♪ >> live from new york where business never sleeps, this is "squawk box. >> good morning. welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. big day for the markets yesterday. regaining a lot of the ground they lost last week. we are back to where we were a week ago with the gains we saw yesterday. this morning, the dow at this point indicated down by 88 points s&p down by over a point and a half nasdaq indicated up by 38 points in asia, the hang seng was closed for a public holiday. the nikkei was up by 1.29% stocks were higher in china, up by 0.60% in europe already this morning you will see at this hour it's a mixed picture there. the dax is down by 0.4%.

the cac is flat. the ftse is up by 0.2% markets are weaker in italy and in spain finally check out treasury yields they kicked things off a couple weeks ago with the moves we saw. the ten-year note is yielding 3.169%. netflix shares are soaring after reporting better than expected profit and a rise in subscriber numbers joining us to break down the quarter is senior analyst from br riley where do start did you have any sense -- clearly the market did not appreciate what was happening here >> i think subscriber growth was suggested to be strong that played out. i think the stock market anticipated this type of strength the market reaction is great,

but you can poke a couple holes in the report. their margin outlook for the quarter had really taken a dive from the third quarter and revenue per subscriber, rpu growth slows in the fourth quarter. >> is that because of the international mix? >> that is a number of things. one of them is currency. so international another issue is they're moving more into lesser developed countries and experimenting with lower priced plans and i think they're lapping the big price exit they put through about a year ago and i think the thing about netflix, with the stock at 120 plus pe, you have to believe that margins are expanding and pricing leverage is robust to make an investment case. those two things were items you could poke at in otherwise a great report what does saturation look like eventually >> that's been the incredible thing. i thought for a long time that

there can't be that many more people in this country who don't already have the service yet they had nice upside in domestic subscriber additions, adding more than 1 million new subscribers in this country. they did 7 million globally. in this country surprising growth and internationally things might be kind of leveling off a bit in latin america, but they are taking off it seems in asia in particular in india that's the new area of growth for them >> for so long we would talk about their programming costs as a potential challenge and whether they would have to dial that back. given the numbers they're delivering on, it only seems like the strategy is working >> yeah. they have gotten the scale and subscribers to spend more on programming than anyone would have imagined possible a few years ago. that's creating this great sucking sound of content heading towards them and away from their traditional tv competitors

i thought it was interesting and almost cheeky in the investment letter they had a shout out to the new fox for exiting entertainment and focusing on news and sports. what's the message they're sending there? >> the message they're sending is, one, i think fox's move is a smart one. but, two they're encouraging competitors to get out of their way. >> let's try to look into the crystal ball for a second. in 12 months from now ostensibly there should be more competition. >> there will be we have not seen what apple arrived with you'll have the disney product, which i think will be probably the biggest competitor, and whatever this new hbo plus warner media project looks like. >> right >> do any of those -- do you think to yourself that anybody would drop netflix for one of those? do you think they all become complimentary to each other? >> i wonder about pricing

leverage and how much they want to spend to stay competitive the disney product will be priced less than netflix it's interesting that their pricing growth is less in this quarter. may maybe -- >> on the other hand, the hbo product with warner media will be more expensive. hbo is typically more expensive than netflix already if it's an hbo plus situation, i don't know where your expectation is for that product to be priced at. >> they'll have competition above, competition below, competition to the right and left it's taking along time for the big battle cruisers of the traditional tv world to respond to this way of delivering content, but they're getting there. it will be a more competitive different world for netflix 12 months from now than today >> thank you >> thank you ibm out with third quarter earnings the dow component posting a mixed quarter and a return to

shrinking revenue after a short respite from falling sales joining us is lisa ellis from moffitt nathanson. number one, i was looking at the chart, it is concerning because it looks like it will start testing moving averages, long-term support. >> yeah. >> they're at sp137. >> yeah. if it fallsthrough 2016 levels i don't know what the next stop is and it's 1$130 billion company now when facebook and google and what we think of technology now, ibm is not even there anymore. it's such a familiar name, big blue, watson, everything we talk about. we give it importance. >> yeah. >> but the story is it's deja vu all over again >> it is revenues came in light again it feels like deja vu. they missed on top-line. they missed on pretax profit as well they made the eps number due to a one-time tax number.

>> it's like what they used to do >> hitting repeat on the last six years. yeah the challenge is i think we all love ibm we would love for this story to turn around. s they're such an american icon. the challenge is -- we're six years into this journey. it's been six years since they started the turnaround there the problem is they still six years in have a major anchor in their portfolio. there's 40% of revenue at least that is punching above weight in profitabilities. close to 50% of profits in areas of enterprise i.t. in decline because of the cloud like data center outsourcing, traditional on-premise license software hardware support they cantake actions to slow the declines to extend the trend, but those areas of enterprise i.t. are not coming back that is displaced by the cloud

>> maybe we should do six months in the previous quarter they had 25% growth in mainframes they had 1% year over year this quarter. they're saying demand is picking up how do you go from 25% to 1% >> it's cyclical the mainframe is cyclical for ibm. believe it or not the mainframe still matters a lot to this company. and it's cyclical. they release a new one every nine or ten quarters so the last release was this quarter last year. so they have now lapped it so this kind of hope that we've seen out of ibm for the last few quarters has been driven by that cycle. they had a strong mainframe cycle this time around, as soon as we lap it -- >> meaning you won't see strong growth for another four, five quarters >> that's right. that's consistent with commentary out of management yesterday on the call, which is that if we're looking out early

2019, we're facing three more quarters of lapping the strong growth in the mainframe which is a couple point head wind to the top line then they have fx and the real weak spot, a surprise weak spot which is what is taking the stock down was in the software business down 6%. the software business is only 25% of revenue, but 50% of profit >> watson, too all the sexy stuff was down 6% >> exactly so it just illuminates that as much as watson is a terrific initiative, it's still really small. they are out of balance still, even with all the effort they put in to watson and ai and blockchain, digital. >> what's your takeaway on the stock? >> look, we're sell rated on ibm. i love this company. i wish we were not negotiaative. >> tough love.

>> but the reality is the time frame to when we could see this thing really turning is years. we would love -- six years in we would love this to be next year or this year the reality is that we're still talking about a significant out of balance in the portfolio, that is the time frame of burning through that piece of the revenue profit that is in structural decline >> 60% of the revenue outside of the u.s., you mentioned fx that won't -- dollar is getting stronger. >> yeah. >> that won't help >> no. >> you know, watson is good at jeopardy, except final jeopardy they were asking about an american airport and they gave all the parameters, it guessed one in frotoronto. >> that was a long time ago. >> couple years ago. watson is smart, but he can't

figure out the difference between a canadian airport -- i knew there were problems then. i don't know then you have to worry about whether watson, as it gets smarter and smarter, does he need us? does he care about us? how does he feel about humans? we don't know with ai. are they ambivalent? i don't have any reason to think they'll need us 50 years from now. >> yeah. >> that's a longer-term problem. if ibm is still around so a sell? >> yeah. sell rated here. ibm pays a 4% dividend >> we hope >> so the argument against is at some level this is a good place to hide out an capture the dividend in a rising rate environment if we see rotation into bonds out of this type of stock, we could see additional pressure on valuations

so it's -- and the outlook on top line and the thing that concerns me the most is the outlook on the profit stream because what they're burning off is so profitable in the last six years they've shed 20 billion in revenue but almost 40% of profits. just illuminating how profitable those base core businesses are >> and how much less profitable the new stuff is >> thank you, lisa ellis >> do you have a preference? we have had them both on separately and together. >> i love them both. >> sort of ying and yang they compliment each other >> yeah. michael nathanson does more of the media internet and craig does, you know, telcos >> i've seen craig throw michael under the bus.

i have >> it's happened >> at your urging. >> at my urging. they're funny together >> they're good. >> joe likes to stir the pot >> i do. it was about the 50/50 call, i think mike the or crachael or c at&t 50/50, wow, giving me guidance which way to play these things >> thank you >> thank you we are continuing to follow a developing story out of the middle east today. secretary of state mike pompeo arriving in turkey a short time ago. he is holding talks with turkey's president erdogan is he there to find out what happened to the missing saudi journalist, jamal khashoggi. tom p we'll continue to follow this story as we see more developments you can see right now checking oil prices, wti down by 37 cents to 771.55. a lot of speculation on whether

or not saudi arabia would pull oil off the market in response to anything that would come resulting from this. most commentary suggests they wouldn't do it >> this is the wildest story did you see what the "new york times" did i have to say it's real remarkable work on this. they have now connected the 15 people -- some of the 15 people directly -- >> the one was a good friend >> they have each one with the pictures, you see them next to each other constantly. it's going to be hard to -- the whitewash plan, i think, that will be very difficult don't you think? >> yeah. what's the alternative is the alternative, okay -- like -- >> tom freedman -- >> did you see what lindsey graham is saying the guy has to go if he did this >> tom freedman says this morning in his column on one side you basically want the reforms that are going on in this country you want the relationship with

the country, yet you need to discipline or at least gesture or suggest that this is not something that is acceptable the question is how do you do that with a regime on the other end that might take some form of retribution, whether it's economic retribution or do you destabilize the country? if the country is destabilized, what does that mean for the region it's not easy. >> but the idea of mnuchin still going to the conference seems like the most mild of rebukes possible if you pulled him from that >> late last night christine lagarde stepped out after having said she -- >> at the imf? >> she said part of my job is to go all parts of the world. last night she stepped away from this more and more people are stepping away. >> is there a thought they might cancel the conference, too >> the hope, of course, was the whole time that -- larry fink

talked about this, canceling the conference i'm told the opposite was at play yesterday, there was some speculation that at some point if, in fact, the u.s. and saudi come up with a press conference explaining what happened, and they were to do it quickly as in today or yesterday, they would then try to then encourage the ceos who already said they weren't going to say, actually, look, we came up with a resolution now you so go. >> if you're saying -- if the official line is they're going to thoroughly investigate it, it's not going to be done in a day. >> it's so front and center these people are left with no choice, including lagarde. i can just tell you, six months from now there are meetings that go on with regimes that have done much worse, and you still have to -- as distasteful as it is, the part of the world -- the real world versus the idealistic world that people want are far apart.

