barron's. pg could be worth $90 a share if it was broken up compared to friday's closing price of $76 a share. it's a 100-year-old company. because a magazine writes it, they should be broken up. >> probably not. >> michelle, thanks for being here. that does it for us today. join us tomorrow. right now it's time for "squawk on the street." good morning. welcome to "squawk on the street," i'm david faber along with jim cramer. we're life from the new york stock exchange. carl quintanilla hat day off. let's look at futures as we look at this holiday shortened week. you can see a bit of a down open in store for us. we'll be watching it as we get closer to the open. how are european markets faring? let's show you. you can get a sense perhaps and gauge how they're doing and how we may do here, there's no

guarantee there's follow-through. it's sort of a down day. nothing of great consequence at this point. ten-year note yield slowly moving higher as we get close to the likelihood that the fed will raise 25 basis points in mid-december. crude came back a bit on headlines. >> more joke headlines. >> let's get to our road map. it starts with that mega pharma deal. pfizer and allergan getting together. $160 billion is what allergan is worth. the new york-based giant relocating to ireland, at least for tax jurisdiction. we'll speak with both ceos of allergan and pfizer in an exclusive interview in this hour. brussels remains under the highest terror alert as french president francois hollande is expected to sit down with president obama tomorrow to discuss strategy for combating isis. and chipotle continues its fall. e. coli outbreak spreading,

linking illnesses in six states including california and new york. want to start with the mega deal. one of the biggest of all time creating the most powerful pharma company. pfizer and allergan getting together would create the world's biggest pharmaceutical company. allergan deals at 363, pfizer down 2.5%. it's 11.3 shares for each allergan share. the overall value around $160 billion. we told you last week it would be a little over 11 shares, it is, 11.3. the merged entity for each of the allergan shares. pfizer stockholder also get one share of the combined company for each of their shares. 11.3 for allergan. it's structured it's a allergan buying pfizer. so it's not technically even an inversion. of course, allergan shareholders will own 44% of the company, pfizer shareholders the rest.

ian read and brent saunders will be our guests in this hour of "squawk on the street." the conference call ongoing right now, jim. i believe they're just heading into the q & a. i was listening in. they were still making their opening statements. what do you think the key questions are? >> for those of us who have been huge fans of brent saunders, it's how do we jive the vision of $20 in 2017 with the 20 multiple growing than the fa average pharma, getting to a substantially higher price what does pfizer have in the pipeline to make it look like you want to hit the start? 3.5% yield. it's probably not going down much. that's kind of the floor. you know, we're stuck here with a really fast-growing pharma merging with a company that some people feel has possible for 10% growth. b but -- there are people who

think the inversion scrutiny will be good. i think first of all, congratulations, you had the whole terms right. the terms are clear. there's very little scrutiny this is a can of them saying second half 2016. >> second half, nine months they see getting done. that sounds like a reasonable expectation. it's not even structured as an inversion. >> right. >> the part they want to avoid entirely. as we reported last week with the treasury potential rulemaking that was out thursday evening, this would have qualified or gotten under the -- gotten past everything with the 44/56 split it has. so, it will be very much -- there may be more of a spread. people will still be concerned. but it is not that as much as it seems to be in the allergan shareholders i have spoken with, why, why now? if you're able to achieve potentially the same stock price by the time this deal closes based on what we think you would earn, based on the proceeds coming from the teva deal, based on the fact your balance sheet

would be unlevered and you would have a lot of capacity -- >> to the buy. >> to pursue deals, why are you doing that? brent, we're giving you a heads up. we'll put that question to you. >> i wanted brent saunders to consolidate, buy some biotechs, they're down on their luck. the price they're talking about, the beginning price that was controlled by valeant and the decline by the acquiring drug companies. pfizer itself, there's a reason why pfizer has been flat-lined, that's because of the patent cliff. they don't have much of a patent cliff after this. other than lyrica, there's hope with the vaccine business. >> we talk about a company that will have $9 billion in r & d spending, by far the largest single pharmaceutical company, have 150 plus programs in development, be in well over 100 countries. you know, it's going to be a powerhouse.

>> yeah. >> i don't know that size dictates success. >> as carl icahn is saying with aig, that some companies are too big to succeed. i look at this and say, you have to hold it. my travel trust will hold it for a year. we own allergan, we have total faith in brent, we'll just hold it. we'll hold it. the cash flow. >> right. don't forget pfizer is going to get access to that overseas cash, whether inversion or not, the reason they're doing this is not necessarily to lower the tax rate which is 25%, it is much more so to access the tens of billions in overseas cash they have. that may end up coming back here, not just in the form of increased r & d spending, but in dividends. >> you will get a yield here. we will get brent running the company saying in 18 months. i come back to saying i believe in the brent vision.

then we go after amgen. then we really capitalize the way we capitalized over and over again. this is a circuitous way to getting to where i hoped brent was getting to i think brent is a genius. >> he will be the number two man running the businesses, conceivably taking over as ceo within a couple years. similar situation that we saw with jamie dimon and mr. harrison. >> that worked. that's a good one. that worked. >> it did. >> i liked that. where did you come up with that? >> you know, there's a lot in there. it's a matter of accessing it. >> i was going to go marty sullivan versus ben bochet. >> speaking of aig -- >> ben, who i miss very much. he had another style that was different. >> would have been good to see him take on icahn. we'll get to aig and icahn. first to brussels, security forces in belgium carrying out

numerous raids overnight. julia chatterly is in brussels and brings us the latest. >> some dramatic scenes over the last 24 hours. as you mentioned, 22 raids taking place overnight. an additional seven raids in the early hours of this morning. we've seen 21 suspects under arrest, but really the main focus of these raids was trying to locate one man that was suspected of being part of the paris terrorist attacks, salah abdeslam, he is still at large. the hunt for him is going to continue. clearly what we're seeing in brussels is about more than just one man. we're operating at highest security level possible. and what we heard from authorities in the last 24 hours, too, is that they believe they got precise information that there is an imminent security threat. primarily in multiple locations.

