ground skbauc "squawk box" begins right now. >> announcer: live from new york where business never sleeps, this is "squawk box. ♪ >> good morning, everybody welcome to "squawk box" here on cnbc, we are live from the nasdaq marketsite in times square the dow was up yesterday about 45 points despite some disappointing results. those components ended up higher the dow indicated up by about 31 points up by close to five and the nasdaq up by about five. no changes are expected. this will be the final news conference for ecb president mario draghi incoming president christine lagarde will be in attendance.

all starts about 8:30 a.m. eastern time it is the busiest day of earnings season bringing you reports of 3m, hershey and more like comcast september durable goods orders and the latest read on home sales. >> tesla shares soaring. earning $1.86 per share versus a loss of 1.82 per share they have reported producing 300,000 vehicles the company saying it is ahead of schedule with its new giga factory in shanghai and on the long awaited model y cross over

and expects that launch by next summer what ceo elon musk said on the conference call for demand of electric vehicles. >> when flat screens came out, it was a big step in demand because now getting a flat screen was much better than having a small crt screen tv weem see the same thing instead of just buying a car because their last car wore out, they'll buy and electric car because it is fundamentally a better car. >> big numbers for investors to a large degree on prediction of when this motdle y will come and when this factory will be on board. it is worth saying so many times. he's offered projections that

have been out there ahead of schedule and sometimes when you are dreaming big, you dream too big. we'll have an analyst join us. >> this is an excellent quarter. they did a great job >> the question i have, you look at the stock i don't know if it is so much the numbers themselves as them saying the hang high will be on top more thanpeople thought. we have the model y issue. he's made proclamation about things coming that have taken longer than in the past. >> they get to create their own milestones and goal posts. model y comingsooner

>> let's take a step back. what part of the news, you you are discounting? >> yes they could show us 5,000 cars before the end of the year realistically, it is demand out of china that demands more than anything not ramping as quickly as we thought. it still should see pretty healthy demand into the end of the year i give almost 100% of the discount into the shanghai move. model y, usually tesla does start shifting backwards with new cars the last four launches have gone backwards. so this is a positive.

i think they are pretty conservative in the time line they shared initially. >> your stock price for this company. >> 2.49 target i'm looking at that revenue is down year over year. why is that? we have 10,000 fewer model x cars this year than last price of the 3 is off year over year looks like quicksand to me we have to look at 2020 and ask, are we going to see further probable price pressure on model 3. i think so >> you think the margin has to come down? >> i think so. >> and the model y isn't going to save the story? >> i'm a skeptic i think it does end up can ib alliesing the 3 in the same way we saw the x come in with the s.

>> what about the competition. we always say the competition is coming these other electric cars are going to come. that's not really the story at the moment >> no. it is not. i think the headline numbers on the porch were taken positive. the range and 0 to 60 not as compelling as the model s. tesla has a technology lead. others are trying to catch up. a lot of the pms out there are all talking about preorders now versus when we were talking about preorders for the model s. >> do you zil think it is an electric vehicle to electric vehicle competition. the way elon musk talks about

it, it is a converting to electric story i would say a huge percentage of people buying a tesla are buying that because they think it is cool versus that or buying a bmw with fuel in it. >> both sides are fair if someone wants an ev, tesla is one of the most compelling stories. there are people being pulled into the pool. i expect that to be growing. you expect that on both sides as they continue to roll. >> they are looking at that as a huge advantage given the fact there. what do you think? >> the recent volatility with the trade spat has me backing

off a little bit just looking at what has happened with the mba and internally, those don't translate in the momentum that they should. elon has done a dramatic job managing expectations there. a little uncertain now we have to see how it rolls and moves forward. i do expect manufacturing there to ramp smoothly though. >> that may be the difference with some of these the honeywell ceo. the way they've been impacted and using local employees and offices. it is probably still a tricky line to walk as an american based company and you don't want to offend your home office with some of these things >> there is merit to that but

tesla's culture is to overhire at the friend end and then cut the head count that is not taken very well in china. there will need to be some cultural accommodations. there has been a tone deaf management style at the company in the past. >> what is the debt story? >> $12 billion in debt is a lot of money >> i'm only pointing this out, when you go out there now

