>> none of us ever sleep. we work 24 hours a day. good morning, welcome to squawk box on cnbc. where are joe and becky? getting ready for the big cnbc republican debate tonight. coverage starts at 5:00 p.m. eastern time. it's going to be great. plenty of last minute preparations being made as our crew gets ready if boulder, colorado and adding to the drama, donald trump slipping into 2nd place with ben carson taking the top spot nationally and in iowa. so the stage is set. tune into the fireworks at 5:00 a.m. eastern time. we might say that a few times during the show. 5:00 p.m. eastern time. >> you think. >> or log on to cnbc.com if you're not near a television. >> before we go any further with the fed or am or the big drugstore deal today we do have to mention the world series. chaos during the fall classic between the kansas city royals and the new york mets.

fox sports had an electronic failure that caused the delay in the game during the 4th inning but little did everyone know the game would go another 10 innings. the game starts with a rare inside the park home run. there it is right there. putting the royals up early. don't often see that. the mets would come back though and they would lead until the ninth when the royals ended up tying it up. they did finally win the game on a sack fly. 5-4 royals. game two is tonight. >> but don't watch it because tonight is the debate. >> since there was a stolen base during the game taco bell will be giving away a breakfast churchwrap on november 5th. >> the news reporter is me is watching like wow how much ad revenue are they losing with this power outage. >> the four minutes and then the

embarrassment. >> i guess the first time on the big stage that you've had an issue. remember at the super bowl in new orleans, remember that, a few years ago -- >> right. >> that was a much longer. more than half an hour. >> 40 minutes. >> so it happens at the worst possible times sometimes. >> i don't think they lost money during the super bowl when that happened. they might have even made marginally more money because they kept running ads. so you have to think of it as opportunity. unused inventory. >> that's why i'm not ceo. the other main event besides tonight's gop debate which starts at 5:00 p.m. is also today's fed meeting. we're hours away from a decision on interest rates and most economists not expecting a change this time around but the sentiment, the statement could provide clues about a possible move in december or just more guessing games about a possible move next year. either way the markets will find out. the futures are suggesting we'll

get a positive open. not by much. the dow would open higher by 39 and the nasdaq 16.5 points. >> oreos had a famous tweet they put out and they were able to create a viral situation. >> really? >> we'll go back to that later. apple posting profits and revenues that topped expectations. earnings per share were 8 cents ahead of estimates. revenue topping $51 billion. a couple of other metrics. they sold more than 38 million iphones. came in a little under the expectations. people expected just a marginal amount of phones to be sold. more iphone shipments to china climbing 87%. sales 9.9 million versus 12.3 million and apple's mountain of cash now officially climbing to $206 billion with a b and that's up from 33% a year ago.

apple remaining conservative on first quarter revenue and as for china tim cook sees no signs of a slow down. more of this in just a moment with analysts that tried to figure out what it all means. >> still on the one hand they were able to say after what is an incredibly tough comparison from a year ago they're going to grow this coming quarter they think, right? and people were worried they weren't going to grow. >> but it's how much you're going to grow. >> the real question is and we, yesterday spoke to the number one ranked it hardware analyst on wall street who suggested exactly what in the context of what you're talking about that apple's best days are behind it at least from the growth rate. not a shocking statement to make because you're trying to sell a whole bunch of phones into a mature phone market but you have

to reset your expectations as an investor as to what kind of numbers you expect to come down the pike. >> even based on law of numbers they're so huge. the fact that they could put up revenue and profit gains like they did last night at the size that they are still now but going forward, there's talk of maybe seeing a first decline in iphone sales year over year. >> the one figure i found fascinating was the smallest one on the sheet which is other products. iwatches. this is beats, this is apple tv. $3 billion. not a bad business but on a relative basis. >> that was growth of 60%. >> but when you think about how you diversify your business and can you, law of large numbers, even if you're killing it and i'm not sure the watch is just yet, it's hard to see how you get there. >> for apple you sell $3 billion of a product and we're like -- like any other company that would be great. >> the other thing that really jumped out to me and i think i got this right that they said

70% of iphone users still have the 5s or older. so obviously you're eventually going to get the upgrade cycle to strike in. it's just a matter of are people waiting longer than they normally would. do they not believe the 6 or 6s has enough features on it to upgrade now and the neck nolg wasn't increasing that much. >> how about the fact that they can charge more for the phone. >> $670 a phone. >> the average selling price s'up. that gets your margins. even if you don't get the upgrade cycle your margins can help improve the bottom line and you can sell in china and the vast majority of the population.

>> expectations get extraordinarily low or people think that the bloom is off the rose they come back and they surprise you in a big way. >> i completely agree with you but at the same time is there a compelling reason to buy the stock now? >> we're going to have an analyst on in just a minute and we can talk about that more. twitter reporting after the bell. yesterday the company beating on the top and the bottom lines but the stock getting crushed after a weak revenue outlet. the social networking site reporting that average monthly users only gained by 3 million to 307 million for the quarter. shares of twitter this morning, you take a look in the premarket down about 10% or so. so they'll be closely wachd throughout the rest of the day. you guys want to spend a second on this one too, this was a surprising number. i think i was reading sort of a recap from our news desk and the gasp that julia had when she saw

the 3 million number because it was disappointing. it was so much smaller than people expected and that remains the key issue regardless of any other me trick you look at, its monthly active users. twitter cannot grow it's user base. >> and how do you charge and get more advertising revenue down the road? you can't meet your targets if they don't get that number up. >> okay. they're monetizing mobile. their revenues are nice. they can't grow their maus and that's been the problem for this company for at least the last few quarters. >> twitter has lived successfully in this bizarre echo chamber of the media. because media people love twitter but the rest of the world doesn't love twitter. they don't understand thousand use it. it has a marginal utility to them and it's hard to get on to it. if you think about sort of just the barrier to entry. you can sign up. i'm not saying it's impossible to sign up. >> i would tweet more accept

it's a lot of work. if it's that tough for me that loves it. >> there's undesirable characteristics and qualities to being a regular on twitter. >> just block. >> moments where it's like a news service. >> moments yes but i saw this thing called polling so you can poll your users and ask them a question. >> they can improve the experience all they want with new features and bells and whistles for the folks already on it. >> more people. >> voblgs wag agalkswagen with loss. it was the first quarterly loss in 15 years. taking a big hit as expected due to costs related from the

emissions scandal. >> barclays naming the new chief today. appointing jes staley to the ceo position. big news over in the u.k. let's check on the markets so far this morning. as we showed you the futures are suggesting a positive open. dow higher than 44 points. s&p higher by 6 and nasdaq higher by nearly 19 points. speaking of europe, let's show you what's going on over there. sque germany is higher. france is higher -- where is greece? i'm here today and no greece on the board. ftse is higher. >> that's so last year. >> it was on the board yesterday. >> it was? >> it was. >> let's show you what happened in asia overnight. japan was higher by .6%.

price of oil. wow, 43 handle on wti. 43.45 per barrel. >> getting hammered lately. >> yeah, i know. his nightmare every day on the screen. >> 2% on the ten year so we're above 2% on the ten year yield t. dollar is weaker across the board. 110 for the euro. the price of gold at this hour is higher by $6. >> okay. we're going to go back to apple. you can never really get enough. apple earnings surges. 48 million iphones last quarter up from 39.2 million just a year ago. here to break it down is ed lee and senior research analyst at jmp securities. thank you for being here. i saw you yesterday, like my fifth hour on tv. i was a little groggy at that

point. help us just understand this, now it's basically a phone business. everything else seems to be irrelevant. >> all the other products are side shows. >> give us the reason to either buy or sell the stock. you're not an analyst in that context but just in term of how you see where this company is going to be a year from now. >> look i think i heard earlier you guys talking about can it sustain growth, will it still be that kind of a company? yes. the u.s. market is saturated in terms of people that want to have iphones should already have them. the international market is where they're going to see the growth coming from, right? that said though and this is the point i was making earlier the last time i was on the show, we still -- we still need to see from am what's next after the iphone. that's the story for apple right now. it's a one product company. they dominate. they win. what's after the iphone? we don't know. same thing with google. google is a search giant. it's massive. it owns that market out right. what's after search for them?

so when it comes to am we still don't know what that is yet and trying to answer that question. >> but part of the argument at least over the past two or three years has been it doesn't matter what the other products are. as a phone company it's a great company. is the phone enough? >> for the time being the phone absolutely is enough and i would disagree. we do have hints about what could be next for apple. open ended opportunity in new media for apple tv. apple car coming down the pike at some point and they're gradually but deliberately in the enterprise. where you doubt apple's ability to execute at your own peril here and we should take notice of the fact that it's growing at almost a 30% clip here in these saturated markets with asps and gross margins rising. so the competition is virtually nonexistence here and with their balance sheet apple can do virtually anything it wants. >> what do you say to folks that

say all of that is great. agree with you on all of those point but at this point the growth rate appears to slow. even by apple's own admission. we say we're going to grow but ultimately we're getting back to single digits here. what's the compelling reason to buy the stock now? >> the compelling reason is here's a name outgrowing the name of global economic expansion by an order of magnitude and trading at a discount to the mean market multiple by about 50% so the question investors should be asking themselves is what are they waiting for here? so the value proposition is there and this should be the time that they believe investors should be putting money to work at apple. >> are you you disappointed by the other product lines and the other pieces of the puzzle?

beats? >> well, it's fair to say that we always want more but one of the things that i like about apple is that it buys it's times in markets many of its competitors prematurely entered the gear market with inadequate products too early. so biegd it's time until the technology is ready. doing things organically is very encouraging profitability but no growth. apple is doing both and it still has a lot of dry powder on the balance sheet to innovate in so many different directions. it's really an exciting time for the company. >> you want to address this question of whether the best days are behind apple? >> you know what, i think -- no, i think they have a lot more room to run. they have growth potential

internationally. even if assume all of that is offshore which it's not there's a lot of money to play with here. they could do a dividend boost or a buy back, in addition to that -- >> they're going to do that. they do one of the biggest buy backs in history. >> but we want to see big picture. we want to see big vision. so they could take that money and buy tesla or uber for that matter or buy both at the same time and get into this car business in a real way and let us know what to look for in the future. >> do you want them to use the money to buy something? that's been a question for a long time. besides beats that's the biggest thing they ever bought. >> we want to see am innovate and whether it does that by deploying the cash on its balance sheet to buy something or just return that to shareholders while it does things organically given the rate that they can invest in and again what we said earlier on the program, there's really no competition to challenge apple right now so it has a ton of

flexibility to innovate in a lot of different directions organically so it's up to am what to do with it. the key point being that it can. >> so from a competitive standpoint when it comes to investor dollars, money has been going elsewhere. amazon to google and other big tech stocks which outperformed apple year to date, why is that? >> people got themselves very worked up in and worried over the quarter with so much of the growth reliant on china and what we saw is that apple absolutely delivered on growth in china. sales virtually doubling year over year. we know they're up to 25 stores going to 40. so still a very large opportunity in front of them for china so we recommend investors don't fear that but look toward it as an opportunity. yes there's room for money to

come back to am here. there's still a good deal of economic uncertainty out there. apple we would argue is a safe port in a storm. they're already facing head wind with the dollar exchange rate and still powering right through that so we like it. if you're looking for more lef raj o -- leverage we like suppliers into apple like sky works that have already been punished so there's more beta in you're looking to mb aggressive. >> we'll leave the conversation there. thank you. >> thank you. >> appreciate it. >> okay. you guys are look at me. walgreens and rite aid agreeing to a deal to create another mega drugstore chain. bertha joins us with the details. >> another mega drugstore chain and another mega health care deal. we've seen nearly half a billion of them. half a trillion of them this year. 500 billion so far. >> this deal values rite aid at $17.2 billion when you include debt. not a surprise it's happening.