we're talking about a copycat attack, similar to what we saw in paris a week and a half ago. as a result, we have a lockdown on the subway, schools, colleges are all closed today. i'm actually standing in front of the main central train station. that's operating fine. as you can see, what's not normal here is that there's an armored vehicle in front. they popped up all over the city. there's an incredible army presence, military, police presence. to give people a sense of security at an uncertain time. this is in stark contrast to the criticism that we saw of the belgian authorities last week that they weren't doing enough to crack down on the extremists here. i can tell you from the conversations i've had here, people are saying they're going too far. this is too much. so it's a real fine line that the authorities are trying to find here. our sense is that this hunt will continue. they still need to find this man. we expect more raids over the next several hours. guys, back to you. >> thank you very much, julia chatterley. >> just a moment on that you're

seeing the upping of defense budgets around the world. i want to stay focused on the fact when you have money and you want to buy military equipment, it's united states. we used to make it for us. we make it for them. now on to aig. just moments ago we got a new press release from carl icahn with some statements. if you recall, mr. icahn made his first foray at aig back on october 28th. he owns about 42 million shares. little over 42 million shares. he wrote that public letter to the ceo suggesting back then the company was too big to succeed. essentially saying break it up. aig came back forcefully, peter hancock, the company's ceo after earnings joined us on set and went through many reasons why they do not feel that would be a good idea. including the fact that they actually would have to pay more for capital, not less. the ratings that the businesses get, some synergies that do take

place between various units. icahn typically does not go away. he said we met, had a number of conversations with peter hancock, despite that it was abundantly clear to us he's not willing to take the bold steps we and so many other shareholders believe are long overdue. in addition he failed to lay out alternative strategic plan with the potential to unlock value for shareholder or compelling reasons why these businesses belong together. >> well, i mean, look -- aig is listed as one of the companies that has been in a threatening article, more money than any other company. top 15 company in terms of buying back stock. mr. icahn is not happy with that. when i look at the companies that break up in the financial company, there haven't been that

many -- >> let me get to the main point this happened while you and i were talking. he is moving immediately to commence a solicitation that will allow them, the company that is, shareholders, to express views directly to the board. may add a proposal to add a new director. that is aloud under aig's bylaws. i want to find out a bit more in terms of what he can and can't do. he's not waiting for the annual meeting. not waiting for the window in terms of a proxy fight. he's coming with a concensillus solicitation. so the fight has gotten hotter and heavier. >> unlike freeport, this is one where icahn is back. i think aig has done well. most of the insurers, led by travelers and ace chubb have

done good. only hartford has not put up good numbers. could be a win-win. i did not think hancock is doing a bad job. >> no. i'll have more as we go along. see what aig has to say. want to learn more about how you -- what you can do in terms of written consent at aig. coming up, the ceos of pfizer and allergan on their $160 billion deal. that's the biggest of a huge year so far for m&a. we'll give you another look at futures. i will have more on activism, jim. >> really? >> coming up after the break. a new activist situation. >> i want to be surprised positively. i was at the eagles game yesterday. when a wildfire raged through elkhorn ranch, the sudden loss of pasture became a serious problem for a family business. faced with horses that needed feeding and a texas drought that sent hay prices soaring, the owners had to act fast.

thankfully, mary miller banks with chase for business. and with greater financial clarity and a relationship built for the unexpected, she could control her cash flow, and keep the ranch running. chase for business. so you can own it.

. welcome back. last -- moments ago, we told you about carl icahn increasing the tension between himself and aig. about to launch a consensilus situation. a new one now about alcoa.

taking a 6.e inine ining elliot take stake in alcoa, taking issue with management's ability to deliver margins and the belief that alcoa can deliver as much as a 700 basis point improvement in margins in the val value ad business. the company was to be split in two on september 28th. they believe that elliott, based on the experts that they consulted, that there is a real opportunity for margin improvement there. they are also pushing alcoa to potentially sell power generation -- >> they have assets. >> hydro power. that is the focus of their investment. they think the split itself

worth $15 a share. they also bloelieve if you get e improvements in the aerospace business, you can get to 21 bucks a share. act on the power generation, as high as $26 a share. we'll see. also a 13f filing last week. >> kleinfeld has been fed up with the stock price and controlled entirely by what's driving down iron ore, tin, nickel, copper. this is perceived as a chinese dumping play. kleinfeld said the world may be in deficit a bit, but china -- the lowest ever. so, i think that -- kleinfeld would like to agree with these gentlemen. >> right. >> i don't think it's that hard. do they think kleinfeld can't get it done? >> i don't believe they do.

what i understand is they had conversations. this will be detailed in the 13d with management that they would construct thus far in terms of whether or not they can get it. this does not appear at this point to be testy at all. >> okay. >> given they support the current strategy to split the company. however these things always evolve and can evolve. elliott certainly can be a significant foe for some managements. that does not appear to be the case here. their track record when it comes to activism has been interesting. technology names they have gotten in. they gotten sales done, not at great premiums. you and i talked about their activity in hess where they ended up winning a proxy fight. but losing the war, some would argue. >> that's -- unfortunately, i would tell you that alcoa at 8 and change is valuing the i aluminum portion at zero.

if you look at bhp, rio, valet, mo, larry and shemp, total respect that i gave them. >> great talents. >> with all due respect, every one of those kinds of shows, what i come back is claus kleinfeld is getting no credit because people feel china is off a cliff and people will keep pumping out aluminum. i think kleinfeld took this action ahead when others might want do it. you don't want timkin steel situation a disaster. >> having split the company. they did what they wanted and then what happened? commodity prices -- >> steel has fallen off a cliff. aluminum holds in better than the others, not much. david, this is a frightening, if you are in the commodities business, it is coming at a time -- >> did you see copper prices?

>> was a time when turkish merchants used to be at big landfills. i know this. i was at one. they would try to grab copper at a huge price. copper is like brass. >> throw it away. >> maybe worse than brass. i don't know. >> we'll keep a close eye on shares of alcoa. he didn't know anything about that. didn't say a word to him, he was able to come up with that. that's why he does the "mad dash" and that's coming up. (trader vo) i search. i research. i dig. and dig some more. because, for me, the challenge of the search... is almost as exciting as the thrill of the find. (announcer) at scottrade, we share your passion for trading. that's why we rebuilt scottrade elite from the ground up - including a proprietary momentum indicator that makes researching sectors and industries even easier. because at scottrade, our passion is to power yours.

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all right. it's a monday. we do have that "mad dash." about six minutes before the opening bell. where are we headed? >> people are turning on chipotle. merrill goes buy to sell. $7.50 price tag down to 4.70. e. coli issue bigger than we thought. david, you know, we're not used to this. we don't know what to do. >> that doesn't look too bad. >> that's because people are trying to factor in. there's been new states involved. there's clearly a problem. no one is saying there's not a problem. when chipotle gets their arms around it, i think the stock will bounce back. people will be saying this is my opportunity. my problem is that we don't know the duration. we don't know if they have a handle on it. they are -- they are responsible people who will get to the bottom of it.

when they do i think we'll say, wow, that's past them. they built a lot of goodwill. they built a lot of goodwill with users. >> is this the downside of natural and organic? >> that's what everybody is worried about. is this what happens when you don't put preservatives in your food? does it raise the stakes of getting disease? that's why our society went towards canned and processed because we wanted to be away from the idea that for some of these illnesses could happen. we need some clarity on that, too. we would love to know it was a particular batch of x. we're not getting that yet. i think chipotle has to come out of the -- where they are and chipotle people have to start addressing this in a forceful way. not for the stock price. that's meaningless, for the idea that they have a handle on it. if they don't, you come out and say we don't. that's what you do. you don't not put the ifb in.

>> no. >> that's an earpiece. >> no. everybody has to answer questions. that's what we like. we have the opening bell coming up followed by the ceos of pfizer and allergan. they'll have an exclusive interview on cnbc on their very, very, very big deal.