>> i would short it here i don't expect the fourth quarter to be as interesting given the cost for shanghai. >> looking for the detail. could be rich. nine grand plus versus 13.80 a car. subsidies are very important they do drive gross margins up there is a couple hundred basis points now so subsidies matter >> we'll leave the conversation there. thank you. we should tell everybody, ron baron is going to join us from the annual baron investment

conference over at lincoln center one of his special guests will be tesla chairman robyn denholm. >> she was already on the tesla board. experience in both toyota and some technology sector >> big telecom person. >> he said publicly, he wasn't going to listen to her >> we'll talk about all those things with her. >> good. dow out with earnings. down 91 cents a share compared to 73 cents. revenue was just above wall street expectations as well says

here although profit did fall 32% from a year earlier on weaker demand higher income costs and global weakness joining squawk on the street at 9:00 a.m. eastern. coming up, earnings check. we'll get reports from 3k and more i'll show you numbers behind the biggest pre-market earner. speaking of movers, here are the biggest losers in t biggest winners and losers in the dow right now. ♪

♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪

>> some stocks to watch. other earnings reported. ford shares are under pressure following disappointing earnings weaker than expected sales in china. ford also experienced a bumpy launch of the redesigned explorer and lincoln aviator

microsoft's first quarter results easily beating forecast on gains and revenue the company's intelligent cloud segments, revenue beat estimates but growth slowed in the quarter. microsoft still reporting profit in fiscal 2020, up about 1%. >> paypal beating forecast saying higher customer traffic as customers used paypal to pay for transactions that is up about 8%. look at that, i don't know if we need to go back about 2.5 years when paypal was spun off -- >> everything is more than what we think it was.

let me tell you, if you remember when ebay and paypal were split apart. carol icon fought about it no you it looks obvious. now the ebay story not as positive secondly, ebay reports facing fierce competition from walmart and amazon >> shares of nokia are down sharply, the company is slashing its out look for 2019 and 2020 saying this saying they will spend author more to fight off rivals check out the stock, down by more than 18%. a drop to $4.16. >> coming up, more on "squawk

box" this morning. are your co-workers coughing and sneezing this morning? joe and becky? >> no. >> that would be you >> i'm not >> most days >> we have results of a new survey about employees that come to work sick you don't want to miss this. back in a moment is the monolithic view of emerging markets obsolete? at pgim, we see alpha in the trends driving specific sectors of outperformance. where a rising middle class powers a booming auto industry... a leap into the digital era draws youthful populations to mobile banking and e-commerce...

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>> do you ever come into work when you are feeling a little under the weather? you are not alone. 90% of emplo iys admit to sometimes coming in with cold or flu symptoms those said they always come into work because they say they have too much work and oerthers don' want to use up their sick time >> you don't have sick time, really >> you do. >> stop coming in here sick all the time >> you have sick days. >> after 20 years on this show >> i don't remember the last time >> i told you, get some animals

in your house. kiss them in the morning you are exposed to every single thing. you should see what they do. your immune system is like super charged. >> too late for me >> no, it is not >> i'm a delicate flower >> you are >> i thought you were thinking about a dog. >> to be continue. >> the cities where this is most common, charlotte, north carolina and miami, florida. >> interesting how many sick days do we get >> i don't know. >> but i want to come in >> if you are vomiting, stay home when we come back, we are expecting numbers from 3m and southwest air in the next few minutes. hang on to that.