rite aid has been lagging. it's been a lagging number three in the pharmacy space and environment where having scale is increasingly important between rising drug costs and tougher reimbursements from payers and insurers and pharmacy benefit managers so it's no secret as well that walgreens was on the hunt for acquisition. shares surged on the news yesterday. the drugstore chains shares had fallen 30% since last month after it lowered it's guidance to account for its own acquisition of invision far ma that it bought earlier this year. walgreens ceo who became the ceo officially in july but had come on board in january through walgreen's acquisition made no bones about the fact that there needs to be consolidation in health care and in the pharmacy space and his desire for an acquisition. question now is how regulators will perceive this deal and what kind of die vestments wall

greens will make to secure approval. walgreens already has more than 8,000 stores in the u.s. rite aid would add another 4600 with overlap particularly in california, here in new york and in ohio. that would dwarf the number that cvs health has. about 7800 locations. but don't forget they also bought up 1600 pharmacy locations earlier this year. there's been a lot of movement in this space they will argue this leaves plenty of competitions from the likes of walmart and super market pharmacies not to mention the mail order types like express scripts and we all need to focus

on scale and beating back what we're seeing from big pharma. >> yeah, they got to have more and more leverage and size. >> if you have a huge number of consumers you can ask for a better price. >> all right. thanks bertha. >> coming up what the markets are watching today is that the earnings or the fed anticipation are waiting for cnbc's debate tonight. that discussion is next. donald trump is no longer at the top of the polls. how the candidate is reacting to being in second place. and as we head to break, check out this day in history.

>> will you get your numbers up, please? will you get these numbers up? i promise you i'll do such a good job. will you get the numbers up iowa, please? i am second. that's not terrible. but i don't like being second. second is terrible to me. >> i knew he didn't like being second. that's donald trump second in the polls to gop front runner ben carson. nationally and in iowa. they will both be center stage

this evening at cnbc's republican debate and our coverage begins at 5:00 p.m. eastern time. joe and kelly hosting the preshow and then becky, carl, and john harwood get to grill the candidates. >> that's because they call second the first loser that's why he done like it. >> yeah. >> some fireworks tonight. we'll see. >> he's been telling people that he's a winner in everything. when you're in second you don't have that narrative. >> all right. >> the fed will end with a statement this afternoon and pay close attention for clues about a rate hike this year or next. it's good to see you this morning. >> good morning. >> what's the fed going to say today? >> nothing. >> nothing we haven't heard. they're going to go to same where we're looking at the data. we're probably not going to -- we not going to do anything

until early next year. >> they're not going to say that. >> they're not going to say that but the markets will say great and you'll see more money flowing into m&a and it's easy money out there and you get a lot of liquidity out there so the market will be volatile. >> do you think december is still on the table? >> no, december cannot be on the table because that's the time when most of the people don't participate in the markets and if you'll do that in december you might cause a year end that's going to be more volatile than the past couple of months. >> what about the drum beat that the longer they wait the harder it's going to be and the more dangerous it snchts we waited 6 or 7 years, what's another two months for them and i think you got into early next year then you could say we had a little more clarity and we can go forward. right now you still have the china issue, you have still other things. why is that going away.

>> to your point the fed survey showed that point. it's not priced in or at least the participants he asked said it's not priced in. it would be a shock to the market if they did move. >> it did and you see the currency wars a currency wars and bonds and all of that will move. i don't think they want to do that. >> to what degree does it matter when the long end of the curve just doesn't seem to budge? we talk about borrowing and cheap money. people don't borrow overnight. supposedly not anymore after the crisis but they borrow long-term and those rates. >> those are not moved. >> are they going to move. >> investor psychology right now today is we are keeping rate where is they are for awhile so how do we invest around a low investment period but you look at companies doing this and talk

about the acquisition with the free money. health care, technology, this is all because companies cannot find growth. access to capital is to cheap. why not do something now. if six month rates move you're in a better position today than later on. >> borrow a lot of money. borrow money and buy back stock return to shareholders. >> you should borrow it here. you can do acquisitions. you're seeing the you till till sector and health care sector and semi-conductors. it's just one of the things that unfortunately you see before things actually in the market potentially could pull back. >> what do you find enticing in the market? industrials have sort of had a rebirth recently. it's been very short. >> short rebirth. >> do you believe in it or not? >> no, i think industrials -- probably another six months. still very tied to the oil cycle. you still have a lot of earnings that come from companies that sell into oil. i think discretionary is still good.

consumer still has a lot of money. 65% of gdp. >> can we bring up the year to date chart? so august is over? we can -- that was a swoon? that was sovereign wealth funds around the world selling? that's done? >> it might not be done. oil stays at 40 to $50. they'll come back and sell. if they have money in hedge funds that have leverage, here you go again. you're not selling what they have in value. you have notional value on top of that and more volatility. so if oil goes up then all of a sudden we have a tax on the system for developing countries using oil but if oil goes down the countries that need oil will be selling into the markets. >> is the market higher on december 31st than it is today or no? >> i think it's right around here. maybe give or take a couple of percent and i wouldn't be surprised if we go down another 5 to 10%. >> you're looking for big volatility then. not just tight ranges and things like that. >> yes. i think you have such a sharp

down and up that you're still digesting. look at the rotation we just went through. healthcare got killed and industrials came back and you're looking at other sectors and saying where is money going to go? and i think after earnings season you'll find the high quality companies will start doing better again. >> see you at noon one of these days soon. >> on friday. >> see you again. when we come back, stocks to watch including one of the big losers of the morning and just announced deal in the food sector as we head to a break. a look at yesterday's s&p 500 winners and losers curtesy of michael jackson music in the background there. the king of pop on top of the forbes list of top earning death celebrities. i don't know if that's a list i want to be on but making $115 million. >> don't want to be on it. >> it is what it is. ♪ no matter how fast the markets change, at t. rowe price, our disciplined investment approach remains. we ask questions here.

look for risks there. and search for opportunity everywhere. global markets may be uncertain. but you can feel confident in our investment experience... ... around the world. call a t. rowe price investment specialist, or your advisor... ...and see how we can help you find global opportunity. t. rowe price. invest with confidence.

they come into this iworld 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.

you know just when you think they have forgotten about you and don't play that music anymore and don't show you any love. >> they haven't forgotten about you at all. >> makes me feel good. among the stocks to watch today a just announced deal will see snack food makers snyders lance buy diamond foods. they'll get more than three quarters of a snyder share for every share they own now.

akamai's technology beating estimates by 5% but the provider also gave a conservative current quarter forecast owing to the strong dollar and slower growth in online traffic and ceo tom leighton is going to be here 7:40 a.m. eastern time to talk about the latest results. panera bread beat estimates by a penny. revenue coming in short. they're being impacted temporarily by increased spending on workers equipment and technology. express scripts beat estimates with quarterly profits of 145 a share. revenue did come up light and did increase earnings guidance for the full year. stocks dismissed. >> i like it. >> coming up, the countdown to the cnbc republican debate. the stage is set. all the candidates are gearing up for the big event. who needs to step up and shine if they need to make it to

november 2016? we'll discuss that next right here on squawk box.

remember today is a fed day. this is the before fed and after fed markets. tune in around 2:00 and see if they say anything that moves everything around. let's show you what's going on in europe which is broadly higher like the u.s. futures are. you brought back greece. thank you. which is higher by more than 1%. >> there it is. >> it's the outperformer. >> do you think it should be there? honestly? should we have it -- >> i was surprised it was there yesterday. give it another couple of months. >> then we have to bring it back as a permanent fixure again?

>> yeah. the republican candidates continue to battle for the white house. can tonight reignite the struggling campaigns of jeb bush and carly fiorina or will trump and carson remain ahead of the pack? joining us is the founding partner and managing director at the glover park group. and he is an informal republican presidential campaign advisor. we'll start with a softball. joe i assume with the dominant narrative being trump second to ben carson at this point he'll be going after ben carson in a big way tonight. don't you think? >> we have come to expect him to go after someone and that's the dominant theme for him. there's two races here. one between the real political outciders. people never elected to anything which hasn't appealed and trump looks like he is under a threat from ben carson. the second debate will be and

trump must love hearing this, is all derivative of trump and how the rest of the people will try to distinguish themselves from trump. so there will be two debates but trump will be in the middle of both of them. >> kevin, what do you think? >> i agree with that. i think that pretty much the end game if it plays out with mr. trump not getting the nomination is probably going to involve something like ben carson surging ahead of him in the polls. a lot of people are now looking at iowa and thinking that carson is going to win iowa and then all of the nonestablishment people are around ben and mr. trump gets out and that's the number one near term threat to trump so i would expect him to try to distinguish himself a lot from carson. being on cnbc with a lot of tough economic policy questions it will be an opportunity for a person adempt at talking about economic policy to shine tonight. >> you're suggesting that's trump? >> no, i don't know. i'm just saying there's going to

be a lot -- but so far policy differences between the candidates have not been the things that moved the polls but tonight there's no way cnbc is going to run a debate that doesn't have a lot of substance in it. that will stretch the nomg of things they haven't been involved in before. >> on that note, who has the most to lose considering the debates thus far are highly entertaining. highly watched. maybe a little bit light on substance. but, you know, real policy ideas. who has the most to lose tonight if it gets more specific? >> well, since trump has dominated the entire narrative of this campaign, if he loses that ability to dominate, he has the most to lose. you know, i think it hasn't been about -- we haven't been talking about their tax program or their health care program. we talked about who he has insulted most recently and how they have come back and whether someone has energy and whether somebody has bad hair. it has not been about substance.

i expect that a lot of people tonight may be getting around trying to pin him down to prove that he knows something about the issues. this guy famously said he gets his advice on military and foreign affairs from watching the generals on the show. i do expect that in addition to your moderators trying to pin him down i expect other candidates will be trying to put him on the spot and demonstrate when it comes to policy he tends to be making it up as he goes along. >> jeb bush has been sort of a, dare i say nonplayer in at least the past couple of weeks. he had an angry outburst recently. what does he have to do tonight to get back in the game? >> you know i think that he has had a rough week. he to lay off a bunch of staff. mccain's campaign came back from that in the past. it doesn't mean it's done but the fact is that the establishment side of this primary seems to be around marco rubio. fluke at the betting markets.

