. but that's because they had effectively shell companies on the other end and effectively -- >> what citroen is saying if shell is in there and herbal life is another story. >> worse. pop cy schemes are worse. >> pyramid schemes. >> same business, isn't it? >> oh, pyramid's different than a ponzi scheme. >> maybe. >> it is slightly different. i looked it up. i can't remember the difference right now off the top of my head. >> pyramid scheme depends on people itself, and ponzi is true accounting fraud. >> sooner or later, you end up on "american greed." >> either way. >> either way. >> which is on prime time cnbc. meg, thank you.

>> thanks, guys. coming up, it's a big morning for earnings, eli lilly here to join us next to provide clarity on the company's quarter, and we expect reports from united airlines and dow components, caterpillar, and 3m, and judd greg is here talking about the lineup for the gop debate next week. we are back with that and a lot more in moments. maybe we get mr. harowitz to come back. 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.

ely lilly posts better than expected earnings, and joining us is john lechleiter, president and ceo, and you're sharply higher on the numbers, joihn. you increased revenue, trying to figure out how you did that. affected by a drag on 4x? >> joe , it's complicated. reported basis, up 2% from last year, including the revenue we get from the health purchase, that agreement closed on january 1st. now, on a non-gap pbasis comparing as if we opened them last year, our revenue's down 4%, mostly driven by kurp curre. take currency out, we're up 5% for the quarter, and that's pretty much a function of the new product launches that we've had including drugs for cancer

and diabetes. >> exactly what i thought. you actually, the animal health business added new revenues to the company, so if you include those, then you're up, but you your affected just about to the same extent as most other multinationals about, you know, would have been plus 4, and instead it was minus 5, is that what you said? >> would have been plus 5, and in countries like japan, it hurt us a great deal, but what we look for in a situation you've got a stronger dollar like this is underlying volume growth, and we saw good volume growth across the business. >> right. and you still are dealing with some of the patent issues and replacing older drugs that have gone off patent with some promising new drugs as well, and able to raise guidance. you were used to be at 320-330. >> that's right. >> you beat this quarter going

up to 340-345. >> that's right. d d >> you continue to beat in the next couple quarters, not just this quarter. >> patent expirations are about washed out. feeling residual impact, but we said on the january call we aim to resume growth, expand margins, and we noticed this year we decrease the expenses 7%, which on a nongap basis gave us eps growth of 22%, up to 89 cents versus last year, and so we're headed in the right direction. >> have any of the new -- are any of the new drugs in the last five years headed for a run rate of a billion dollars yet, john? >> i think, certainly, molecules, drugs and medicines are capable of getting there, joe. >> where are we now with both of those, and what do you think you'll do over the next 12 months? >> well, we can't predict, but in the last quarter, what we

launched last year sold 111 million dollars, and our diabetes medicine sold about $74 million, so we think these are on good trajectories. >> what's next? did you -- you have any positive clinical trials for drugs that you're really excited about? >> well, we had several pretty interesting data disclosures this quarter, a big european diabetes meeting last month. we, along with others announced that an oral medicine for type 2 diabetes is the first diabetes medicine to show improvements or decreases in cardiovascular risk and death. this is a so-called outcome study, and this was big news, obviously, because so many people with type ii diabetes succumb to cardiovascular problems like heart attacks or

stroke. we announced last week some really exciting data on an oral medicine for rheumatoid at arthritis, and shown in two studies i studies, an older oral drug is the starting point, but adding currently the biggest injectable drug, humira, showed superiority in a second trial to that, so those are positive readouts. >> okay. john, i was going to ask you quickly about this breast cancer drug, work on something other than brca or work on that we don't have treatment for now? >> well, it works on whormone positive -- >> her positive. >> yes. >> the fda gave a breakthrough

status, based on results from earlier studies in breast cancer, and we're now conducting larger trials. >> all right, john, thank you. >> thanks, joe. >> appreciate it. the pope is a jesuit. >> yes, i knew that. >> okay. we're jesuit educated. that was between me and you. viewers don't know what we're talking about. >> joe, the pope, and john all have that in common. reports from caterpillar, 3m, and united reports. we'll be right back. zwlnch who is the only woman whose portrait appeared on a u.s. currency note? the answer when cnbc's "squawk box" continues. aa-flac! aflaaac. aaaa-flaaaac. someone's sandbagging.

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enterprise more agile, borderless and secure. hp helps business move on all the possibilities of today. and stay ready for everything that is still to come. in panama, which is a city of roughly 2 million people, we are having 5,000 new cars being sold every month. this is a very big problem for us with respect to fast and efficient transportation. it's kind of a losing proposition to keep going this way. we are trying to tackle the problem with several different modes. one of them is the brand new metro. we had a modest forecast: 110,000 passengers per day in the first line. we are already over 200,000. our collaboration with citi has been very important from the very beginning. citi was our biggest supporter and our only private bank. we are not only being efficient in the way we are moving people now,

we are also more amicable to the environment. people have more time for the family and it's been one of the most rewarding experiences to hear people saying: "the metro has really changed my life." who was the only woman whose portrait appeared on a u.s. k p currency note? the answer? martha washington. welcome back, even. shares of underarmour up after the company came in with earnings that beat. last i checked, a bid ask of

99.89-100. up clear where they trade, but beat expectations with expectations of 45 cents, a penny better than expected, revenue beat, raising giee inin for the full year, earned a billion in sales. more earnings news, reports from caterpillar and united airlines in the next few minutes. the numbers and reaction from wall street. we'll be right back.

