going to be in lincoln center. we'll have ron on from 6:00 to 8:00 and then move into our jobs. we got a lot of stuff going on tomorrow morning. >> all right. we were going to look at the markets but it was better -- markets are up a little. nasdaq was down because of facebook, maybe it's come back. >> pound is up. >> what is that? >> pound is up on relief. >> certainly is with that thing on the courts over there. make sure you join us tomorrow, jobs friday. "squawk on the street" is coming up right now. ♪ ♪ go cubs go ♪ hey chicago what do you say congratulations to the chicago cubs on their world championship and the end of the longest drought in american sports. good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber at the new york stock exchange. speaking of droughts, s&p's down seven straight, a loss today would be the longest since the crisis in '08. but futures are up for the moment. big news out of europe as a court rules brexit can move

ahead without a vote from parliament. watch bonds as odds on december approach 80% and oil is up for the first time in five. road map begins with facebook, company reported beat but investors focusing on the cfo comments of slowing revenue growth. fitbit shares getting clobbered this morning. poised to open lower by 30%. just as competition grows in the wearable sector. and the election days away, polls show trump and clinton neck and neck. both candidates making the rounds in battleground states today. but facebook's our top story, down in the premarket. the social network's revenue outlook overshadowing those better than expected quarterly results. this is the cfo on last night's earnings call. >> ad load has been one of the three primary factors fueling that growth, with a much smaller contribution from this important factor going forward, we expect to see ad revenue growth rates come down meaningfully. secondly, on expenses. though it is premature to provide specific expense

guidance, as mark mentioned we anticipate 2017 will be an aggressive investment year, adding top engineer talent remains one of our key investment priorities as we continue to execute on our three, five and ten-year growth map. >> a lot of downgrades on this one. people sort of knew this time would come, fair to say. >> yes, stock at 125 when the three words echoed, meaningfully aggressive, went to 124, got to 123 when they said aggressive and then it just went right down to 118 when it said substantially as in substantial expenditure growth. this is a company where basically those three words were fighting words meaning take 2018 numbers down from $7 to maybe $6.50, maybe to $6.20. i do not think that was correct. that's what the knee jerk reaction was. when you take the quarter in totality, revenue growth of 56% to 7 billion. $2.4 billion in not nongap, but gap revenue.

$2.5 million from free capital, those three words overshadowed everything which i think is ridiculous. you're talking about a market of $1 trillion in advertising that they want to capture some of. what do they really have of it right now? they have a very small fraction of it. and because they're spending so much money, they want it everywhere. i thought this was an incredibly -- really, really unbleefu unbelievable call. i'm not backing away one bit and not cutting numbers, easily goes 7 to 7.50 in 2018 and cheaper than pepsico. >> i got the same message from a number of investors i spoke to this morning, jim. grant it they own the stock, but they also follow the company closely and they were not surprised that the company was talking about deceleration of any type because they'd been talking about that. in the second quarter numbers they sent a similar message. obviously the law of large numbers plays a role here. the fact they are going to be investing or taking the ad load down as they said in '17, but you're still talking about an

expectation of a 35% top line growth rate in '17. >> yes. >> and 27% in '18. and you've got people now looking at estimates on '18 that are about 16.5, 17 times the stock. >> thank you for saying that. >> that's a multiple based on what the estimated revenue growth rate is even with significant deceleration seems to me to be pretty compelling, at least again to those who own the stock. >> pepsico has double digit growth and therefore gets a 22 multiple. i think this company has much more upside in growth than pepsico. and i use pepsico for the gold standard now for consumer products. i found that this quarter was remarkable and zuckerberg spends the whole time talking about all these new venues he's going to be able to advertise on ultimately. which means that the ad load for the traditional product is not -- won't be as taxing. he wants to keep the product great. but look, if the stock was at 130, people felt it had run up.

it's one of those run up in the quarters of 22%, they want to take profits. i think the company when they added the word meanfully when it came to growth rates people freak out. meaningfully and material, material is code word for 10% decline from your numbers, taking your numbers down 10%, go from 7 to 6.30, 6.30, slash lower multiple and slash a 20 multiple on and that's how you get to where the stock is. i don't buy any of that. i agree with david. i think the multiple is going to be too low in 2018. by the way, the expenses are actually going down as a relative amount. >> right. >> people thought they were going up. >> i mean, you have to marvel at the performance of the company's -- >> yes. thank you. >> incremental margin. 70% increase. >> top line basis if you take out m&a, they are growing twice as fast as any other u.s. company with $20 billion or more in revenue. >> this international company of -- you know, we sit there and we think, hold on, wait a

second, they're up to 1.2 billion users, they check it every day. 1.2 billion users. how many people watch the super bowl? how many people watched last night? with that 17-minute rain delay. >> not to mention 93% on mobile. >> and there you've got -- i mean, i remember when this company started they were talking about some sort of chinese gaming company that sheryl sandberg had spoken to. now they're talking about she drops names at proctor & gamble and gm and -- >> the incremental amount they're talking about increasing op x by to hire engineers i think is over $5 billion. it seems almost inconceivable they could find enough people. >> well, they have -- they're building like four seasons like dorms to get the people. >> and the fact their earnings came on a day where gannett, the journal with layoffs, the times -- ad revenue is falling at 15%, 19% at these legacy companies. >> i had clorox on last night,

one of the smartest consumer packaged goods. his budget from 10% social media to 40%. it goes up every time i speak to him. and it's facebook. >> and google. >> and google. that's it. >> that's more or less the entire marketplace. >> he said the return on investment for facebook and google is so much greater than -- >> and the bigger they get, the more data they have, the better they are in terms of giving an advertiser better what they're getting. >> if you back out facebook and google, u.s. ad spend estimated fallen five in the quarter. >> i put up a picture of my dog sleeping where i like to sleep and second most watched thing we had and most common on piece i've done in years. look, if you make fresh pet, if you make dog food, i mean you say i got to target that guy's thing, well, what do they know about me if i'm watching the game last night?

they don't know jack about me. okay. but they know that i have two rescue dogs and i'll do anything i can to not have the collar on them so i will use that new -- make it so the dogs don't itch. i don't know if you have dogs or not. you don't have anything. i forgot. >> not for now. i got nothing right now. there is talk of a dog, but we'll get to that another day. >> there's no talk of anything at your house. you probably didn't watch the game. you probably don't have tivo. you probably cut the cord. probably cut my cord. >> i cut your cord. i'm cutting your cord right now. whatever one is going in there. >> go ahead. but i am saying this facebook is such a juggernaut, look, there's 7.2 billion people on earth. what is their goal? their goal is to have 7.2 billion people on facebook. do you think that's not going to be where a trillion dollars in ad spend is going to go? >> all in video talking with each other. who's going to pay for all that bandwidth, that's what i want to

know. >> these guys. >> no, they just live off of it. somebody's got to come up with a way to transmit all this video effectively. because right now i'm still getting the windmill all the time. >> i get that circle of death. >> yeah. >> circle of death, i had that last night when i was watching sports. now, this is the greatest gross margin free cash flow story of all-time. because the cfo uses the word meaningfully in otherwise one of the most beautiful texts i've seen, that's putting a mustache on mona lisa here -- there's no mustache on mona lisa, that's a painting, david. >> i have seen it. behind glass. >> so you went somewhere. >> i did. we'll get to some other earnings, politics though, donald trump and hillary clinton battling it out in the stretch here. our chief washington correspondent john harwood is in ohio with the latest. good morning, john. >> good morning, carl. we are in lima, ohio. you know, we cover this

election, but these people behind me are the one who is are living it. this is a beehive of activity. it is the allen county republican headquarters. you've got people behind me who've been phone banking, they're making signs, they're rallying to get out the vote for donald trump. and this is a state that right now if you look at the quinnipiac poll that came out yesterday, donald trump is doing very well. he looks in position to take this away from hillary clinton in the democratic column. quinnipiac poll out yesterday showed donald trump ahead by five percentage points and one of the reasons is counties like this. look at the 2012 election results, mitt romney beat barack obama 61 -37, almost two-to-one in this county. this is very strong donald trump country. i talked a few minutes ago to keith cheney who for 20 years has been the chairman of the republican party in this county, he said more enthusiasm for donald trump than any republican nominee he's seen during that entire time. and i asked him why. >> i think it's two factors.