the odds of rubio are about double the odds of bush winning the nominations so there's a second fight going on tonight which is rubio versus bush. can bush launch a come back? and those guys both made a lot of effort to have real proposals and when the debate turns to substance, both of them might advantage one another against each other but also against the other guys. >> on rubio, his strength absolutely is foreign policy. there's a lot of economic policy tonight. >> but he's got his own, you know, tax plan that he's proposed. he's very, very -- any senator will have had to have had an opinion about a million things so you can imagine that a moderator can say name three regulations you would cancel or what's the worst part of the tax code or how many rounds of quantitative easing wouing did ? >> i'm going to throw this to

you. we're still at the dating stage of all of this. when you're growing up there's people you date but you know you're never going to marry them or people you date and you think this person i could marry. that's where we're at it with the republicans at this point. there's lite of people that are interesting, funny, et cetera, but ultimately right now they're only dating and when push comes to shove and you have to vote to marry somebody, do you think carson or trump are there at that point? >> i wouldn't be surprised. there's going to be a lot of support from that part of the party all the way through and it's going to be a tight race and somebody is going to want to be a power broker at the convention. i think that one of those guys is going to be in it for the long haul but i would guess when people get serious and they think about political experience that christie, rubio, and bush, those three guys will be the focus of a lot of attention and the people that i would expect

to move up between now and new hampshire. >> thank you. >> thank you for getting up early for us. >> the latest poll results would suggest that americans want to divorce everybody who is running for president. >> that's true. >> the dissatisfaction numbers are higher than anybody's likable numbers. >> divorce rates are higher too. the co hoff founder or paddle8 will be with us. and shares of akamai getting slammed this morning. we have the ceo. he's going to join us first on cnbc at 7:40 a.m. eastern time to talk about the challenging quarter. squawk returns in a moment. i say we go all in on the internet of things. what we're recommending as your consultants... the new consultants are here. it's not just big data, its bigger data. we're beta testing the new wearable interface... ♪

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welcome tack to "squawk box" this morning. our auction website, paddle 8, is attempting to shake up the auction house world, and the company is getting attention of heavy hitters in the art world. they raised 34 million in financing, and how they attempt to be the auction house of the 21st century. >> thank you. >> tell us about what it is, and are you really going after the others, is that what this is about? >> paddle8, first of all, thank you for having us. this is an online auction house.

we serve the middle market, ebay on the lower end, and christie's at the higher end. there's a massive middle market, underserved, dramatically by a number of brick and mortar houses. it could cost 70% of the october. >> what are you selling? >> the price point of $1,000 on the lower end, and $100,000 high end. that's the middle market in the art world, which is high by many standards, but in the art market you see multimillion dollar records shattered every year, that's the middle market. >> what dominates the line? furniture, art, rugs? >> so we started with contem contemporary art, but we expa expanded into memorabilia, so we were selected to sell the album, which was an honor for us

because they chose us over incumbents. >> first album? vinyl? how much? >> it's the final album they did, sold as one single piece of work, rather than commercializing it, it's a single piece of work, and they wanted to show this is their done of music to art, an art form. >> is it for sale? >> we are not disclosing that yet. >> sold, undisclosed price? what's the most expensive thing sold? >> what was it? >> a unique egg, created for charity auction we work with. >> why not tell us the price on the album? i mean, it's not public? like, in my head, i see the website, i watch this happen on line? >> you actually can't watch it. it was a private auction. >> got it. >> sealed submitted, but we were selectsed to do the auction on

line. it was great. >> that's interesting. never heard about that. how does that work? sealed bids online? >> effectively, disclose the object, it was a fully explained object, and people submit bids to determine what they thought the market valuefuls. we provided an estimate for it us but, you know -- >> what is the age of people on the site? is it a different audience, demographic than the people? >> it is. >> or even those on e bay. >> e bay is hard to measure against, but the biggest demographic for us is 18-34, a younger generation of collectors. >> what's the average income, do you know? >> we don't know specifically, but i think given where our price points are, it is not always millionaires. we cater to the same people as well, but, you know, i think our average price point is closer to $5,000 opposed to theirs which is multiples of that. high disposable income, but

lower. >> what commission do you take? what's the revenue model? >> 15% from the buyer, 8% from the seller. >> this is -- so every time i see all the disrupters, guys like you, i mean, where -- you have found a market that was not yet online, and where you have been able to clear things, right? >> yes. >> incredibly inefficient. were you in auctions before or seek it out knowing this is the sweet spot of the market? this is, like, uber same thing, incredible inefficient to find a car. >> it's interesting. i'm a biologist by trainer, and he's a former banker. we were not from the auction or art world. i sold the last company in 2010, and i was introduced to an auction ne auctione, auctioneer. theyed said, well, we don't know you, we can't sell you anything, wait 16 years. >> they are snobby. it's awful in the art world. they are. >> tuesday morning, 11:00 a.m., i was behind the computer and

not headed to new jersey for an auction. clearly, there was an opportunity there. we looked at the malice aforethought, did the research, and it looked like this is something that technology could change. here we are. >> are we in an art bubble? >> i don't think so. prices are where they should be. november is shaping up -- >> cheap money? interest rates are low. what happens to art sales when interest rates, if they ever rise? >> you know, they will keep rising. what happens is where we operate in the market is least susceptible to changes. i feel safe either way. >> cool. congratulations. appreciate it. >> thank you. >> good luck. the countdown to the republican debate is on. the platforms, policies, and what you could hear from them tonight. it's going to be huge. back in the earnings report, but a cold reception for the stock after some weak guidance. that's next on "squawk box." you wouldn't order szechuan without checking the spice level.

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hours away from the show down in colorado. cnbc's presidential debate, your money, your vote. clock ticking down to the fed decision. markets standing by for clues about a panel rate hike, and the chair's all important statement about the health of the economy. >> all that, plus, the morning's big tech movers, apple, twitter, akamai, the list goes on and on, and inside the megadrug chain deal between rite aid and walgreens. >> i got a fever, and the only

prescription is more cow bell. ♪ >> live from the beating heart of business, new york city, this is ""squawk box." ♪ >> welcome back to "squawk box" here on cnbc, first in business worldwide. our guest host, wells capital management chief investment strategist, joe and becky preparing for the big republican debate tonight with our coverage at 5:00 p.m. eastern time. preparations made in boulder, colorado, and adding to the drama, donald trump now officially slipping into second place with ben carson in the top spot nationally and in iowa. the stage is set, and we expect a lot of fireworks this evening starting at 5:00 p.m. of course, log on to cnbc.com if you are not near a television to get in on the action. in the headlines this morning, the fed wrapping up a two-day

policy meeting today. the statement coming at 2:00 p.m. eastern, not much suspense here. they expect keep banks steady, but they look to clues when a rate hike arrives. congressman paul ryan is officially nominated as a candidate for speaker of the house today. the formal election is set to take place tomorrow, and let's look at today's early winners, late yesterday, an air force bomber contract that could be worth up to $80 billion, and this morning, it's reported better than expected third quarter earnings, also raised its full year forecast. game one of the world series between the royals and the mets in the books. not without some chaos, though. fox sports having an electronic failure due to the power outage causing a delay in the game in the fourth inning. the royals won in the 14th on a sack fly. they beat the mets in game one 5-4, and the other side notes since there was a stolen base in the game, and maybe this is the most important fact, taco bell

gives away a breakfast crunch wrap on november 5th. mark your calendars now. >> you're welcome, yum. counting down to the gop debate tonight, 5:00 p.m., don't miss it. we are in boulder with more. >> reporter: good morning, michelle. it is debate day in america today in boulder, colorado, set for the main event as you said, 5:00 p.m. eastern time. the podiums and lecterns are set up on the stage, downstairs from where i am here. all eyes today on number one and number two here. look at the poll numbers. donald trump and ben carson are at the top of the heap going into tonight's debate. everybody else mired down in the single digits. look at the "new york times" cbs poll out yesterday. first time, donald trump in the number two position and carson at 26%. trump at 2 2%. that's within the margin of error, but that is a significant

marker point for trump to slip to number two position. we see marco rubio down 8 points, and carly fiorina 7, and jeb bush down at 7% as well in that poll, so that gives you a sense of the lay of the land. all guys in the bottom of the heap try to change the narrative here. how did they get here? take a look at ben carson, a couple details for a dense of the unlikely front runner in the nomination. back in 1992, he published first of temperature books on success, faith, and politics, and in 2013, he retired as neurosurgeon and in may of 2015, he announced this campaign for the gop nomination, a long shot, but with support from evangelicals, conservatives, and voters dissatisfied with trump, he now piqued at this point in the poll yesterday. trump considered a presidential campaign in 1988, 2004, and 2012. didn't run in any of the years,

but in 2000, he ran for the reform party nomination, and in 2003, of course, "the apprent e apprentice" reality tv show premiered. guys, all the people you expect will be asked about the big debt deal we saw in washington last night. expect that everybody here is running as an outsider. they will attack that big deal in washington, but nonetheless, that deal looks like it's going to sail through even though everybody in politics say they hate it, guys, a fascinating moment in boulder, colorado. >> thank you. you're back at 8:00 with even more of a pregame setup for us. good to see you. >> that's right. the apple story and what cook said about the results to josh lipton. we have more on the story from san francisco. good morning. >> reporter: good morning, andrew. so for all the talk about apple tv, apple pay, and apple music, we know apple is still the iphone company. it is apple's most important product. accounting for more than 60% of

its total sales. some investors, though, questioned whether the ceo, tim cook, keeps the momentum going, and it's legitimate. there's a slowing market, slowing china, and tough comparisons, but cook said the company will grow iphone units, something emphasized again on the conference call with analysts. >> we believe that iphone will grow in q1, and we're -- we base that on what we're seeing from a switcher point of view. we recorded the highest rate on report for android switchers last quarter. >> reporter: that, by the way, apple is also able to keep lifting the price of the iphone, the average selling price during the quarter was $670. in the june quarter, it was $660, and as for the worries about a slowing chinese economy, and what that can mean for apple's business, cook told me,

what slowdown? he says he sees no deceleration in apple's business in that part of the world. in fact, he saw revenue in greater china surge nearly 100% in the quarter to 12.5 billion, and now some of apple's other products do remain under pressure. ipad units, for example, were down 20% year over year, but cook remains confident in that, especially its potential in the workplace with the introduction of that all new ipad pro. guys, back to you. >> all right, thank you, josh, from apple to twitter. twitter posting earnings and revenue that topped analysts' expectations, but weak guidance sent shares tumbling 13 % after hours. breaking it down, our senior analyst. poor twitter. right? i mean, not just -- not just the revenue or guidance or anything like that, but the fact that 307 million users, excludeing the people only using it on text messages, right, not as