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>> announcer: welcome back you are watching "squawk box" live from the marketsite in times square >> good morning. we are awaiting quarterly results from 3m and southwest

air. take a look at where things stand right now with futures dow looks like it would open higher s&p 500 looking to open a little above five points and the nasdaq looking to open up about 38 points pg&e looking to cut power to california homes now the second shut off. portions of 15 counties are without power. the expansion will span to more today. thousands will be affected the power company is warning that the forecast for high winds could mean more outages that extend to next week. >> xilinx says full-year outlook is down. including the impact of the u.s. government's restrictions on

huawei the second major to impact the trade war. chip making equipment maker lam research are rising. beat estimates saw jim tweeting about this. monster quarterback for lam. >> johnson&johnson cutting profit by $3 billion to account for the deal announced before federal trial was set to start the framework hammered out in north carolina, tennessee and texas. saying j&j would pay a $4 billion fine and other drug companies have offered to pay $18 billion collectively over 18-year period they'll need proud support

johnson&johnson facing thousands of lawsuits over a number of its products lowering a number of third quarter profits to 1.81 a share. no impact to its adjusted earnings numbers when did we talk to the cfo of j&j? two weeks ago? might have been three. we were talking about what these settlements could mean >> i think it was the next day it wasn't that long ago. the next day is when they had to recall that single lot of baby powder we weren't even really talking about that part of the litigation should we look at this >> looking at a number now

>> 3m, does it make sense? >> no. 2.72 the gap number is 2.72 street was looking for 2.49. that still puts earnings above expectations and gets you back down to 2.58 versus 2.49 expects were for 8.16. talking about the performance. the chairman and ceo says the macroeconomic environment remains challenging. >> looks lore. not a big beat >> still looking for what else to strip out of that >> southwest airlines reporting. looking at luv i always like the symbol

the ceo will be on to talk about the results. we are going to talk all about boeing let's look, adjusted earnings per share is $1.23 versus expectations of $1.08. getting a nice jump. revenue $5.6 billion capacity was down a little at 2.9% load, 83.5%. that's a pretty good beat. i don't know if there is anything in that one either. well above expectations. is he on our show today? gary or on squawk on the street they are trying to do everything at once. luv just reporting, you are on

your own >> just looking back at the 3m guidance excludeing some things they now expect 2019 earnings to be in the range of 8.99 to 9.09. it is below their prior expectations of 9.25 including 15 cents a share impact of the recently closed facility even with that 15 cents that brings guidance to well below what it had been before. that's probably why you are seeing the pressure shares off that updated guidance again, it looks like it is weaker than what they had said before. in april, they had cut their guidance that stock was up by about 13%

when we come back, we'll talk about facebook under fire. mark zuckerberg testifying on capitol hill talking about cryptocurrency and privacy and more we'll talk to a governor there part of that conversation. we'll talk about bit kind taxes. you won't want to miss stay tuned you are watching "squawk box" on cnbc

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>> welcome back. futures now indicated up 27 points nasdaq um almost 38 and change s&p indicated up 5.23. 3m at this point, so we were up quite a bit more on the dow. that is shaving down about five points equivalent -- the dow would be about double now in terms of gains. >> facebook ceo mark zuckerberg facing questions on capitol hill yesterday on libra, data privacy and more >> libra is going to be backed mostly by dollars. i believe it will expand

leadership around the world. if american doesn't innovate, our financial leadership is not guaranteed >> welcome the congressman from texas. good to see you. thank you for joining us today >> thank you good morning >> what did you think of mark zuckerberg's testimony yesterday? >> let me start positively i think mark zuckerberg is a nice guy he was calm, cool and collected in a hostile environment now to the actual subject matter this was supposed to be about cryptocurrency and it was but some of it was a general airing of grievances from both sides of the aisle. it got a little out of hand. i think members walked away not he'lling any better. one thing i was concerned about

is his decision or statement that if u.s. regulators don't jump on board, they'll pull out. let's bring this home and have this based in the united states. >> what was his response to that >> it wasn't a total shutdown but it wasn't an eager stance to agree with me. i implored him to consider it. i think he will. they seem to be moving towards the direction of switzerland >> why do you think they chose switzerland? that struck me as being odd from the beginning. >> i asked that question some asked the question, one of the responses he gave is that the companies headquartered there are international. he didn't say the word neutral but i think the thinking is that

it is an historic location for financial firms. a democrat from california said, don't we have a few financial institutions based in the united states i don't know why it is so important to move this to switzerland and why they wouldn't want the u.s. on board. it is important we be leaders in innovation let's be leaders in the usa and make this a project everyone can get on board with. maxine waters brought up the idea of breaking up facebook yesterday. what do you think about that and what do you hear from people on both sides of the aisle concerning that? >> that is one thing chairperson waters is big about. i don't particularly think republicans will be pushing for something like that. but i think facebook has become a victim of their own successes.