. you're watching cnbc's "squawk on the street," we're live from the financial capital of the world. the opening bell will ring in about 45 seconds. it's something we do when it's just the two of us, when we're missing carl. i ask you what is the key to the market? >> for once, it's no longer valeant. valeant has bottomed. we don't have to worry about that derailing an allergan deal. i would literally say the key to the market may very well be retail and the reaction that we're getting to the cold snap

this weekend, which could turn retail around. let's watch macy's, which has been left for dead, and was packed this weekend. >> you were there. >> of course i was there! >> why wouldn't you have been there. there it s opening bell. at the nyc, ringing the bell at the big board, deluxe corporation, provider of graphic arts and design. celebrating its 100th anniversary. >> they will be on tonight on "mad money." they're far more than a check printing firm. that's why they have a story to tell. >> over at the nasdaq is the softwaremaker, sciquest. celebrating -- >> one would hope. >> if you've been in business 125 years, you learned to change. you're not just printing checks. >> fair. yes. yes. >> god bless. way to go. 100 years. >> wells fargo, not just a

stagecoach company anymore. i looked into that! >> thank you. ibm, not just a typewriter company anymore. >> no. no. >> they're not. the cloud. >> the cloud. >> i read the most frightening story about artificial intelligence in the new yorker this weekend. thinking of watson. we are in deep trouble. >> we are. >> all of us. >> geez, i don't know. i feel sanguine. >> once it gets past a certain level of intelligence, it exceeds ours. machines will be in control. terminator, matrix, we are in trouble. >> i shouldn't be worried about gamestop down six. we're irrelevant anywhere. >> the machines will take over. >> you know who does well in that environment? >> who? >> velveeta. thermonuclear war, velveeta is good. tastes even better. >> so many different names.

let's start with pfizer. importantly you want to keep an eye on shares of -- there's gamestop. down sharply on not great numbers. >> no. no. paul rains -- wow. i know there was rumored he wouldn't do -- a big short position. trying to -- when you try to transform your company and you start being the midwest seller of apple and doing some at&t stuff, you have to get the core right. get the core gaming business right. activism, 55 all the way up. electronic arts up. people would feel that gamestop should be good. those are digital plays. we'll find out more. paul rains, good man, bad stock. >> not doing well. >> not today. >> too early? >> way too early. >> i did -- i was about to mention pfizer keeping an eye on those shares. they are down. you can see it there. a little less than 2%. that will impact the overall

value of the deal. for those of you who may be confused, they're creating a new company. you get one share of new company if you're a pfizer shareholder and you can get cash if you're a pfizer shareholder. that's in part because that deal is not tax-free to pfizer areholders. it's taxable. so there's a cash component for pfizer shareholders. i haven't gotten all the details. the allergan side, getting the premium here, 11.3 shares of pfizer for each share of allergan. there are those asking the simple question, jim, why is that a number that is worth taking, mr. brent saunders, ceo of allergan? why is that a number you feel is appropriate? he made a point on the call that when we started to negotiate this back in the very end of october, pfizer shares were higher. it was worth more. but overall we're getting 44% ownership of the combined company. we -- they don't contribute as

much ebita as 44%. >> that's why. this thing could reverse. if chipotle could reverse just now this could reverse. we need to see an acquirer justify it. pfizer has some great medicines. they do. eloquis is fantastic. the vaccine business is fantastic. there are franchises here that need to -- that -- prevnar, great franchise. ian read focused more than we thought on taxes. >> he has. he's a form er accountant. he's been focused on taxes. >> he should be proud of his pipeline. i said that to him personally. it will be great to speak to him about the pipeline. the pipeline is the reason why brent saunders went with the company. that's the reason. >> and it is quite a pipeline. $9 billion in r&d spending. they were go through many

benefits they see accrue to both sets of shareholders. 2 billion in synergies. >> lowball. >> you will get access to overseas cash if you're pfizer. it's not structured as an inversion, it's structured as allergan being the buyer of that. pfizer will no longer be a u.s.-based company it will move to ireland. >> i'm excited about pfizer's anti-cancer franchise. there's so much for pfizer to talk about. i think that that's what brent understands. brent did have -- this combination that i just loved. botox is up big. botox is not a payer business, it's a you pay business. he did not cut back r & d. i felt he could get there on his own. we have to hear how ian read thinks the vaccine business, the bio similar business. there's a lot there. you're hitching your star to ian read, pfizer. if you're an allergan

shareholder which my travel trust is, i wanted to be turned on by it. that's all. ian read will tell us. if not, brent saunders will tell us. someone will tell us. should add pfizer shares are under pressure in part also because you get some risk -- 4.4 billion shares will be issued. >> a lot of stock. >> so do you have some pressure. >> unless the fed raises 180 basis points. >> 3.55 is the yield. one would expect overtime they will increase that. >> how about the 40 billion coming from teva? >> i don't know. >> buy back stock? we can't buy back stock if we're issuing stock. we? what's this we? i'm searching. >> i'd be curious to mesh sure the impact from a tax/revenue standpoint. we may not be measuring this

inversion properly. if you have overseas cash, you no longer have go through tax planning. it's conceivable that more jobs will be created. i'm certain they'll try to articulate that thought as a result of the deal rather than fewer. therefore you may end up with pfizer playing less in tax, end up with a higher revenue overall being created for the u.s. treasury because it creates more jobs, brings more money back in the form of dividends. who knows. >> frank -- frank, the cfo, we know him for a long time. always been very good at telling the story. i just want the story told. because you -- if you're an allergan shareholderer, you're trying to figure out why not just go and buy cell gene. >> cell gene up today a bit. tiny bit. >> i think the receptos is very undervalued. >> on the activist front, two new developments.

carl icahn deciding to move to a consensus solicitation saying we talked and a half, mr. hancock. we don't think you have interest in splitting the company, we're moving. that stock not doing anything. also as reported earlier, alcoa has a 6% shareholder in elliott, saying we think you can improve margins a lot. they had some meetings with klaus kleinfeld. >> chickens, tyson, delivering some margin improvement. that stock is up. last time disappointing. the commodity players are interesting. chicken prices have held up. why? i don't know. the food stuff business has held up. chipotle held up. >> right. >> short squeeze. >> i should add by the way, elliott on alcoa is supportive of mr. kleinfeld. >> not enough. >> they are supportive of him.

not pushing him to sell the power assets. they see a number of different opportunities for them to potentially monetize some of them or realize more value from them. >> let me explain my confusion with their position. i think klaus kleinfeld has said something on "mad money" leading to that expansion, and trying to explain why the aluminum business is going to be good. maybe because some power costs are so low. they are still on the curve as being not as the cheapest producer. that's going to be hard. a lot going right at alcoa. i think people are stunned if it makes a metal, it goes lower. it doesn't matter. any metal. >> any metal. with that, covering what we covered, let's get over to courtney reagan. we have about 3 1/2 days of trade here this week.