valuable, they can't get the user growth. in a world where facebook is talking about a billion, they got 307 million? >> yeah. i think the way to frame the approach to looking at twitter as an investment would be in terms of three things, user and user growth, number one, engagement number two, and monization number three. user growth is slow. we don't have an outlook in users into the fourth quarter. there are twitter moments, engineered and sort of geared towards reinvigorating user growth. too early to tell. engagement, no update on the daily user, monthly user metric. i think that's down year over year. on monitorization, we think that the ad revenue per user decelerates into the fourth quarter. >> if you don't move numbers your ability to hit revenue targets set up are not possible. >> they are contingent upon the longer term, and this is a company with the ambition to be the largest audience in the

world, but it's a fraction of facebook's, and maybe it's just a niche property platform that has unique characteristics. maybe he's not tedestined -- >> give the company a pass this quarter because founder's back, give them time? >> a little bit, yeah. a little bit. i think the street will give jack another quarter or two, you just have the restructuring. you know, you just have a furious pace of product launches here, but, you know, take a step back, think about internet, you think about technology stocks, turnarounds are rare. there are not a lot of precedence for successful turnarounds. >> doing the turn around in a road show. >> for the okay company. >> that he's the ceo of, which, by the way, takes a lot of work. >> that's a question. building leadership around him, so the coo, google, but you're right, that question, that division of his time is going to continue to be an invester question, particularly if things do not turn around and products

do not really jive. >> 12 months from now, is this an independent company? >> you have to identify a real buyer. there's an agreement with google, but i don't think my view, it's tough. >> known for that. >> right. so, you know, chances are, an independent company. >> what are the chances, it is, in fact, a niche company and remains this -- oh, i don't know, widely used and by media members, members of sports, entertainment, east coast, west coast, whatever. >> could be, you know, 75 million users in the u.s., you know, could ultimately be 350-450 million globally. that's fine. could be a great product for realtime information, but trades at a lofty multiple. question is, if you don't have the three to five year explosive growth to the mainstream, i think it's important for twitter to articulate who they go after, segment the market. is it everybody? is it specific users? then i think that over time it

could be a niche internet -- maybe the word "niche" is not right, but just a specific use case within the world of the internet. >> unable to grow into the multiple in which it trades? >> difficult when, you know, users' engagement and slow down are not working in your favor. >> have we introduced you to the world yet? >> just at the top of the show. >> apple or twitter, thoughts on this moment on tech? must have thoughts on both. >> well, certainly. apple to me, seem like it's going the way of a mature tech company to me unless they continue to have product innovati innovation. i don't know. >> you own it? >> i don't. no. with twitter, i think they are a franchise, to me. they have these star personalities, but they never, like, cash in on the ability to allow people -- a lot of people

want to get into the twitter, the tweets of a certain perpalty, but it's not set up in way to get compensated for the right that they got that. seems like other other possibilities there for twitter yet they have not done. >> yeah. part is communicating the case for twitter. why should a casual user use twitter? that was the marketing campaign launched last night with the commercial where they linked it to professional athletes and their hashtags. you know, i think twitter moments is a way to bring twitter to the mainstream and do more of what you're saying. i do think it's possible for twitter, as a second screen, to become more of the use case. as twitter starts to strike deals with the likes of cbs news, and other news platforms for the presidential debate and things of that nature, twitter is events. it's about celebrities and big events. >> it is. >> the use case continues to e evol evolve, and it may be, you know, it may continue to serve narrow in its focus. i don't know.

we'll see. >> thank you so much. >> thank you for having me as always. ? anthony? >> coming up, trump going in tonight's debate in second, adding to the drama tonight. we check out the economic plans of the candidates, who may the right stuff, and shares crushed after an earnings miss, and the ceo is with us, tom leighton talking to us first about that quarter.

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welcome back to "squawk box," countdown to tonight's cnbc's presidential debate is on. we have the director of domestic policy studies, a stanford university professor and senior adviser to senator rubio's campaign, and with us is jared bernstein, senior fellow on budget and priorities, and adviser to vice president biden, who is not running, and jim paulson is here this morning. lonny, given your relationship with mr. rubio and the fact that

i imagine you have views on where it stands. you see what happened to trump going from number one to number two. how does he react to that, and what's ha do to everybody else on the stage? >> well, good morning, app drew. look, polls bounce around a lot between now and when the first votes are cast in iowa. tough to place stock on polls today or tomorrow. in terms of senator rubio, he'll present a forward looking vision on the economy. glad we can talk about the economy. we have not in the first two debates. there's a forward looking vision on the economy, best way to move america forward with foreipolic he feels good about the position in the campaign and where it's going. >> jared, when you look at what could happen tonight begin the trump factor and where bush is, what does he have to do to get back in the game? >> well, look, conventional wisdom is he needs a breakout performance. he had a tough few weeks because

headlines talked both him downsizing the campaign for money reasons, trouble with funders, with endorsement, and i think the conventional wisdom in this case is right. he's been ineffective in the debates so far, and riding on assumed front runner status, but single digits for this long, the numbers do jump around, but he's been in 5-7% for a while now. he needs a strong performance. >> jared, do you think they get all the way to the end? >> you know, my intuition is no. i think everybody's intuition about trump and carson should pretty much be thrown out the window. we are playing by a different set of rules. this is an outsider campaign so far, and, you know, establishment candidates are having a hard time. rubio's interesting in that regard fitting in between the two models. >> is this the last gasp for the long shots tonight?

>> well, you know, i don't know. it's tough to say. i think that, you know, there's a lot of opportunities for the campaign for people to make their points. debates are important though, andr andrew, presenting an opportunity for people to talk about the vision for the country. there's viewers, for some, it's their only opportunity to see the candidates. i think tonight's important. there's no question about it, but as i said earlier, these polls are going to jump around. who knows what's going to happen, but we'll see tonight. i hope we'll have a robust discussion on economic policy. >> a point about that. i very much agree, just excited about this particular debate, one, republican is that it's on cnbc, so we like that, but they really have not had a lot to say about the economy so far. that's critical. i mean, listen to the democratic debate, you heard really pretty granular policy ideas about the economy. jub bu jeb bush wants to grow at 4%, but how? there's growth, jobs, income,

things people care about a lot, not a lot in the republican debate so far. >> i agree with that, jared. up until now, the debate's been led by two people that basically take the campaign on a personality attack between personalities of the people involved. there was a jump in the polls from someone from the other brand was when the first debate, when carly fiorina rose in the polls dramatically after the debate mainly because she was the only candidate that really went to substance, to depth, to breath of economic issues, military approaches and the like, and i'm wondering if this debate tonight, you get to economics, that you're going to uncover sort of a lightweight trump, lightweight carson compared to the real candidates in the run. >> well, it's a great question, and another reason to, i think, tune in for this economic piece

very carefully because donald trump, when he gets into that corner, he tends to say, i'm not talking about the plan, but it's great. that worked for now, but if we get in the debate we expect to with the moderators, i don't know that works. >> i bet you hear carl icahn's name mentioned multiple times. >> i know a guy. >> exactly right, i know a guy. >> you better be able to step up tonight, right? i mean, if you can't have a real substantive, comprehensive view and arctticulation where this economy is going, you're going to sink fast because the questions are not going to be softballs, and you're put on the spot to articulate your economic vision. >> yeah, look, i agree 100% whether it's the moderators, they will press on economic issues on the substance of economic issue, and there's a lot of economic anxiety out

there. manufacturing is slowing. you see job growth slowing. we think growth is closer to 1% when the reports are out next quarter.wonder about rates, and there's a lot of important issues here, exposing the true contenders from the wanna bes. >> from a financial perspective, how long can the long shots go on for? meaning, if you're playing money ball, is there a time when everybody has to say enough? there's no light at the end of the tunnel? >> historically, there is, and one would expect based on historical model that some of the others would be out by now, but they are not. they are willing to sell finance or run on fumes instead of real contributions. >> i'm hearing talk of a broker convention, when was the last time that happened? board walk empire? >> yeah. >> i mean, that's what it's feeling like at this point. >> yeah. i believe -- >> this could be a long time.

>> translato >> i don't think they are out because they are short on cash works in this group. >> no. it's an unconventional leadership at the top, they they they will fall. >> gentlemen, thank you so much. of course, a quick reminder, you knew we'd say it again and again. catch the action here on cnbc's live coverage of the debate begins at 5:00 p.m. eastern time. coming up, a deal in the drugstore business. walgreens and rite aid are getting together. investors love it so far, but does it fly with regulators? that's after this. don't move. time now for today's aflac trivia question. who was the first film kwark to be a finalist for time magazine's man of the year? the answer when cnbc's "squawk box" continues. mpany's data is , the possibility of a breach can quickly become the only thing you think about.

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who was the first film character to be a finalist for "time" magazine's man of the year? the answer? e.t., the extraterrestrial in 1982. all right, wall greeps posting results, beating estimates on the top and bottom lines, coming as the drug story

giant agreed to a deal with rite aid, and we are joined now on the squawk newsline to break down the deal, buzz, and reacting to the quarter. senior managing director at evercor isi. the deal make sense to you? >> caller: absolutely. the company is looking to utilize its balance sheet, and improve its own stores as well as, you know, revamp its margin structure, and, certainly, rite aid in the mix helps with that. >> two of the three biggest drugstores combining, what do regular laters think? >> caller: rite aid is a small portion of the market. compare the retail drug business against the pbm market, a key peer, that's a much more con ten traited market. you have cvs, sizele, walmart sizable as well as over half the market in the nonchains, so we think it's still a competitive landscape post this deal. >> what's it mean for cvs.