first of all, i think there's just the anti-clinton factor. which allen county is a strong republican county, as are our surrounding counties. and i think that as the voters look back and say, you know, not another clinton. and quite frankly we heard that during the primary on our own side, not another bush. and so i think the propensity of excitement quite frankly comes from somebody new, something different. not your typical quote/unquote politician. and certainly mr. trump has laid out there that he's not your typical politician. and he's done his share of making that quite clear. >> now, guys, this also happens to be the home district of jim jordan, he is the chairman of the house freedom caucus. that's much in the news right now because they had a meeting yesterday, they're trying to figure out their stance after the election. some in the freedom caucus are

even talking about alternatives to paul ryan as the house speaker. so in addition to the presidential drama, the senate race drama and in ohio rob portman is about to -- on the verge of winning a re-election. that will help republicans if they're able to hold the senate. but republicans are likely to hold the house. paul ryan's fate is in the balance. and we'll be talking later this morning to jim jordan, one of the people who will help determine if he's still going to be speaker. >> john, thanks for that. we'll talk to you later this morning. our john harwood in ohio. peso's up a bit this morning. as john mentioned, reuters still has clinton up six. abc has her back up two. are we in this period now where we walk into the office and check the abc/"the washington post" tracking? >> 538 was doing every ten minutes last night. i was watching the game, going back and forth, 538 is doing instant updates now which is the site on espn. when i first got involved with property in mexico, which was six years ago, the ratio was

11-1 on the peso. now it's 18-1. that's a five-year period that a currency's gone from 11-1 to 8-1. that is the most -- this is a country next to us, okay. that is one of the most incredible declines. this is not turkey. it's not some country in africa where they've had hyperinflation. this is literally a country where the wages were $5 an hour. >> is there a way to play this? >> i've tried and the only way to do it, david, is something you're not going to want to do. you have to buy real estate. and actually have three or four houses for you, if you would like that. >> are they near your compound? i hope so. >> we're going to do the show from there one day, jim. >> i'm not going to have cable, so i'm going to come over and watch your house. >> it's going to be odd having tequila at 9:00, but we'll do it anyway. >> down there there's really not a time constraint.

it's true. but we have factories, mercedes benz, lexus, bmw, and the workers are making $3 an hour and no health care and the pollution you can do whatever you want and there's a train line goes right up three times a day union pacific. not to sound like a guy who's running for president, but why would you ever make a car here if you knew that ratio? yeah, when we come back a morning to forget for fitbit. shares of the wearables company taking a beating down 29%. we got to get jim's take on that. also had an exclusive with superstar quarterback tom brady on everything from under armour to the nfl's tv ratings to donald trump. take another look at the premarket as the year-to-date gains are now narrowing. dow up 31, s&p 26, back after a break. the pursuit of healthier.

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fitbit getting hammered in the premarket. the company missing on their full year guidance and quarterly revenue as it faces heightened competition. this is what james park told jim last month on "mad money." >> can i trust versus what ultimately results will be? >> you know, without knowing how the analyst did the channel checks, i can't really say.

but what i can say is, look, we just started shipping the product. fitbit charge 2 is the number one best selling fitness tracker on amazon. you know, we launched two other great products earlier this year, and if you remember the investor reaction to blaze was, i think, just you know i couldn't understand it at all. and even today blaze is the number one selling smart watch on amazon. >> well, b of a is doing more channel checks today because they go buy to sell. >> yeah. in the old days i think i would just be cast incredible dispersions across mr. park. i think what's happened here is he's looking at a rather surprisingly he's looking at amazon and making a judgment about how -- i'm actually implying honesty here. >> okay. >> that he's looking at amazon and saying that's how things are selling. obviously that was not the tell. the channel checks referring to were saying from pacific crest saying sales had dropped off a cliff. and he was refuting that with

looking at how it's doing on amazon. and that was obviously either completely inaccurate as a reader on the company. but it says to me here's a man who obviously is not in touch with how his company is selling the product. this was not that long ago. this was less than a month ago, in a quarter where the numbers were falling hard. and he is quoting numbers from amazon when the company's numbers, which i think obviously are broader than amazon, were dramatic shortfall. so i don't know what to make of it. it would be like, hey, i don't know what you're talking about. your guy is looking all over the place everywhere saying things are bad. but if you go check amazon we're number one and it was indicative of nothing. and mr. park, i think, has lost any credibility. and i think that fitbit is now done. >> done? >> i think everybody who has a fitbit -- everybody who wants a fitbit has one. i don't want to talk conclusions about apple. i think apple can draw conclusions, but i think it's

done. i think it was ultimately something people who wanted it bought one. you don't need the new ones, that's what this is saying. and someone's saying well now isn't someone going to take it over? well, you don't buy companies in decline. >> so this is a crippled company? >> yeah. and a company that doesn't know anything apparently about its markets the way i thought it did. i was actually thinking, well, if he thinks amazon's number one, what he's really saying is i can't tell you what the numbers are. but, jim, i mean, if you did your homework and you look ed - >> october 6th. >> right, it was not long ago. >> right. i mean, did he not know that sales were falling apart? he just looked at amazon. i remember when my book was number one on amazon. i didn't tell you, hey, listen, i'm selling millions of books. no, i was number one on amazon for a couple of days. hey, millions and millions sold. like mcdonald's.

no. either he doesn't know his company or he dissembled. i am saying the first. he seems like an honest man. i think he doesn't know his company. but i think his company's credibility and his credibility are shot. they're just done. >> paying a price today. when we come back we'll get cramer's mad dash, we'll countdown to the opening bell. later this hour the head of aig peter hancock going to join us at post nine. stock's down on some earnings news. get to futures and more on the nyse after a break.

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♪ [ technical difficulties ] out as the co-ceo. >> oh, are we? >> am i miming? are we miming? >> we're good. >> we're not miming? >> i was hearing you fine, but the rest of the world may not have been. whole foods -- >> right. >> mad dash. >> all right. now i got to cut it short i guess. out as co-ceo of whole foods. that's not why the stock's up. numbers were better than expected. john mackey is a little less subtle, he's saying same store

sales are still not what we want. 365, the new form factor, some good, some bad. but the important thing is ebitda's really strong, raised dividend, feeling very good about the idea that the stores they open a new store almost all stores before the red are making money. and just kind of felt better particularly after kroger ri affirmed guidance yesterday. i like kroger again very much at 31, 32. >> no dual ceo structure any longer. it was one of the few of course out there. is that a positive? >> i think that if the company keeps taking expenses out and if -- there were layers upon layers, maybe walter had a layer and john mackey had a layer, i don't know. walter rob is a guy who i think if he wants to work anywhere in the world at any company, people should snap him up today. they should call him and say we want you to run a company. because he's fabulous. but, you know, maybe the structure was wrong.

remember this is inventive category, a lot of companies came after the category. it's very difficult to be able to say these guys didn't know what they were doing because they still run very profitable stores. little better than expected numbers, but the comp store sales are not positive. so don't go all over the place. don't go nuts. but i really like walter rob. i don't know, i mean, i just -- that's just my own view. >> all right. we'll watch shares of course of whole foods as you see looking up. by the way we've got a lot more to get to. not just this morning, but tomorrow. we're going to start promoting tomorrow because when you have an interview with elon musk coming up, you let people know. >> did they hear i said i love you? i said you're the greatest guy in the world -- >> they didn't hear all that. got the opening bell after this.