they are dealing with a problem they never thought of. alexandria ocasio-cortez was asking questions like if an ad is run in a district that targets minorities of a certain age and says that election day is on a wrong day to surpresident turn out, is that allowed? he didn't have answers for those. >> i saw that exchange >> irthink they just haven't considered them. they are so big, they are dealing with things they have never dealt with before. i think his intentions are good. i think it really troubles him that facebook has gotten a bad rap. >> congressman, what do you think the answer should be

>> on the issues i just raised, that's a problem and that particular issue is a problem. the follow up question is, what if i run ads in someone else's district with false claims, is that okay? >> they deliver a political mailing no matter what the mail has to deliver it why does facebook has these issues >> would you be in favor of mark zuckerberg stopping you if you were to advertise the wrong date for the election, for example? >>i would not be in favor of mark zuckerberg or anyone at facebook policing me if i tell a lie, which i would not do, the people are going to

hear about it. if elizabeth warren says a lie, joe biden is going to call her out on it and let the people supply if you get into the business of policing political speech, when d does it stop >> when do you think the real movement in washington is going to be on that? you have that opinion but a lot of people think facebook is playing a much bigger role i think zuk i think zuckerberg is big facing the board. the last discussion, they got a big wake-up call >> i think you'll continue to see problems and unhappy parties. it is shocking to me that

someone who i suspect whose politics are pretty progressive. a group flies out to washington and the democrats are most hostile. when i come back home to my conservative republican district my con diswentz don't like facebook either. when you hear people like maxine waters saying, let's break up the company. you start to think if they've got these many issues, why are they pursuing the cryptocurrency project. if the intention is to disstrakt from other problems, i don't think that worked yesterday. >> i think they really wanted to do this project. when you have both sides of the aisle so angry >> do you think facebook influenced the election last time around?

is. >> i don't know facebook influenced the election more than anything else facebook is a tool i use to influence voters >> did you buy fake ads? i ran ads to encourage people to come out and vote and why i was the better candidate for the most part tharks is what happens. when you've got russian bots running ads. i think facebook is spending a lot of money identifying that. >> do you want them identifying those bots >> absolutely. they need to be identified you need to get into a difficult situation when you have actual declared candidates like myself and alexandria ocasio-cortez who are being censored by facebook i don't want their board or whoever is monitoring what i'm

running to tell me not to run something because they disagree with me. let's say the gun control debate does that mean they are liars? using their argument, then facebook should run their ad >> there are people who write on facebook that sandy hook and parkland never happened. that it is a hoax. >> if that's a political candidate? i don't know questions yesterday where thalib asked about armed men outside of mosques and people insighting hate spoeech do they ever get all of them

taken down at what woi at what what point does political speech mean you are free to say whatever you are free to say? i don't know i don't believe there is an answer to this but i also don't think either side of the aisle will ever be fully happy. >> coming up, we'll dig more into wefhen we come back whether your beauty routine is 3 steps... or 57, make nature's bounty hair skin and nails step one. it's the number one brand uniquely formulated for silky hair, glowing skin and healthy nails. nature's bounty, because you're better off healthy.