>> for them, you know, i think this is a good outcome, you know, if they would have combined with express, that would have posed a bigger threat. i think cvs is a different health care service company if they are clearly competitive on the retail drugstore side, but, ultimately, we think this is probably a new tral to positive event. >> i appreciate you coming to the phone it talk about it. earnings look good. take it for what it is and see what happens. thank you very much. coming up, ready for the fed announcement at 2:00 p.m. eastern time, with him live in washington, and the toll volkswagen emission scandal hits the bottom line. multibillion dollar loss, breakdown on the numbers and what it means for the future. we return in a moment.

welcome back to "squawk box"

on cnbc, first in business worldwide. mortgage apps falling 3.5% last week. the average 30 year mortgage rate increased slightly over the prior week to 4.10%. a newly announced deal unites two snack makers buying diamond foods and excludeing debts, it is a cash and stock valued at 40 prepondera 40 .46 a share. congressman paul ryan is nominated today to be speaker of the house. the formal election takes place tomorrow. day two of the fed meeting, the decision at 2:00 p.m., no news conference, could there be fireworks, however? steve is in washington with more. steve? >> reporter: yes, second countdown clock there, michelle. it's a tricky meeting for janet yellen. her communication, as you know,

a increasingly criticized on wall street. no rate hike expected, but the focus is on the guidance in the statement and if it suggests the possibility of a hike in december. stephen stanley wrote this morning, i still believe the majority of the committee very much wants to go in december if the data allows it and they can gather the nerve to actually pull the trigger, but keeping there flexibility is tough. much of the best news in the last statement was softer like jobs and household spending. here's the issue. what does the fed do with this line, this controversial line in the statement where it said, quote, recent global economic and financial developments may restrain economic activities somewhat and likely to put further downward pressure on inflation in the near term. some thought that may have gone too far in really undermining confidence in the economy. folks, for a meeting in which the fed is expected to maintain the status owe, there's a lot

riding on the statement. they want the flexibility to hike, but it's hard pressed to do so if they accurately describe the market, the state of the economy, michelle sh. >> steve, thank you. stick around. the feds comments on rates causing anxiety in the markets. this is what the markets are bracing for. here's the cnbc crickontributorh our guest host at wells capital management. when you look at what happened to the markets last week with mario draghi's impact and what you can say to move the markets even if he had not done anything, a lot can happen today, right? what are you watching for in. >> well, i think what you're really looking for is a statement of how glued they are to waiting or postponing or are they still open to changing their minds and maybe lifting rates for the end of the year. i think one of the biggest things that could cause them to change would be if the inflation numbers, like the eci that comes out this week, the wage number

that comes out with the jobs report, if those pop up, that puts the fed in a real difficult -- >> slim to none? >> i don't think so, really. >> no? >> we got 5% unfloiemployment a other indicators like adp suggesting wage pressures. think of the position they'd be in if wage numbers pop up dramatically and there's weak overall growth in the world and weak reports here. that's a difficult position. >> what do you think, potential to move the markets today with the statement? >> potential to move markets, certainly, but after the last statement, they said they don't expect to hit their 2 % inflation point to jim's point until 2018. that was discouraging to me. now, yes, there could be a blip in the data, but they don't see the long term trend change there. markets have pretty much been moving on every utterance of the fed. put up or shut up. enough promising we are going to

raise. they said they will not change policy, meaning they are not going to start a tightening process. they are making a nominal raise. i want it over with. i don't think they are going to. market the would like it. >> you're in ibm, thoughts on ibm? we have not talked about it at all this morning, and there was a day in age where they were apple of the world, and with the investigation, there's an orphan stock. you concerned at all? >> a little bit. any time the fcc sees fit to take a closer look, everybody should pay attention. they have been hit and miss over the past couple years. i don't own it. it is my kind of company, but we've stayed away. we didn't think, really, the organic growth was happening at a rate sufficient to merit the price. we stayed away. longer term i think they got to be fine. >> here's the question, michael. ibm finds out about this in august. >> yeah. >> if you think it's material, you have an obligation to tell

people then and there. tell more than told thus far. clearly, somebody in the room, rightly or wrongly, believe it's not material. how is it not material? that's the question. that's the question. >> well, that's the question. we've seen companies misjournal these things before. we have seen companies that said this is really not a big deal. we're not going to take a seriously. you know, a famous, i guess, home economist, ms. stuart, ended up in prison for not taking that investigation seriously. you got to respond. take it seriously. they are not playing. i take the point, but too ea ease -- you can't dismiss them. >> jim? >> yes. i want to point out on getting back to the fed that sort of the elephant in the room for the federal reserve is the dollar and what's happening in other

central banks around the world. you got easing happening in china, easing happening in europe, and what that means is that if the fed were to go the other way, it's going to ultimately strengthen the dollar and you guys have all seen what the manufacturing numbers have. doing. you had guys, and we talked about it yesterday, executives at companies talking about a recession in the manufacturing sector of the economy, which even though it's a small part of the economy, it's a big and volatile part of it. the danger here for the federal reserve with hiking is not so much focused totally on the u.s. economy, but what's happening abroad, and that's got to be a big factor, i think. >> steve, that's -- >> they said today, interest and revenue would have been higher by 8% if not for currency. >> you see that time and again with one company after another reporting on the concern cy effects. >> but, steve, that's really getting to be a broader problem, isn't it? that the fed now is responsible for what's happening in the global economy now? i mean, we have to react to central banks, and we can't

raise rates because of what happens to the dollar and europe and in asia? >> well, certainly, the fed was contribute sid criticized with the part of the statement highlighted there, the focus on global developments, but whether or not the fed ought to focus on that, certainly, what happens abroad affects the u.s. economy, and, michael, welcome to the new world we live in, which is that the u.s. is not an island unto itself, and the effects of the dollar play out inside the u.s. domestic economy, and in this particular era we're living in in a big way. >> steve, you know, some of the fed says their mandate is too broad, having employment and price stability, and now they are expanding their own mandate. >> well, what would you have them do, michael? ignore what's happening abroad, ignore the dollar and the manufacturing sector? that would be stupid, wouldn't it? >> they painted themselves into a corner. >> michael, i asked you a policy question. if you were in that particular seat there, forget about pinning yourself in a corner, how do you

handle it? put blinders on? >> no. they can't, steve. >> okay. >> absolutely can't, but they can't control it either. i mean, there's a real risk at their credibility. i don't think they can control it. >> no. >> real quick, say the fed downgrades assessment of the economy todayme. at what point is pure bad news in the market and it's not great because it pushes the fed further out? >> i think one of the things -- >> data lately is not good. >> one of the things going on in the mart is it's tough to find a growth rate in the economy that's sustainable for the stock market because the fact of the matter is right now bad news is good news, which means, you know, weak growth is good and if it keeps up being weak, that's going to become an issue, particularly when the s&p sales are now down year on year, earnings under pressure, it's not long before bad news is bad news if we continue to go below trend in the economy. >> guys, thank you, michael, steve, good to have you from

washington, jim is with us until the end of the show. coming up, a dark cloud on wall street. the stock down over double digits and aftermarkets trade after soft guidance. the company's ceo explains after the break. volkswagen slowing. we have the numbers and the company's forecast coming up.

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welcome back to "squawk box" on cnbc, first in business worldwide, and stories front and center this morning, morning falling 3.5% last week -- yep, we're just talking mortgage apps. >> that means we have no idea what to say. >> mortgage apps were down. you know? fed meeting today, statements, rates, hey. >> we're going to move on. despite the third quarter analysts' estimates, akamai, trailing yesterday, but the guidance was the issue disappointing the street.

we have the ceo here with more. so you beat on the current numbers, guidance is weak, i'll let you put it in your own words. what's the problem? >> i don't think there's a problem at all. you know, the media business, whiching thes for half of the revenue is highly dependent on the amount of traffic customers generate and pass to us, and we are looking forward to seeing the largest accounts having less traffic. this is the nature of the business, and sometimes you get more traffic and there's a lot of estimate. sometimes there's less traffic, and people are worried. business is healthy. >> in terms of the traffic, talking about your larger customers, talking apple and netflix. >> well, no, we're not, you know, naming names. >> we're not naming names. >> we're not. >> we are. [ laughter ] >> but -- >> great you're not, but we are. something to be said about folks like netflix who are moving to different types of connections that will ultimately bypass you? >> no, i don't think so. you know, we do have some of the

largest media accounts, have a do it yourself cdm. mostly that's used for the things that are easier to deliver where performance does not matter like a software down load in the background. looking to the future, it's broadcast, online, live, quality matters there. you don't see the do it yourself, you know, happening as much there. >> when you have media customers, a slow down in traffic, is that because people are using it less or they are getting less advertising revenue at this point. explain to me the break dodown revenue. >> traffic in time grows substantially. has been on our platform 60% a a year over the last decade, and sometimes it grows slower, and i don't think you can say, you know, oh, something happened here. sometimes it grows faster as the quality of video is higher, you

get traffic. as people buy more devices, play games, download software, you get the traffic. sometimes it slows down. it's not a straight line. >> what's happening -- what happened isn't that you're losing market share to someone else or anything like that? >> no. we track that carefully. >> not that people are bypassing your service to go straight to the provider. >> no, people are not bypassing our service. our shares are strong as it's ever been. that's not the issue. >> i think expanding on andrew's question from what i read, whether it's apple, netflix, whoever, people trying to build their own distribution networks to bypass you, is that at least the potential for a longer term issue that you'll face in. >> we've been, you know, competing gwen do-it-yourself efforts for a handful of mediaing thes for over a decade, and very successfully. i think that'll be here for the next decade too. you know, when the performance matters, we tend to get the

lion's share of the traffic. >> right. >> i know you said there's not a problem, but when you see the stock do what it did and what it's doing and what we presume it's going to do today, it's got to be painful, isn't it? >> you never like to see stock go down. >> the one-year chart is really tough to look at. >> that's been the nature of our stock, you know, since we created the company because of the ups and downs in the amount of traffic. it's not a straight line. the company is just as healthy today -- >> at 18%? >> wow. >> another question. yahoo! streams first nfl event over the week. that's an example of potentially where this goes, and you'd think you would be a great beneficiary of this. how quickly do you think that happens where you see much more in terms of live sports, live entertainment and things being pushed over broad band? how does that affect you? >> generally affects us well. we were a primary distributor for yahoo! with the event, you know, very, you know, good performance for the event, and i think that is a big part of the future.

it is really hard to know just how fast broadcast moves over the top, and how fast subscribers adopt it. i don't think anybody really knows, but that is a very good trend for us as that happens. >> and the other question i had about sort of numbers for the quarter, do you look and think to yourself, oh, okay, apple is going to be distributing the new os 9, and there's going to be a lot of down loads to that. does that actually factor in? is that a load issue for you? >> traffic is very important to the forecast, and that's what we're forecasting here, not apple or anyone specifically, but we look at top accounts, look at what kind of traffic they might generate, how much of that we get, and that drives our estimates to those accounts. >> you love a new phone because every time i get a new phone, there's upgrades, every single app upgrades, and that's traffic you benefit from. >> we benefit from that traffic, absolutely. >> okay. leaving it there, thank you for coming in this morning. >> thank you.

>> thank you so much. coming up, vw stalls after the first quarterly miss in 15 years, phil lebeau has details next, and at the top of the hour, your money, your vote. what to expect in tonight's republican debate, politics, the economy, and our former white house adviser, chairman will be right back. need to hire fast?