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you're watching cnbc "squawk on the street" live from the financial capital of the world. the opening bell in just about 30 seconds. a lot going on. we've gotten to facebook, we'll

do qualcomm, fitbit, watching the election polls, bank of england remains unchanged on policy following the fed yesterday. and then brexit looks like there's going to be an interesting battle in the uk over whether a vote in parliament is needed. may is going to address parliament on monday, but the pound, jim, having some action today. >> i think it's amazing the uk economy maybe it is because of the weakened pound -- i find the whole uk thing every time you talk to -- i watch wilf and sara -- or sara and wilf, every time they talk about brexit, within 30 seconds they talk about our polling. because that is what makes people so nervous about a poll that shows a 70/30 hillary clinton. because brexit was the great huh? and that's how, i mean, the takeaway is huh, and how everyone from the banks to the people, commerce, everyone was caught leaning the wrong way.

and it does say remember leading to the idea that market did drop very seriously and then recovered, except for some lloyds, barclays -- you ever look at that stock? >> no, i haven't looked at lately. what do you call deutsche bank these days? >> deutsche bank is five below. >> five below. >> and royal bank of scotland, you know, that's 99 cent store. >> got it. >> we have these, right? we have analogs to these companies. >> yes, we do. >> by the way, big board today southerland asset management celebrating recent merger. and at the nasdaq an investment company based in switzerland focused on sustainability investing. do you want to do qualcomm? >> all the ceos talk about. >> what's that? >> all the ceos talk about. let's do qualcomm.

change stripe conference call -- best for action alerts we were talking about said this is the great transformation. this nxpi deal. and the way to look at qualcomm is look at what happened to avago, yesterday they brought brocade at what i thought was a high price to do connectivity storage. and the market took brocade up, and the market took broadcom up. and what i find so interesting is that there are companies -- did you see that little lattice? >> yeah. >> the consolidation in this area is so strong. and when an acquirer goes up -- look, broadcom is up again. that company is great. we used to just think of them as apple and to go full circle i felt some of the worry last night when i talked to people about facebook was is facebook going to be one trick like

apple? holy cow. as if again, another company that's really good saying, oh, boy, are they just going to be advertising like apple's the iphone? >> been a pretty good trick app apple's had. >> that's my point. if that's the one trick, i'll take it. my dogs, they can't do a single trick. i still love them. >> it does go to the point here shares of facebook had been down as much as 8% in premarket. >> knee jerk. >> after hours. and now as you see opens down less than 4% as people take a closer look. >> right. >> and sort of weigh the comments that did spook people as you said, but perhaps have been heard before. >> but remember it was 63 and then 66, right? 63 is at 125, facebook, goes to 6.6, that's 118. and then ultimately 122 because the cubs win. i mean, it's that -- you think that analogy is -- i mean it's on everybody's mind so why not

just go there. there was a little rain delay. see the rain delay between 9:00 and 9:30? >> i tell you what, people are tweeting some source ed ratings but potentially a 40 share for fox. >> oh, my god. >> i know you're going to go over fox's quarter. >> 40? what else was on? >> what a world series coming back down 3-1, the cubs won the world series. you keep saying it and you still can't believe it. >> you know there's some droughts. my friend just tweeted some droughts, other teams that have just not won a championship. there's the eagles. >> the indians now have the longest drought at 68 years now. but i love this, the last time the cubs won the model-t was being introduced, women could not vote, it was 18 presidents ago. >> sheesh. >> that's been a long wait. >> it's been a long time. they did a little thing on fox last night, too, right? thomas edison was still around. >> really? >> mark twain was still alive.

>> get out. >> yeah. 72. >> it was historic. sports lived up to its billing as opposed to tired night football. >> right. what did you make of fox? >> the numbers? >> yeah. >> geez, numbers were very good. very positive conference call. very coherent. i didn't think i was listening to a media conference call. i thought i was listening to a conference call some businesses that are, you know, secular growth. >> they had a strong quarter, fox did. and the stock is reacting positively as you might expect up over 6%. the number there couple networks are not fully distributed, so they actually show growth, which is kind of something you don't expect to see. >> no. >> in terms of subs. in the environment that we talk about so often. but overall a strong quarter for fox. >> very understated, good conference call. >> they kept the call very short. >> yes. >> which may have benefitted them. in part they knew facebook was

coming up and some of those same people probably need to get on that call. >> that's a good point. >> but they did kind of keep it short and sweet. >> they were worried about the facebook conference call getting a 40 share. how did that facebook conference call do in the huds? in the key demo? >> i think okay. in the same area worth mentioning that shares of charter, the second largest cable company for lack of a better term although we can't really call them that anymore, broadband company in the country is also up after reporting numbers better than expected this morning. they did lose i think it was 49,000 -- what was it? something like that 47,000 video subs. that was a bit more than anticipated, but overall the numbers were quite strong. free cash flow $1 billion, that was well above what analysts who follow the company estimate. $1.7 billion in capital expenditures, residential internet ads $350,000. and they started buying back

stock a bit earlier than people had anticipated they would. >> parent company of this network, comcast shares reacting well to that. comcast stock got hit by kind of a one-two punch, remember that? >> a lot of it was last week was the directv now bundle. $35 for 100 channels basically freaked some people out saying, wow, that's a fat bundle. and that's going to get people to disconnect their video. >> i don't think it will, but you can say, well, come on your house, but i don't think people switch as easily. i have every single one of these other than comcast. >> that did threaten both those stocks. >> because i have time warn sgler which remains under 88 this morning. >> time warner the entertainment company. >> time warner cable and i was, you know, i was praying for comcast, frankly. those of us who have time warner cable we kind of like comcast. we have come cacast envy.

i told david cowen, this could be big for me. not because of the stock but because of the tv component. so we went fios skinny bundle. for reliability. >> are you? >> yeah. in brooklyn. i have skinny bundle. it's not bad. i only have one espn. like the regular espn. >> you don't need espn 7? >> no. i just have fios. i also have directv because the out of market eagles. >> got it. >> other house i have everything. >> good. >> dow just a shade below 18k. let's get to bob pisani this morning. good morning, bob. >> hey, carl. let's see if we can break the seven-day losing streak for the s&p 500. we have something unusual happening, energy stocks are finally up. oil has stopped going down for the moment it's pretty tenuous but energy's leading. banks doing a bit better. health care another big laggard

recently, but ouch, also reversing. this is a little encouraging early on. there is a lot of talk about oil because it's a major problem for energy and for the earnings outlook for fourth quarter. this st a five-week chart of oil. look at this 45 to 52, back all the way down to $45. that is a real shock to people because three weeks ago everyone was assuming the new trading range for oil was $50 to $60. that's where it was going to be going into 2017. everyone was happy. and now the new trading range is closer back to the old $40 to $50. not good overall. remember, we're ending the earnings recession. we're about three quarters of the way through the earnings season. and the news has been overall really good. look, we're breaking the earnings recession, earnings are going to be up. revenues are going to be on the upside. the trend's in the right direction. numbers are not coming down dramatically for the fourth quarter. the earnings estimates up 6%. here's a problem, a lot of the big gains for q-4 based on oil company profits turning around. take a look, s&p for q-3, that's not a typo, down 68% for the

earnings at this point for the energy. they're a big drag on the stocks. q-4, they're going to turn positive because overall better efficiencies, oil at higher price. oil $45 major problem overall. so that's going to be a big issue. today we have energy earnings from a number of big companies. transocean, big deep sea driller did really well, much better than a lot of people anticipated. and chesapeake as well if you put up the chart for those, they posted a much better profit overall here. here's the important thing, there you see nice gains for those two companies. the rig which is a deepwater miner had tremendous operating efficiencies. they're just getting much better at controlling costs overall. so look what happened here, $400 million they said their costs were just a couple of years ago it was $1.5 billion. that should be $1.5 billion for their overall cost. they're reducing personnel, but getting more efficient at operating the rigs. that's what the baker hughes/ge deal is about getting more efficient in the way you operate. transocean is figuring that out

and that's one of the reasons they've turned positive overall. i want to note a small story here. if you look at the egpt, egyptian stocks down very big, egypt floated its currency overnight. they devalued currency by about 50%, they liberalized the exchange rate. that's a big issue and you can see egyptian stocks down 20%. one last thing, the fed is going to be a big issue after the election. you can see the impact the fed is already having. the russell 2000 is already down rather notably 10% from its highs on interest concerns. there you see interest rate sensitive stocks this quarter also being impacted. back to you guys. >> bob, thank you. let's get to the bond pits where they are celebrating that cubs championship. rick santelli had a late night in chicago. hey, rick. >> yeah, it indeed was a late night. so many ghosts after yesterday especially when they blew the lead, but i have to tell you these guys over here did we do good last night or what? [ cheers and applause ]