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southwest airlines out with its quarterly numbers. phil lebeau joins us with more hi, joe. >> reporter: southwest posting better than q3 earnings. earning $1.23 a share, above the estimate of $1.08 per schare you can see the stock reacting favorably. revenue $5.6 billion

the company has not had the full complementary fleet that it expected when it placed its orders for the 737-max and they laid out all of their capacity plans for the year capacity down 2.9%, and also because they are not taking all of those aircraft, their capex expenditure a little lower than expected now coming in at 1.1 to $1.2 billion what's been the impact of the max? it cost them operating income of $210 million in the third quarter. when you look at southwest, they have more maxes than any other airline. 34 of those that were grounded starting in march, but a lot of people also forget that they were scheduled to receive another 41 throughout the rest of 2019. they now say they expect to take delivery of seven of those 41 in the fourth quarter, pending whether or not the faa signs off and recertifies the max.

and then the remaining 34, those arepushed out into 2020. remember, guys, they pushed back the date of when they expect to put the 737-max back in the air, back all the way to early february and that's provided that the faa does sign off on the plane by the end of the year. and then it's going to take a couple months, a, to get the planes ready, get the software update and had get the pilots trained. you can't felipe switch and have your crew ready to go. gary kelly will be talking not only about the q3 earnings, but also the outlook, specifically about the max. remember the last time he was on, guys, at the end of q2 earnings, he'll be on "squawk on the street." last time he was hopping mad, especially for gary kelly. if you've ever talked with gary, you know he's a fairly measured person he was not measured the last quarter. he was mad and so we'll see what he has to say about the max and whether or not they can finally count on it by the end of the year >> yep all right, thanks, phil.

for more on southwest earnings, let's bring in susan de nofrio you have a positive rating on the stock, outperform. you were pleased >> very pleased, better than expected i think not only on the revenue front, but also we think the company is doing an excellent job with respect to managing costs despite the max groundings it's been a real challenge really the past couple years you've had the 737 classics that got retired quickly. you have the accidents, and now the max issues and we think, really, especially as we start to look into 2020 and how we would be positioned as far as investors, we think southwest is doing an excellent job, certainly from a cost perspective. >> do you -- well, they eventually take delivery of all the max that they've ordered do you think? >> absolutely. >> all 280 of them >> you know what it is

they have ams been a much higher standard with respect to their training i do think when the max does come back, they are not going to have to have a huge training events like perhaps some other airlines so i think as a result of that, you know, they are going to be quickly getting the maxes back it's a very cost efficient aircraft you know, and again, it does have to do with a lot of the training, et cetera. >> susan, boeing has said that they expect to have the faa, i'm assuming, signing off on that plane, being brought back by the end of this year >> right >> we spoke with an analyst yesterday. he said he's not counting on it until march 2020 when do you think that will be brought back and how do you factor that in to your -- >> what we try do is be conservative to what we are assuming for supply for the airlines because we had recently upgraded the group because we do think there has been this cast of concern over supply coming in for the airline specifically and we had been anticipating

first of the year coming in for the max. we don't think that's going to happen we think it is going to be more like first or second quarter and we do expect it to be more gradual. so, you know, we think given overly pessimistic expectations, you know, we're feeling pretty good about supply next year. >> delta, very quickly, has gained some market share, stealing away from the companies that don't have the 737-max. do you think those shifts stay >> no, i do expect that southwest is going to be more aggressive yeah, you had mentioned him being hopping mad last quarter i think part of it was his ability not to be as present as he normally is in the market place. we do expect an aggressive southwest. >> do you have a buy on delta or united >> we do >> outperform or buy >> we have outperform. >> that's your highest rating what you use >> what we >> you like delta better than united >> united at this point, followed by southwest then

delta. more valuation quality airlines for 2020. >> thank you >> thank you >> for your insight. don't miss a first on cnbc interview with swees yo gary kelly at 9:30 this morning >> when we come back, twitter numbers crossing active users are based outside the u.s. we'll see what kind of growth the company had t linheast quarter. we'll do that next plus so much more when we return ♪

♪ ♪ but we're also a company that controls hiv, fights cancer, repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes, and keeps you healthy your whole life. from the day you're born we never stop taking care of you.