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slammed by costs related to the diesel emission scandal,

vw's results short, lowering the profit outlook, and phil lebeau has more on the future of the world's largest auto makers, hi, phil. >> hi, scott, we are hearing from the ceo of the volkswagen at this moment, talking at a conference call with reporters. over the quarterly numbers first for volkswagen. it is the first quarterly profit loss for voex way again in more than 15 years, and as you mentioned, they are breaking down the guidance for full year financial implications for the company, although, to what extent is still unclear. full year deliveries, however, strictly deliveries, they are on par with what they were last year, and a little over 10.1 million vehicles, and just a few minutes ago, talking with reporters in a conference call says we will be ruthless punishing those involve and said the company is going to have to come up with a new map in terms of future growth going out

through 2025. remember, through 2018, the goal was we want to be up over 10 million vehicles. we want to be up to a million vehicles in sales in the united states. matias now saying we need a new plan. we need to put that together once we figure out exactly how far we have to go to fix all of the vehicles ibecause of the rigged diesel emissions. that call is going on. guys, volkswagen getting a little of a pop after announcing these results and the statements on the conference call. guys, back to you. >> a long road ahead of them, not just because they are a car company, phil. >> absolutely. >> thanks. u.s. domestic markets, a chinese company, one of potentially three, maybe mewant to buy starwood, would be the biggest chinese acquisition in the united states ever. jim paulson of wells capital management is on set with us. i bet this is in the debate tonight, right? that it might feed into the

insecurities that a lot of americans have about whether or not we're competitive or the chinese, like the japanese way back in the 90s, good, bad, whatever. how do you think about this when you see this kind of transaction possibly? >> i'm okay with it. i've always been more global free economics, and i fail to see how it's a risk to the united states or anything. if it really got bad, we could nationalize like other countries have done. we're never going to do thattings but the point is capital should flow freely. if that's where it comes from, they provide capital that provides jobs to the country, and -- >> the republicans are not sounding that way, though. >> i know, right? i don't have a problem it. i think if you do that, that, to me, is no different than government regulatory controls in this country, that reduces economic activity and reduces job and production creation. >> i wonder if it speaks to the chinese desperation to get money out of the economy, right? they wanted to diversify away

from the chinese academy, which soot -- >> well, they are not alone. central banks around the world created so much money that everyone has excess cash, and as a result, we have almost record setting m&a activity. here's a per cement of gdp as high as the dot-com. that's a risk. that's a risk, i think. >> the president's going to run out of hotel options too. >> i was going to say -- >> places to stay at because they are bailing from the waldorf. >> he was going down to the u.n., the palace? >> i don't remember. >> it's high sscrutiny, not jus the trumps in the world, in the debate tonight, but the hill any way as a result of a move like this, biggest ever acquisition by a chinese company in the united states. that's going to draw scrutiny in the backdrop. it's not an energy company. >> goes two ways. >> only 5 million. >> they are going to skrcrutini

deals we want. >> we have a category -- >> smithfield, upset about smith field? come on. >> we just had the presidents of the two nations at the white house, and where, you know, pretty much the president called out the chinese leader in some respects and said, look, we're not going to deal with the issue of cyber security and all this other nonsense of stealing our secrets anymore, so it's just an interesting timing as that narrative has bubbled up. we have to go. coming up in the next hour of "squawk box," a big hour, a big night in boulder. stage is set for the republican presidential debate, which everyone will watch here on cnbc. we have two gentlemen very familiar with the white house politics and economy. both serving as the council of white house economic advisers, gregory mankiw and glenn hubbard. apple earnings, another record, and cash pile is growing, asking questions on keeping the winning

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a big night in boulder, the countdown is on, your money, your vote. breaking it down with two former white house economic advisers, greg mankiw and glenn hubbard. >> adding more places to buy a chrysler? ceo mike jackson is here to talk results, the car buying experience, and the state of the auto industry straight ahead. all that, plus, iphone sales driving profits for apple, but can the company keep its growth streak alive? we'll go inside the numbers, talk slowing ipad sales, apple's big pile of cash, and the holiday season, the final hour of "squawk box" begins 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. we are first in business worldwide. i'm michelle caruso-cabrera

along with scott and andrew, and we are less than 90 minutes away from the opening bell in wall street, and futures now suggest a positive open, dow would open up 43. europe this morning, ahead of the fed's decision today, all the markets higher across the board there, athens higher by more than 1% for old time's sake, andrew. the fed set to conclude the two-day policy meeting with a statement at 2:00 p.m. eastern time. they are expected to keep rates steady, but they might give clues to the teemiiming of a ra hike, maybe, and rite aid bought in a all cash transaction. focus on whether regulators let the second and third biggest drugstore chain combine and sell anything to make it happen? the house could vote as early as today on a new budget deal negotiated by outgoing house speaker john boehner, and that raises the government's debt

limit. andrew, stocks this morning, apple beating estimates top and bottom lines with iphone sales ngzing over a year ago, but apple did give somewhat conservative guidance in the current quarter. the ceo is joining us with more on the results. the shares jumped on two pieces of positive news. the defense contractor beat street estimates with its latest earnings and won an air force bomber contract that could be worth up to $80 million. >> squaring off in boulder, colorado, the prep work almost dope, and we are ready to go, and we are in boulder with what to expect in tonight's debate. hello, again. >> yeah, hi, michelle. the prep work almost done, working a little here. while we wait for the action to heat up here, here's a tour of the spin room here, the cmbc broadcast set, where we have a bunch of shows coming from you the rest of the day and evening. the guys are there, just setting up, preparing to make sure the

angles are working, all the important stuff. over here, we got live broadcast positions. say hello to cnbc's carl quintanilla preparing for a live shot there. there's a wall to wall group of phone booth sized broadcast positions. this is wall to wall live broadcasting this evening, empty now, but print reporters and tv producers here. this 1 the press file area where they write stories hitting the front pages tomorrow. what's fascinating about the spin room today is spin rooms debate back to the 19 8 o80s or earlier where they come where the debate is over with and try to make the argument that their guy won the debate. that was shaping the headlines. today, though, spin rooms are outdated in the sense that a lot of spinning happened during the debate on twitter, facebook, snapchat, social media. the campaigns live tweet trying

to make the argument to get attention of reporters in the room and producers in the room, making the case their guy wins the debate during the debate. the spin never ends now although we have the official spin room, the spinning goes on in cyberspace in the debate, guys. we'll be here after as well. >> it's going to be great, thank you for the preview. >> okay. joining us now to talk all about it and make sense of what happens tonight or what needs to happen tonight, economics professor, a former adviser for chairman. your a jeb bush man, i think? >> i like bush as well as other candidates. i think rubio's very strong and kazic is strong. i think there's a very strong republican field here. a lot of very good candidates. bad news, i don't think any two leading candidates fall in the category of being strong. >> that's the question. what do you think jeb bush would

have to do tonight from either a substantive matter or in entertainment matter to get the attention of the nomination? >> well, i think the entertainment is the problem. i think we've been too much focused on entertainment on the performance art of politics, and not enough on the policy. this is a typical trump speech, nothing about policy there. he doesn't talk policy but talks about himself. that's intertaping too, but don't choose a president on the basis of who is a good intertaper. who knows policy? who can lead the nation in the right direction? i think there's several strong candidates to do that, but i don't think donald trump is one of them. >> who is the greatest risk here of losing this evening from the substantive stand point? >> well, the whole republican party, actually. i think if we -- if the republican party nominates, say, trump or carson or who i have a lot of respect for as an individual, but not as strong as a presidential candidate, i

think if we nominate one of those, we lose to hillary clinton, and so i think the anger in the republican party may end up doing themselves in. the people are app gri and don't like establishment republicans like hillary clinton less. >> i wonder about that. i said earlier, you know, i don't know if it's wishful thinking. we're in the dating stage, right? nobody has to marry any of the people, trump is fun to watch. carson is so interesting, but,me but,mentally, when people have to choose, i don't think -- i'm not convinced either one makes it all the way to the end, but, you know, look at the poll numbers. we've been wrong before. >> to choose someone for dinner with, it would be ben carson, humble, smart, open minded, but he has a lot to learn as a statesman, as a policymaker. >> and trump would be fun at dinner, no doubt. >> start small, like the senate before he goes on to the

presidency. i think he's a man of potential. you don't want potential. you want experience and knowledge of the policy issues, which are complicated and broad. i think we have several people who could do that, but i'm afraid that ben carson or trump are not one of them. >> greg, along the lines of what andrew was getting at, you got to bring it tonight. this is a conversation that is going to be driven around economic vision. you have to articulate what your real positions are on growing the economy, et cetera, et cetera. who do you think of all those in the feel tonight is most at risk of being caught with ideas that just are not up to snuff? >> well, you know, i think -- i think a lot of the candidates really have sort of avoided ideas. you know, when trump put out his tax plan, oh, do what bush does times five. makes sense then, but doesn't make sense.

similarly, ben carson, talking about tithing, let's get to a nice reference to the bible and so on, but if you look at so% of income, two pings, poor pays more in taxes than now, and, secondly, we are not raising the revenue to cover government because government is 20% of income. you really want to shrink government by half? neither of the things seem applausele. there's nothing -- there's no there there. i think there are reasonable plans coming out from several of the other candidates. bush tax plan that glenn hubbard designed. there's a lot of good plans out there. i think voters should look. is this rhetoric? is this performance art? are there smart policies behind the words? >> jim paulson, i think we do need sub staps. we need someone that sells sub staps. you know, we need entertainment

value. what trump has been able to do is define the issue that's going to be talked about by the media, and if someone can -- i think someone can beat him on something, but someone needs to be able to sell it and make that the issue he has to respond to and show he's not up to the task. curious what you think. >> no, i think that's exactly right. in terms of compelling television, trump is number one. he's fascinating to watch, even when i disagree with him, just absolutely fascinating the watch. the question is who is the best salesman in the end of the day? the end of the day it comes down to the an outside figure, carson or trump, versus an inside figure, you know, jeb or marco rubio. if i have to bet a dollar, i bet at the end of the day, it's going to be rubio versus carson, and we'll eventually go with rubio just because people realize carson's a compelling person and really a person you can respect, but he's thin on the knowledge of the issues. >> greg, and --

>> i think rubio's the person to sell the message, the establishment message the best. >> one name not mentioned who is actually a great seller is carly fiorina. she's done very well in the debates over time, and you would think on a night like tonight where economics and business are the subject, she would really shine. why have we not. talking about her as much in the past two and a half weeks? >> i'm guessing the stories about her tenure at hp affected her. she was not -- she's a great sales woman, and she does a great job of message, and her messages are substantive, actually, unlike the other outsiders. he has a message. i think the personal history, she's not been as much a success as she has you believe. you want someone with a track railroad of success in a past life. >> trump is the one that put that issue out there about carly fiorina. he's the one that -- >> well -- >> and where she got in life. >> and jeff has written about it

on multiple occasions too. that narrative's been out there. >> trump just championed it, i think. i think he did. >> she needs to do better, right? listen, running a computer company at that time was like running a financial constitution in 2008 or twine. we were still standing when it was said and done. >> be from minnesota, when we think trump can't win, carson can't win, jesse ventura one, two stereotypical, and we went with jesse. it could happen. >> leaving the conversation there. greg, thank you. >> my pleasure, thank you very much. >> we'll all watch tonight. coming up, apple profits feuele by the iphone, but can it keep the growth alive? we'll ask top tech analysts after the break, and, later, auto nation's results out a short time ago, announcing another deal to expand its dealership portfolio.

mike jackson will be here and "squawk box" will be right back.

welcome back to "squawk

box." mondelez, one cents above estimates, and the company will continue to aggressively cut costs to deal with volatile and challenging economic conditions. looks like it's at or reapproaching the new 52-week high. >> they have oreos, right? >> i had birthday cake oreos yesterday. >> brownie batter ones. crazy. i love an oreo. >> yeah, i mean, wow. [ laughter ] apple profits soar, the giant reports earnings, and they continue to pricey iphones, apple sold 48 million last quarter, 22% more than it sol in the same period last year. joinings now is ubs managing director and it manager. the stock is not doing much after earnings. how would you assess, not only the quarter, but the look ahead?