so far muted start to the open. we are seeing pressure across the board on equities, only mildly so we will get existing home sales in about 20 minutes. that may add energy to the market in some sectors that have to do with the interest rate sensitive movers or home builders. more traders and investors starting to believe that the fed is going go ahead and hike rates in december. there's a topic of conversation at my friendsgiving this weekend, also gaining steam here on the floor of the stock exchange. asia, slower, mostly in china. korea and australia seeing movement to the upside. australia equities have be their strongest day in about a month. mixed in europe. they have bigger things on their minds in europe right now other than the markets. commodity stocks are under pressure again today as we have continued fears of the slowing chinese economy. so you're seeing glencore down

almost 3%. and it's black friday week, let the games begin. cal mart coming out of the gate saying we're not waiting for monday to start cybermonday deals, we'll start them on sunday. retail is a big game of one upmanship, so i expect many other retailer also follow suit. retailers marginally higher here. best buy and target higher. best buy starting door buster deals in store, 5:00 p.m. on thursday. i want to talk about gamestop. i know you brought it up earlier, a big miss for this company on earnings. revenue, comps, hardware sales down 20%. new software sales down 9%. the company says, hey, we still expect the same thing we did before for the full year. i guess think think they'll have a strong fourth quarter. david? >> thank you very much. let's go from here to the bond pits. rick santelli joins us from the cme group in chicago.

good morning. >> good morning. interest rates are not much different than they settled on friday. the subtle differences are short-end yields are a bit higher. the long-end yields lower. we're only splitting small amounts here. look at the intraday ten. was higher in yield. has come back as you see. maybe the best way to look at this with a bit more perspect e perspective, if we open the chart up to september 1st. you see the ten-year there. look at the difference in fives. if we want to look at twos, we can't just go back to september. we have to go back to may of 2010. yes. this is -- here we are at 92, about where we settled on friday. you can clearly see the two-year ramped up over the last several years. but if we're to go back a year or two more, considering computer sailing, it would be mostly a flat line. it's been much higher.

of courkourcourse, if we go bac pre-credit crisis, spreads. spreads today, as i said, have flattened a bit. if you look at an april 1st of tense minus twos, you can clearly see that the december meeting is totally being looked at in a more aggressive fashion based on flattening relationships. 30 minus fives, same scenario. if we want to look at foreign exchange, not a lot of movement today but march 1st, the last time the dollar index was at these levels, 100 is the area technicians are looking at, the euro dollar comps back to the worst levels since april so about a three week spread there on the comps in history. david faber, back to you. >> thank you very much, mr. santelli. coming up, it is the biggest m&a deal of a year in which we have seen some huge deals. remember anheuser-busch? >> that stock goes up -- almost every day.

this is a lot bigger. emc? more than twice the size. this is one of the biggest deals of all times and creates a pharma powerhouse. we'll have an interview with the ceos of pfizer and allergan. we'll be right back.

it's time. time for stop trading with jim. >> gamestop had a problem. some of the games had a gap. they didn't come out until november. call of duty was in november. assassins creed, you and i don't play these, but they also missed. i'm wondering whether gamestop is not pressed down by the shorts, they want it to look badly. i was trying to figure out why gamestop didn't lower the year, because these games may have missed. >> may have been uneven in terms of the introduction of the games. they're not cutting back full-year guidance. >> so you try to figure out why

is that -- >> they did not have a good quarter. >> they did not. but they may have a gap here. let's just say this is one where the bears shot first, now the bulls will shoot. the bulls will say there was a bit of a misschedule. that doesn't mean that they didn't miss the quart ir. i'm saying that will is a strike back here. there's a strike back by the bulls. it will be happening. >> okay. keep an eye on those shares. >> exactly. we know chipotle was down badly. now people say maybe the worst is over. allergan still kind of -- >> say it. i've never seen you speechless. >> if you would have seen me yesterday in the fourth quarter of the eagles game, you would have seen me speechless. allergan is a story where it might have been at 340 on brent saunders alone. i don't know. we have to learn more. i love the pfizer pipeline. but right now i think people are saying, you know what?

>> let's put it this way, people walking into a deal did not expect to see allergan shares down. >> no. we told people last week -- we said weeks ago it would get done the week of thanksgiving, 11 shares. 11.3 shares. that said -- >> ian comes on, explains it, it could change things. >> all right. >> when ian comes on, we ask questions about the pipeline. >> right. that's what we're looking forward to. ian read, former accountant. we got him. coming up. "squawk on the street."

all right. oil, something we have not spoken much about this hour. it is a component of the market moves we see, wti down earlier. came back on headlines apparently, out of bloomberg saying the saudis are ready to cooperate with opec for stable prices. saudi government willing to do what it takes. not a lot of details. that was from earlier that had the effect of lessening the losses. >> venezuela, an outlaw nation basically, has been saying if nothing is done, oil will go to

20. venezuela reserves may eclipse everybody's. if you look at the new ways of drilling. i have to tell you i think oil bottoms 38, 42. but the negative thesis is there because of copper, iron. people regardless of commodity. no matter what price it is, it can't be moved. that's not true. but remember, we are overproducing in this country continually. and you do need to see somebody blink. and it has to be the saudis. that's why oil stays -- saudis are all that matters, david. we -- we should stop thinking we matter. we can make money -- >> make money at 41. >> eagle ford can. >> bakken can't? >> no. >> what's the difference. >> transport. light crude. that's not what we want. we built refineries for heavy crude.

train costs are bad. no real pipe. so i think oil is no consolidation, lots of companies going -- starting to go under. the pipeline companies have been incredibly bad. the complex is a house of pain. but exxon and chevron, no the big dogs have done well. watch pioneer there. pioneer is incredibly low cost. let's watch that. they're great. great at what they do. mr. sheffield. oil is so key. people think that commodities -- if oil rolls over, we'll have a recession. >> right. >> i don't buy that. allergan -- it has had an impact on the industrial economy. >> and the credit problems. allergan is supplanting macy's to the key to the market. >> yeah. allergan moving down because pfizer moving down. there's a shareholder vote here. shareholders will have to vote. so, it is incumbent upon both gentleman to make their cases as

to why this deal makes sense. there will still be some fear, maybe not based on the facts on the ground, that the u.s. government will try to do something that prevents this. very much uncertain. as i said so many times, the ultimate inversion is when a foreign company buys a u.s. company. this is not structured as inversion. >> spread at this point versus other deals? >> the spread is fairly significant. i got do the math here. talking 31.24 times 11.3. gets you to almost 360? 350? talking about big spread. even percentage-wise. >> other drug stocks have been doing well. can't lose sight that the group has gotten a bit underneath. that matters. >> what do we got on "mad" tonig tonight? >> diebold, we have not even talked about that. lee schram, deluxe. another company that you were

correct in trying to figure out what is deluxe now. deluxe is another one of the companies that has reinvented itself. when companies reinvent themselves, they usually have do it because the technology is out moded. these are not bad stocks. how is gme? it's early. it's early. >> we had two empty chairs with us the entire show. ian read, brent saunders. disguised as empty chairs. >> wow. maybe that's why the stock -- >> yeah. >> doesn't mean they won't join us. they're up at pfizer headquarters. we'll have interviews with the ceos of pfizer and allergan coming up. important than your health.