>> welcome back to "squawk box" here on cnbc, first in business world way. quarterly same store sales rose by 1.1%, and don't miss the company's ceo on "closing bell" this afternoon. also, stanley black and decker

beat the street, top and bottom lines, raising the full year forecast, and polte is short missing wall street expectations. >> 3m hit the wires, company has earnings better than expected, earnings per share of 2.05 comparing to the street expectations of $2, beating by a nickel. the sales are light, coming in at 7.7 billion versus 7.85 billion. this is a story seen again and again this earnings season where companies manage to beat bottom lin lines, but missing revenue, and r obviously, the dollar impacts the companies. >> caterpillar shares at this point are headed a little south so far. i -- i have the estimates, and waiting for the numbers to come up. i have not -- >> i have not seen them yet either. >> now i see them. >> i see them. >> third quarter was 62 cents, a clean number compared to

estimates of 78 cents, adjusted is 75 cents. 3 cents below. adjusted 75 cents, 3 cents below the 78 cents estimate. sales 10.96 billion versus 11.246 expected. those are sales -- the -- i assume they are the same as revenue, but sometimes there's a financing arm to add to it, but that's below on the sales number as well. restructuring costs for 2015 is now seeing at about 800 million dollars, and you can messaimagi you were caterpillar, a lot of operations affected by commodity prices, you'd restructure in terms the mining and everything add the to the operation the of, like, five years or so ago. was it? >> no. it was the company -- remember paul ryan, the mining company based in his -- he was on set with us, and it was a, oh,

wisconsin company back in the day. >> yeah, i remember. yeah, yeah. mining equipment. not harness. >> the company's talking about their 2015 outlook. they say at this point they expect the profit of about $3.70 a share, or $4.60 excludeing restructuring costs, and that is where the street is right now. >> so can i ask a question? we're going to talk to doug in a bit coming up in the 8:00 hour, but they talk about the strong balance sheet and repurchasing close to $2 billion in stock in 2015 and $8 billion in three years. i think there's a question worth asking in this is whether buy backs -- >> in this case, no. look at the stock. >> benefit of hindsight in this case, obviously. >> that becomes a larger question about how you approach the buyback issue. right? >> right. >> like i said, benefit of hindsight, clearly, in this

case, that was ill-conceived and not working out how it should, buying high and selling low. do we have a 4x effect? see that yet? >> no. trying to see the guidance on 2016 sales. sales revenue for 2016 are expected to be 5% lower than 2015. just doing the math on this. that would put a drop of about 3 billion off $47 billion. maybe the revenue outlook is not as bad as the street already anticipated, trying to do math quickly in my head, but that's an 8% decline that the analysts said versus 5% the company said. it's been a long term thing. >> does not equate. >> not a big deal for them because they produce a lot of the stuff. >> sales and revenue for the year expected to be 5% below last year. it has to do with it. >> 2016 expected to be 5% below, and if i'm measuring and doing this right, it looks like the

street expected 8% drop. maybe hathat's good news. >> mining down 10%. >> doug says, looking ahead to what will be the fourth consecutive down year for sales, which has never happened in the 9 0-year history, we are restructuring, painful, but it should position us better when conditions improve. we'll ask about that and what that means. >> restructuring the work force is part of it. >> right. >> layoffs. in the meantime -- that's what i imagine it is. in the meantime, over to phil lebeau because united airlines is reporting, and mr. lebeau has the results, phil? >> a miss by united airlines at 4.53 a share, shy of the street estimate of 4.55. revenue in line at 10.3 billion. the third quarter relative to

expectations, passenger available seat mile down 5.8%, most expected 4%, worse than expected, and yield down 5.6%. what was hurting united in the third quarter? they blame lower yield on strong dollar, lower surcharges, a drop in demand for corporate travel in the energy sector. remember, they got the hub down in houston, so that's where they fielded that, and also lower domestic yields. by the way, this is an earnings report from united that is now led by brett hart, the acting ceo. we'll hear from him, really, the first time many on wall street will have heard from him later on this morning in the earnings call, but, again, united missing at 4.53 versus the expectation of 4.65. back to you. >> thank. another headline crossing now. nasdaq buying suggest market. we talked about second market before. this is the company that's allowed trading of companies prior to them going public. now nasdaq is buying that company.

that has to do with taking the unicorns eventually public, but it does say, perhaps, or speaks volumes about where they think the market may be. >> seeing more and more of the funding that's going into the companies if they are not going public. >> gary went off to invest in b bitcoin. in the meantime, the house freedom caucus all but endorses paul ryan last night, clearing the way for him to make a run for speaker. i don't know if that's really true. they sort of endorsed him, anyway, the house leadership change leaves a path or a budget deal, makes it murky as the deadline to avoid government shut down quickly approaches. joining us more on the supbject, judd greg, and we have to talk about the trump effect. >> great. >> paul ryan, what's happening here? >> he'll become the speaker of a dysfunctional caucus. >> happily? >> not really. i think it's tentively, just answering the call of being a person who is wanting to make

sure the government works and has a history of being a very effective legislature, and he's really the only one who can go in and do the speaker's job and do it effectively right now. he's taking on the job. my sense is he's not too excited about it. >> we like paul ryan. is this good or bad for the career? >> he's the star republican party. >> who is ywe? . i like him. you liking him, bad. us liking him natural. >> i don't agree with everything he says -- >> you think when reid endorse him, that was good for him? >> this is the issue, though. >> same issue. >> what i was saying, good or bad for his career, career prospects if he's going to one day run for president, putting him in the mix of this now, he now will own -- >> they don't potentially -- does he want to run for president? >> that's the question. >> speakers done run. >> i don't want to interfere here. >> there's always a first. >> you're the guest, go for it. >> i like him too, and i do

think -- >> still? >> i do think that if he does a great job as speaker, he'll have a pathway to president, and the -- actually, the bar to do a good job of speaker is not high, just pass legislation which actually shows we can govern as a nation. there's a number of areas that happens. >> that's a high bar lately. >> it is high lately, but i'm beginning to hope, and i think most republicans who i call rational conservatives, so to say, are beginning to hope these folks in the house who have been so disruptive, which there are not many, realize soon if they continue the path, they are in the minority. many have not. in the minority, but being that in the house is like being a bass in the baseball game. they run buy and step on you. the simple fact is they learn quickly how bad it has to be a minority member, and somebody, hopefully, explained this in rational terms to them, and they are not all irrational, but all ideological, and so i think ryan has the capacity to bring together a working majority