>> yeah. i think it was quite good. the quarter was better than the street expected, but there were issues in the quarter. win was china. the slow down in china, affect apple? it did not, up 87%, and the rest of the market was down. they are gaining share. the other issue was december quarter, tough comparison year over year, and tim cook came out and explicitly said iphone units would be up. the third issue is march. there's been apple supply chain noise recently, questions about the march quarter, did not address it, but sounded confident. i felt good about it. >> you're as confident as they are? you're referring to, what, dialogue sent me a couple days ago, an earnings miss that not only sent that stock in tail spin, but apple down 3.5% that day. regardless of what tim cook says, you're comfortable with the supply chain and where things look to be? >> reasonably so. it's something to watch. there's dialogue in a another company week, and they were

strong, fair amount of apple business, so we're going to have toe see how it plays out, but there's chinese new year in the march quarter, and issue obviously, china's 70% of the company's profit growth. as china goes, so goes apple. >> new year is good or bad for it because? people buy more at that point? >> yeah. basically, there's a lot of gift, and, exactly. >> the growth rate going forward, people are so concerned that large numbers already, you had a monster comp to be up against. i mean, what if you get single digit sales growth? is that good enough to pay for it at this point? what if you get a decline in iphone sales at some point? >> yeah. that's why apple does not act like amazon and google in terms of breaking out herement there's concern about size of company and, okay, maybe the next quarter's fine, but what's the quarter after that look like? look, i would point out that we do see positive revenue growth, and the company's getting hit 7 points by currency. you really, at some point, add that back in.

we believe earnings grow double digit, buying back stock every year. i feel good about downside protection. upside is tougher to call because you don't have big new products that are going to affect the top line. it's about the iphone. >> it's a show me story now it feels like than it's been in some time. that's why amson and google, as you mentioned, why apple did not react post earnings like those stocks did, soaring higher. there's skepticism around the growth story and it's one of your competitors on the street suggested yesterday, the best days could be behind apple with growth. ? the growth rate, obviously, has to slow this year, and decelerating growth is not good. couple things. first of all, only a third upgraded, and we have a long way to go. sec, new customers would be the other source of revenue, and 30% of the shipments went to android switchers, the high. the near term momentum continues

to be grood. >> why -- you brought up to the number, and 70% of people have 5s or older. why are they waiting? economic conditions? 6 just not as good as they want yet? not enough of a leap forward? what's the deal? >> i think the big screen phone is a big leap forward, and you were also missing people upgrading to the 5s, particularly in emerging country, they do not start out with the 6, but i think it's just there's a more consistent pattern to the upgrade than people think. okay, big new product, everybody moves. that's not the way it works. people are just coming off to the contracts. this gets to the point that apple could be more of an annuity than people give it credit for, which helps it over time. >> especially with the new pricing model, no, the automatic upgrades and more consistent turnover at some point. >> that's right. installment plans, not just from

apple but the carriers send people to upgrade every year, helping sale, but gets them on a subscription plan. >> somebody who buys and sells stock, times are great for apple, the market never gave it a big multiple. why do you think that is? >> well, i think we're just in the sheer size of this thing, and you are reminded of the ibms, reminds you of some of the others in the world, how close are they to the mature part of the cycle? i, you know, i think tim cook taking over adds to that idea. they got to continue to be as innovative as they have been. i don't know. that's where i am when i look at that. just how penetrated they already are. you know, already. and in china, i wonder, you know, did they do well with, you know, did they avoid chinese slow downs because they are still penetrating the market, covering tit up, or is that pas

too now? that's concerning to me. >> china is a large percentage of the business, will be the largest company, and at the same time, though, the 4government's exhibit -- 4g is only a little pep traited there. historically, we have a chart that shows, you know, every 10-15 years the leadership in tech dramatically changes, and only company among the top 15 market caps in tech in decades is ibm who almost was out of business in 1982. >> glad you brought that up. you cover that as well, yes? >> yes. >> the company said yes in august it learned of an sec probe. number one, why didn't we learn about it in august, and is that material to have known about it, number one, and number two, what's it mean for the stock that's already been under fairly good pressure? >> it's hard to know what it

means. there's no detail around how big is the investigation, significant part of revenue. a year or two ago, there was investigation into cloud accounting. never heard about. that quite often investigations die, and the sec does not say we're closing the case. you just never hear about it. i'm inclined it's not a big deal. what's a big deal is the change in the industry, and ib's getting a third of the revenue from so-called strategic imperatives, two-thirds is legacy. we don't see the lines crossing until 2017, so we believe 2016 is another difficult transition year for the stock, too early to buy ibm. >> the company announced a bigger buyback yesterday and stock is down. is that a statement that investors are tired of what some call financial engineering? >> to some degree. this reflects free cash flow now. they announced a authorization. last year, five, year before was ten. they really cut back substantially. they are now investing in the business, the right thing to do,

people like that, but it's late. they are clearly behind the competitors. >> jim, ibm in your portfolio? you had to have looked at it? >> no doubt about that. >> strong thoughts on it? wait and see? >> i'm not a big fans. >> okay. simple. all right. thanks, steve, thanks for coming in. >> thanks for having me. >> paul's going to stick around. >> all right. >> you can stay. ? epic start to the world series, 14 inings and, yeah, a power outage. if you watched last night, oh, details after the break. check out the futures at this hour as well, suggesting higher openings ahead of the fed meeting later on today.

chaos in the fall classic between the kansas city royals and new york mets. fox sports had an electronic failure due to a power outage causing a delay in the game during the fourth inning, but little did everyone know, the game goes on for another ten innings. the game starts. take a look at this. a rare inside the park home run, the royals up early in the gaem. mets come back, lead until 9th, royals tie it, win in the 14th inning on a sack fly. 5-4, kansas city the final, game two tonight.

mets pitched matt harvey, didn't get the w, but game two tonight, a chance to get one back. when we come back, countdown is on for the debate. covering the issues that matter most to your money, taxes, the economy, global risks, asking former advisers chairman glenn hubbard what he expectings to hear tonight. we'll be right back.

all right, welcome back. catching up on earnings reports that came out this morning. hilton worldwide matched street forecasts with earnings of 23 cents a share. the hotel chape raised it full year outlook saying demand is especially strong in the u.s. market. hershey beat estimates baa says sales in the u.s. weaker than expected, and results have been impacted by the stronger dollar. boston scientific beat estimates by a penny with quarterly profit of 4 cents a share, and revenue

above consensus, although current quarter guidance is not the medical device maker said it's benefitting from new product introdoouxs. michelle? >> day two of the fed meeting, a statement not expected this afternoon after the announcement, chatter about when the fed raises rates will be on the tip of the tongue for investors. steve leisman has the inside look at the debate going on, not just the one on cnbc, but going on inside the fed. steve? >> reporter: that other debate, michelle. the idea discussed inside the fed not talked about much is this, should the fed raise rates to remove quote-on-quote emergency rate levels? an idea put forward on our air firsting and it's now also debated inside the federal reserve. this month, the federal president said, quote, the committee's goals have essentially been met. the policy settings are at

levels. this idea of removing emergency cuts is something fed leadership finds compelling. could they finesse, sell to the markets as not a taight ping, bt a limited removal to get rid of the emergency levels? 5% up employment. 2% growth. may argue for lower rate, but not the lowest rates in history end acted to respond to the financial crisis. here's the other side of the story. the argument against this is is this. first, how much of the current level is mremergency cuts? in other words, what's the interest rate? some see 1%, others as high as %. if rates are so unnaturally low, why isn't the economy booming? why is inflation so low? the fed would expect to see really or higher inflation if rates were so out of whack. idea of removing these funding levels like former fed governor

wrote yesterday in the wall street journal saying low rates in qe itself holding back the economy, reallocating, share of buybacks, and steering away from investments. this is app idea rejected, though they like the idea of considering or possibly characterizing future rate hikes as removing emergency levels. michelle? >> all right, republicans are gearing up for tonight's much anticipated debate, airing live on cnbc. joining us to talk about fiscal policy, the fed looking at the candidate's economic plans, the dean of business school and we'll talk about the debate, but, first, glenn, steve has a question for you related to the fed, steve? >> yeah. gle glenn, the idea, you and i until the cows come home, could debate this, 200 years in the economic economy, the right, natural rate of interest, going back to the

sweden economists, but we'd bore everybody. could the fed remove emergency funding and really finesse the idea of a couple rate hikes to get it back to a natural level in. >> no question in my mind, steve, that's what the fed should be doing. the economy is on life support. early next year, below 5% unemployment and close to 2% inflation. there's no reason if it. i don't expect the fed to do that right now. that's what they should do. >> you advise jeb bush, stepping it up? >> i think governor bush and candidates have the opportunity to talk about the economy tonight. we need to have a debate over whether we can grow fast ere. we talk about the fed, what we need is faster growth, better government policy. i hope that is center stage tonight. >> still, i mean, what was presumed to be the leading candidate, right, jeb bush was hillary clinton of the right,

and at this point, that narrative is not working out. changes in strategy at this point in order to breakthrough? tonight make or break do you think? >> well, i'm not a political person, but what i can say for governor bush is i expect him to talk very strongly about the need for faster growth and what it takes to get there, and tax policy and regulatory policy, frankly, some of the candidates in the race present economic flimflam to the american people, and tonight is a chance to expose that. >> who has the greatest opportunity, glenn, to go ahead and do that, given what the subject matter is going to focus on heavily? >> well, i think governor bush has a great opportunity that's right in his wheel house. i would also say governor kaiz kazic, rubio, serious economic ideas out there to talk about, and then there's flimflam. tonight is a chance to mix it up. >> get substance on the table, see what the actual, you know, plans are all about. what -- >> well, i hope so because we

actually have some candidates out there that have proposals that reduce gdp growth. >> like who? >> donald trump is in that category. this simply dangerous. >> how would he reduce gdp? >> i think the combination of his immigration policy, his trade policy, his cavalier notion on entitlements, a tax plan that's unrealistic. on and on and on. it's not serious. >> why does the american public run him so much now? he polls well with people you don't expect, women, for example, and he's captured the imagination. why? >> again, i'm not a political person, but we have to have a serious debate over whether we're stuck at 2% or grow faster? we will not do that without the policies that donald policies suggested. >> what about the idea whether the fed has too much power, the