>> this was done with such -- >> no one has a choice now, but even if it turns out it was ordered and orchestrated, it's not like they'll become an international pariah they're saudi arabia they're going to be part of the -- part of -- people will deal with them people deal with iran. look how quickly europe after that -- after we did the iran deal, they were so quick to go back in there. oh, god, we can do some business in iraq. with all the human rights violations >> a lot of nations have human rights violations. >> but exporting terrorism and everyone else they do. >> it's a complicated topic. >> it's still a -- there's parts of this world that our values don't apply whatsoever >> right let's talk more about business bank of america ceo brian moynihan sounding off on the u.s. economy at a cnbc net-net

event yesterday. here's what he said about growth and the fed's plan for hiking rate rates. >> they have been very transparent. they say the ratees will neutralize to neutral rate, is that 3ish? some people say yes if you are sitting here saying anything that doesn't fuel the economy adds risk, i can see why somebody might say that. that's not how the fed operates. i don't think you need to overread is. you just look at what they say they have done what they said slowly but surely. the minute they don't think the economy has growth, they'll stop >> in terms of what he sees for the economy, he says things are moving around. he talked about how in the third quarter bank of america customers spent 7$700 millions

that they took out of atms and wrote checks on. he said that number is 8% higher than a year ago. and that's strong growth in 2015 and 2016, that number was 5% he sounded very calm and relaxed. he sounded like for as long as he can see there are no problems on the horizon when it comes to the economy. he said they'll be watching housing closely. if you would like to get more on that interview including the impact of technology on the banking industry, go to cnbc.com. when we come back, we'll talk about what's groodriving t markets, from rising rates to earnings reports how you should prepare your portfolio, that's next right now a look at premarket winners and losers in the dow. right now boeing is leading the way.

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welcome back earnings season is in full swing. let's check the markets. joining us now to do that is james lu head of research from cle clearnomics and also joining us is chris burtelson a lot of companies we're hearing from are giving us positive guidance, particularly looking at the banks but there's still some questions about what's happening in the economy. the stock market did pick up where do you stand on all of this >> the crash we had was sort of a mini crash, powell-induced >> 5%. i don't know if i would call that a huge crash. a pullback >> 7% in nasdaq. i think very much expected my view is the market will shift to earnings driven in technology adobe a couple days ago, netflix

last night blew it away. i think by the end of next week this becomes history and some things that are right in the news cycle, if saudi arabia comes out clean, then that's over with in three days to me the fourth quarter of a 6-quarter presidential midterm cycle is the best. it averages up over 7% so i think the averages are going for us the only wildcard is will we have a change in the house and maybe the senate and how the market reacts to that. i think it's good to go. >> you think the wobbliness in the market is behind us and it's straight up from here? >> absolutely. not straight up but we'll have a good fourth quarter. >> james, how about you? >> we are positive on the markets, but we think there will be increased volatility here in some ways the big swings are reminiscent of what we saw in 2010 and 2012 when we had these

risk on andies m off d risk offs earnings will still be good even if we hit peak earnings expectations the actual growth numbers will be strong. then there are questions about the fed. the focus right now is should the fed stay on this path. and to us the bigger question is if there is an economic shock will the fed have the impetus and wherewithal to act on it as in the past. >> there are questions about the economy. this morning credit suisse is taking down its rating for home depot and lowe's based on the issues in the housing market they say just based on what's out there, it wouldn't be a surprise if the weakness in the housing market caught up with these stocks what do you think about what's happening in housing, what's happening in the broader economy? are there issues, signs of cracks that say to you the fed should slow down >> we think the overall economy

is healthy the fed should continue on its pace this pace is moderate. talking about inflation that is acceleratin accelerating unemployment rates at historic lows that's the baseline level. with that interest rates are rising so you will see a feedback effect but broadly speaking consumers are strong now consumer net worth are at strong levels >> chris, if you like stocks in general, is there a sector or a few stocks you like the best >> in the technology sector, qualcomm, they make a deal with apple on the courthouse stairs i think they're a big leader in 5g and if you want a more expensive stock, square. unfairly punished. it gets back to its old highs. >> chris and james, thank you very much. >> thanks. coming up, get ready for the trading day ahead. we'll show you how the economic data and earnings reports that are coming out could move the

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♪ welcome back, you're watching "squawk box" live from the nasdaq market site in times square good morning, everybody. among the stories that are front and center, shares of netflix are surging after the latest earnings report. the steaming giant beating wall street's expectations adding 7 million new sub skrscribeubscris that's above what was expected it was the lack of growth that caught the street by surprise in the july quarter that sent the stock down netflix shares are now up 10% to $381 ibm's earnings beat forecasts but the revenue number concerned the street the company says there are signs demand is recovering but shares are down by almost 4% this morning down to $139.43.

united continental reporting better than expected third quarter result and the airline is raising its profit forecast for the year higher fares and cost cuts hurt surging costs. there is an upgrade from deutsche bank this morning, not only for united but also for other airlines american and delta raising because of better than expected fuel expense recapture don't miss united's ceo joining us at 8:00 a.m. eastern time on a cnbc exclusive interview. u.s. equity futures at this hour are mixed the s&p down by 3 points dow down by 93 and what you saw already from ibm, that stock down about 4%, home depot is the other big decliner on the dow. nasdaq is indicated higher, up by 36 points. time for the squawk planner.

september housing starts due at 8:30 a.m. eastern time on the earnings front, reports from abbott labs, u.s. bancorp, m & t bank and winnebago pse&g's investing in efficiency spending billions to develop a green grid so customers will use less of its product. joining us is ralph izzo of pse&g. it's good to see you as the chairman and ceo of a utility, what do you wake up thinking about now efficiency, clean energy, lower prices >> no, the number one thing any utility ceo thinks about is reliability but also helping customers use less of our energy >> we would all like to do that. the less you use to get the same benefit the more -- like, that defines renewibility right

there. we can do that with technology, smart grids, the right type of the meters how much is still just going up in the air unused? how much is wasted >> it varies depending on whether you want to look at just economics or what is technically feasible but anywhere from 10% to 30% can be reduced overtime. what you said a moment ago is important. we're not telling people to put sweaters on when it gets cold out or sweat when it gets warm out. we're talking about preserving your lifelifestyle, do everythi you want but using devices that are more efficient >> our governor, a democrat, is big on clean energy and emissions control. you want to make it clean. he has a proposal that's extensive. you will try and recoup the expenses through the efficiency you're talking about so you're still looking at paying more to achieve the less emissions that will cost more. what do you -- how are you

making it clean. >> by using less energy, it's less of all of the above you have to convert a fossil fuel or you'uranium 238 into a , and with that there are byproducts >> why will it cost more if you're using less? >> most people view opportunity costs as higher. if you're a hospital, people don't come to your hospital because you use less energy. it's because you have the best equipment and the best doctors so customers are reluctant to make that investment we have to insecent them to do that where do we get that money from other customers the question is are we targeting the right customers for energy efficiency we think we are. we will target public use, hospitals, low-income customers. >> i could see -- it will be an extra $9 a month eventually by

what you're -- >> that's only if you're not the beneficiary. >> certain customers it will cost $9 a month. other customers it will save $10 a month. >> and you're actually getting efficiency, you're not just making it less emissions you are actually spending more to be more efficient >> if you draw a bubble over all customers, the total bill goes down yes, there are some who will benefit more because they actually get the l.e.d. bulb, they get the smart thermostat, others will pay more because they didn't get that l.e.d. bulb and that smart thermostat. when you add it all up, the overall bill to society goes down >> five years from now, what's your main feed stock >> for our company it will still be nuclear, but for our industry natural gas. >> will be natural gas >> i think so. >> there's a way of getting -- for whatever reasons, it's cleaner in terms of emissions

and pollutants >> everything is relative. so natural gas is a much cleaner air from an air emissions point of view. >> and cheap >> very inexpensive. >> that's still something you have to think about. >> we just built three natural gas plants we're not anti-natural gas at all. >> let's talk about cybersecurity issues that's something we talk a lot about on this show i know it's not the first thing you think about when you wake up but it must be a concern to you, too. >> it's in the top five, and there's certain things we do depending on the asset we're trying to protect. candidly i don't like to go into detail, we treat nuclear plants one way, transmission systems a different way and customer information a third and different way. >> in terms of overall costs, security is what component, do you think? >> it's millions of dollars. >> right is that still nominal relative to your total costs?