within the house, and a majority that can accomplish some things. >> this is not a buzz saw, not walking into a buzz saw? >> yeah, it's a tough job. no question it's a tough job, but he has the character and capacity to do it, and if he does it well, which there are places to make progress, like tax policy, he's an expert on, he's going to have taken on the toughest job in government, succeeded, and will be on the pathway to presidency if he wishes to go that way. >> talking about the presidency, gop debate, these guys are going to be out in colorado. what do you think of the feel at the moment? >> it's big. it's big. i don't know how -- >> diverse. >> i don't know how you'll handle the debates, but it's going to be difficult with that many people on the stage one more time. i tend to see it this way. trump is for real. he's going to run to the finish line, i believe, and the question is who else is going to be at the finish line with him. at some point, people will move

away from anger politics to, hey, who can we elect who is substantive and can win and can govern? when that happens, happening in the polling booth, not in the polls, calling them up, and they are angry and pick the person who is identified with, but voters are substantive, thought about it, have a reason for why they vote for the individual. i tend to think that as we get into the electoral process we'll get down to two or three people, trump is one of them, and we settle out. may be settled out at the convention. >> i think we could go into the convention with it not being a clear winner. >> and having a series of back and forth and behind the scenes sort of? >> well, then you have delegatingsdelegate delegates. >> there's no -- donald trump is

not participating in some broke ramg anything. >> if you have that, that could be a huge mess, judd. wind up in a situation where even if somebody else walks out, i don't see trump saying okay to a convention that takes something away from him. >> i don't think we're that far yet, but i don't think you're -- you may not have a clear winner going into convention, and as a practice call matter, i don't see that as terrible. >> right. >> i think that keeps focus on the discussion of who should be the next president. >> run back to mitt romney, help us? >> no. >> bernie sanders is up how much? who are the people thereupon? do you run into them? >> they moved in from vermont. what do you do. >> i say whacky about new hampshire, vermont, i don't have a word for. >> this affects the primary dramatically because independents volt in the primary as democrats or republicans, and if there were a contest on the

democratic side not involving the base, for example, if biden were involved, there's a lot of independents moving into that primary issue but that's not going to happen now. hillary clinton's going to be the nominee. independents vote in the republican primary, and it's going to adjust it. >> hillary clinton wins new hampshire? >> yes. >> in the primary? >> in the primary. again, people are called an angry saying to the pollster, i'm for the angry person. >> is it the maple sur rip? >> we have no maple syrup. they buy theirs from quebec. >> can't write it off as too much syrup? >> write it off to the general atmosphe atmosphere, one of frustration with washington and when they talk to pollsters expressing that.

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breaking news, everybody. the ecb leaving rates unchanged. that was expected. look at european markets, in the meantime, check it out, things in the early trade right now, there are some modest advances for both the dxax and cac, ital is flat lining at this point. check out what's happening in the united states. yesterday was a down day for the markets, but this morning, there are some mild green arrows.

s&p futures up 3.5 points, dow up by less than a point now because of a lot of big companies that have reported dow components, caterpillar included, pulling down the dow at this point. you can also see the nasdaq is higher by 17 points. ecb president, mario draghi having a conference at 8:30. >> coming up, our guest host is here joining us to weigh in on the cnbc gop debate. vice president's decision not to run, and paul ryan's bid for house speaker when we return. (vo) rush hour around here starts at 6:30 a.m. - on the nose. but for me, it starts with the opening bell. and the rush i get, lasts way more than an hour. (announcer) at scottrade, we share your passion for trading.

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welcome back, everybody. the stage is set. the lineup for cnbc's republican debate announced for next wednesday. our focus is jobs, taxes, the deficit, and health of the nation's economy. joining us now with his expectations is guest host, ken langone, cofounder of home depot and, ken, great to see you this morning. >> nice seeing you, and thank s having me again. >> the rubber hits the road, details for the plans, and what are you interested in hearing? you're a supporter of chris christie. >> i'm a big supporter of chris

christie, and money is easier to raise. >> what do you mean? >> well, people, for all of them -- i think that things are just settling in. i think you have to acknowledge one thing. this trump's 101st day of leading in the polls. >> yeah. >> and they keep comparing him to the last cycle when herman cane was at -- that's not this way this time. this is one steady lead. and i was just telling senator greg that what amazes me all the fellas are professional politicia politicians, and they do not get it. the american people are disgusted. they are fed up. i think any way they can manifest how they feel, and i'm not taking anything away from donald trump, but suggesting he's in fertile ground, fertile as it's ever been for somebody from out of the political sector. and we got to get it right this time.

whether it's democrat or republican, we have to get it right. we're in a hhell of a mess. >> if christie does not get there, would you support donald trump? >> i'll say this to you, i know one thing about trump, he understands business. he has a way of getting his way. that's a little of what we need in america today. we need leadership. >> we are looking for someone to support hillary. >> hillary clinton? >> i'm telling you, you don't -- >> i didn't say that. asked app open ended questions. >> you ask all the republicans here, would you -- >> they'll all poll trump, if they have the -- someone who moved so far left -- >> let me say this. >> help him. >> i have to say this.

>> don't look at me. i'm asking the question. >> why not hillary clinton? >> why don't you explain it to him. >> i think her character is terribly lacking. i think she has trouble with the truth. >> not like you need to ask. >> i think there is an arrogance that shocks me, talking about being for the people as she has a billion dollar foundation. my wife said last night, she's not had the same outfit on twice. think about it. no, no, that's petty to you, but someone paid for all that. those costs -- i know because my wife dresses well, thank god. >> speak to donald again. a great leader of the country, that's what you're saying? >> you didn't ask me that. >> you're leading the witness. >> hold it. i think donald has the flexibility and the capacity to be a great president.

i think this guy is so certain of himself that he's going to say every time, is this going to be the right thing for america where i can idea myself to the american people. >> this is where you lose not just andrew, but a lot of the american people. watch the left's and mainstream's position. they don't cover him. that's the left's idea about -- and they are incredulous saying he might be a good president. incredulous. >> i'm not incredulous. >> you want to lose? think about losing? you want to win, say that's all i'm interested in. i have not thought of anybody but chris because i think chris can pull it off. from where we are at 4%. >> how do you go from 4% to being the top nominee? what happens? what has to happen? >> people decide they revert to the norm, that is they are going

to go with the conventional politician, when you look at all the lineup, look at casic, you look at, frankly, and jeb bush is a very decent man, that ad ran with a bunch of kids was a stupid ad for me, because the way you look at him, he's a professor, and they are only -- they are reaffirms he's teaching. when you listen to him, he sounds more pref sore yal than passionate and whatever it takes to be a great leader, i'll be it, do whatever i have to do. you know, leadership implies one thing. that you can get people to believe that you can get them to where they want to go. if i don't want to go there, if i believe the guy that's going to take me there, i'm going with him. if i want to go there instead, i don't care about that guy. i think that chris has all the attribu attributes to be president. >> what does he have to do?