♪ go cubs go >> i tell you what, the volatility, these option traders the only actual humans left on the floor of course are trading options. there's option volatility, but there's also human volatility, and these people all watched the game. you can tell they're all suffering a bit today. when it comes to the markets, maybe the character under review the most will be central bankers, bank of japan, bank of england, our federal reserve, everybody is walking away that i talk to and e-mail and telephone that they've run out of runway a bit. and new programs probably aren't going to materialize. there's going to be an adjustment. we all knew this day was coming. will it be bumpy? won't it be bumpy? many talk about things getting priced in, but the reality is it will get priced in when moves actually occur and maybe our central bank will be the first to have their second increase of course. and that may be in december. you can see by tens that they were affected a bit. they moved back up in yield.

but let's look at three may charts. first is our tens, european tens and the gilts and the uk. interesting to see the gilts turn back up. and one of the things that was effected rather dramatically based on how the judicial process in the uk is going to try to potentially put voters willingness to go out there for referendum, stand up for what they believe in, now there's going to be a legal issue there. this is going to get fascinating because the will of the people most likely wins out. it's going to be interesting to see how may and the appellate court and the process in the uk plays out, but you can definitely see the effect it had on the pound. finally, the dollar index. kind of synthesizes everything for you. if you go back to february, you can really see that we've lost some ground in the dollar. today it's hovering near unchanged. if the central banking issues really start to bite, i would be surprised not to see the dollar move higher after the shocks of things like the british pound filter through the system. carl, back to you. >> all right, congratulations again, rick.

rick santelli. when we come back, a live interview with aig's peter hancock here at post nine. tomorrow as jim and david said, elon musk, an exclusive. we'll talk tesla, solar, space, a.i. sdp more right here on cnbc. dow's up 38.

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shares of aig getting hit a bit this morning. the company fell short of analyst expectations for its latest quarterly earnings report. it also announced an additional $3 billion share buyback as part of a large capital return. aig's president and ceo peter hancock joins us right here at the new york stock exchange. it's a short walk from aig, a few blocks away. always nice to have you here. thank you for being here. >> it's good to be here. >> you've had a lot of progress. and i want to make that clear. but there are a number of people who say that progress didn't show up as much in this quarter, peter. and they're particularly focused on the core commercial pnc loss ratio as the most important data point and one that they're disappointed in.

explain what happened in commercial pnc and why perhaps they shouldn't be disappointed, or should they? >> well, i've got to start by saying i too am deeply disappointed as a former cleveland resident. and i just want to begrudgingly congratulate chicago where i'll be tonight. so, yes, i'd like to focus on the quarter because i know a whole lot more about aig than i do about baseball. so please don't ask me what the indians could have done differently. >> no baseball questions. >> yeah. so let's talk about the loss ratio. if we look at the progress, it's about two points better than last year. but there is certainly room for improvement in certain segments of it. but as i look at what it tells us about our earnings potential going forward, i'm very pleased with the improvement in the casualty lines in particular which have been troublesome in the past where on the underlying loss ratio we're down about three points year on year.

>> right. okay. but sequentially it deteriorated by 3.1 points, sequentially. >> sequentially. >> is that a concern? is that something that's going to continue? if so, what's going on? >> no, as we show in our presentation this morning, the sequential progress is still very much on trend. we had a really outstanding first and second quarter on that particular metric. but we're still on track for our six-point improvement by the end of next year based on the significant changes in our mix of business that we've done in the first half of this year. we're basically reduced our top line by 17% from lines of business which really made that loss ratio trouble in the past, but in future will mean that we're focused on the most valuable components of the business. so we have a lot of confidence that as those changes earn in and as you know in insurance

there's a time lag between taking underwriting action and it showing up in earnings we have a pretty good line of sight on the next few quarters loss ratio and we feel very good about the trend. >> but, peter, there was also a surprise about this particular kind of health care insurance that you wrote. it's almost as if it's a benefit issue where someone can extend the benefits over their life rather than take a one-time lump sum. and because of mortality and changes, it led to a surprise. some of it may be because you don't mark this to market, we don't know how every quarter how people are doing and people are living longer. i know it's legacy business, but can this continue to come back and haunt aig? >> so back in january we helped people understand the valuation of our company by really splitting the capital of the company into two buckets. the operating bucket and the legacy bucket. and this sits within that legacy bucket. and everything in the legacy bucket we stop doing business in many years ago. so you need to think about what is the value of that legacy

bucket when you determine whether a book value per share is a true representation of your starting point for valuation. and then look at the operating portfolio for whether ongoing earnings are going to be above our cost of capital. in our operating earnings this quarter we're north of nine, we're feeling really good about that. the health care issue you're talking about which is the structured settlement book, these are settlements that are entered into for severely disabled people that gives them lifetime income. and the good news for them is science has led them to live lo longer, but that's more expensive for us in our legacy business. that's not a business that we've been active in since 2010. and we're very active in the 2000 to 2005 period. so it's more about the past than the future, but the actuary assessment takes place once every seven years as you start

to watch the mortality and longevity trends. >> that ultimately could impact book value which is at 85 and did go up. i know you did the buyback again, you reiterated. is it still accretive even though the book value could be coming down ultimately from this kind of line of business? >> yeah, it's very much. there are really a couple of adjustments to book value as stated that we like to think of. first is the very sizable deferred tax asset. secondly is aoci, which is the unrealized gains on the bonds. and the third one is the degree of discount we'd have to accept if we were to dispose of the legacy portfolio. which we lay out in our january plan last year. and analysts need to sort of think about our book value adjusting for that, but we believe our buybacks are certainly accretive to intrinsic value, which is an adjusted book value concept. >> and, peter, finally because we're short on time, in the fourth quarter of 2015, you took a $3 billion reserve charge.

people were surprised to a certain extent that you added another $328 million to reserves. and they wonder whether, you know, your property exposure sort of is skewed in the book and therefore that's not going to be uncommon for you to continue to have to do that. >> so the reserve charge was related to something we call a programs business where we have third parties do underwriting in specialized niche areas. about two-thirds of that reserve adjustment was in programs which we have terminated in the first half of this year. so not a problem going forward. but i think the most significant things i'd like to bring attention to in the third quarter are the major transactions we executed to really transform the company. five major divestitures and one major growth initiative where we exited 12 countries where we were subscale and we're getting our expenses in line year-to-date down 10%, which i think gives us the fundamental

foundation for long term profitable growth. >> peter, we got to leave it there. that was a good place to end actually. thank you as always for joining us. appreciate it. >> thank you. >> peter hancock, ceo of aig. >> make sure you join us tomorrow in exclusive interview with tesla's elon musk 11:00 a.m. eastern time. meantime, the dow up 29 points to start this thursday. we're back after a break. the pursuit of healthier.