>> our number one cost is always fuel, just in terms of -- >> just just in terms of manpower, employees. >> it's low single digits in terms of the whole piece of the equation >> how much do smart meters cost why is new jersey so bad 48th >> we're estimating about 7$700 million for smart meters that's an area that is long overdue for investment in new jersey if we can get much more meaningful data on how customers use energy, we can then help them manage their energy so much better when we read your meter once a month, we don't know if it's your air conditioner, refrigerator, lighting system that is causing you to may more than you need to pay if we can fnarrow that down and apply data analytics we can get smarter about the big energy consuming object in your home. >> do you have a direct phone number >> last time you did this you tried to do that becky saved me >> well done, ralph. run away

>> short hills where i live, it's an affluent neighborhood. why do you fix us last you think these people don't need us? >> they're fixing the masses first. >> they know you have a generator, my friend >> it takes so long. >> do you do that on purpose in is it because i ask you for help i won't reveal the real reason >> it's because the driveway is so long. >> if you get through the gate if i don't release the hounds. >> if we can restore a couple hundred customers -- >> kuwait. >> his number is 555-1212. >> honestly, it is a good system when it's out and i call but it's usually, you know, six days or something. you do get an answer >> good to hear. >> so you're not going to -- let's go to break, we'll talk

more >> coming up, when we return, the ceo of allianz will join us. we'll find out where his company is investing trillions and much more about the blockbuster quarter for netflix, what it means for the rest of the f.a.n.g. stocks and what it means for disney and everybody else later, united continental shares are rising we'll have an interview with oscar munoz.

time now for the executive edge employees at u.s. steel are set to get the biggest wage jump in at least six years under a new deal that was negotiated this week that's according to a reuters report that says the company is going to hike pay by 14% over a four-year period it's a sign that president trump's clamp down on foreign imports is bolstering at least the domestic steel industry in this case. okay barry diller warning the media

industry it will not be able to catch netflix. i sat down with the chairman yesterday and had some provocative things to say. >> they have such a lead that there is nobody that is going to compete with them at that level. doesn't mean other people are not going to have successful streaming services of 20 million, 30 million. but to think that you can invest whatever you think you can invest and ever get up to their numbers is kind of a fool'ser ran. >> after the bell last night netflix reported it had hit 137 million subscribers. we'll have much more of this interview throughout the morning. recreational marijuana is now legal in canada. this was the scene [ cheers ] this was the scene last night as the first legal ounce of weed

was sold the man behind the counter is bruce linton of canopy growth. that store is now closed but it will reopen at 7:30, and we'll go live then and talk to bruce people last night said this is the most excited they were about anything in their lives. seriously. >> except this next story for certain people roll out the -- andrew, you will win. you think you're going to win. i know >> can't win if you're not in it you're not sure what you will spend the money on >> i didn't play the lottery this time because i forgot my kids and i had a whole conversation in a taxicab over the weekend about what we would do with the money. that's the conversation. >> the mega millions jackpot hit a record 8$868 million you have a really good chance of

winning. that's because no one -- shocking no one had all six winning numbers, because it's only 1 in 800 gazillion that you might get it which could happen >> you're saying there's a chance >> i really don't think it is. i think you round down to nobody wins i think those are fake people. this is last night's drawing the jackpot has been growing since july the next thing is we tell you what you can take home in a lump sum. the drawing is on friday >> i will buy. >> if no one wins, the jackpot will hit $1 billion the largest ever >> "squawk" pooled its money we all played. we didn't invite you two. >> you didn't tell us? the whole place? >> on any given day just have a little fantasy, what would i do with $1 billion >> it's good to have dreams. >> just save the money save it. >> save the dollar the dollar will never get me the dream. >> you don't need the dollar

>> you are saying i can dream without the dollar >> i'll buy your tickets for you. you may not win. i'll go wait in line give me the money. >> he will never wait in line. he'll let me dream >> exactly sorry, you didn't win this time. >> i'll get you twice as many tickets. i promise. when we come back, a company delivering fresh organic baby food each week based on your child's age and tastes looks like the dax is down by a third of a percentage point. the cac is flat. the ftse is up by just over 0.10%. we'll be right back. at&t provides edge-to-edge intelligence, covering virtually every part of your healthcare business. so that if she has a heart problem

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welcome back to "squawk box. parents around the world pump billions of dollars into the baby food industry every year. joining us now with he plan to disrupt that industry, co-founder of baby food start-up

ume. >> it's adorable, yes. >> tell us about this business i should say she is a former journalist both at "the new york times" and "the wall street journal. >> yeah. >> how did this happen >> and actually, you're the one who hired me at "the new york times. several years ago. >> this is true too. >> i owe a lot to you. >> we have to give ray and jane credit >> yes my mentors so how did i transition here i think in the same way that journalists try to shed light on important issues, once i really dug into this topic and it was my cofounder angela sutherland, she had her first daughter and went down this rabbit hole of trying to understand how does everything i eat impact my child. she came across this concept of a thousand days. which the scientific community

has circled around as the most important. so much happens from day zero to age two. it was so profound we were digging into this research and looking at the current market it's so important that kids get this nutrition yet you get things high in fructose that means it's low in nutrition. that was shocking. for us it was, yes, this is a great business opportunity but it's also an important mission. >> this is dare i say a high-end product. you're shipping this as an overnight product. because it needs to be refrigerated at all times. tell us what it is >> every week to your door you get a set of meals and you can kind of pick based on how much your kid is eating at that time. tell us your kid's birth date. we help customize and curate your journey for example, at age 6 months,

iron sources are depleted. we're going to highlight what's high in iron of course there's still a content component. and we also tell you what's happening. and so you can really as a parent help understand the correlation between what you're eating and what your child's eating and what's happening. >> you've raised a lot of money to do this what's it cost to buy this >> yeah. so it's about $5 or less based on the size of your -- >> $5 or less per jar? >> per jar, per meal, yes. if your child is smaller, they could get two meals out of it. and i think it really helps parentings, though, understand about the current food syste and kind of where they want to go and i think people should expect more from their baby food. right? so eventually, yes, we will be in retail. we'll be at scale and all these things but i think in terms of where the product is today, we wanted to maintain really high standards and elevate --

>> you were telling me off camera, men, adults -- adult men are now subscribing to the service to buy the food to eat themselves, not for kids >> yes well, that was an unexpected serendipitous occurrence but there were people ordering for themselves and a lot of them were men trying to eat more plants in their diet which is actually very trendy thing that's happening a lot of athletes are doing it and it's a healthier version of, say, juicing instead of having a juice that might be high in fructose, you're having nutrient dense meal >> is the ultimate plan to be direct to consumer or do you plan to be in whole foods and other places selling product >> yeah, i think when it comes to e-commerce, you're seeing a lot of direct to consumer brands becoming omni-channel in the future how we do that, it's something we're going through. but we do want to be a platform. we want to have content and products across this category of

thousand days. >> evelyn rusli, thank you it's neat to see you transition into this. >> baby food i thought it was tiny portions -- like a doll house. >> adults are eating these >> yeah. baby food. interesting. it's great so there's life after journalism it might be too late for me. >> you're not a journalist, i thought. >> you're right. i never had a journalism course. shocking coming up, are you investing your money in lottery tickets? you need some real investment advice we're going to talk strategy with the head of allianz and see if he thinks it's a good idea to throw money away on lottery tickets. plus overnight united continental stock popping.

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after the dow soars more than 400 points, investors are turning their focus to more quarterly reports. what you need to watch as we head into the heart of reporting season squeezing on china josh bolton joins us the largest legal marijuana business is open for business. canadian cannabis sales are already smoking. take a look how pot stocks are responding this morning as the second hour of "squawk box" begins right now ♪

live from the beating heart of business, new york, this is "squawk box. >> good morning. welcome bab to "squawk box" here on cnbc. i'm andrew ross sorkin along with becky quick and joe kernen. let's look at the equity futures right now. s&p 500 would open off nasdaq up 46 points. let's take you through the headlines this hour. the federal reserve will be releasing minutes of the most recent meeting they raised benchmark rates in september. going to be searching for more insight on a future rate hike. the minutes will be issued at 2:00 p.m. eastern time

president trump making myrrh comments last night about all of this and what the fed is doing the u.s. economy is the world's most competitive for the first time since 2008. that's according to an annual ranking by the world ek forum. the u.s., singapore, switzerland, and japan nice reversal for the united states workers at u.s. steel will be getting their biggest pay raise in at least six years. they stuck a tentative agreement with the steel workers union netflix shares surging after earnings beat estimates and the service added more subscribers than the street had been expecting. julia boorstin joins us with more on this what a difference a quarter makes. >> absolutely. the streaming giant added 7 million subscribers in the quarter. that's 2 million more than projected. they now project it will add 9.4

million subscribers in the fourth quarter ceo reed hastings saying he's not concerned about that growth because he's not concerned about a flood of new rivals. >> there are so many competitors. of course disney's going to enter. at&t's going to expand hbo youtube is on fire growing around the world video gaming like fortnite i mean, there's so many ways to have great entertainment on a screen so we don't focus that much on any one. no one affects us that match >> when pressed if those media giants will limit the access to content. they are succeeding at getting more creators to work with them directly >> the people definitely want their content seen and the best chance of doing that is doing it with netflix. you see in the long list of

content brands and newly minted stars out of netflix just this quarter, you can see what we're talking about about putting it into the content it can get nominated and win emmys or oscars. those are important to creators. we're proud of them and happy for them when they win >> as for the company's next leg of growth, there were lots of talk on the call about the potential in india especially as they have more content there >> that's what i wanted to ask you about. the pace of growth -- of revenue growth and whether it can ultimately keep up clearly investors think it can but he spoke to that in a couple different ways on the call, right? >> they said that one reason that they did so much better is they really were underestimating the growth they would see in asia in particular

when they were talking about india, they're going to be launching more -- this could be a market of a hundred million subscribers and they're going to add them 1 million at a time they're looking at the international markets as a place they're really going to expand it's remarkable they've been able to keep expanding >> okay, julia absolutely thank you. few stocks on the move this morning. ibm shares coming under pressure the tech giant revenue -- the company says there are signs the demand is recovering the airline raising profit forecast for the year. don't miss ceo oscar munoz at 8:00 a.m. eastern on a first on cnbc interview let us talk capital markets,

volatility, and more bank of america. brianmoynihan sitting down wit becky quick yesterday. he had this to say about economic growth. >> our team has the u.s. economy going about 2.9% this year 2.7% next year it went down to 2.7% the theory is it will start growing more slowly. that's all good. and so what's this about it's the uncertainty of what could happen you can go through the parade of things that can happen it's about oil prices rising which takes a chunk out of the economy. we're paying them more and they're spending more, it's going to be okay >> oliver's here here now is oliver beta of allianz.