>> hang in there. keep saying what he's saying. by the way, remarkable thing is he is where -- four years ago, he's where trump is today. he was the outsiderment he was a guy that was going to walk -- i mean, this was a charm of kris kentera -- chris christie. >> politicians are fickle. >> trump stole his thunder. he had nothing to do with the bridge thing, but he appointed somebody who was involve d, and unfortunately, guilt by association. we'll overcome. he did a fabulous job in the state, a great job in the state. he's vetoed more bills, and they stuck. he worked in the first term wonderfully with the other side. >> got elected twice in a blue state. in a really blue state. >> why did they turn on him? they are jackals, thought he was wounded, thought they would get him. the first time, they ain't

touching him. the guy's too good. look, this game ain't over by a long mile. >> neither is this conversation. we have much more with our guest host, ken langone, still to come, and first on cnbc interview with caterpillar ceo joining us about the earnings report which was released earlier this morning. that stock is under pressure. dow component that closed at $68.90 is now trading at $67.55. "squawk box" will be right back.

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cat pill lar set to report results. can they dig out of the profit slump? we are joined for the first cnbc interview president valeant attacked, short selling questions the company's accounting practices. can valeant survive the allegations? former medtronic ceo, bill george, joins our guest host, ken langone, about the future of the company. >> and global success of pitbull. a look at what is driving mr.

worldwide to fame and phenomenonture, first look at tonight's big prime time special. grab your fire ball and meet me in the hotel room. the final hour of "squawk box" continues right now. ♪ live from the most powerful city in the world, new york, this is "squawk box." >> welcome back to "squawk box" here on cnbc, first in business worldwide. we're less than 90 minutes away from the opening bell on wall street. the futures right now indicated up 24 points as they -- seems -- other than yesterday, we've done very well since the bad jobs report, adding 1500 dow points. markets in europe at this hour. they have been pretty good. and -- basically unchanged at this point. fractional losses in ftse and india and up in germany and france. stocks on the move, though. we have some stocks on the move,

though. >> from whom? >> 3m's earnings beat, revenues light, companies lowers the top full years forecast, 1500 job cuts in restructuring, and united continental short of estimates, airline's revenue per available passenger seat mile fell nearly 6%. i'll give you a hard time, ken, talking about united later. southwest topping consensus and the top and bottom lines, airline helped by increase in profit margins spurred by lower gas prices. under oarmour is up, and dow chemical beat estimates, reviewing the business, and dow is selling its stake in a joint venture in kuwait with tax proceeds of a billion-five. >> share of mcdonalds, better than expected numbers by a big number, and the stock is up

sharply as a result. ms. speak earnings at 1.40, compared from 1.27. this is unique for the multinationals dealing with the stronger dollar. 6.6 billion versus 6.4 billion the street had been anticipating. look at stock over -- if you want to look at a slightly longer stock, it's built up expectations. look at -- eventually, the ceo -- turning around. >> already happening, not just expectation, and you can see it's happening. 1.40. >> steve easter brook is encouraged, looking at the comp sales in all segments including the u.s., up 0.9%, global comps up by 4%, and he's just expressing the confidence in the fundamental strength of the mcdonald's system and ability to drive initiatives focused on

delivering the greatest benefits to the customers. >> this was not supposed to happen for liberals either. look at that. new high, 108.25 for mcdonald's. >> why not for liberals? >> fast food, junk food, adding to the obesity, adding to the income inequality. >> that's a whacky narrative. >> remember when i said, they were paying off initiatives. you said, no, it's expectations they are paying off. they beat by 13 cents. would you say they are now bearing fruit? >> they are, yes. >> okay. >> the reason they moved -- >> the stock didn't move in the the last month. >> correct. ahead of the earnings. we just got the numbers, so that's exactly what happened. >> why not -- >> good things were happening. >> what i said was happening happened. >> why not say how we got to where we are now. the board did its job. they gave the job to the wrong

guy. >> originally. >> recognizing it quick. >> right. >> this guy, let me tell you something, he's going to be one heck of a ceo for the company. i think they have a glorious future. you meet kevin plank and understand why under armour is going to be around a long time. >> walmart's not doing well. i know that -- >> i understand why we're -- why are you thinking -- each -- >> a political one. >> it's not. it's good to see a dow kpo component, an american name like apple pie, is at a new high that had real problems. people thought mcdonalds was not coming back. >> people thought it was over. people thought -- >> caterpillar earnings and revenue falling short of estimates. let's hope no more happy meals draw kids into the stores where they are drawing them into eat this terrible poison. more on the results, caterpillar chairman and ceo.