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♪ come on, baby don't you want to go ♪ good thursday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen and david faber at the new york stock exchange. market lifting for the first time after seven losses, the longest losing streak since 2011. a lot going on whether it's earnings, the bank of england, brexit, oil, facebook and some data crossing the tape. >> yep. let's get to that now. rick santelli has the numbers for us. rick. >> play the music some more. >> our read october non-manufacturing dips to 54.8.

we're expecting a number around 56. it follows 57.1. so this is weakest since august which was 51.4, however 57.1 for last month actually was the best read in a year. now, let's go through some internals. we know what we have tomorrow. big jobs report. so the employment index on the ism nonmanufacturing moved down from 57.2 to 53.1. and new orders moved down from 60 to 57.7. so this is very fascinating. now, if we look at the september read on factory orders was up 0.3, a little better than expected. a revision that added 0.2 to last month originally up 0.2, now up 0.4. this is our final read for september. down 0.3. this followed a down 0.1 and definitely much worse than the unchanged we were looking for. and my favorite area within this of course after you take out transportation it's up 0.1,

capital goods orders, nondefense, ex-aircraft, proxy for spending on the business side down 1.3. down 1.3. this isn't good. it follows minus 1.2. and if we dig into this one, two, three, four, this makes the fifth minus read for this camp this year. that's our seed corn in a way, and we want to pay particularly close attention to the weakness there. carl and the gang, go cubs go is now they did it and maybe we'll say wait until next year to see if they can do it again. >> i think dynasty's in the cards, rick. thanks so much, our rick santelli in chicago. meanwhile, investors continuing to anxiously await tuesday's presidential election. we got the dow up about four points this morning, five days until voting officially gets underway. investors are trying to figure out wlast in store for trade, taxes, corporate regulation, the potential for continued policy uncertainties and the outlook of course for that fed rate hike in

december. in a moment we'll discuss that with trump senior campaign advisor steve calk and jared bern stein estein, but first it is a sprint to the finish and eamon javers joins us now to break that down. >> carl, they are sprinting hard right now. it looks like what we've got is a tightening race, but that hillary clinton maintains a lead here going into the last weekend of the campaigning. take a look at some of these national polls and you'll see what i'm talking about starting with this "new york times"/cbs poll. this one has hillary clinton at 45%, donald trump at 42%. that's a pretty good lead for hillary clinton going into tuesday. gary johnson at 5%, jill stein at 4%. a similar picture at abc news tracking poll. they're showing hillary clinton 47%, donald trump 45%, johnson 3% and stein 2%. but of course with the electoral college you've got to look state by state. and just one state to highlight for you here, university of denver, colorado poll in that

state they're looking at tied 39, 39, johnson 5, stein 4. that's in the state of colorado. of course the big unknown here, carl, going into this last couple of days is whether this fbi situation will change any voters' minds going into the voting booth on tuesday. you've got a lot of leaks out there, a lot of new news, it's a lot for voters to digest in the final days. the question is whether voters have simply made up their minds about these two candidates that they already know so much about or whether this new information is going to start changing people or make people on one side or the other decide to simply stay home, carl. > >> eamon, thank you for that. let's bring in jared bernstein and steve calk. good morning. >> good morning. >> steve, do you think what's at play is a market selloff? >> no, i think what's happening is folks are looking at the lack

of overall strength in the economy. i think most folks understand if we can integrate some real changes in our trade policy, lower our taxes as mr. trump has proposed, work on some deregulation as well as unleashing american energy, i think we're going to be flying the "w" just like we are here in chicago, no doubt about it, guys. >> you think that's become apparent in the last seven sessions? >> i think most importantly the real numbers have played out. you know, jared and i had a really real invigorating chat here, whether we're in new york, chicago, l.a., i'm focused on the numbers. i'm focused on what the real differences are in creating an underlying strength to our economy. and what we saw again today is not quite fully adjusted numbers that we'll find out a little later, but a real understanding that here on main street people are not feeling the strength of the economy that's been talked about in the election. i think we're all positive. we want to win. we want to go forward and build a strong economy, but things

need to change from a policy perspective in order to make that happen. >> yeah, we don't want to revisit that real versus nominal gdp argument. we know how you both feel. but, jared, we are seeing a decline in the stock market and whether it's nervousness about the uncertainty around the election or not that typically does not bode well for the incumbent party. are you concerned? >> no. i don't think the wiggles in the stock market make any difference at all at this point as eamon was saying. most people have made up their mind. in fact, recent poll showed less than 10% of people will call themselves undecided at this point. minds are made up. and i don't care whether it's factory orders or even tomorrow's jobs report, i can't imagine any one statistic or one day of numbers moving around really making much difference to where voters are at at this point. and i think steve is exactly right. i mean, at this point you have very clear different approaches to what you're going to do to help this economy reach more people. now, i definitely object to

steve's overarching point that the economy is not working and kind of this trumpian notion that the u.s. economy is in terrible shape. in fact, the unemployment rate is at 5%. we think the fed -- this actually may be more in the markets than the election, we think the fed is probably going to raise in december. that's not because the economy is a wreck. that's because they're worried that the job market is tightening up too much. now, i may disagree with that, but they kind of know what they're doing over there. now, that said, i want to give a shoutout to something peter thiel, who's very much a trump supporter said the other day. he said what trump represents isn't crazy and it's not going away. and i actually think that's a very important statement. what that is saying is that while the economy is doing much better than the trump team likes to argue, it's definitely not reaching enough people. now, i think hillary clinton's plan is the one that's going to reconnect growth to middle class prosperity. i know steve thinks otherwise, but when you start cutting taxes as aggressively as they are for the wealthy people,

deregulating, you know, blocking trade, that strikes me as very much of a throwback to the supply side george w. bush kind of economy that we don't want to go back to. >> well, steve, a lot of people wonder even if clinton wins how she implements any policy when she's going to be clearly under instant and constant investigation. >> well, look, you've probably hit the toughest point of all. first of all, i want to thank jared for coming a little more towards the middle. and just like i think, i certainly have as well. i think back right after the very first presidential debate we had an immediate reintroduction of the border tax equality act to try to create a more parody, a greater parody with our trade partners, primarily addressing the i inequities of v.a.t. tax. in other words, if manufacturers here in foreign countries, manufacture and sell products to

the u.s. and other foreign countries, they get relief from the value at a tax. in essence, they receive a rebate from the government or those dollars are offset. however, if an american company manufactures and sells abroad, those products and services are taxed. so clearly those are the types of trade and balances that we talk about finding middle ground on that i think both parties can come together and move this economy forward. and things like rediscovering the fbi investigation and talking about things where it appears there was lying or cheating, those are absolutely going to affect these last-minute voters that are undecided. just like tax, trade, deregulation and energy policies will. >> jared, are you of the mind that people need to start paying closer attention to what kind of president tim kaine would be? >> no, i mean, i think the thing

about -- look, the fbi probe, the key thing there and comey's getting a lot of pushback for this is that he doesn't have anything. so he's saying we don't know how significant these are. so many people are really scratching their heads, i'm one of them, as to why he would inject himself into the campaign at this point. but put that aside. look, there's no question that -- steve and i are actually more on the same page here around the following, there's no question that the next president has to take this economy, which is way better than steve or the trump team like to say, and figure out how it's going to reach people it hasn't reached yet. now, you simply don't get there by massive tax cuts for the wealthy. we've tried that. it doesn't work. all that does is exacerbate the inequality that's already in the mix. what hillary clinton does is she takes the revenues from those at the very top who've done the best, bumps taxes up a bit on those folks and uses that to

invest in the middle class and the poor. infrastructure investment, education, college education. >> the simple fact of the matter is -- >> working family. that's the way forward for the middle class and the low income people who haven't been able to latch themselves onto this growth and prosperity. going back -- >> over taxation on redistribution -- >> i got to go, steve. >> going back to the supply side formula, you know, the tax cuts on the wealthy, deregulation, that's just going to get us back into the soup. >> gentlemen, that's a good place to stop. we'll be talking about this again. congratulations. fly the "w" steve calk and jared bernstein talking about the election. by the way, catch our special coverage tuesday night beginning at 7:00 p.m. eastern time right here on cnbc. it was all going so well until taxes came up. when we come back, a rough day for facebook. shares falling despite soaring profits and growth overshadowed by a big warning. the stock is down now 5%.

plus, economists against donald trump, we'll ask a nobel laureate why he signed a letter urging people not to be voting for donald trump. and nfl superstar tom brady to take on under armour, nfl ratings and even the presidential election. we got a big show ahead. stay with us with the dow up 23. . to win, every millisecond matters. both on the track and thousands of miles away. with the help of at&t, red bull racing can share critical information about every inch of the car from virtually anywhere. brakes are getting warm. confirmed, daniel you need to cool your brakes. understood, brake bias back 2 clicks. giving them the agility to have speed & precision. because no one knows & like at&t. we're drowning in information. where, in all of this, is the stuff that matters? the stakes are so high, your finances,