the busiest day for earnings we break down quarterly results from comcast, twitter and american airlines, and we'll tell you what the numbers mean for your portfolio >> zuckerberg grilled on the hill >> you're trying to help those for whom the dollar is not a good currency. drug dealers, terrorists, tax evaders. >> senator mike brown joins us with reaction to yesterday's hearing and tells us why he supports facebook's cryptocurrency >> he's calling it quits here to tell us why as the second hour of "squawk box" begins right now ♪ don't stop believing ♪ hole on to -- >> announcer: live from the beating heart of business, new york this is "squawk box. >> good morning. welcome to "squawk box" right here on cnbc we're live at the nasdaq market

site with becky quick and joe kernen. dow looks like it will open 31 points higher. nasdaq 39 points higher now, the s&p 500 looking to open 5 1/2 points higher. joe. >> our parent comcast universal as well, earning a share for the quarter, and that was up 4 cents above estimates. which were at 75 cents a lot to look at revenue was above analyst forecasts as well. comcast cable added a record 309,000 customer relationships during the third quarter 379,000 high speed internet customers were added as well video customer losses, which people still look at, 238,000 compared to losses of 106,000 in third quarter '18. but the company points out, as we've stated previously, we're not chasing unprofitable subscribers. with the addition of sky and all the other assets, more than 55

million high-value customers globally at comcast cable and sky with 1.5 million new net customer relationships in the last 12 months so as you can see right now, the stock indicated up about 1 1/2 points >> somewhat tough comps on the nbc universal side >> comps >> you had a couple other things in terms of licensing. telemundo -- the world cup as a big piece of that. so we'll keep going through these numbers. but looks like it's up 1.5% of the premarket right now. >> the other thing that matters is free cash flow. obviously we watch that pretty closely. it was $2.1 billion. that was down from the third quarter a year ago, but that was because of the timing of sky sports right payments. it's heavily weighted to the start of the soccer season not a surprise on that they did see ebitda, pro forma ebitda 7.4%.

it was all of the different branches, cable, nbc universal and sky beat in terms of the ebitda that was expected of all of them. in the meantime, take a look at shares of twitter they are down 13% as those results are just hitting the wires as well. julia boorstin is here she has the numbers on that. >> that's right, becky twitter's top line falling short of expectations even though its daily active user numbers have beaten expectations. we see the stock plummeting. earnings falling shortcoming in at 17 cents a share on a nongap basis, 3 cents less than consensus. expectations revenue of $824 million, falling short of expectations of $874 million the company did grow its monetizable daily active users by 6 million in the quarter, ending the quarter with 145 million. that is 3 million more than projections. but one other factor really seeming to weigh on the stock here is guidance fourth quarter guidance range for revenue between 940000001.01

billion. that is below analyst expectations in the company's prepared remarks twitter attributing some of that shortfall to product issues as well as greater than expected seasonality in july and august the other issue for the company likely to be in focus on the earnings call what they're calling the health of the platform spam, et cetera. c.e.o. jack dorsey saying in the earnings release that they are making progress on this issue with more than half of the tweets removed for abuse i have content in the quarter taken down without a person reporting them he'll probably be talking about that more when they do their earnings call coming up at 8:00 a.m. eastern >> it's been the personalization that wasn't working, the mobile application promotion, i think some of those, the things they a justed that getting kind of into the guidance that they're offering, that is probably what the street is really reacting to. >> i think the fact that the guidance is lower than expected, they had seemed to really been

turning things around with better customization tools, making sure you're seeing the tweets you want to see the fact those things didn't really work this quarter and that really impacted revenue, it sounds like they expect things to get better and there was some improvement in september, but they're giving their guidance that things could be a little lower than analyst projections >> stick around. we'll continue this conversation right now want to get reaction to twitter results joining us is john freeman, analyst at cfra. you're hearing these numbers across you're looking at the stock already down this morning. does that make sense to you? where do you think it should be? >> yeah, no, that makes total sense to me. so, this is kind of reason why we've had a hold on the stock. i mean, management has done a really good job over the last couple of years of making, you know, of sort of making performance a little more consistent but then -- and then they have a quarter like this. and, you know, they've got -- they've made a lot of improvements to the tools, to the -- to make it easier to