kind of scary. that's neither here nor -- right? it's crazy anyway oliver, you're watching the world from munich. that's why i wanted to talk. so i want to get your perspective on watching what's going on in the united states. in terms of -- i mean, economic growth is the envy of the world here right now and the stock market has outperformed almost all other markets as well. what kind of perspective do you bring as managing allianz and billions of dollars when you're watching this happen here? >> positively biased i went to school in new york city so i have to say when i get up in the morning, i'm happy when i'm here so i really am happy for the united states. that you have had this long streak of growth and increase in values now what i heard earlier about that actually wages are going up in some of the industries that haven't seen wage growth for a long time which i think is

important for political stability in the country and you are still the leader in innovation we just heard about netflix and the amazing successes. so we are long america. >> we always talk about the bund and how we may be importing disinflation from the rest of the world. or that our ten year isn't just based on economics maybe it would be much higher if it wasn't. >> let me talk first about volatility and then the bund we have had a lot of re-regulation that has taken market capacity out of markets longer a duration cash flows, the tail reacts more

aggressively to interest rate hikes. that is normal in the world where there is less market making capacity. so we have to get used to higher volatility in the markets than what we've known in the past that's the first observation america and europe are having different directions at the moment there's a lot more stability in the economy here there's a lot more global growth despite the talk of trade war. in europe the picture is not the same underlying good growth in a number of countries. but in others you don't. so you have a mixed picture. and we have waited far too long in europe to reverse the interest rate cycle. so interest rates are artificially low in order to support the southern european countries. and they are very, very large deficit. >> think about that. we talk about that all the time. the multi-speed economies between northern and southern europe and you're putting all these

disparate things together hoping it works but it's problematic to some extent >> it is and we have to move forward. the banking union is important to be completed so we have a stable banking system. but there's lots of ings that still have to be overcome. we have a long-term investor we don't worry about daily fluctuations and what we have to see is that we still have a lot of over-indebted severance in europe that's one and second, we still have too much of a cozy relationship between the banking industry and because they hold a lot of sovereign debt still and the sovereign credit so we need to make more progress on changing that position. >> but if they were to raise rates right now, that would be disastrous >> i'm not sure. i think we have to do the same -- we have to slowly but surely raise rates the governments have to listen to markets the italian government has to

listen to what happened and people are nervous for too long they have been benefitting from the strong credit of northern europe. it's not just germany. outside of europe as much as inside they all have done their homework so the markets are reacting. >> angela merkel has been trying to hold together that union. if she's not in leadership anymore, what would happen >> but she is in leadership and don't underestimate her staying power. >> do you think that the system has been de-risked or who's holding the bag on some of this stuff? >> very interesting. i don't think any people are really holding the bag it's more difficult to assess where the risk is today. it's moved out of the banking system into the asset management history. and i'm not sure we have the proper view on where they are. >> i can tell you it's not in

the allianz balance sheet. >> how many times a day do you think about italy? when you wake up, do you think about it >> we think about it quite a bit. but with all the nervousness, italy has a few things in the constitutions that are very important to understand. there's a very strong president. after the second world war, they make sure they have a very strong president that if something goes wrong in the government, he can intervene. different to other countries so there is a couple of safeguarding mechanism in place that your populist government cannot cause too much trouble. that's what we're convinced of so at the end of the day, we're worried to see that people behave properly. when you have populist governments in at the end of the day, europe is quite resilient. we came back strong. >> so oliver, how much do you put in european investments versus other places based on the scenarios you just laid out? >> we are liability driven investors. so we don't take large positions

or speculate in the markets. given that we have about 60% of our liabilities in europe, a lot of our investments are obviously in europe. but we run a very, very strong capital position we are north of aa rated there are few places in the world you have such a strong balance sheet. so we're trying to offset some of the investment risk by having very conservative capital positions. >> i love it you hurt your neck though. do you go to the -- is that just what tourists do >> of course i have been i love munich. >> i do too. it's the english garden i'm talking about, you know what i'm saying >> yeah. it's right on the -- >> keep your eyes straight ahead. >> yes central park is pretty cool, but english garden can compete >> it's amazing. it is. thank you. >> thank you for having me >> would like to have you back for the global perspective

i wondered what, you know, the rest of the world thinks of it and we've got trump too. so you must think, wow, this is nuts you're just shaking your head, right? >> it's exciting >> that's one word oliver bate. coming up, when we return a lot more on "squawk. coming up josh bolten is going to join us after the break to talk about whjobs and taxes ands much more. and later, o' cannabis we'll find out how the first day of sales are going we'll tell you you're watching "squawk box" on cnbc place, the xfinity xfi gateway.

and it's strengthened by xfi pods, which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. welcome back to "squawk box" this morning take a look at the futures we have some red arrows across the dow, but the nasdaq is higher dow off about 68 points right now.

nasdaq up about 47 the trade dispute between the united states and china is one of the major topics front and center for many multinational companies. the leaders from the business round table are watching this closely. our next guest just got back from a trip to china joining us now on set is business round table president and ceo josh bolten. it's great to see you. >> likewise. >> we're trying to figure out if it's a trade skirmish, war, whatever you want to call it is at this point. what did you learn on your travels? >> well, it's a very tough situation. there is a major confrontation underway and the best news we got on our travels is while we were there, the white house let it be known that president trump was planning to meet with president xi at the end of november. that's really good news. >> at the g7 >> g20 meeting in buenos aires

just an opportunity when both leaders are there. because people on both sides in both governments have said to us this can only be resolved at the highest level. they need to give instructions to their negotiators to sit down and cut a deal >> how does the business round table feel about this? there are companies already doing a lot of business and don't want to see anything disrupted. there are others that feel like they're getting ripped off from intellectual property or forced to be in joint ventures. you hear a lot of different things what's the consensus >> you do and we have that whole spectrum of interests within the business round table but the companies are united in wanting to see some important reforms in the chinese market. they need to open up to investment they need to reduce their barriers to entry into the chinese market they need to make sure that once you get into the chinese market,

that it's possible to compete on a level playing field. that the regulation isn't going to be tilted against the foreigner. and so on. there's a lot of work to be done in china and almost every multi-national business experiences some problem. so we've been actually very supportive of a lot of the administration's objectives in the trade confrontation they're having with china. we've objected to, however, a lot of the tactics because we think that the imposition of a heavy dose of tariffs before really sitting down to attempt a negotiation has been productive. >> what i hear from people behind the scenes is the most likely way you get to some sort of an agreement would be a more superficial one. one that looks at the trade deficit and says we can chip away from this here. that seems counter to what a lot of businesses and steve mnuchin

when he was with us said he would like to see the joint ventures -- forced joint ventures and technology go away. what do you think of that? that seems like a much bigger hurdle and a tougher one to kind of get at. >> it is, but it would be a disappointment if we came away from this confrontation which has caused a fair amount of damage to a lot of u.s. companies. not just chinese companies but it would be a disappointment to come away from this confrontation with nothing more than a short-term deal to buy some more lng that's much harder to negotiate than a deal just to buy -- temporarily buy a few more products you're just kicking the can down the road >> does the round table view the midterms as a pivotal moment

are you involved with different races in races anywhere >> we don't do politics in that way, but it's a very important moment because it will dictate for the next two years the direction of the congress. we had very important success in this past congress with the adoption especially of tax reform which has been huge >> which people don't know whether they like it or not in general. in terms of polls. >> yeah. voters, maybe. but i can tell you from the standpoint of business round table companies who employ a lot of those voters -- >> it's either deregulation or tax -- something somewhere along the line moved us into a higher gear i think. can i say that >> absolutely. >> is that a stretch i got to ask andrew. >> it's not a stretch at all >> that's what i mean. you can't really take it away if

all you do is win the house. you can't reverse any of that stuff if you win the house how is it in jeopardy based on the midterms, would you think? >> well, if the house goes democratic, then there's always some risk -- >> no new stuff. they'll do investigations. there won't be any additional progress but what's been done, you can't reverse. >> business round table says it doesn't take a position, but -- >> they like growth, andrew. >> i understand that >> they like gdp to go up. >> right but it's interesting because you have people on all sides of politics that are part of the business round table >> sure. yeah we've got democrats and republicans. but every one of them likes pro-growth economic policies which means don't mess with the tax cuts which are as joe just said are doing a lot to make this country much more competitive. >> i want to ask a separate question the headline in every paper this morning has to do with saudi arabia so many u.s. executives have been caught in this issue around not just going to this

conference which has become sort of this public symbol or crucible over it but more about the relationship the u.s. should have with saudi, these companies should have with saudi. i imagine you've been on the phone with some of them. >> well, right now -- we had a number of our ceos who were planning to attend the conference and now none of them is planning to attend the conference that's what ceos deal with you want to do business with everybody you can reasonably do business with. but sometimes the geopolitics make it impossible >> they won't be at the conference next week that's one part of it. but the question that may aride -- arise on a longer term basis is would you do business with saudi. and saudi the way they think of loyalty will think of the decisions not to attend this high-profile conference.

given the report yesterday, richard branson said he pulled out or was at least postponing. the saudis turned around and said, we're not doing business with them either will some of these companies be hurt by this decision? >> i hope not. but all of the ceos in that conference and pulled out, they took some risk with their relationship with the sue dees you did the same you pulled out >> do you think that treasury secretary steven mnuchin should be going >> i'm going to leave that to the incumbent chief of staff to make a recommendation to mnuchin. but, yeah, it's a tough situation. this is the kind of place where americans need to stand up and say these are our values this is what i stand for even if it causes some economic damage -- >> i'll have to go to break and ask josh what you thought of kavanaugh. but we're going to break first

>> i want to thank you for your time today josh bolten, president and ceo of the business round table. coming up, get ready for pops and drops incdi alung few airline stocks that might be ready for liftoff when we return ♪ still to come this morning, our friends to the north legalizing recreation aal

marijuana. deidra boson is there with more. >> reporter: we are on the ground in the eastern most part of canada where pot became legal. historic day in canada we'll tell you what to expect as this experiment plays out on the world stage.