doug, always -- do you feel some type of bottoming process at this point? >> good morning, joe and everyone. as always, nice to be with you. there's no question we're in a rough patch right now. listening to a couple of the other earnings, and all i can say is our day will come, but it's not right now. we had a fairly good operational quarter, reporting 75 cents without restructuring, and within that, was an impact of 17 cents of currency translation in brazil, smaller amount in china. add those back, we had a decent quarter, but be that as it may, our big markets are mining, our oil business supplies to that market are very soft right now. we announced a major restructuring a month ago to address this, to get out in front of it for 2016, and we're doing all we can to fortify this company to get through this very rough patch we're seeing today. this is to the our first down tou

turn or recession, seeing them many times in the 90-year history. we'll come out better. we're fighting right now. >> did you make a comment declines, though, have never lasted this long in year over year numbenumbers, right? this is a new paradigm. >> that's exactly right, joe. we have had a three year period, never had one four years down in a row, and we've put out outlook for next year, down 5% from where we are this year, about 45 billion or so. we're addressing it, cost restructuring, going through it as painful as it is. >> doug, ken langone, how are you today? >> hi, ken, good morning, how are you? >> good to see you. >> good to see you. >> i ride all over the united states, and the roads are in

terrible, terrible shape. by the way, you make, i think caterpillar defines the meaning of the best of american quality. the stuff you guys make is -- >> thank you. >> absolutely -- well, it is. you see it, and you realize end dur ra endur rans of it. if we get the focus in america, which we desperately need, how much of a tail wind does that give caterpillar? >> boy, i agree with you, ken. it's not just the roads -- >> bridges. >> the supports, the airports, all kinds of infrastructure we have fallen so far behind on, and, frankly, there's efforts in the states, you know, a number of states pass ed tax increases. the state of georgia is a good example getting after it. but we really need the federal highway fund step up again. i'm confident we'll get that, and multiyear hopefully, but that helps us a lot in the country, could be a catalyst going into next spring, which we

need. >> well, what i worry about in that regard is the government taking the money dedicated for roads and infrastructure, and now using it for other purposes. i mean, that's -- >> well, we've seen that over the -- >> that's my point. >> we've seen that over the past, and there's going to have to be controls on that. what worries me in the bigger scheme of things, ken, is the competitiveness of our country compared to others. take the panama canal where ships pass through. we can't take any of them. we have ports under construction to do that, but can you imagine missing out on that commerce because we can't dock the ship? that's where we need to be and where we need to invest in many money going forward. >> the stock is cheap, hang in there. >> we're going to hang in there and be better than ever when we come out of this, believe me. >> i agree. >> doug, hindsight is 20/20, but looking over the stock

repurchases have not. wise. it's 20/20, but how do you measure the stock and figure out whether it's worth buying? >> what we've tried to do, becky, is coming in out of the recession of 2009 is strengthen our balance sheet. we brought it down significantly since that period of time and raised our dividend 83%, a big number for us. going into the recession, we were almost 60% debt to cap. today, in the mid-30s with $6 billion of cash on the balance sheet, and we keep that cash on the balance sheet. we need a strong balance sheet because of the cycles we go through, and i'm glad we did it. in retrospect, yeah, hindsight, of course, we want to do a lot of things over, but intrinsic value going forward of the stock is good, as ken mentioned, and seen in cycles before, but it's a strong balance sheet allowing us to weather the storm we're in, which is a good one right now. >> global employees are -- what's the number, doug?

>> we're just under 110,000 at the end of the third quarter. obviously, that number's going to come down in the fourth quarter on into '16 and '17. painful time for our people. we have wonderful people around the world, but we have to adjust to it. >> restructuring number, what's that equate to in terms of -- >> 10,000? >> 10,000 positions? >> we said -- yeah. we said up to 10,000 in three years and 4,000 to 5,000 end of this year. reacting quicker than we have when we made the decision to restructure to move this along and in this quarter in 2015, hitting the ground running in 2016, we have a full year of benefit restructuring and costs. our commitment to our investors is 750 million dollars of cost reduction, and we'll measure it every quarter going through 2016. about a billion and a half total by the time we get down with it out in 17 and 18 setting us up

well for whatever comes. >> doug, thank you, again, for coming on, and we'll see you every quarter to talk about this illuminating things for us and for shareholders, obviously. thanks. >> well, when we get through the storm, you'll see a bigger smile and better attitude here, joe. these are tough storms we're weathering. >> i know, i hear you. >> more than 70% of government expenditures are in entitlements today. you want to know why we're developing an economic paralysis in america? that's why. do you think of the job creation that can happen if we address -- i'm not talking about country roads. i'm talking about new york city. i'm talking both chicago. >> we live in long island issue and there's a road that goes to the expressway, and it's in horrible condition. country roads i've been in never paved ride smoother than that

road. the opportunity -- here's for you liberals -- >> i can't answer that. >> look, you're stuck. i'm sorry. >> i'm not stuck. i'm stuck only because -- >> you're probably more conservative than i am. >> i may be, but putting me in the box is up fair, sir. we have to go to a commercial break. >> all right. >> when we come back, valeant crushed after a report from a research firm, citroen, running through the facts and why the situation could be ugly. "squawk box" will be right back.

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. changes you'll notice. wherever you are in the world. sheraton.

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welcome back, everybody. shares of mcdonalds jumping now, up by 6.5%. the dow component came in with earnings, revenue, and same store sales beating expectations. we'll take to an analyst in the next hour, but check it out. the dow component is helping the dow too. before it was a weaker open for the dow, but now futures up are 55 points. caterpillar not helping things out, but mcdonalds giving futures a boost overall.

stock in the opposite position, valeant pharmaceuticals taking a hit. stock plunging as much as 40% on a short seller report that alleged improper accounting before coming back and closing down by 20%. a lot of things happening there, but it looks like the stock is weaker again this morning, opening down another 8 points, trading down $9.61. this morning, bmo downgraded the stock to a market perform saying, quote, we cannot defend the pharmacy structure, the call raising new questions about the company's accounting." bill george, a professor of management practices at harvard business school and a cnbc cricketer. ken langone is our guest today. bill, thank you for being here. this is a complicated story. what's happening? >> well, fist of all, i said for three years this business model makes no sense. i see this as a house of cards and i pray it's going to tackle. >> do you think it's an accounting problem or channel stuffing problem or concerned about the rollups? >> there's not enough

transparency. if you continue -- if an acquisition -- only game in the health care business, nothing wrong with acquiring, we acquire a lot. but you have to continue to invest in research and development. they do it on 3%. you can't do that. he comes out on monday, shaking me, saying we're shifting the business model, not acquiring, and now going back to research. you know how long that takes? 12 years. john, he invested in research, now drugs are coming out, and i question, is this a financial play or health care company? look at the board, only one health care guy on the board, andrew, and the rest are all financial plays. >> describing symptoms, but not talking about whether there's accounting irregularitieirregul. >> you won't know until the fec invest gaits. >> is there's indication of anything going on? >> there's a lot of smoke. it could take it down. i don't know. i don't know. you don't know until you get into the books.