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that would appeal to a child. raising a teenager, that regulated system makes a lot more sense than what we have now. plus, 64 taxes marijuana to fund priorities like after-school programs. personally, marijuana's not for me. but my mind's made up. i'm voting yes on 64. but my mind's made up. he's the drug company big shot who raised the price of a lifesaving pill by five thousand percent. said he wished he'd raised it more. prop sixty-one targets drug company price-gouging to save lives. the drug price relief act will save californians nearly a billion dollars a year. join the california nurses association and aarp and vote yes on sixty-one. the drug giants won't like it. and he'll hate it. welcome back to "squawk on the street." a quick programming note, tomorrow live from the baron

conference in new york city, we'll talk exclusively with tesla ceo elon musk. you do not want to miss that. in the meantime watching shares of facebook reporting earnings after the bell yesterday. the social media giant posted a huge revenue number in the third quarter, but concerns emerging over facebook's growth after the cfo's comments on ad load. take a listen. >> ad load has been one of the three primary factors fueling that growth with a much smaller contribution from this important factor going forward we expect to see ad revenue growth rates come down meaningfully. secondly, on expenses. so it is premature to provide specific expense guidance, as mark mentioned we anticipate 2017 will be an aggressive investment year. adding top engineering talent remains one of our key investment priorities as we continue to execute on our three, five and ten-year growth map. >> joining us now is canter fitzgerald internet analyst

youssef as well as our own julia boorstin. youssef, how does that change the outlook? >> we have to put that in perspective. this is not the first time, david, the cfo, came out and warned the street that, you know, 2017 is going to be an investment year. he did it in 2015 and 2016. clearly there's a trend there. you want him to do that considering so many people are covering this thing and you want to make sure to manage expectations. that said, for our numbers we've taken our revenues down a little bit, a little bit. less than, you know, 3%. but we've actually taken our eps up a little bit. so net-net we've taken our price target up. we continue to think this is probably except for google the best play in growth and online advertising. >> julia, when i heard you first report the numbers yesterday, more than 50% revenue growth, 1.8 billion users, i thought the stock would be up. clearly it takes a lot to please

these investors. and then came that warning. can you just put that statement in context for us? >> well, i think it's worth noting that expectations for facebook were incredibly high. this is a stock that up until yesterday had already beaten each of the prior eight quarters, beaten analyst expectations for earnings growth. so facebook has really been on a tear. expectations are incredibly high. and i think that what we heard yesterday from analysts on the call and also from cfo david wehner was the idea what comes to driving facebook growth, the key so far has been ad load. investors have talked a lot on our air and we've heard a lot from mark zuckerberg about the fact you can't just keep on adding ads because you don't want to hurt the user experience. that warning yesterday from wehner they're not going to be able to keep on adding ads is not really a surprise to anyone. i think what really shook the street and what sent the stock down lower was this idea that it could meaningfully hurt that growth rate.

obviously facebook has other potential growth drivers such as the ability to start making money from messenger as well as whatsapp, but i think investors are trying to figure out how much that growth rate will slow. facebook will keep on growing, just not as fast as it is right now and as it has in prior quarters. >> so, youssef, how does that affect the valuation and stock which is now down 5% but still up 15% so far this year? >> well, that's part of it. so if you look at facebook, the stock is actually up some 22, 23% year-to-date. the average internet stock is up maybe 14%. and that's as of today's price. as of yesterday it was up even higher. so i think you have that. you also have the fact that in general if you look at valuation stock is trading in 23, 24 times p/e or 13 times cash flow, we think that's very attractive for

a company that as julia says has multiple growth drivers. everybody's focused on this ad load issue. remember, ad load is one of three drivers. we think at the end of the day it's not the primary driver. we think growth in users and growth in engagement r rare eve more important than ad load and then you have instagram which just started monetizing. you'll have the kick in of messenger. i think this train has a number of engines that will continue to make it grow probably in the 30% to 40% rates for the next couple years. and, you know, you don't have too many -- in fact, this is the only company in the space with this kind of scale growing at that level. >> julia, i got two questions. one, is there any sense that facebook live is not growing to expectations? and two, on the ad load, is the company giving the sense that people were getting turned off by the amount of ads they were seeing? >> well, to answer your ad load question first, i don't think they're getting turned off because the engagement is

consistent, it's continuing to grow. i think they just realize that there is a limit to how many ads they're going to want to put on there. so i don't think there's a sense that their ad load strategy isn't working. i think they just know there's only -- you know, there's a top end to that ad load for the news feed. as for facebook live, i don't think that facebook live is not working to engage users. there were a number of statistics shared by zuckerberg on the call last night talking about how much engagement, how much excitement there is for live videos and for the video strategy in particular. i think what facebook still has to figure out though is the advertising strategy for video in particular to help steal over some of those television ad dollars. we know that the more time people spend watching video on facebook that provides more opportunities for facebook to show ads in your news feed or wherever. when it comes to those tv style ads in particular, that's where we're going to have to see more innovation. but it's something that zuckerberg and sandberg said they're really focused on.

>> yeah, video first i think is what they kept saying. julia, thank you. and our thanks to youssef sqauli as well. when we come back, according to a letter signed by 370 economists, donald trump is dangerous. we're going to speak with one nobel laureate who did sign the letter in a few minutes. from dg right by our customers. who's with me? i'm in. i'm in. i'm in. i'm in. ♪ ♪ one, two, - wait, wait. wait - where's tina? doing the hand thing? yep! we are all in for our customers. ally. do it right. i've got a nice long life ahead. we are all in for our customers. big plans. so when i found out medicare doesn't pay all my medical expenses,

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370 prominent economists signed an open letter this week in opposition to republican presidential candidate donald trump. and joining us now on the phone is one of those economists, harvard professor and nobel laureate oliver hart, thank you for joining us. >> you're welcome. >> so why did you decide to wait until the politics here by signing this letter? >> well, i think like many of my colleagues i'm very concerned about the possibility of a trump presidency. i think it would be disastrous for the economy as well as for other things. and i felt compelled to speak out. >> what specifically do you think would be disastrous for

the economy? >> i don't think that mr. trump has coherent economic policies. and i think he has advisor who is are not competent economists. so i just worry about what he would do. >> i can't help but think back to brexit when all of the prominent economists and institutions and global elite were worried and warning against voting for brexit and then it happened. and so far the economy and the markets have held up. >> well, i think it's very early days. i think from a pure economic point of view brexit was a mistake. i think actually there were different arguments for brexit having to do with the british wanting to take back control from europe. and actually i have some respect for that argument. but i think it's way too early

to judge the economic impact of that. but coming back to the u.s., i think donald trump, you know, is appealing to some people who feel left behind in economic terms. and i think the position -- you know, it's quite understandable where they might feel aggrieved, but i think what's wrong is to think that mr. trump is actually going to do anything for them. none of his policies make me think that he could actually help or will help the people who've been left behind. >> one of the points in the letter states that he has misled voters in states like ohio and michigan by asserting that the renegotiation of nafta or the imposition of tariffs on china would substantially increase employment in manufacturing. do you deny the fact that some of these trade deals that have been in existence have hurt

american workers and wages? >> i do not deny that, you know, trade deals i think in general are good for the economy as a whole, the u.s. economy as a whole. but they can be winners and there can be losers. and i don't think economists would disagree about that. actually, i think a lot of the reason that some people have suffered in those states is actually not because of trade deals. it's because of new technology, automation. i don't know how donald trump is going to resource that. also, to the extent there are losers the best thing to do is to stick with the trade deals but find some way to compensate the losers as opposed to tearing the deals up. >> oliver, the letter does not mention hillary clinton. in fact, it just says it recommends voters choose a different candidate. a separate letter signed by some economists did endorse clinton. who is the right candidate?