good morning, everybody. welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square among the stories front and center this morning, general electric is reportedly about to win a $15 billion bid in iraq. that is according to the financial times which says the trump administration put pressure on baghdad to award a u.s. company target will be adding new space to its stores dedicated to selling toys they're trying to boost toy

sales for the holiday season and beyond the government will be out with september housing starts in an hour's time looking for a drop of 4.8% for the month after starts jumped in august and google's youtube suffered an outage overnight users were unable to access for more than an hour. users on youtube's app also received error messages. youtube acknowledging that outage and fixing the problem. but didn't explain exactly what caused it. shares of the google parent alphabet right now up just a little bit this next segment dedicated to melissa lee hope you're watching time for pops and drops. netflix downgraded by keybanc. while they don't give a price

target, keybanc says fair value for the stock is $377. deutsche bank upgrading delta and american airlines from -- that's so lame no wonder she got rid of it. but we like it >> because we're lame. >> yeah. the analyst says that -- says that current share price levels represent an attractive entry point. delta's price target goes from $53 to $60 and credit suisse downgrading -- come on. thank you. home depot and lowe's. the key concern there is home prices will continue to moderate and the -- now has a neutral rating that's not up or down. we need just -- >> just a tone >> all right and now a price of $204.

lowe's has a neutral rating. >> i want to talk to cramer about this this morning. because this kind of plays into his thesis where he's been seeing weakness in these areas what does this mean? >> not a silo type weakness. >> no. broad based. we'll check it out and mortgage applications, they are taking a hit. we talked about real estate recently >> they are? >> they are. the figures released a short time ago diana olick has more on this story. >> yeah. you're going to make that down drop sound now it's a big drop. go for it. all right. most of that was probably part of it at least due to the columbus day holiday there was no adjustment for that really it's rising the interest rate here. 7.1% this week applications to refinance which

are highly rate sensitive, they fell 9% for the week and were 353.5% lower than the same week a year ago rates have moved a quarter of a percentage point higher in just the last four weeks. they're now more than a full percentage point than a year ago. refies used to make up a third of the volume. the rate is at the highest since february of 2011 and solidly across that line mortgage applications to buy a home also fell sharply down 6% for the week they were 2.5% higher compared to the same week one year ago. home buyer demand has been very strong, but affordability was week even before interest rates started to rise. now you have the combination of rising rates and higher home prices knocking a lot of buyers out of the market. all the numbers are on cnbc.com right now. >> all right

thank you. you heard the -- we played around we heard it. so let's do that if you want elements to reports i think help everyone, don't they so if you have something going up, we'll save that sound for you too. next time you're on. there it is. our ratings as you're on, that was the sound of ratings anyway, the recreational use of marijuana is now legal in canada deirdre bosa joins us from newfoundland good morning >> reporter: good morning. guys, i am here in one of approximately a hundred stores across the country that as of today can now legally sell recreational cannabis. this is a long time coming for many canadians the store first opened its doors last night at midnight to huge crowds lots of cheers many telling us this is a historic moment and one many of them didn't think they'd see in their lifetimes. the store opening 9:00 ath local. i've got to tell you, there are

only a few people in here. i got to tell you, guys, there's only a few people in here today. seems like the big moment was last night and today is business as usual or perhaps they have gone back to their dealers we don't know. this is a grand experiment playing out for everyone to see on the world stage now, of course, guys, this is the only the start of what's expected to be a $5 billion market for cannabis sales in canada a lot of that windfall expected to go to the government. just today has sent cannabis stocks soaring this store last night was open from midnight to 2:00 in the rng mo they sold about $9,000 worth of legal recreational pot what happens now is a big question there's still lots to be seen such as how certain regulations are implemented. there's questions about border issues as well as how to judge impairment but from the video earlier, you might have recognized someone making that first sale

it was bruce linton, canada's biggest pot company ceo. congratulations. >> thank you >> reporter: how are you feeling? >> feeling great the question marks about what happens when prohibition ends, they'll be answered over the next year. but the lineup forming, remember it's 9:00 a.m. people go to work today 37 so this is just the beginning but people want to soo it regulated. they want education. they don't want it sold in a dark alley >> reporter: and you flew in from ottawa to make that first sale why is that important to you >> at the time we opened, you couldn't say anything was going to happen. we started with the federal medical program to here we are october 18th with a federal -- or 17th with a federal program that allows adults to make a choice all of that without the medical, we didn't have the platform, the

ability to grow. now the world is copying us. in 11 countries federally legal. >> reporter: let me press you on what happens next. last night there were lots of crowds but i talked to a lot of the people in the line i asked are you coming back to retail stores. a lot of them told me, no, i'm here for the picture opportunity. tomorrow i'm going back to my dealer and it's cheaper and better. >> well, i think they didn't get to try it. so better will be a big argument what's going to happen is people are going to start realizing that the product from the dealer comes from officially nowhere. the best way to get that product is to spray it with chemicals. then maybe people don't wash their hands well this morning if you're one of those people selling illegal stuff, the police have new rules. if you're a landlord who's hosting them, that can get

really expensive really quickly. the state gets about two-thirds of the taxes now if you're the bad guy, you're taking money from the government i don't think that business is going to be as easy or prosperous and what's going to need to roll out, we're selling oils and edibles. not in a mor mformat you may se colorado the future isn't dried cannabis being smoked it's all kind of things like a beverage included. >> and talking of u.s. companies with what's happening here, how important is it that canada get this right and is canada ready? i think a lot of people don't understand i saw people on the sidewalks last night you can in some places but can't in others. >> so we have a lot of rules this is canada we love lineups.

we like rules. we like paying our taxes and schedules. health canada has been regulating since 2001. we've gone through five generations of rules what's amazing is when people come to canada now, what they're actually doing is not being tourists they're regulators from germany or jamaica or brazil they're saying canada has the best set of rules. canopy is sort of the leader in that and now we have this global thing happening at an unbelievable rate. >> reporter: we'll certainly see how this happens good luck. enjoy the celebrations >> we've got to talk to the japanese media and who knows next >> reporter: back to you >> thank you can't say i'm shocked to not see people lining up at 7:00 a.m. to buy pot. we'll see what happens this morning. when we come back, the disappearance of a saudi journalist hurting the image of

crown prince mohammed bin salman we will talk geopolitics and the impact to your portfolio after this break then coming up top of the hour, united continental ceo oscar munoz will join us "squawk box" will be right back. broke my personal record. aflac!? no-good break. gooood break. i'm so sorry we can't make your barbecue. i'm just sick about it. aflac!? different kind of sick. if i can't work after surgery, how am i gonna pay my rent? all these bills? aflac! oh, aflac! and they pay you cash in just one day. see how aflac helps cover everyday expenses at aflac.com.

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♪ does that include everybody? kids too >> hopefully not kids. welcome back to "squawk box," everybody. after a big day for the markets yesterday, you will see things are more mixed today dow futures down by about 88 points that comes after weakness in ibm

last night worse than expected results. and some weakness in home depot after a downgrade at credit suisse the nasdaq is indicated up by 36 points and the trade dispute with china and the string of ceos dropping out of the summit in saudi arabia generating a lot of headlines over the past several days joining us now is d.j. peterson. thank you for coming in. let's talk saudi first and then china. what do you think the long-term implications are for business -- for u.s. businesses to not at least appear at this conference? is this a short-term blip? is this something we'll talk about six months from now? >> good question i think they're in it for the long-term. saudi arabia is too big. there's too much money at stake. they're too important for the

region they want to be important players in a range of areas. technology, transportation, tourism. and so the opportunity is so big, i think they look beyond it i think the companies right now are -- >> the companies may want to look beyond it i want to know whether saudi looks beyond it. you have to think about and we talked about this on the program. when citigroup stepped out of the country back in i think 2003 or 2004 after 9/11, after the lawsuits that were against that joint venture, it took them 14 years to get a license to do business back in that country. there are long memories there. >> absolutely. and loyalty is very important to the saudis but some of these players are going to want back in. their ambitions are so great they're going to need foreign participants and cooperation some will be probably black balled they're working these companies and investors are working very hard to signal privately they're there for the long-term.

>> maybe she shows up to an empty room, but clearly the trump administration has signalled there was saudi for the long-term. >> is that the right answer? >> it's the political answer that the trump administration wants to convey. >> i know what they want to convey i'm asking you what the right answer is. because it's complicated i'm the first to suggest that you do have -- we have a real interest as a national security interest to having a relationship with this country and at the same time their leader clearly looks like -- has done something quite disgraceful and terrible the question is how do you deal with both of those same ideas at the same time? >> we've done it in the past we've certainly done it with regards to the war in yemen. we've looked past it we certainly looked past --

>> looked past it or look the other way? >> both. >> and made up stories and all of that? >> yeah. i think the interesting thing about the current case with the journalist is that it's really gripped attention. and obviously the rumors and the stories coming out of turkey -- >> but will also require a legitimate lie, perhaps, to look past it. >> absolutely. and that's the struggle that i think it's forcing everybody to think about. who is the leadership? who are we dealing with? >> you talked about the business in saudi arabia. everyone talks about the transformation of the country by 2030 you look at the public investment fund. public vumt fund at the moment has little money everyone looks at it as a grand honey pot that's not there yet

that requires a whole host of things happening and it's possible that none of those things are going to happen >> that's absolutely true. which would change the business calculus as well people are so optimistic and hopeful at this point. we've been saying this as a pie in the sky scenario. so, yes, people are still wanting to show up in the desert this year. people are still optimistic. it suggests that perhaps people have -- you know, are not all eyes open. >> switch the conversation to china. where do you think we really are in these trade and tariff negotiations >> we're at the beginning of a cold war this reminds me of 1948 when the united states' view of soviet union shifted from ally to opponent this is much bigger than trade this is about unfair competition. this is about the south china sea. this is the growing chinese

navy this is embedding chips in our hardware this is a whole range of issues. strategic competition. the agenda has expanded much farther beyond trade it is about strategic competition. >> with the original cold war with the russians, i would say a shift in strategy in dealing with them was the appropriate way of going about things. you wouldn't expect to have a nicey nice relationship in going along on all sides when you're trying to out-flank each other on so many issues. is this the right path >> we have a different relationship with china that we didn't have with the soviet union so we're having to adjust. that won't go away entirely but we are having to recalibrate the united states and its allies the europeans are also think how do they relate with china over

the long-term. china certainly reaching out to the europeans right now. there's a growing perception that this is a broad threat. >> we didn't have a supply chain built up in the ussr what do we do about that >> companies are going to have to adjust. >> does that mean rebuilding here >> it doesn't mean rebuilding everything i think it's selective a adjustment >> and when you think about the apples of the world, in terms of -- when you look at specific u.s. companies that will be meaningfully impacted, who should be the bellwether if you're an investor out there looking at everybody that has a connection to china, what are you looking at >> certainly looking at taiwan both as taiwanese companies operating in china as well as thaiwanese companies manufacturing --