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of their kind endorsed by aarp. rates are competitive. so call today. and learn more about choosing the doctor's you'd like to see. go long. good morning. welcome back to "squawk on the street." i'm david faber, along with sara eisen, simon hobbs. let's look at the markets and oil as we are a half hour into trading. not much going on in terms of -- not supposed to say that.

you're supposed to say a lot of activity not resulting in many moves. crude is down 1%. off the lows of the morning, after perhaps some comments from the saudis or as reported by bloomberg saying they're looking for stable oil prices. >> you would expect the price to go up on that. >> it did go up from where it was. >> oh, okay. okay. our road map starts with a deal, the deal in healthcare. the largest pharmaceutical company being created in the world and a big debate over taxes. pfizer and allergan's $160 billion merger is official. but ceos will join us for an exclusive interview in moments. >> plus belgium remaining on lockdown. more arrests overnight. authorities still warning of possible imminent attacks. >> and it's a big week for retail stocks. will it make or break the quarter? >> first, we have breaking economic news.

let's get to diana olick with the data on existing home sales. how do they look? >> existing home sales down 3.4% to a seasonally adjusted annual rate of 5.36 million units. the street was looking for a drop of 2.7%. wider than expected. still up 3.9 year over year on home sales. realtors saying it was the west hardest hit with sales, down 8.7%. that's due to really rough affordability out in california and in parts of the west. inventory is the story here. down 4.5% year over year. usually this time of year we see inventory increasing as sales slow down. we are not seeing that that is keeping pressure on prices. median existing home price of $219,600, that's up 5.8% year over year. the realtor's chief economist says the inventory situation now

is "disturbing." we did see a slight increase in first time home buyers coming back to the market. 31%. that's still historically low. but it was up from 29% a year ago. seeing weaker sales on the condo side, stronger on single family. distress sales moving out of the market. the lowest level since realtors began tracking it in october of 2008. the real story is a drop in inventory impacting fall home sales. let's get to the biggest deal of the year. one of the biggest deals ever. pfizer is grouping with allergan. pfizer ceo ian read and allergan ceo brent saunders are uptown. >> clearly a big morning. the biggest deal ever in the drug industry, setting you up to be the fourth largest market cap

company in the world. given the political climate now around tax inversions, the fact you're moving into ireland, how confident are you that the deal gets done? >> first of all, i would like to say this is a great deal for america. it allows us to continue to sustain an investment of, you know approximately $9 billion mainly spent in the united states. we have 40,000 combined employees in the united states. so i think it's a great deal. i'm very happy to be announcing this deal with brent. on getting it done? we looked at the laws. we looked at recent notice from treasury. you know, it's going to be -- allergan will have approximately 44% of the new company. pfizer shareholder also have approximately 56%. this is a great deal. it's not an ordinary deal. this is a real deal that creates value for pfizer shareholders, allergan share holders and patients. >> have you spoken with folks in treasury, president obama, about

what is going on with the treasury rules on inversions? >> we've been engaged for the last year and a half in -- with leaders in the congress. we see this deal as being positive for the united states. and we feel that the notice that been given by treasury. we'll go forward. >> does it make sense for you if the tax benefits go away? does this deal still make sense? >> this deal is not just about tax benefits. this deal is about great franchises. brent can talk about the franchises allergan has in a second. i'm excited about it. it takes -- our two businesses are established business and innovative pharmaceutical it gives it greater growth, brighter portfolio. it's a strategic deal from that point of view. it enables us to incorporate brent's open science, open development philosophy.

there are benefits from tax. if they weren't there, i would still try to do the deal, but i suspect the price would be different. >> brent, tell us about the reason to sell now, and the price. some people were expecting $390 milli per share. >> you can't look at a spot price, whether that's friday's close, 3.66 and change. when we negotiated the price, that would have equaled over $400. you get a proforma ownership, you get access to 100 new markets, access to a deeper pipeline, $25 billion in free cash flow and access into a dif dented for shareholders. when you put that together, the valuation for allergan is

immense. >> the drug industry is a political pinata. you are the target of so many different politicians does this deem make you a magnet for more attention? how do you respond to that in terms of criticism of cutting of research spending? >> we're focused on research. this is a high-risk business. we will continue to pump in 9 billion globally into research, mostly in the united states. we're focused on finding cures that make a difference in peoples lives, focused on alzheimer's, on rheumatology, cancer, vaccines. and anesthet aesthetics which i important. i feel this should be a positive sign for patients. these sorts of resources are being brought together to cure major illnesses for humanity. >> traditionally allergan spent less as a percentage of revenue on r & d than pfizer had. what model should we expect to

be the one going forward? >> i think it's a combination of two great models. pfizer has deep and strong capabilities in research, we have limited capability there's, so we turned to an open science model. we have a philosophy of being humble enough to realize we don't have the best ideas, but bold enough to act on them. i think that will survive as a culture. having a budget of $9 billion to spend on advancing our pipelines, looking for cures and treatments, i think that's really going to benefit patients and build very strong category and therapeutic leadership across the entire range of our portfolio. >> how has the pressure on drug prices affected your decision to do a deal like this? >> this deal has no relevance vis-a-vis drug pricing. the cost of pharmaceuticals to the healthcare system has stayed at the same percentage, 10% to

12% for a decade. i expect it to stay there. what we're focused on is how do we bring benefits to people who have illnesses. how do we ensure the safety of children, the safety of people who have diseases like cancer, alzheimer's. that's what is important. the hope that that research offers to the population. >> i would just add, i think our social contract to invest in r & d, to invest in cures and treatments for medical needs is stronger in this combination. so, our drugs, our cures, our treatments are always priced at an economic value principle around making sure that we share that value with the patients that we're trying to cure and treat. >> tell us, is there a breakup fee here? presumably there is. you didn't disclose it. can you tell us what it is? in ordinary and customary terms, a breakup fee of up to 3.5 billion, the details will be given as soon as we file.