i think, you know, there's a lot of smoke there. i can't -- i read the whole thing. you can't tell. >> i don't understand -- >> i don't know about specialty pharmaceuticals. i said, what's the specialty pharma? >> list prices and discounted prices, some go through cvs, but they get it directly where they pay a lower copay, and seems like there's all kinds of opportunity to have numbers not be what the list prices are. >> one more thing, there's a lot of the patient assistance that is provided by valeant. >> by valeant? >> yes. >> how do you do revenue? >> some companies do that for a humanitarian basis, but take that to app extreme, who knows. >> opposite side of the argument. >> okay. >> i bet my last dollar there's no accounting issues here at all. i think they are going to be generally accepted. they got one of the big four. >> that's a lot of dollars, your last dollar, too, isn't it? >> there's merit to a big point.

when you engage in rollups, it's g geometr geometric. the deals have to get bigger and bigger. >> i missed great deals, waste management, auto nation. they did it early, and it did not take a jump. with oxley and complete paranoia accountants have, i'm betting there's nothing placed the acc muster. the issue to e me, in fact, there was speculation to me that the diet goes after lilly because it had to have size like that. >> well, to bill's point -- >> that's the point. so i think it's business judgment here that makes me say i don't want to own the stock. rather than internal growth.

rather than what john did with lilly where he's poured money i had spirited discussions with john because lilly spent over $40 billion in r and d, and as of right now, not much to show for it yet. we hope we see at the end of that funnel that's going to start coming in. >> yeah. >> at leastings y, you know, lo for innovation, growth, and discovery. that's not the case. >> investing 20% of the revenue. you can't do it on 3%. >> no. >> he's dope it over 20% lilly's done it, i've been a stockholder for 37 years, that's the amount of money spent. >> you know, they upped the position by 3% yesterday, but what happens to the other hedge funds pulling out. 30% of the four or five, and value act pulls out of this thing, saying -- >> bill, thank you for the insight here today. love having you here and talk again soon. >> thank you for having me.

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tip community, 2016 presidential candidates would love for his endorsement, but will he give one? our chief international correspondent michelle caruso-cabrera is part of her prime time show tonight. >> pitbull is the perfect political get. >> alex gail. ? if you get the endorsement, you're going to do well. >> it's no surprise that pitbull is wooed by politicians. >> jeb, rubio coming to you looking for end dorsmentes? >> not for end dorsmentes, they just like to talk, i like to learn and what they are thinking and what's going on, but being cuban-american and everything my family's been through, we are politically tied. i'm already born politically end correct. when they want to talk and speak, i'm open. but that doesn't mean i'm getting on stage, saying, hey, vote for this or that person,

even when obama gave me the chance to speak here in florida. >> it doesn't matter whether we get a la tee know, black, ping, orange, white, it doesn't matter, we're americans. >> i didn't say vote for obama. i said, thank you, obama, for giving me the opportunity to tell these people my story. >> joining us now is michelle caruso-cabrera, and, michelle, i love pitbull, i can't wait to see it, but it's outside the wheel house, why pitbull? >> an interesting question, beck yes. we met him through the conference in mime, and he's a rammer, but as we knew him, wow, he's a real business guy, like, we can talk to him in the same way we talk to ceo gs, the perft person for a profile thinking about what he does, thinks of it as a business, not just as an artist, and beyond that, he's got a great american story, coming from nothing, came from

very adverse circumstances in the '80s, all the things that ken langone talks about, about the american dream, about making it in america, this guy embodies that. it's an amazing story. >> ken's here nodding along. >> that's interesting. because i believe the republican party has made -- missed a significant opportunity. >> yes. >> i believe fundamental lly latinos are republicans. family, work ethic, spiritu spirituality. okay? >> yep. >> this man, look at what he's done, i know about coming from nothing, not as bad as he was, but maybe close, but the point is, what made america great is giving people with modest talent like me, the opportunity to do a whole lot better than i dreamed i would. this is the greatest country on earth, and we got to let people

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welcome back to "squawk box." breaking news. initial jobless claims rise 3,000 from a slightly revised 256,000 placing it firmly at 259,000. these are some of the lowest initial claims since the '70s, but, of course, the economy is not cooking in grease. we continue to monitor it and contend the biggest news in claims will most likely be when they move higher. in terms of interest rates, well, if you measured the distance between 2% and the ten-year, you needed a very small tape measure for the last several-plus weeks. obviously, we're all going to listen to mario draghi's press conference saying something nobody expects -- doubtful -- we are monitoring the euro currency, and, of course, the cubs choked. back to you.

>> well, give the mets credit, though. i was watching last night -- >> no, no credit in '69, no credit last night, cubs shochok choked. >> your pitcher choke the in the first inning of every game, then. i was watching last night. >> mets played good baseball, cubs didn't. >> i like zempb gaseven games, t through the weekend, but -- i'm not a true mets fan. they wanted a sweep, believe me. you don't want -- >> and that call was changed. i had the wrong people holding the broom. >> i remember that because the '78 or '77 we swept the yankees, cincinnati swept the yankees. i didn't want seven games. >> you know what? the edge goes down. your anxiety is down. >> right, right, right, you're right. >> of course. >> sorry, rick. >> yeah, it's sad. >> it is what it is. >> it what it is. >> chicago's known for many things, and winning world series is not one of them.