>> china would consider that as an insult that you would be looking at them. >> right that's fraud i think philippines are very interesting. southeast asia, obviously, vietnam is in a challenging place. because they want to be an alternative to china while they're next door to china they sharedisputed territory so it's going to be just a much more fraught and tense world in that region, and business leaders are just going to have to deal with more volatility >> okay. d.j. peterson, thank you, of longview global advisers coming up, the futures are interesting. the nasdaq is up pretty well with the other averages down dow down triple digits as we head to break, here's a look at this morning's premarket movers "squawk box" will be right back.

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unstopand it's strengthenedting place, the by xfi pods,gateway. which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. barry diller, of course, is a powerful media executive and not one to mince words i sat down with him yesterday and here's his dire prediction about the movie business >> the movie business is for all intents and purposes finished. you know the theatrical motion picture

business we knew >> because it's all moved to netflix? >> because it's moved to not just netflix but others. hbo, hulu, et cetera and because the movie business went from being a place where each company developed a slate of movies, they wrote screen plays. then they developed them into films. the whole chain of it. and that produced the most decent years, it produced a crop of really good movies. now it is only about making sequels and big tent pole movies and all of the rest of the movie business is now basically television >> barry diller also commenting -- we showed a clip of it earlier -- just the idea nobody can compete against netflix. not only does he think the movie business is dead he effectively said -- he had

conversations with bob iger. he said everybody who's going to try to do this, it's not they shouldn't try. it's just netflix is now so far ahead. we talked about competition and antitrust issues and whether things should be broken up it got interesting >> netflix thinks thesame thing. when we come back, united continental ceo oscar munoz will join us. "squawk box" will be right back.

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are the bulls back investors set to be tested again one day after the dow soared by more than 500 oints. earnings alert shares of netflix soaring after the streaming giant crushes quarterly estimates. plus taking flight ceo of united airlines is circling he'll join us for a cnbc exclusive as the final hour of "squawk box" begins right now. ♪ live from the most powerful city in the world, new york, this is "squawk box. >> good morning and welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square.

playing "drunk on a plane. we have oscar munoz coming it's a plane song. dierks bentley i'm joe kernen with becky quick. andrew ross sorkin is here intel. -- as well here are the futures which you can see in the lower right dow down about 117 that's where it's indicated after that big snapback yesterday. we took care of thursday's losses anyway. erased those the nasdaq's up. netflix is strong. ibm is down and home depot has the dow -- affecting that. s&p not fairing quite as badly down six treasury yields have been under control since they sort of caused -- i don't know if they caused it, but they added to the volatility >> i think they caused it. >> i think so. powell we'll see whether 3.30% is on the horizon.

or whether we could breach 3%. i don't know i really wouldn't know which way to bet on that right now but if i was going to spend money -- >> i'd take the over >> i'd put money on betting on that rather than buying a lottery ticket just because i know we're going to talk about that again don't do it, sorkin. >> i may have to it's for a billion bucks okay let's tell you about the top stories. other top story being the lottery is now going to maybe be a billion bucks. but netflix shares jumping double digits this morning revenues were in line and the key catalyst for this stock, net subscriber additions were well above analyst expectations the expectation, by the way, that it will continue. different story on the shares of ibm this morning earnings topping expectations but the revenue down today after missing forecasts down 2% from the same period a year ago and csx out with quarterly results. results were helped by cost

cutting and higher prices for freight delivery some other stocks to watch this morning, express script says it will cover new migraine drugs. but the manager is excluding a rival medication made by teva. as you can see amgen and eli lilly up teva is down this morning. home depot and lowe's downgraded by credit suisse he's concerned about the impact of higher interest rates on the housing market and what he calls the decoupling of the housing market with these stocks in particular we'll talk more about this a little later this morning. also, general electric will reportedly win a $15 billion power generation contract. the ft says that germany siemens was close to the deal. but put pressure on to award the contract to a u.s. company united continental raising guidance after posting its best

quarterly revenue growth since 2010 phil lebeau joins us now with a special guest. good morning, phil and good morning, mr. munoz. >> hey, joe. how are you? oscar munoz. this is one of those mornings you're happy to come on because you have strong performance in the third quarter. what stands out when you look at the numbers you posted for this last quarter >> it's a combination of the plan we put together right? it's a journey from getting our people back together, getting our union structure worked out, getting our operational reliability which is important, putting a strategy together to get this business back and so, you know, a couple of quarters later, watching it work in this way with a specific point we made with hub growth as well as customer service, all of that is coming together. it's a good quarter. >> you've added these flights, smaller markets into your hubs in the midwest whether it's denver, chicago, houston

they have seen real growth there. how much more do you have to go, so to speak, in terms of how much growth is out there for you to mine and grow with? >> well, two answers one, from a standpoint of our mid-continent hubs, that was a specific part of the growth plan and so it grew -- capacity was 9.7. working well from a margin perspective. with regards to future growth, we estimate since the merger, we've probably seated 1200 flights -- >> cut 1200 flights. >> and gained 200 in the last year and a half. now we're going to do that smartly doing it in the right bases. >> you've not 100% you were able to recover 100% yet jet fuel continues to edge higher at what point do you become a little bit worried not just for united but for the industry

overall? >> listen. high fuel at any point in time impacts the broader economy. there is a point out there that will certainly affect the broader economy. from our perspective, we'll continue to do what we're doing today. our growth, our yield, our cost control is what we have been able to do this year and we'll continue to do that. >> what's the outlook right now for corporate travel >> it's good still really strong. >> so you're seeing that demand right now? >> yeah. >> is the growth primarily corporations is it leisure? or is it international i know it's a bit of everything, but where do you see the biggest growth >> we're predominantly a business airline we're seeing that strongly hawaii has been a bit of drop off. >> there's been some spottiness with the chinese economy a little bit of a slowdown in certain sectors. are you noticing a slowdown in terms of demand either from chinese customers here in the u.s. or u.s. customers going

there? >> we can ask this a lot and this is not a political statement. it's doing just fine we are seeing no impact. our third quarter passenger revenue was up double digit in our fourth quarter >> you're optimistic on china. you're optimistic on the corporate travel out there what worries you right now when you go to sleep right now, what worries you >> we got the issues of safety and security out there that we always worry about but from our perspective now that we've laid the foundation of our people, operation, and strategy, we can continue and double down on our customer experience issues from wi-fi to how we make you feel when you fly. that's the real exciting thing 2019 and beyond is going to be about you the customer >> you bring up wi-fi. at the executive club earlier this year, you were asked on stage i've had hit and miss experiences tend to be negative

with wi-fi connectivity on united flights i hear this continues to be a problem. when can people look at a united flight and know they will have wi-fi? >> that's what we want to avoid. we put lots of effort with all our suppliers. i won't bore you with the complexity, but it will take time we do have solutions there are new vendors. we just retrofitted some aircraft with new generation technology it's beginning to work better. a lot of the things we have, we hear you, we hear all of the custom custome custome customers. >> i have a customer question to the wi-fi. would you ever consider making the wi-fi free just simply free in large part because in part it doesn't work as well as it should and because people are paying for it, they feel worse about it when it doesn't work

>> free or not, you know -- we have to make sure we get it working and working well and consistently i think from a longer term perspective, whatever that time frame will be, i think we will evolve to a free product >> oscar, i have a question for you as well. >> guys, that it >> no, i have a question as well in terms of what we've heard from the street, we spoke with several analysts recently. there was another upgrade for you and american and delta from deutsche bank. with one of the top analysts we spoke to says he expects huge run-ups in the stocks for the last quarter of this year even though airline prices are higher, the thinks that's a goo thing. it will prevent others from having more. do you think that viewpoint is a right one? >> i think that the industry is

evolved to a point becoming where people will have a real business we have top line power we have -- we can manage our cost and some of the other issues that impact businesses. and we're growing eps. we're growing our cash flows and we can withstand like we have with fuel this year this is an industry that's evolving and changing. we still trade together to some degree the stock will be volatile at times. we took a pause on our share repurchase this quarter just because of that. and you saw the stocks move up and down with no specificity to our fundamentals so at the end of the day, it is a great industry with lots of possibilities. >> and you think there's discipline historically you think to a certain extent that's locked in now? >> consolidation does help i'm sorry. there's a big celebration going on behind us >> i think they just heard the numbers for the third quarter.

oscar munoz, ceo of united airlines they're seeing some improved optimism from analysts covering not only them but the entire sector back to you. >> phil and oscar, thank you i'm looking forward to free wi-fi in the future. coming up, futures pointing to a triple digit drop one day after the blue chip posted a 500-point-plus jump. as we head to a break, here's a look at the biggest premarket winners and losers in the dow.