>> i'm looking at the new ceo of the combined company, and the coo and president of the new combined company. are we looking at a succession plan right now? is this your potential successor. >> i'm very, very looking forward to working with brent. he's done a fabulous job with allergan and the companies he's been in. we'll have a great partnership. together we'll be successful. >> thank you both for joining us. we appreciate your time. >> thank you. >> back over to you guys. >> meg terrell, thank you very much. they just announced the biggest deal of the year. david, the biggest inversion. >> great deal for america. >> despite the rules that the treasury is trying to put in rules to block inversion. >> it's not an inversion because it's being structured as allergan as the buyer. if it had been pfizer as the technical buyer, which pfizer is the one, 11.3 shares offered to allergan shareholders, even it had been it would have passed

under the current test for treasury which allowed them to do the hopscotch loans, earnings stripping. 44% owned by allergan, 56% by pfizer shareholders. it will be fascinating to see the progress of it. right now, not much progress. allergan stock down. pfizer stock is down. pfizer may be down in part because it's being shorted by those setting it up. given how many shares are out there, it may be down because people are not embracing the deal, despite the efforts of those two gentlemen to explain it in particular brent saunders has more explaining to do because there are a lot of his shareholders who believe when the deal closes, the allergan price would be what it would be anywhere, given the cash from teva, the unlevered balance sheet allergan would have had, the ability to pursue other acquisitions. it will be interesting. >> my question is whether the

tax take falls to the irs given that they're stockpiling money abroad. $74 billion last year. presumably that's not taxed. >> the numbers gets complicated. i don't believe pfizer has 74 billion in cash overseas. it has do with earnings what they treat as earnings what they treat as potentially coming back to the u.s. now they get access to all the cash they have overseas. they don't have to do tax planning here in the united state states. >> i like how read started the interview, this is a good deal with america. they clearly are -- >> can you imagine the conversation with pr? >> good deal for america. company moving to ireland. brooklyn-based company. moving to ireland. >> i don't think we heard the end of it. still ahead, stephen hadley joins us as the security lockdown in brussels continues.

david cameron urging british w lawmakers to approve an extension of military operations in syria. card from capital one. i earn unlimited 2% cash back on everything i buy for my studio. ♪ and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business... that's huge for my bottom line. what's in your wallet?

brussels is on security lockdown for a third straight day as the manhunt continues for the suspected ring leader of those paris terrorist attacks. sweeping overnight raids has failed to captured one of

europe's most wanted men. julia chatterley has the latest. >> reporter: 19 raids in total overnight and this morning. 21 suspects arrested. yet, as you rightly said, one of the main targets, one of those believed to be involved in the paris terrorist attacks remains at large. still believed to be in brussels. clearly when you look at the response we've had, it's not just about one man. it's about a far greater threat. the authorities here believe that there's a risk of an imminent attack. perhaps in multiple locations. we're talking a copycat of what we saw in paris. the lockdown was immediate. we have seen subways closed. shops shut or opening just temporarily today. clearly there's a risk of a greater threat here. a lot of questions asked about how quickly they can dial back this threat response if they do find this suspect. clearly bigger issues at work here. guys, we wait to see. this manhunt continues. back to you. >> julie chatterley in brussels,

thank you very much. president obama is back in d.c. this morning ahead of an oval office meeting with francois hollande tomorrow. today, david cameron meeting with hollande vowing to keep fighting isis. joining us now is the former white house national security adviser, stephen hadley, now chairman of the united states institute for peace. welcome to the program. great to have you here. >> nice to be here. >> as we look at these events playing out in brussels, in the wake of the paris attacks, how concerned should we be geographically so far away in this country? >> there's always a risk. what isis has shown in order to try to deter the united states, france, and other countries from going after isis in its safe areas in iraq and syria, they're going to take the fight to

foreign shores. that potentially is the united states. but we've had now almost 14 years since 9/11 to try to learn how to put in place the systems that will protect our borders, protect against terrorism. we have to be vigilant. we have to be diligent about it. we have to recognize there's a threat. but at the same time we spent a lot of time and money getting the nation prepared for this eventuality. >> people are extremely concerned with what's going on. you see that in the political narrative at the moment. at the heart of the white house's strategy is a belief that they have learned since 9/11, and therefore though they perhaps look slightly someplace sent, they're not changing the strategy. the view seems to be military occupations are costly and that they don't work. at the same time it's argued this country has too readily reacted to the threat of an attack in its foreign policy. would you agree with that? >> well, really nobody at this point is talking about military

occupation. i think one of the issues is that many people say there's no military solution to these kinds of problems. and that is certainly true. but you know when you're dealing with an entity like isis, there's no political solution that does not have a military element. the debate is what is that military element? is what we're doing sufficient or should we as some people called for try to have a no-fly zone that would give some sanctuary and protection to refugees and to opposition fighters trying to fight isis and the assad regime. some have gone further saying that the risk of terror will exist as long as isis continues to control territory in iraq and syria. and the only way to control territory is some troops on the ground. those troops on the ground should be local forces for sure.

but to succeed many people feel there needs to be greater u.s. element on the ground than the administration so far has agreed to. >> simon's earlier question about the threat facing the united states, we heard from the nation's top homeland security official on meet the press this weekend, he said we have no credible intelligence about a paris-style threat directed towards the homeland here. how effective is our intelligence gathering when it comes to isis and finding this sort of threat? should americans trust this and feel safe on a week that's dominated with a lot of holiday travel, a big parade, other parades in major cities? >> there's obviously a risk. we have less intelligence in iraq and syria today. certainly less in iraq than when we had when we had tens of thousands of american troop there's and a substantial int intelligence infrastructure. we do a lot of i intelligence

sharing with other agencies, other governments. but the homeland security secretary is right. in order to throw up a specific defense, you need actionable intelligence. the who, what, where, why, and when. >> right. >> that's what we're looking for. short of that, what we simply have to do is maintain our defenses, be on alert. and maintain readiness at home. >> what about the debate which resurfaced at the end of last week and the weekend, as to whether you should be selling explosives and firearms to people on the terrorist watch list? or people from the visa waiver program who can walk on to american soil from 38 countries? would you support those people -- in opposition from, of course, the nra, in their attempts to do that, to prevent that from happening? >> there's a whole question about the provision of arms,

people on the terrorist list. that's something that needs to be looked at. >> i'm asking you for your opinion. do you think it's right that people that are on the watch list in this country for terrorism are legally allowed to buy firearms and explosives? >> i would hope the background checks that are done before people are able to buy explosives and firearms would take into account those on watch list and if there's reason to be concerned for terrorism they wouldn't get those weapons. i think that's got to be looked at. the visa waiver program is being looked at from the standpoint of perhaps those people who would normally come in without a visa under the visa waiver program but who had been in iraq and syria in the last five years, perhaps they should go in the regular queue and have to have a visa so they can be interviewed, reviewed to make sure they're not a terrorist in hiding. i think that's the kind of thing that congress is looking at and should look at.