>> oh, i think -- well, i signed both letters. my view is that hillary clinton is a serious and sensible person who will be good for this country. i mean, i don't think she's perfect. i don't agree with all of her policies, but i think she's way better than any of the alternatives. so that's why i also signed that letter. >> don't you worry at all though as an economist, as part of the global elite donald trump has been so appealing because he's an outsider. he's a disrupter and he's going against the global order and people like that. don't you worry aattaching your name and giving more press to the faktd economists are backing him in a fact it actually ends up helping him? >> well, you know, you're assuming -- i mean, this letter may have no impact at all. i don't know. could it have a negative impact? that would be worrying.

but sometimes you just have to -- i mean, i felt that i had to sort of stand up and say that this guy's not good for the country. you know, i think he's sufficiently bad that it's important for people who study economics to actually, you know, stand up and be counted. i certainly hope it doesn't actually work in his favor, but my guess is it probably won't. it's more likely not to have any impact at all than to work in his favor. >> all right. well, we certainly thank you for joining us on the phone to talk about your signing of that letter. oliver hart, harvard professor, nobel laureate, won his nobel in contract theory negotiations, carl. when we come back, medical companies spending a record $109 million to fight a proposition on the ballot in california. we're going to go to los angeles, see what's at stake. later on, nfl superstar tom brady will weigh-in on everything from nfl ratings to donald trump.

we'll talk to him exclusively. don't go away.

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built for business. good morning everybody. i'm sue herera. here is your cnbc news update at this hour. britain's high court ruling the prime minister cannot trigger the uk's exit from the european union without approval from parliament. the government said it would go to the supreme court if necessary to challenge that ruling, which if upheld could prevent the government from starting exit talks by march 31st. isis leader abu sbz bakr al baghdadi releasing his first message he called on people in the province to continue the fight. in an audio recording he also called on saudis to attack security forces and government supporters in their country. german police have arrested a syrian man in berlin on suspicion of being a member of a foreign terror organization. he had been living in germany since 2015. he was arrested in an apartment in the city.

back here at home the curse is over, as you probably know, the chicago cubs winning the world series for the first time since 1908 with a dramatic 8-7 win in ten innings over the cleveland indians. the indians now have the longest world series drought in baseball. they haven't won since 1948. that is the news update this hour. now over to jackie deangelis with the eia inventory report. good morning, jackie. >> good morning to you, sue. natural gas inventories out from the department of energy, an increase of 54 billion cubic feet. just slightly less than expectations. we were trading 279 before the report, you can see we have a slight bump here in prices, but this trade we're seeing the tide turn a little bit. that's because take this 54 bcf, we had a 58 billion cubic feet injection at this time last year, the five-year average 63, so we're in the range that we need to be in. but overall stocks are now just a hair under the all-time high that we saw last november. so we're in good shape as we

head into the winter. yes, we're starting to see demand pick up a little bit specifically right now in the midwest, but we could potentially have a mild rest of the fall and a little bit of a late winter like we saw last year. so right now this trade under $3 seems to be the fair value for nat gas. sending it back over to you guys at post nine. and say hi to tom for me. >> okay. jackie, thanks so much. jackie deangelis. california meantime is getting ready to vote on more than just the next president. state is spending half a billion dollars on 17 propositions ranging from bullets to prescription drugs. our jane wells is in l.a. and joins us with more. it's good to see you, jane. >> hi, carl. good to see you. you know, nobody breaks ground on issues like california. look at this voter guide this year. it's ridiculous. up to 17 propositions, the granddaddy of them all is prop 61. and look at this. drug companies led by merck and pfizer are spending a record $109 million to defeat the proposition because it would cap drug prices.

but supporters have pulled in a popular outsider. >> we need your help the entire nation is looking at california. >> now, specifically prop 61 would cap prices for drugs bought by the state for employees or by public unions. that cap would match the federally mandated discount paid by the v.a., but veterans groups are against the proposition along with every major political party and newspaper because they're fearing passage would lead all prices to rise. so the cap would rise too. >> that will happen if the drug companies punish people by raising their prices. that's the only way it can happen. >> it's not logical or understandable why some of these medicines are so expensive. >> the problem is is that the details in proposition 61 matter. and independent experts like california's independent nonpartisan legislative analyst has raised red flags saying there's a possibility that if prop 61 passes the state could pay higher drug costs, not lower drug costs, higher drug costs.

>> okay. now, prop 61 would only affect about 4 million public employees and prisoners and people in some medicaid programs, but it could set a national precedent. but get this. the aids health care foundation is pushing for support, it provides drugs, sells drugs to its clients through the state's largest health care program and coincidentally medical is exempted from the prop 61 price caps. see what happens tuesday, back to you. >> jane wells in l.a. thanks so much. of course the outcome remains clear but no doubt the election will have major implications on u.s. business from everything from trade, job and taxes. joins us at post nine for his insight, former medtronic chair and ceo, bill george good to have you here. >> thanks, carl. >> your point is no matter who wins business is entering a truly new era of anti-globalization, starting in europe and making its way here. >> yeah. i followed elections going back

to eisenhower. we've never had a case where we had -- now we have both candidates picking up with this populist wave. i think ceos have been smart to stay below the radar and not get caught in the crossfire, but starting november 9th they're going to have to get out and advocate for the things they want, a pro-growth policy at the same time build a fire wall against some of the things that both candidates have put forward. >> i'm thinking of like immelt at ge who has written about this is not going to go away any time soon, so they're thinking more locally, right? trying to localize some of their business units. is that what you see as a model? >> well, yeah, but ge is totally dependent on global growth. we've driven it on good cash and good earnings and a lot of financial engineering for the next four years to grow it we have to have global growth. that's what companies are going to have to do. i was with a company called rpm, most successive company no one

oos ever heard of, grown at 20% for the last 20 years compounded. why? they give companies a global marketplace to go after. business cannot stand a pullback from globalization. but here's the key, we've got to have more empathy and we have to have plans to take care of all those workers that can't find work. so i think a massive retraining is going to be required of the american workforce. it's not just for today's jobs. our workforce could be obsolete by 2020. if we don't move quickly, it's not just going to be coal miners in west virginia out of work. we've got to move to get our own work forces. i think it's a combined business effort and government. more vo tech education for young people, more apprenticeship programs, they have these all over north carolina. piedmont community college has 70,000 students, mostly people trying to engage in in vocational technical education. >> what about drug pricing as jane just referenced? it's on some state ballots, but at a national level do you see any practical solution whoever wins the election could put in

place to cap drug prices? health care is now the worst performing sector so far this year. >> isn't it amazing all the emphasis on obamacare and there's been no talk about it in the election? i can tell you it's going to be a big issue in 2017 and 2018. we're going to hit the wall on medicare, medicaid and all the costs of obamacare. i am not on this repeal and replace. i think we've got to improve what we got. but the drug companies and i think the health plans need to show some restraint. this idea of some had on the show from mylan, you can't just keep jacking up prices. >> but you do expect a national response. >> there's going to be a huge response from the congress. and it's going to come from both parties. this isn't just a pro-democratic thing. they're going to respond and they're going to either cap prices or the drug companies better move quickly. the same is true of the health plans. this consolidation as you know it's been blocked, but i don't think that the higher rates are going -- there's going to be a real reaction in the american public to that. >> do you think we're becoming

more like europe? that we're going to have sort of our own national front party, we're going to have our own la pen and that's going to be something companies will juggle for the next 10, 15 years? >> politically i do. >> you do? >> i do. i sure don't want our companies to become -- we dominate virtually every world market, carl. we only do it because we're global powers. it isn't just goog ls and ges, it's all these smaller companies doing a fantastic job of dominating world markets. my former company, i'll tell you every time medtronic put up a factory in india or china, we added three workers in the united states, r & d, marketing, manufacturing process people. so this myth that somehow putting a factory up overseas makes no sense. look at ford, they put big cars in detroit, expanded workforce and added workers in mexico. is that a bad thing? of course not. you need to stay with global economics and compare it to workforce events. >> the rise of automation, one of the economists we were speaking to is probably more responsible for the loss of jobs than actual movement of

factories overseas, but this is only continuing, bill. it's only going to be more and more of an issue as machines replace people. >> you're 100% correct. and the people in silicon valley worry the most about a.i. this is going to get a lot worse. businesses need to move forward so they can handle extremely complex computer aided design, machines, everything else. the manual jobs are going away. what's the answer? you have to upgrade the workforce. it's not just about getting a college degree. it's about having skills. if you don't have skills in this workforce, you're going to be ut of a job. big task. >> huge task ahead. good to see you. >> thank you for having me on. >> bill george here at post nine. quick programming note tomorrow on "squawk alley" live from the barren conference in new york, we'll talk exclusively with tesla ceo elon musk, perhaps about some of these issues we just spoke about with bill. that's at 11:00 a.m. eastern time. don't miss it. as we head to break, look at shares of fitbit. you can see it right there the stock getting clobbered down almost 30%. this on weaker than expected