>> after beating st. louis, that was tough. i thought it would be a much better game. more deal making and chips research buying knl, latest in a string of m&a mergers in that sector. as for demand for cheaper chips, pressure -- pressure and company is a fine way to cut costs, the man behind the deal, martin, president and ceo of lam research, heading the combined company, we have to tell you that yesterday lam reported earnings of 1.82, handedly beating street expectations by 11 cents. there's one now, i think. what happened? we always did novelis, lam research. >> pod materials. >> and now there's materials and you. >> and us. >> and you. >> indeed. >> it's made sense for years. why did it finally happen? >> as you know, it was the commentary on a number of things coming together -- opportunity and need from the customer in the marketplace and capability,

and if i think of the need for the industry and this type of innovation and consolidation, it's, i hopefully is obvious to all, it, and connectivity and lek tr electronics, memory storage, and in the next ten year, and from a capability point of view in manufacturing, the complexity of technical road maps and economics make the need very of. both companies, lam research and great performance in september, great guidance, both companies articulate a strong outlook for growth in calendar '16, great platform, and, you know, one of the important points, that you set up, is the transaction for lam research, really demonstrating hope and ability to integrate, deliver value and out perform, part one, scheduled for part two here excited about that, and opportunity and

capability and need all come together. it takes time. when it does, it's special. that was the reaction yesterday. >> martin, just to tell you, new tech looks like a lot of the mergers are additive because of opportunities to expand, you know, a base sort of, to add operations. >> yes. >> mergers in old tech like emc, and what you're doing, looks like there's a way to rationalize operations to put heads together and get rid of operations. times are tough, decline of the pc is that the wrong way? >> wrong way about our deal. we are not rivals. we are complimentary. we have zero product overlap. from the perspective of antitrust, complexities, and perspectives, this is about as easy as they get. >> do you think people are listening, or do people -- do you -- is there questions at all about this? the number of players are high. >> we are very comfortable about this deal and ability to close

this deal, and we articulated our objective, and regular lated the review process, and had the opportunity in 24 hours to dial out personally and talk with the team and customers. the reaction is positive. we are not rivals. we are complimentary, a different portfolio. we bring process, the guys who make it possible to make chips with a company that's in process control, all about making sure that the yields and the cost elements and the performance of the devices meets the specifications of the industry. process and process control is all about technology and productivity. it's about solving the technical challenges of physics and also the really important challenges of commissions. >> does this merger allow you to rationalize costs? >> yes, it does. >> that's not very important to

me because it's essentially a one-time deal. >> yep. >> the thing that i look to is when you take two businesses and put them together, do you give your sales and marketing and your engineering people the opportunity to make two and two seven or nine? >> yes. >> i think, to me, if there's going to be an economic validation or combination, it comes about by the front end becoming more competitive than better. >> i think that's right on the money relative to the rationale for this transaction. >> right. >> it's increasing strategic relevance, and strategic relevance has some elements of cost rationalization. that's not the reason for the deal. the reason for the deal is increase our ability to contribute to the success of the customers long term. it is exactly about bringing engineering communities together and developing more capable solutions that enable more extension and performance scaling. >> so we don't need as many cpus maybe because of pcs, but we're always needed integrated

circuits for the internet of things, for everything right? >> yeah. >> we need chip making equipment. >> yes. perpetual demand. >> integrated circuited. >> yes. >> so people talk about the decline of the pc, that shouldn't necessarily spell the end of chip making? >> i think one of the realities of the industry, look at the impact of the pc on the semiconductor industry in terms of demand and effect on equipment, much less today than before. it is several years ago that the pc lost its confidence in terms of unit demands. >> now you make new things. >> whole new range of mobile. >> and going back to my point, putting together engineering and research, nih is alive and well. >> yes. >> that's a management challenge that i think people don't have enough focus on, not only in the merged companies, but from the outside. hey, the first thing you get, if you go to a drug company with a

product, the research people are going to say to the boss, we don't need that. we can do it here. >> i think one of the most fundamental value properties is culture of the companies and ideas of the company. that's competitive differentiation, and the value of brings the teams together and getting them to work together -- >> the other side is cooperative and -- >> yes, it does. the good part of the deal, we've been working together for years in a collaborative way, a great collaboration, and we'll do it again. >> okay. >> thanks for talking about it. >> make it happen. >> i will. breaking news on the ecb news conference happening now. michelle? >> guys, yeah, the euro down to a three week low, falling 1%, german ten year yields lower by five basis points, all european basis lower, and draghi started to speak, so we know already that nothing to do with interest rates, but made it clear, in december, they will consider more. they have to reassess the situation in december because

the risk of the economy is in the emerging markets. people expected that they would be talking about something bigger, a bigger qe in december, and he seems to be confirming that's what they will be discussing in the markets. back to you. >> all right, michelle, thank you. yeah, look at that. when we return, mcdonalds reporting earlier in the hour, talking numbers and all daybreak fast next. look at the stock this morning. all-time highs. what a quick snap back since the new guy started. amazing. look at that.

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mcdonalds reports higher than expectations. stock up $8. now it is up $8. the senior restaurant analyst is here, and it's happened quickly, bob, that -- can you name something that the new ceo did in the last three months to account for this, or there's more than one thing to talk about? that's a new all-time high. >> caller: yeah, you know, joe, it'd be too easy to just simplify and say it's just one or two things because, quite honestly, this management team has been working on this company trying to make some strategic changes, literally, remember, it's a worldwide organization. it is one of the biggest restaurant, you know, companies in the world.

when i look at the results, you know, it was a great feel-good quarter, no doubt about that. comps were better than expected, same-store sales better than expected in all of the markets relative to expectation, and, clearly, the earnings number was a much better than expected beat, so lacking really ugly numbers from last year, it was a really feel-good quarter, and i think what the company said in their release is they essentially telegraphed they expected same-store sales glo l globally will remain positive until the fourth quarter, so stock is responding to that. >> we still didn't -- didn't give me anything on what changed. we went through a couple of years of disappointing comp store comparisons in mcdonalds, and we had analysts in some saying you need something new, i don't know, frappes or a new food class, but some analysts