>> it's good to have your analysis. stephen hadley joining us there. thank you, sir. when we come back, the dow is up 35 points. more on the big week for retail. winners and losers. plus more on the relghurdles fa allergan and pfizer merger.

welcome back to "squawk on the street." shares of gamestop sinking about 13%. new video game software sales fell, and gaming software sales slipped by 20%. the move today makes at least all of the gains year to date for the stock disappear. david, very heavy volume on shares of gamestop today. back over to you. the battle between carl icahn, large activist investor and aig heating up. mr. icahn says while he has spoken a number of times to

aig's ceo, peter hancock, those conversations are not something that has met his expectations. it was made clear to him that mr. hancock is not willing to take the bold steps that we and other shareholders believe are long overdue, namely to split up the company. he goes on to say that he will intend to commence a solicitation for shareholders to express their views to the board and may include a proposal to add a new director to succeed mr. hancock as ceo. aig comes out with a statement not really addressing icahn but says the company plans to take additional actions to excel rat accelerate its previous action. the expectation that mr. icahn

can act by written consent, yes, you can act by written consent to add new directors. he did say may include one director, clearly targeting hancock who has said we won't split the company up because the sum of the parts and the tax benefits we get from being together is greater than if we actually split the company. get ratings from each of the insurance agencies which would be lower and cost on the tax front. >> that word tax comes up a lot. it does. >> extraordinary. >> an important component of the capital structure of many businesses. up next a rough couple of weeks for retail. can a strong holiday week rescue the sector? sure, tv has evolved over the years.

it's gotten squarer. brighter. bigger. thinner. even curvier. but what's next? for all binge watchers. movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. good morning, i'm sue herera. vladimir putin in tehran to attend a forum of gas exporting companies. he discussed the syrian conflict. syrian president bashar al assad says his most important consideration with regard to the country's political system is

that it should be secular with freedom for al. israeli police say two palestinian women tried to stab an israeli pedestrian with scissors near a market in jerusalem. a police officer saw the attack and opened fire killing one of the women and wounding the other. a bit later a palestinian stabbed an israeli man to death in the west bank and was killed by israeli troops. president obama returning home to washington early this morning after his trip to meet with southeast asian leaders. he defended his strategy in combating isis saying the u.s. and allies would not relent in the fight against the extremists. you are up to date. that's the news update at this hour. sara, back to you. >> thank you very much, sue herera. keeping an eye on the markets, the s&p is up a quarter percent. it's a big week for retail as we look forward to black friday. walmamart launching cybermonday deals on sunday this year.

paul, we'll start with you. you cover walmart what are they trying to achieve by moving cybermonday to cybersunday? >> absolutely. walmart is being aggressive. they've not the only ones. we're seeing incremental deals year over year brought out by target as well. i think everyone is trying to just grab attention and grab market share, present incremental discounts. particularly on electronics and toys led by star wars types of items. seeing fitbits and other apparel products all being on the front pages of the black friday and the cybermonday ads. >> well, what it reminds me of a bit is the retailers bringing forward black friday to thanksgiving holiday, which i know some of them are as well, including macy's. did that work well for them? this idea of spreading it out beyond just one day?

>> look, it has definitely expanded well beyond one day. we're seeing ten days of deals announced by target. does that lead to an increase in sales? >> it does not lead to an increase in meaningful sales, but because the market is so much more fragmented today than it's ever been, because amazon is such -- is the elephant in it the room, i think the brick-and-mortar retailers in particular just want to have their doors opened earlier and want to put those announcements out to showcase where they're different. >> susan, i was looking at some of your calls. below consensus on urban outfitters, on lululemon. which retailer do you like heading into the fourth quarter. >> heading into the fourth quarter and for holiday our top pick on the specialty retail side is american eagle. i think they're doing such a great job differentiating fashion. they added more quality to products. they raised prices a bit.

the consumer is responding. they're a big winner out there. they comped about 9% in the third quarter. not seeing that type of same store sales comp by anyone else out there. they're doing all the right things. i think it will continue into holiday. >> the holiday condition season confuses me. we have conversations about grabbing attention, volumes, and not about margins. where is the best margin hidden in this as an investor? let me just ask paul for a minute. >> the customer is certainly winning here. margins are downward trajectory across retail. not only from a price competition standpoint but because of shipping costs. and labor costs in the store. >> now you set off all the alarm bells for investors where is the solid stream of profits in your

view. >> it's only through market share gains and revenue. it's a fight to the bottom on margins. simon, i think that retail investors expect that. it is very difficult, let alone -- throw expand margins off the table. even to maintain margins is not expected -- not this quarter. probably not over the next year or two across retail. >> susan, do you agree? we have to wait a year or two to get done with promotions that will help retail margins and get rid of the pressure from higher labor costs? >> i think it's different in the specialty retail space. because they went through a rough past two years, they were the first to clean up inventory. even with warmer weather, we are seeing reduced inventory. it's coming off very low lows, but this year a lot of retailers out there such as american eagle expanding 200 basis points in third quarter, same expected in

fourth quarter. a lot of missy players expanding gross margin that's because they did bring inventory down so much to the sales levels that they're seeing now. even in a tough retail environment they're able to pull back on promotions. >> there is a case of winners and losers when it comes to retail. susan anderson, thank you. paul trussel. the consumer retail sector is up 12% this year. coming up, an interview with the ceo of intuitive surgical. that's next. glasses?

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the street." check out what's happening with the markets. they're being led by the material sector. standing out as a top performer in the s&p 500. among the leaders, cf industries, alcoa and owens illinois, ecolab. alcoa is the leader after elliott is taking after 6.5% stake in the country. materials for the year are down about 5%. trailing just energy and utilities as the worst performing sectors. back over to you. >> thank you very much. intuitive surgical celebrated 15 years listed on the nasdaq by ringing the bell last week. ceo gary guthart is with us. you reported third quarter numbers that were quite strong, mr. guthart. there are those who say this won't last long because eventually competition will come for your various systems, the

key one da vinci. are you expecting competitive pressures in your business? if so, what are you doing about it. >> customer also have increased options as we go forward. however i think both the appetite for computer aided surgery, robotic surgery will increase over time. and i think customer also choose those systems that bring great value. value will be a combination of those systems that can make a difference in outcomes as well as total costs to treat. our systems in our company are well positioned. we have known for many years that computer aided surgery will make a difference. so we anticipated more interest in the space over time. >> of course there are those who argue at least, i'm referencing now a story that granted is a year over in the wall street journal, they did a study or cited studies that says robotic surgery brings higher costs and more complications. i know you guys will say -- or

obviously will take issue with that. to those who say it's not clear at all that there are benefits you're talking about what is your response? >> you know, it's absolutely clear in the literature -- by the way, the literature is vast. there are 9,000 peer reviewed journal articles citing the use of da vinci and about 2,000 that compare it to open surgery or other kinds of surgery. data is clear. when you look at costs, you want to look at total costs to treat. not just the cost of a piece of equipment but what is the total cost to treat a patient through their entire episode? those are hard studies to do. they take a lot of care and strong methodology. we find when people do take the time and care with that methodology that in many cases, for many populations of patients, da vinci is both better in terms of outcomes, compared to the open surgery they would have otherwise have gotten, as well as lower total cost to treat. we see that in our very large

customers across our customer base. >> you face some scrutiny over the years. one of them from herb greenberg who did a special investigating the da vinci technology, raising questions and concerns about cost and safety. i think those have mostly been put to rest. how has your strategy changed after the controversies? have you changed your marketing? >> we have really been focused from before and now on enabling surgeons to get great outcomes. surgery is really important therapeutic option. often has great results. but surgery is hard. it's hard for surgeons and on patients. so our marketing focus has been providing great products, products that meet our customer's expectations in the hands of surgeons. we focussed on that and remain focused on that. >> international is one of the