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lives in the neighborhood. was it pretty loud last night in wrigleyville? >> yeah, it kind of calmed down about 3:00. we're going to pay the price around 2:00 when the entire city of chicago falls asleep. >> we have plenty of time to wake up because the next baseball season, boy, we'll g going for a two-peat, that will be pretty neat. when it comes to today's data, to me the durable goods component, it's always one of my favorites. when we look at orders, nondefense ex-aircraft, that's down a lot this year, but it made a little bit of movement. what are your thoughts there? >> yeah, i thought that overall today's data, nonmanufacturing as well sum it up it's disappointing. wasn't necessarily game changer for the fed, but if they want continued evidence that they should raise rates in december, today was a non-day. now, tomorrow's the big day, but today you didn't get it. >> you know, i love having richard fisher as part of the cnbc team, because he really kind of speaks the way it is. and he sounds a lot like us. okay. whether you look at the bank of

japan, whether you look at the bank of england, whether you look at our fed, and you consider the way markets have moved, i mean there's really only one conclusion that i come to. what conclusion do you come to? >> all central bank stimulus is fungible. >>. let's start with that. doesn't matter who does it as long as it gets done. but the conclusion you're getting from all of them is we might be at the end of the line. now, for the last couple of years interest rates have been driven lower all the way to negative by central bank buying. they buy bonds, put them away on their balance sheets and people thought they were gone. we've been constricting the supply. if that's ending, this is a huge deal for the bond market. now, the bond market's not completely sure it's ending, but if we're going to get to a point where the central bank buying is done and maybe it's an inflation driven thing, it will be very difficult for the bond market to move forward from here and for all other markets like the stock market as well, too. >> all right. you gave me an interesting anecdotal fact about brexit and the betting polls. tell our viewers quickly what

you said. >> trump has never traded above 50 meaning that he'd be the favorite to win. he traded 39 a little while ago. his all-time high was 44 back in may. so he's starting to approach all-time highs. brexit never traded above 50 until two hours after the polls closed. so this thing could go all the way until after the polls close next tuesday if this trend that you see with trump and the betting markets continues. betting markets are the aggregation of consensus opinion. doesn't mean they're right or wrong, it's what everybody thinks. he had an 18% chance of winning last friday before the fbi report. he's at 39% right now and leads the polls. >> real quickly, prime minister may, what's going on with parliament, the necessity and potentially put into a vote? to me this is unbelievable. have any of these brexit lessons hit home to any of the ruling class? think that final scene in "frankenstein" with torches and pitch forks, your comment. >> i agree. they have to be very careful.

the public voted. they wanted brexit. if you're going to try to ignore it by finding a procedure to get out of it, they'll fall. >> change from brussels to parliament and, boy, how long will the confidence in that government last? >> not long at all. >> if you like this discussion, we're taking it to cnbc pro and we're taking the gloves off. not the hat. just the gloves. back to you. >> all right. you have to wear it all day, rick. thank you. the pound certainly likes it. it's at its highest level in a month against the dollar. send it to jon fortt with a look at what's coming up on "squawk alley" at the top of the hour, jon. >> we have a packed hour. we've got the ceos of adobe, hp and godaddy. we're going to cover your software, your services, your cloud, small business, large, a lot to dig into with new things coming out of adobe max this week. also we're going to dig into facebook's results and more. it's going to be a packed hour on "squawk alley." sara, you should stick around. >> i think i will be doing that with facebook shares off the lows. when we return, our exclusive sit-down with superstar quarterback tom brady. his take on trump, under armour

and those declining nfl ratings. much more ahead. stay with us. so is donald trump that person to take it -- to help america? >> that's for america to decide. what's critical thinking like? a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create,

not just wealth, but things that matter. morgan stanley

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tom brady helping under armour open its first store in boston last night. we spoke exclusively with the four-time super bowl winner about a whole range of topics including the ceo's leadership at ua. take a listen. >> i've learned a lot from him, you know. he's one of the most positive people i know. he's a great leader for his company, and, you know, the people respond to him. his employees and what he's created over 20-plus years in business is really amazing. so, i mean, i think he's living the american dream and to start, you know, at maryland and think of one shirt and how that could transform the entire sporting world is pretty remarkable. what he's built, you know, and what he continues to build and what his dreams and aspirations are, i mean, it's great to be part of all those things. >> we also asked him tact state of the nfl and the recent ratings decline. is it possible we asked there are too many nights and the nfl product is getting diluted?

>> i think that remains to be seen. it may be. the it is, the nfl will change it. they want to do what the people want and when the people respond a certain way, they certainly listen. >> brady says the league may be stretched too thin. we could not let him go without of course asking about the election. brady, who famously had a make america great again in his locker briefly quoted gandhi, actually, talking about his stance on trump and the election. listen. >> he sent me that hat when he first got into the race a long time ago, so, you know, i think religion is a little like politics and a little like medicine and a little like a lot of these other controversial things where there's never a right answer and never a wrong anxious and there's a lot of people on different sides of the fence. that i believe, you know, we're all responsible for doing our best to help change the world, you know. i think gandhi said it best. he said, "be the change you wish to see in the world." i think that was a great way to put it. trying to just do what you can

in your own society and your own community and your own family to help your own family grow, that's where my focus has been. >> wouldn't exactly say whether he was a trump supporter, david, but clearly that has been the big question. he sort of dodged the question in a number of press conferences recently. he also talked about the proliferation of nfl content including on twitter now and we've got that for "squawk alley." but we also asked about whether maybe he blamed the league and roger goodell at all because he got suspended for the first four games. maybe that led to the ratings decline. he said no, that wasn't it, probably more like the election. >> that's an interesting story as this season progresses, nfl ratings and their weakness thus far and whether or not after the political season is over they will rebound or not because it goes into the whole ecosystem in terms of what the nfl is getting paid, what it's being paid by the broadcasters who are dealing with unbundling. there's a lot there to get to.

>> you wonder if the league's stance of blaming it on the election, what happens after next tuesday? we're still going to have, what, half of america upset about the results of the election and whether those kind of cable rate lgs stay in. speaking of ratings, watching disney shares outperforming today for a change. >> for a change. obviously continued concern at espn. it's never been clear to me that the election is why the ratings are down, but who knows, maybe it was or maybe it is something that is going to be a seminal change. i don't know. football's still kind of fun. >> just on that under armour note. wanted to check shares of adi s adidas, which did report overnight. under armour and nike hurt by the resurgence of adidas especially in the u.s. somewhat disappointing numbers overnight, especially on revenues, adidas shares in europe down almost 6%, but they have been on a tear so far this year thanks to the weaker euro and thanks to better business prospects as i mentioned in this

country, north america. >> glad you got adidas in there. >> we hit under armour nicely. >> not a show unless we mention adidas. did we get the mexican peso? >> no. i'm so glad you mentioned that. getting a little relief, but it has been hammered more than 3%. >> now i can rest easy. thank you, sara. that does it for "squawk on the street." more ahead on "squawk alley." stay with us. it's your tv, take it with you. with directv and at&t, watch all your live channels, on your devices, data-free. switch to directv and lock in your price for 2 years.

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good morning. it is 10:00 a.m. at wrigley field in chicago. it's 11:00 a.m. on wall street. and "squawk alley" is live. ♪ welcome to "squawk alley" for a thursday. jon fortt is back at post 9, sara eisen will join us for the hour along with henry blodget, business