fed's been politicized over the last couple years. what cop text do you think that has tonight if the discussion goes there? who is likely to be most critical of the fed or perhaps most supportive? >> i think the real discussion about the fed among the presidential candidates ought to be, are we asking too much of the fed? we had the government sitting on its hands, and candidates can say what they would do. the fetd entered the field of financial regulation. that will come up tonight, but the real issue for the fed is we're asking too much of the chair and colleagues. it's time for a government policy. we have to hear about that tonight. >> are you concerned hearing fed bashing at this point? >> well, i don't think fed bashing is the right answer. i think we're just asking too much of the federal reserve. i think the fed is doing what they think is right. i disagree with that policy, but i don't deny they do what they they is right. we have to have a better government policy, and i hope we

have more than broad jep r generalities tonight because the candidates have interesting ideas. >> steve, was that you? >> yeah. glenn, as you know, the growth rates are really tied to productivity, and i'm wondering, which particular policies of governor bush lead directly to higher productivity in the economy? >> well, that's a great question. there's two that come to mine, tax reform and regulatory reform. most of the gapes from tax reform come through productivity. they give you a chance to reallocate capital, make the economy more efficient, and likewise with regulatory reform, stop the taxes on investment that are occurring with bad economic regulation. that's why cap dats tonight, and i think governor bush led here, but all the candidates have to talk about the issues instead of -- >> broad generalities. >> glenn, democrats and republicans both agree on a lower corporate tax rate and agree on corporate tax reform. getting rid of loopholes, but

nobody's. able to do it. why would governor bush be able to get through what is -- how is his plan different from the one republicans to coalesced around, which is not far from the one democrats coalesced around. >> problem, steve, is doing corporate only reform. more than half of americans working in the private sector work for noncorporate business. the reason we don't have tax reform is the president has said he's not touching individual marginal rates. we will not have corporate only tax reform. that's a fool's error. we need general fax reform, and governor bushments that. >> it's a big day. >> for sure. >> thank you, steve. thank you, glenn. >> all right, guys, when we come back, the nation's largest auto maker expanding its dealership portfolio again. auto nation doing more than a billion dollars worth of deals this year alone. hear about the company's quarterly results and why more chrysler dealerships helps the company's growth prospects. mike jackson here with the head

of sales and alpha romeo. we'll be right back.

auto nation quarterly results out, matching estimates for the latest quarter. the nation's largest auto dealer announcing another chrysler d l dealership acquisition. inquisitive year for the auto dealer, spending $1.7 billion on

acquisitio acquisitions, and joining us now is mike jackson, chairman and ceo of auto nation, and reid bigland is here, ahead of sales of alpha romeo, chrysler usa. great to have you. tell us about the quarter, strength is from what? >> an all-time best quarter for the company, so we're thrilled to do that, earnings per share of 1.05, up 17%, driven by revenue of 4.5 billion, strength in all business types, and even texas, business there is holding strong, despite all the difficulties in oil, so just an outstanding quarter for the company, and consumers embrace the brand and digital effort, generating 25% of the business, and industry first in the quarter, where we announce that a new policy that we will not retail or sell any vehicle with an open recall. >> do you have anything left?

felt like for months there were millions and millions of cars recalled to the point americans don't care anymore. how much does that impact your business? >> oh, you better care about recalls. i think the industry has to get its act together around recalls. we want to do our part. i think the idea that you can sell consumer vehicles with open recalls is not very consumer friendly. >> taking them off -- >> well, it's disruptive, michelle, no question in the short term. >> 2%, 10%? >> 15% of the used vehicles have open e recarecalls. >> higher margin? >> percentage basis higher margin, so in the short term, it's disruptive, but we are billing systems to identify systems quickly and put in place a logistic plan to get them repaired, and no competitor followed us. again, that builds the brand, auto nation. we are different than everyone. we put the customer and customer safety first. >> how is it short term

disruptive and not continuously disruptive? cars are recalled all the time. >> it's app on going issue, but we build the system to get the vehicles repaired quickly. we'll increase inventory because a certain percentage of inventory is tied up in recall and cost of money is not that much ma you can increase your invenn tore to offset percentage that's now tied up. >> tell me about the decision to buy more -- did you have a question, sorry. >> dying to ask a question. >> i am. >> curious, you are doing so well, auto sales at record setting high, all time, over 18 million, and you're always doing well, seems like to me, and yet there's this conversation that's in the country about how weak we are. i just -- how -- how are we doing so well in the automobile industry and against this backdrop of somehow we're weak and the country can't raise rates off 0? >> so, jim, first, we are bouncing from a depression in

autos, 2008, 2009, 2010. there was a drop in the bucket. that took the average age to 11.5 years car on the road. pinned up need. we're not selling at 18 million. we'll be over. >> 17 million. >> pretty strong. >> strong. >> what is this new deal that you guys have done for people here? >> auto nation is a first rate organization with great leadership with mike and the entire team, and they are exp d expanding with chrysler, an additional six stores in the u.s. to bring the total stores to 30, and they've been a great partner of ours, a key factor in the growth over the last five years in particular, and we're looking forward to growing with them here in the future. >> just to be clear on the numbers from the promotion, we acquired revenue so far this year of 1.7 billion, of which over 1 billion is with my good

friend, reid, chrysler, dodge, ram, jeep. >> tell me about the process of buying more dealerships. first, they carry cars people want to buy, correct? >> that's step one, very good. >> but beyond that -- >> we're not doing yugo. i can tell you that. >> right. >> we look for a strategic fit and cultural fit. it's in the footprint in texas. as we build the brand, we have more density in a market, we increase the marketing around the name, auto nation, so that's a double impact there. we look for business that's a fit, and those we acquire has a value system close to -- integrating those exceptional associates in the business is not difficult, and we put in our systems and technology. >> is there a financial arbitrage? you're so large, do you get

better borrowing rates than other companies? >> no question we have leverage. the business is more valuable to us than anyone else. >> can i ask you -- >> both the brand and financial leverage. >> because of your growth strategy, do you feel you're at risk of being too inquiztive? there's questions about other companies and different businesses, the word rollup has a negative connotation to it. do you feel like you can do too many acquisitions? dangerous to the business? >> i've. at this 16 years, look at my track record. we're very disciplined. every hundred deals that we seriously are at the negotiating table, we do ten. so 10% we actually sign an agreement to get to the finish line. also, speaking of arbitrage, whenever we're out of favor with investors, we aggressively buy stock. we repurchased 80% of the outstanding shares in 16 years and average price of just over

16 a share, now trading at 60. that's the right way to do share repurchase. you pick partners like reid, my good friend and there are those not as confident about the future of chrysler as i am. so there's a gap there that i have a point of view different than maybe someone else, and we take advantage of it, and reid just led a meeting we had in vegas showing the product port folio folio. >> we had a meeting in vegas, dealers from around the world, products we bring to market in two to three years. great turnout. we got a tremendous amount of moe men tum behind us because of mike. we have year over year sales growth, picking up more incremental units this year than any of the other manufacturers that we compete against. >> is this a jeep driven thing? >> chrysler, dodge, jeep, ram,

the jeep brand on fire, doing phenomenally well, not just here in the united states, but around the world. and you're going to see that in europe as well as we are back to double digit sales growth in the european region, thanks a lot european region thanks to the expansion of the jeep brand. >> what will you do when manufacturing picks up? >> i can't comment on all segments, as we were talking about in the auto industry, at 17.8 million, that's the strongest vehicle sales in 15 years. low interest rates, low oil -- >> tell us about drive pink. >> that the another brand attribute. we're behind the effort to beat cancer, our fall campaign is drive pink to raise awareness for breast cancer and to raise millions of dollars for breast cancer research. >> glad we got that in. >> thanks, mike. >> ladies get a nice, pink bracelet, as you can see. when we return, market thoughts from jim paulson.

here are the futures. they suggest a positive open. we have the fed later on today. let's see what happens. 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.

tonight on cnbc, the battle

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all right. we're back with one last look at stocks on the move. diamond foods being bought by rival snyder's in a $1.3 billion cash and stock deal. health insurer anthem is one of the winners this morning. anthem earned 2.73 a share for the third quarter, that beat by 40 cents. it was helped by increased enrollment in its commercial and government segments. and twitter is under pressure. investors focusing on a tepid current forecast and weak user growth. >> let's talk to jim paulson here. how do you feel about the market at this point? you haven't been that excited. >> it's certainly a strong rally. looks like that correction is over. >> surprised by the rally? >> i think i'm surprised it broke out the top. i thought it might go down and rechallenge.

i don't know if we're done. we're back up here close to highs. we have not solved what i thought brought about it in the first place, the same valuation we were, we have not set interest rates, we have a mature earnings cycle showing signs of stress. we bathed sentiment a bit. outside of that, i don't see if we -- i think we're struggling to find a growth rate that's supportable for the stock market. we could go too fast or too slow now that we're at full employment. >> are you still worried about a retest of the lows? are you suggesting we have this grind, that flat line that we've had for so long? >> i think you could have a more violent reaction at some point. that might come about if we do get wage numbers, inflation numbers picking up forcing the fed's hand in a more panicky exit. the other alternative is a year of nothingness as earnings catch up and we get to a multiple level that can handle higher

interest rates. >> did we overreact to china a bit? >> i don't think china and commodity prices were the thing that brought us down. i think it was other challenges, overvaluation, resetting rates, losing the fed friend. >> overvaluation plays directly into if you have a belief that -- that the china economy is slowing down more dramatically than people think. it's having a ripple into emerging markets that will cut into earnings for u.s. corporations. the multiple of the market has to come in as a result. they're all tied together. >> that's more the earnings side of the equation than the multiple side. the multiple side is about interest rates and the level of inflation. if we can keep rates at zero and inflation at zero, we can start trading at 19, 20 earnings. >> great to have you here dote. you're going to watch tonights right? >> i sure am. >> join us tomorrow. and tonight, watch the gop presidential debate right here on cnbc, coverage begins at 5:00

p.m. eastern time. >> a good look into apple all day long today. twitter is going to be followed, maybe more ibm fallout and we'll see how that plays into the way the market trades as the futures going into the day look decent. >> you know where they'll talk about that? >> tonight. >> no, next. >> "squawk on the street..stree" . >> don't move. good morning, welcome to "squawk on the street," i'm david faber along with simon hobbs, sara eisen, carl quintanilla and jim cramer have -- what are they doing? preparing for that big debate. the republican presidential debate on cnbc, live from the university of colorado boulder, coverage begins at 5:00 p.m. eastern. we'll take you out to boulder momentarily. we're at post nine where at this time we always give you a look at futures. so let's do that