made sense to me, you need quality and you need it quick. go back to the roots. stick with simple, do what you do, do it better. isn't that's what is happening? >> you know, there's something to that, joe, but, for example, look domestically, the same-store sales improved, however, they certainly were not, you know, they were down last year in this quarter about 3.3%. they were up .9%, and that's, you know, better than what, you know, expectations were. however, the company still has a lot of work to go. here in the u.s., which represents roughly 40% of the company's earnings, they are -- they are in a dog fight. as best i'm aware, i don't know any restaurant chain to agreed to give up market share to help investors at the company feel better. >> right. >> caller: in that regard, yes, the qse program better quality, better service, better cleanliness, they are focused on those things, but, again, you know, those are simply requirements to get customers in

the door. so the food improved? not yet. >> so you're looking at down 3.3% year, and so all they really did was come up .9 from being 3.3 last year. like, maybe the -- the bad -- it got less bad. it's not -- for years, mcdonalds has been losing market share, i guess, so that's stopped. if you could just cause that to slow, that's a reason to buy the stock, probably? >> caller: well, you know, to be fair, believe me, they are putting money where they mouth is. they bought back another 2 billion plus in shares during this past quarters. they are aggressively supporting management's plan with their balance sheet, and,mentally, if they can continue to make both operational changes as well as restructure the the balance sheet and other considerations there, i think they can continue to make this stock work. will this company ever be a true growth company?

will it ever have a strong craveble product mix? they are trying, but they have a lot of work to go. >> okay, bob, well, shareholders rewarded today, all-time high. thank you. when we return, jim cramer with comments on mcdonalds. the futures up. we'll be right back.

>> i have been saying this guy is the real deal. he turned around international before. he has made international accelerate. he has churned up the united states. that previous fellow that was on, i don't think he realizes the power of getting the franchises by. this morning's "wall street journal," i read after i read the release. it seems like you can't put that back in the box. this is an example of what management can do. easter brook is a hitter. he came in and hit the ground running. he is never going to be deturred

by all the negativity. this all-day breakfast is working. the way he has cleaned the stores is remarkable. he is the real deal. if you don't give him credit, you don't understand the business. >> jim, first of all, i've got an axe to grind. i am a major stock holder in yum. i think that's going to be the equif lea equivalent with what's going on with mcdonald's. i'm biased. what this guy has done. we hear that you will crap about vision and culture and strategy. this guy has gone back to make sure the french fries are crisp, not sog kgy, the store is clean. if blocking and tackle -- home depot has an inverted triangle. the ceo is at the bottom of an upside down tri angle and the

people on the floor, the people with he celebrate, say they are the most important people in the company, the kids with the aprons on, there is where you have your business and there is where you have success in business. >> that's just what easter brook is saying. >> that's what he has done. i'm so impressed with this guy. the guy is all about blocking and tackling. that's business in america. >> he is interested. where you show him there is a bathroom that is not clean at mcdonald's, he will go fix it that day. he said, if he had a chance, he would go fix it individually. that's his style. >> if you are in the drive-through lane and there has been a car in front of me and i've waited, 8, 9 minutes, that's where you go, i know you don't call yourself fast food but it is supposed to be fast food 679 if you fix that and get the people inside moving quickly. it is simple, frcrispy fries, ft

service. >> i will look at yum. i spent a lot of time in the company. i will look at yum. i have to give the new guy more of a chance than i have. thank you. >> jim, the deal they made. they bought the company from us, geek net. it is going to be a bonanza. the guy that runs it, former home depot guy, former first class manager. >> i am reopening the books. >> thank you. >> i'll call you. >> when we return, we are going to wrap this show with our special guest, ken lango.

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welcome back. i'm michelle cabrera. the reason is that they have considered and will consider a whole menu of policy instruments in december. they discussed a cut to deposit rates, not interest rates. once again, the market is reading what he is saying and believing, there is likely to be month are action by the ecb at the next meeting in december, hence the move we are seeing, not just in the euro but in

german yields and european stock market. back to you. >> all right. they are where we were. do we feel better about ourselves? >> a little bit. >> it would be nice to get off to zero. >> i was in italy two weeks ago. the most exciting thing i heard. i was able to have lunch with the prime minister. >> what? >> good man. >> you go to italy and have lunch with the prime minister. >> i went to italy on a charitable thing. >> you just go over and have lunch with the leader. >> it turned out he had a free day and my friend -- >> are you telling me you met the pope? >> this guy said, we are not going to be greece. look at the changes this very to the left guy is doing in italy. he is making structural changes that are important to stabilize. i think italy is an exciting play right now. >> i hear trudough, the new

hunky canadian guy, he is more private sector oriented than some of the people in this country? >> it is funny the current left doesn't understand what generates jobs, which is what we need. >> all these numbers and problems in corporate america are impacting, not you, not me, the guy that is struggling from paycheck to paycheck. these people have not done better in the last eight years. they have not done better at all. >> how do you fix that? how do you make sure that they are starting to rise? >> let doug obleheim have a market for scrapers, bulldozers, infrastructure. we need it there. >> why have we not seen that? >> we have diverted partly tax revenues to entitlements.

guys, can you imagine, my wife and i get $45,000 a year from the government. what the hell is going on here? i shouldn't get that. it this is what's wrong. corporate america has to understand if we are going to have tax cures or tax fixes, they are going to put chips on the table. let's get rid of corporate welfare. let us go first. let us be the ones who get dinged first? >> you mean with wealthy individuals going first or corporate structures. >> with people who don't and shouldn't look for things from the government, i am saying, we should be the first to say, don't do it. don't help us. we are doing pretty good. that's what made america great. our best years are ahead of us. we have probably five years of tough sledding. >> what if your side loses this election? >> my side is not. america has had enough of socialism for a while. i think the american people are going to get it.

i'm believing that. we all have to understand and have skin in the game, starting with guys like me. thanks for having me. >> great to see you. >> thanks for being here. that will do it for us today right now. it is time in five seconds for "squawk on the street"s starring david faber, jim cramer, carl quintanilla. bing. meet the mets, meet the mets. ♪ step right up and greet the mets ♪ >> congratulations to the mets, head of the world series for the first time in 15 years. good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber. on the biggest day of ernths, mcdonald's, cater pillar, under armour and more. mcdonald's is going to add at least 40 points. the ecb keeps rates unchanged by draghi hinting that the