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morgan stanley and david lefkowitz. you guys have a lot in common today. that is a fixation on the fed and the 10-year. that's what's causing things that's what caused things last week i'm going to start with you, jim, on the fixed income side. when we thought 3% was going to do it and powell said 3.5%, that's, in your view, what caused everything, all the trepidation. >> that's the crux of the matter i think what's important to note is the fed has not been tightening policy. right? they've been moving to neutral what we heard on october 3rd from powell was that he actually is thinking about tightening that's the move from a 3% nominal fed funds ragt terminal to 3.5%. so that 50 basis points extra, that's not in the market that wasn't priced in. the bond markets reacted quickly to that. yields rose. then the equity markets reacted

slowly at first then all at once last week. i think where we're really adjusting to mathematically is a rise in the risk-free rate it's going to bring down the stock price. but if economic growth continues to be strong and continues to be good, then i think that we can research from this i view this as mainly technical and not fundamental. >> so i understand it. so the recalibration of the risk-free rate return causes the initial break. but then fundamentals take over, earnings go up which we saw this week we saw earnings and we snapped back >> right there's probably some overshoot, some liquidations in the market. it's going to be noisy this is okctober, after all. once that gets settled down and we realize we were on track to grow at 3%-plus this year and maybe higher than 2.5% next

year and if earnings are good, hey. you know, i think we can rebound from this. >> you don't think the vix ends up being a predictive of anything i don't think you do either, do you? >> no, the vix -- in terms of the vix, it's a coincident indicator. the fact it's moved up a little bit tells us stocks have been volatile that's what it's telling us. interestingly when it gets to high levels, that tends to be a bullish indicator. besides the 10-year the other information we got over the last couple of weeks is there's increasing concerns about how trade and tariffs are going to impact things. a couple of industrial wholesalers have been talking about that a little bit more there's pockets of uneven growth in the global economy. so i'm not sure it's only the 10-year. i think there were some questions about the growth outlook. and that's why we saw more of a defensive rotation >> not a great combination saying you're going higher in rates when the economy might not

be doing as well as it was going to do previously >> i think that's fair but the fact we're talking about mostly earnings are doing pretty well looking for 23%, 24% earnings growth in the quarter. i think companies are beating at a pace that's pretty normal relative to what they normally do we should get solid earnings growth going into '19. it's just some questions about the growth outlook, but not necessarily a big change in the trajectory >> you know, the one thing we keep hearing again and again is housing. that's a real question mark. larry fink talking about affordability and mortgage rates and nondeductibility in the tax law of mortgage interest how much of the strong economy is based on housing? they have a pretty high number you can't really do it without housing, can you >> housing is a crucial part of the economy, no doubt. but i think it's important to bear in mind a couple of things. first, incomes are growing not only on an after-tax basis

because of the tax cuts, but wages are rising as we know about and the job market is very healthy. so even though financing costs are going up, incomes are going up as well and if you look at affordability, it still looks pretty good. it has deteriorated a bit over the last couple of years but it's still higher than average. >> i mean, mortgage rates at this point, i still can't get that petrified of 5%, can you? >> no. i think there's a lot of positive technicals in housing housing supply, affordability. the other thing, too, what are we talking about here? we're talking about a housing market that was very hot for the last two or three years at a 6% year over year growth rate now it might moderate to 5%. that's good. you don't want something to get too hot too fast and that creates excesses -- >> we're coming back from a huge trough. >> right so now we've got to be -- >> but that'll act as a break on

the economy, right >> sure. it'll slow things down a little bit. but longerterm, pretty healt healthy -- we're talking about 5% and it's about -- >> that's across the country you look at other places especially mid or higher end and the mid or higher end is just about higher end anywhere else and all of a sudden, no, no. but you could see -- i would argue the new york market right now is probably down 5%, 10% already. >> there is a wealth effect component to it as what you're saying i think housing does represent a big portion of that. you're talking about a wealth respect hitting a higher income earning part of the population so, you know, there are some factors to consider around that too. >> gentlemen, thank you. jim caron from morgan stanley, david lefkowitz from ubs thanks when we come back, soybeans

getting slammed in the early part of the trade war. >> reporter: farmers are facing a glut of grain out here in the heartland, guys. xtyowhcongp y mi u ne

welcome back to "squawk box" this morning this year's record soybean harvest getting hit by tariffs

ylan mui has been checking it out this morning good morning >> reporter: good morning. you see this truck behind me it is filled with soybeans the farmers who farm this land were out clearing the crop until 1:00 a.m. this morning this is expected to be a banner year for soybeans. 4.5 billion bushels expected to be harvest ed this year just at the same time demand is bottoming out because of the chinese tariffs. >> best case scenario now would be that we have profitable talks with china and at some point put this tariff retaliation on our soybeans behind us >> reporter: that was mike beard. he is hopeful that a bigger harvest will offset some of the

pain from the lower prices but he is expecting a glut of grain this year. he's going to need to put it somewhere. storage silos are filling up all around this area not just for soybeans but also for coin we visited kokomo grain company. they're a family owned company and they had to clear out an old building just for grain. they also had to take bushels of corn and put it under a tarp >> we have gone to extraordinary means to come up with more space to be able to handle this year's crop i feel we're doing a pretty good job. >> reporter: now, typicall farmers do have to store part of their harvest for the season but this year, the stockpiles are bigger than ever farmers are hoping they can clear through some of those stockpiles by the spring of course tariffs are the wild card in that back over to you

>> ylan, thank you i love watching soybeans i know days as a commodity broker beans in the teens i don't eat a lot of tofu. i think it's mostly fed to things i eat >> edamame >> what? bless you. >> oh, enlightened one >> that's me coming up, breaking economic ws key read on housing when "squawk box" comes right back.

good morning welcome back to "squawk box" right here on cnbc we're live at the nasdaq market site in times square among the stories front and center this hour, mortgage applications falling 7.1% last week both new purchase applications and refinancing activity declined the highest since february of 2011 row cue will resume sales in

mexico this coming after being absent from that market for more than a year that follows a favorable court ruling sales had been halted involving distribution of pirated material joe? rick santelli is standing by we were just talking about housing. the numbers, please. >> absolutely. close expectations expecting $1.21 million. we end up with $1.20 million seasonally adjusted units. but we did get a little bit of a down tick on the revision. now, that number from the revised number comes down a little over 5% building permits they were also a bit of a drag here we're expecting 1.27 million 1.241 million seasonally annualized

so this number is down about half of 1% maybe a little more than half of 1% so once again, joe, housing numbers aren't spectacular and everybody will jump to blame rates and maybe in part it is. but it's also affordability in a variety of other issues. maybe that big historic jolts number will afford people a better opportunity to find more suitable could be the fifth day we close in a 1.5 basis points range. we're hovering at 3.15%. take your pick treasuries have been steady eddy during this period in the equity markets. back to you. >> your reaction was already the stuff of legend from yesterday what'd you say i hope you don't have a heart problem when you saw that number for job openings, rick >> i mean, really, yes

it really is incredible. this number's been around basically since the turn of the century. and we never even had a 6 million read until early last year it's quite amazing now, i know jolts isn't as easy to assimilate because all of the other components just in a macro way, joe, the housing market is pretty good. is the unemployment rate really as low as advertised probably not between u 2 and u 6 we could debate that all day. but in a macro setting, the economy is on solid footing. does that mean there's not a couple of, you know, little mouse droppings here and there of course nothing's ever perfects but we're sailing along pretty good the tune up seems to be taking this card on the expressway to good speed >> okay, rick. yeah even though you gave the keys back to the same people that drove it in the ditch. remember that? love that. anyway, thank you. >> thank you

>> i don't know. somehow got it out got all four tires filled up we are cooking along thank you, rick. meantime, want to get to steve liesman. he is in washington this morning. his reaction to today's data and also a look at the bigger debate on whether the economy and earnings may be starting to slow >> just so you know, the starts, 20% up on the northeast. down in the south and the midwest, i wonder if there's a bit of storm in that data. we did have a storm in the south before this latest one there was one earlier. still housing is weak relative to where it ought to be. you know, we did 2 million in the boom and maybe 1.5 million before that. now we're kind of in this 1-2 area let's jump to the broader economy. many economists see growth and earnings slowing for the rest of this year and next but not necessarily to actually be all that slow take a look at the cnbc rapid

update q1 actual growth reported at 2.2% q3 in at 3.3%. and fourth quarter, that's the forecast part of it. that's 3%. i don't really have an estimate of the nine or ten we have that's below, say, 2.9% or 2.8%. so that's good we do have stronger capital spending we have a stronger consumer in part helped by the tax policy that's there so fiscal policy overall on increased spending on the tax cuts are a tail wind for the economy. all of that has meant stronger for companies that don't have much margin right now. but those are seeing putting them through the rest of this year and the early part of next. bad news is that growth is forecast to fall back towards trend in 2019. and to trend in 2020 that trend is between 2% and

2.5% here's some of the head winds that are happening higher oil prices. you do have at least for right now slower global growth then fiscal policyby most economists seen turning into a head wind. and i don't have an arrow on trade. i don't know which way it goes most people think it ends up being a negative unless those tariffs go away. goldman sachs saying we're looking for 3% in q4 and annual average in 2019 as the fiscal impulse diminishes. there don't seem to be many believers amongst the wall street economists that i talk to that tax relation will change the growth that is the sum of hours worked and productivity some see the chance that it could jump by a quarter or a half a point, becky. i'm just not getting many believers, i guess, for

investors it's a question of whether or not maybe literally and figuratively you take the red or blue pill about the future. >> although somebody's going to be right we'll see in details that come out on this. there was a downgrade today of both home depot and lowe's because of the thought that they have decoupled from any concerns in the housing market. >> right a big part here is you think about corporate earnings in terms of nominal growth of the economy. so that's real growth plus inflation. that's been pretty strong. 5%, 6% that's why you have companies reporting top line growth in the 6%, 7% if that nominal growth slows, you can expect the top line growth to slow along with it >> sure. that's valid steve, thank you >> pleasure. folks, tonight could be a defining moment for brexit or for theresa may. wilfred frost is here. he's got the details. >> tonight marks the first eu summit since last month's

contentious gathering in salzburg that may failed to return to the uk with progress on brexit expectations this time are once again low all because of growth. a hard border between the uk and the rest of europe that's not so much a problem between the uk and france. but it could be an issue in ireland. northern ireland is part of the uk and so still part of the eu. yet, partof the northern ireland peace process commits to an open border between the two the other option would be a border in the irish sea which the uk won't allow as it would cut northern ireland off from the rest of the uk with the countdown onto march 2019's departure date, teresa may needs her plan and her government to be kept alive. what does this mean for markets?