great potential growth areas for you. is it easy to harness that, at your size? >> you know, i think that international markets are a great opportunity for us. of course they are different by country. each country has its own healthcare system, it's own reimbursement system, often its own approval system. on the one hand patient value, the ability for surgeons to get great outcomes crosses borders. that's an opportunity for us it takes time and investment to make sure they have the data they need, the right team on the ground supporting customers. that's what we've been focused on the last three years. we've seen nice results in europe, japan and other parts of asia. >> i wonder if you go internationally if there's a big opportunity with governments. you won a contract with the u.s. defense department earlier this year wha year. what are you doing for them and how much are you going for other governments abroad? >> conversations with government

is, and national healthcare systems are important and continue. great examples are in the nordic countries and in the uk. conversation with government is a require in terms of what their national priorities are what the economics look like and what they're trying to do in our field of surgery. as we've had those conversations, we've had good response and good results. it's a standard part of the strategy. >> finally, there seemed to have been some who believed there was a ramp up in surgical procedures with those being insured under the aca. people have fallen off the exchanges. i wonder if you might expect a d dimmunition in surgeries. >> we can just speak to what customers tell us and what they see. our procedures tend to be the more serious diagnoses, often

cancers, sometimes complex benign disease. we have seen a steady trend out there. we do have some impacts with regard to total admissions, though we're probably not leading indicator of total admissions. >> gary guthart, appreciate you joining us. >> thank you very much. okay. let's send it over to rick santelli for our first exchange of the week. up 19 points on the dow. hi, rick. >> hi, simon. like to welcome, as simon pointed out, first guest of the week, holiday week, andy brenner. thanks for taking the time. >> thanks for having me. happy thanksgiving. >> happy thanksgiving to all those watching and listening. andy, you're writing that the markets are preparing for the ventricle raising of rates. look like it might be the december meeting. something odd is going on. i'm sure you're up on it it seems as though there's a special closed door meeting today that was created under what is called the expediated procedures, many believe they're

talking about the discount rate. is that what you think is going on? is it anything we should be interested in. >> rick, i think we should be interested in it. the meeting starts in about an hour. unfortunately it's a closed-door mee meeting and they won't come out with any results. any decisions they make, which may be raising the discount rate, will come out on december 16th. that meeting is happening, like i say, in about an hour. >> andy, when it comes to normalizing rates, let's forget the banter about whether it's the right time and wrong rate. let's talk about normalization. according in 2007, the collateral markets were 10, 10.5 trillion in size. now 6 trillion in size. how will that condition of a shrunken collateral market take

the notion of a normalization of rates? >> it won't take it well. we've been preaching that there's a tremendous lack of liquidity in the marketplace. a lot pushed by regulators. banks have to pull back based on balance sheet, risk. and they're cutting wherever they can. i think it's going to be a real big problem over the next few months, over the next few years with this lack of liquidity until regulators wake up and realize how much they'll cost the u.s. treasury in actual fees as far as interest rates so on and so forth. i think it will be a real problem which is why i didn't think the fed should raise with two weeks left in the year. they should have raised back in september and probably back in june before that. you know what? it sure looks like they'll go in a couple weeks. >> final question, there's a lot of talk that congress may be looking to get their hands on the money that the fed gives the treasury with regard to the money generated by their huge balance sheet. your final thought on, is that

something that surprises you? is it something that will happen? >> well, look, first of all, it doesn't surprise me. look at what they have done with fannie and freddie. they already paid back everything they borrowed and still continue to collect from the government. but the real fear is what will happen when the fed reduces their 4$4.4 trillion balance sheet and get it back to 800 billion, that's when we will see significant higher rates. >> andy, thanks for your thoughts. sara eisen, back to you. >> rick santelli, thank you very much. coming up, the pfizer allergan mega deal sure to get the attention of regulators in washington. the tax implications and political issues when we come back.

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major news in health care. the biggest tax inversion yet as pfizer's ceo successfully gets them to agree to a $155 billion deal. plus last week united health warning it may pull out of obamacare exchanges as it slashed over $400 million from its own earnings forecast due to the losses it's incurring under the affordable care act.

joining us is health policy expert, the president of health policy and strategy associates. bob, nice to see you again. welcome back to the program. >> thank you. >> the ceo of pfizer has looked for a tax inversion for a long time. earlier this hour on the network, he said it was a great deal for america. would you agree? >> no, i wouldn't agree it's a great deal for america. think what we need is tax reform so we finally have the incentives for these companies to bring back money from overseas. >> there's no sign of that clearly, is there? >> no, the congress is bottled up on that. most of the presidential candidates are calling for it. that's good news. we need business tax reform. and hopefully we're finally going to see something in 2017, but certainly not before then. >> that debate is clearly going to run and run. let me bring you back to united health care which shocked a lot of people last week. people are writing about it and

trying to work out what it means they can still be suffering these huge losses under the affordable care act. clearly the pressure is on for them all to merge. what is your takeaway from that, what are you telling clients? >> the united warning or the united threat to pull out of the exchanges is part of a broader situation where the health insurance companies are just about all losing money in the health insurance exchanges. not only does united see heavy losses but there's a goldman sachs report out that says the backbone of these exchanges, the not for profit blue cross plans, will lose money in their overall business for the first time since the 1980s this year, driven by their heavy losses in the obamacare exchanges. then we've got the health insurance co-ops. 12 of 23 have gone broke, which most people know. there's a report now out of politico that says the surviving co-ops had an aggregate loss of $200 million in the obamacare exchanges the first nine months -- >> one of the basic problems you

have here is there aren't enough healthy people in the system paying the insurers. those who are healthy get sick, enroll, get their treatment paid for, then jump out again. my question is what happens when the fines really start to kick in, in january, when people start paying to the irs, family of two, $100,000, they're fined $1,600 if they've not signed up to health care. that continues to grow. so are we, over time, going to push enough healthy people into the system to make it work? >> probably not. because the fines have already been just about that high for 2015, number one. number two, the fundamental problem with the obamacare health insurance products and the exchanges is the premiums are really high and the deductibles are super high. so the consumer faces perhaps a $1,600 fine, but a family of four making $60,000 would have to, for example, pay $400 a month or $5,000 a year for

health insurance and then face a $3,000 deductible per person in the silver plan. so these families are doing the calculation. you know, the fines are interesting. it's a real political dilemma here. what proponents of obamacare are forcing these folks to do is to take a plan they still can't afford, the deductibles are too high, or pay an onerous fine. that's not a very good set of choices. >> very quickly, we don't have much time, but i want to get your thoughts on this. clearly the entire health care landscape has shifted dramatically. $160 billion deal. the drug companies are getting bigger. the walgreens and the cvss are getting bigger. who ends up winning? >> well, corporate america will end up winning. the consumers won't because these companies are getting too big. i think you're going to see some real pushback on at least the health insurance mergers. all of the provider community, the doctors and the hospitals, are really fighting back against the aetna, humana merge, the

cigna/anthem merger. don't be surprised to see -- to see some real issues there with the federal government trying to approve these mergers. >> thank you. >> coming up next on "squawk alley," business insider henry blodget weighing in on the deal and a look at what is ahead. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this. i've got a nice long life ahead.

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