sterling is in the six month range at the moment. the economic data in the uk has been quite strong which is playing a part for that. but there's likely a significant binary move up or down if markets get confident they're heading for a deal or a new prime minister and a risk of a no deal. guys >> you really think the entire government rides on this whether she makes progress or not? or that's it then what happens? >> well, i think if she comes back with nothing, again, there's already people that don't even like the path of brexit she's trying to go down if she can't even deliver that path, then it starts to question if a new leader can try that path the process would be they need 15% or 48% of the 316 conservatives to call for confidence in her. and you need 159 of the 316 mps.

the people that would sort of celebrate removing her are both sides. the people that want a fresh second referendum would need to see a change in government to get there. and the people that want a harder deal brexit slightly ironic the two sides that would celebrate that would be increasing the chances of getting what they absolutely don't want because of that, a lot of people say poor theresa may look at this impossible tight rope she has to walk but also fair to say she called this in june it's a mess which yever way you spin it. if she doesn't come back with progress, those people that want a different path will see it as a moment to seize their moment >> thanks, wilf. haven't worked with you for awhile you're a lovely man.

you are. i wanted to say that just to -- because i can get away with that with you can't i? >> i don't know. we're not meant to -- >> we're not supposed to, but i figured i would pull it off. is there anything wrong with saying wilf is a lovely man? >> training worked, huh? >> i think i'm in the green with that >> you explain what you're talking about? >> we need to be respectful and there's certain things in the work place that are acceptable >> apparently it's not >> for british people -- uh-oh now i'm -- >> oh, gosh. >> okay. we got to -- >> in the british -- >> we got to bring some -- >> i see it as a compliment and i say thank you, joe >> have a lovely day >> thank you very much we have news to bring you this morning in addition to what words may be good or bad prudential financial has lost its so called sifi designation

that designation had brought with it a lot of extra supervision. prudential had never met the label of sifi. they are now saying now this decision for it no longer to be a sifi is a, quote, appropriate one. that should actually -- it hasn't moved the stock just yet. but potentially it will. no more annual stress tests. when we come back this morning, netflix shares soaring after the giant crushed quarterly earnings estimates and subscriber numbers we'll get wall street's reaction when "squawk box" comes right back super. but today you're building wind turbines. morning sir. chief, the blade isn't passing quality gate. that's why you work with watson. i detect frictional loss on the midspan. it can detect the tiniest defects from just a few images to help production stay on time and on budget. i optimized the fiberglass finish to reduce frictional loss and maximize airflow. i was also part of the maximizing.

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welcome back to "squawk box. the futures right now have worsened if you're long. well, come back a little down 140 on the dow jones. the nasdaq was up 35, 36 a little while ago it's now up 19 and change. but it is up diverging from the dow and the s&p. the s&p is down about six. just now out on tesla, some news just crossing the wires. elon musk plans to buy $20 million in common shares of tesla during the next open trading window company plans to issue the stock and then sell it to musk >> is that on his twitter feed or is this somewhere else? >> i don't know. it didn't specify. $20 million worth. >> worth of tesla stock. >> s.e.c. filing not a twitter >> all right

>> certainly could buy 20 million shares too though i think that'd be a lot more >> he already has huge exposure to it. it's been interesting to think he's going to buy more under that scenario. >> he might be -- i mean, i imagine he is continuing to borrow money to buy more shares. >> or borrow against his existing shares to do it which the shorts have said look out if it falls below certain levels he has borrowed against "x" amount of it and will have to put up or get rid of some of it. that's kind of a bizarre -- >> sounds like a lot be like one of us buying, you know, $500 worth of comcast. maybe. in the meantime, want to get to media news. i sat down with iac chairman barry diller here's what he had to say about the industry consolidation that's taking place. >> the fact is that consolidation is going to continue there will be fewer companies.

i think that's not a particularly healthy thing because i think when you have such large operations, the actual product is so far down, you know, on the kind of weighing scheme that you lose sense that you're actually -- your purpose in life is to make good things. >> diller was very bullish on netflix saying media company wills not be able to catch up with the streaming giant and that company, of course, just reporting yesterday >> in fact, he was right if this was all happening before netflix came out with its numbers. when it did report, the shares are up sharply because the company reported better than expected profits a rise in subscriber numbers which had been the big issue in the last quarter joining us now is michael from guggenheim they're looking at this as a huge win the stock is almost up 10%

today. was it is the subscriber numbers looking like they're back on track and better than what the street was expecting >> absolutely. there's two things really driving this company in the long-term. one is the subscriber growth and the second is the profitability potential and cash flow. right now investors are acutely focused on that subscriber number all the good things in the future can stem from the subscriber side. >> things are back an track and the stock jumps sharply. now, what makes sense finior yoi terms of valuations? >> what we try to do is keep investors focused on the big picture for the company in terms of valuation on near term metrics, it's difficult to justify on a ebida multiple but this is a company disrupting the television industry. they currently have $16 billion of revenue we think the revenue opportunity

for the company is vastly underappreciated right now as they continue to take share, take profit share. and that's why we use a long-term dcf valuation. right now it's $420 a share. that's progressed upward over time and we think given that global runway, it's likely to continue to go in that direction. >> your price target of $420 a share was before you got these subscriber numbers that was based on what we had seen in the july quarter >> that's correct. what we'd rwritten in the past was we were concerned about the stock when it went up in the past we maintained a buy rating on the stock, but we felt investors had been excited about the growth trajectory following the earnings looking backward. they think the trajectory is very strong. we think it's going to continue. we caution people by getting too high and too low on these individual quarters and really focus on what that long-term penetration looks like which we think could be upward of 300

million global subscribers >> you have amazon agreeing to commit more money by the day and existing players that are still doubling down on some of this. what would concern you what would change your mind on what was obviously a spectacular report >> it's a great question we are never dismissive about the concerns in the industry competition. we think sports still has incredible value we think that the bundle and the sports component is going to be there for a long time. you've seen ratings for the nfl up this year even as entertainment ratings have been down we are not dismissive of competition. but a $400 billion television industry we're talking about the annual revenue business that netflix is doing $8 billion of revenue on we do think that streaming consumption of entertainment content is absolutely the future advertising free or advertising only meaning you don't pay a subscription fee

we think there's plenty of room for multiple companies to be there. think about the network business currently. there's four broadcast networks. they've thrived over time even with the addition of cable networks, et cetera. when we think of internet delivery and the economics there, it's incredibly incredib attractive for multiple stream players. the industry that the company is disrupting is an incredibly high margin . >> michael morris very much >> when we return, we'll talk to jim cramer live from the new york stock exchange, i want to hear his take on where netflix is headed. here are the futures, nasdaq is looking higher we'll be back in a moment.

it is tricky situation because we never had a slow rate environment. if you think of people from 2009 until now, that you hire, they don't know what interest rates are like they don't know. >> really? 5% or 6% >> yes, they don't know.

zero through nine out of college is a good figure pass. they have no idea. you got to go back to 2004 and 2005 think of a race struck that was more normal. >> that was brian moynihan talking to becky last night at cnbc's net event let's get down to the new york stock exchange with jim cramer we had a big snap back yesterday and it was fuelled by some of the positive reports and some of the down stocks. ibm is problematic again netfl netflix, i know you were expecting pretty good numbers. we got better than that. i have come to no read listen i am not a great forecaster, i am a great content maker, he's trying to get better

fraesi fra forecasting but he did say the last quarter, don't worry. i can't believe the number they are adding the stock is down a little and keeping with the futures it was a good conference call. it was a clinic about how you can add subs in the global world. he's hoping everybody come in. it was a great quarter stocks should be up more the market is looking temped >> i wonder what maximum would be >> we don't. he dominates in these countries where you don't think he may have anything going. wilfred was on earlier talking about ireland. he dominates ireland >> why is there room for at&t

and hulu and everybody else to do this. >> i don't know, he welcomes everybody. >> there was room for everybody. >> the issue where yesterday not that these companies can't exist, they will it is the content cost to compete against netflix because they'll never goat the same kind of scale you may get 20 or 30 million subscribers and that's meaningful to compete against the giants that's going to have 100 plus million subscribers, you are playing a different lead your cost, you have to be similar and that's the problem >> right, you need beat walmart against amazon, lose as much as you want, doug, we don't care. we want you to be in the ball game with amazon reid was talking about we got to spend more yeah, it gets wider, it is such a good story it is fun. conference call is fun

it is better than a lot of sport events much better. >> jimbo, we'll see you in about three minutes. >> excellent >> and we'll see you tonight on "mad money," don't miss the ceo of veeva and first horizon stay tuned, "squawk box" will be right back what do advisors look for in an etf? i tell clients, etfs can follow an index, but which ones target your goals? it's not about quantity. it's about quality. no trendy stuff. i want etfs backed by research. is it built for the long-term? my reputation depends on it.

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all right everybody, let's get a final check on the markets. the futures, a big update yesterday. dow futures indicated down by 124 points and s&p is up by 4 and nasdaq is down by 7. make sure you join us tomorrow "squawk on the street" begins right now. good wednesday morning, welcome to "squawk on the street," i am carl quintanilla with jim cramer and david faber, the new york stock exchange the coming off that bounce, the best day of stocks for seven months ibm is a piece of that as revenue is going back to falling. europe is not picking up on yesterday's gains either and watch bonds and currencies, we