target for advertisers, but then, you know, they have a quarter where -- they're blaming product and seasonality. come on, seasonality happens, you know, every season so, you know, that always kind of gives me real pause there might be some value here at this point if there is an overreaction, but it doesn't really surprise me that they missed expectations. but it did surprise me that they missed eps by so much given, you know, the operational leverage they should have in the business >> what do you think the fair value is for this company right now? >> my target was 40, but, you know, maybe a little less than that now i, you know, i just don't -- i want to see -- i come at this from a fundamental perspective i want to see fund amouamentalsd could consistency. it's there from a -- it's got

social media, network effects, things that should be able to really drive both the top and bottom lines consistently. >> one thing i think that's worth noting here is that over the past several quarters we've seen the street come around with the idea this is not going to be a huge business in terms of the number of users. it's never going to be as big as a facebook it may never be as big as snap if you focus on daily active users, they have this dedicated user base. twitter has done a good job making more money from those users. what we're seeing this quarter is they are actually growing their user base better than expected both in the u.s. and internationally. the challenge, though, is if they have these hiccoughs with the product and they're not able to adequately monetize those users, then everything in the last couple of quarters of growth have been based on start to come into question. >> i would also, i would also add that, you know, there's a lot of -- twitter has become increasingly more of a broadcast one to many sort of medium

and that doesn't capture the kind of targeting and that doesn't gather the kind of data that advertiser -- that are as rich even, for example, snap obviously has operational issues but i think that's really been a handicap for the company over the past few years >> how do they change that is there anything they can do about that >> i'm not sure. that's a very good question. i thought about this i don't think there's a good answer to that, although, you know, maybe you just own what you are and you're more of a broadcast medium and you monetize and optimize for that >> and you don't think they're optimized for that now >> well, obviously they're not as optimized as they should be like i said, there should be a lot of operational leverage in this business. and you see it for a couple of quarters, and then they take a huge step back like they have this time. so that's -- you know, like i said, it's attractive perhaps as

a value stock if there is an overreaction, but i don't know, as a fundamental investor i would step to the side and we've been to the side for a while. >> john, how much of this is privacy, though? if facebook is in trouble for, you know, data mining or for privacy, potential breaches, if twitter is trying not to do that, the answer is you may be unable to sell as much advertising, right >> right and, in fact, there's a possibility that, that twitter benefits from some sort of, you know, very intrusive facebook regulation but in the meantime, advertisers care about the return on investment for their advertising. and obviously the improvements in the tools were certainly not as consistent and obviously -- i don't have the dee tames but they mention product-related issues that hits their customer base. and i don't know, i just don't think -- i need consistency from their fundamentals in order for me to be more positive on the

stock. >> and i would say even though twitter doesn't have as much of the personal data as facebook does and it doesn't have the same questions about encrypted messaging, twitter does have questions and potential regulation about the kind of content it's allowing people to broadcast on its platform. if it is a one to many broadcasting tool, should it be regulated and held to the same standards as broadcasters, such as the tv networks and what does that mean from a regulatory standpoint >> that's a great point. and that is something that, you know, people on capitol hill, you know, the guys behind me here, they will pick up on that and, you new york stock exchange even though twitter doesn't appear to need regulation, they may very well fall into that category as well and get sucked into the same vortex as facebook, even though the anti-trust argument on twitter doesn't really hold as much -- nearly as much water >> okay, john, we're going to leave the conversation there we appreciate it very, very much julia, thank you >> thank you >> we should tell everybody in the next hour, you don't want to miss this. twitter's cfo is going to join

us right here on "squawk box." that's going to happen at 8:45 a.m. eastern time to break down and comment on some of these numbers. i think we have a lot of questions for him. actually, if you have some, you can send them is in to us on twitter as well. >> when we return, billionaire investor jeffrey vinik is closing his stock picking hedge fund eight months after he started it it's the latest sign of challenges facing the hedge fund industry stay tuned you are watching "squawk box" on cnbc >> announcer: coming up, the future of libra. senator mike rounds joins us to discuss yesterday's facebook hearing. plus earnings from american airlines and what they are saying about the boeing fallout "squawk box" wl rhtacilbeig bk. what do advisors look for in an etf? don't just track an index, help me meet a client's need. is the fund built to sell or built to last? etfs are only part of a portfolio.

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welcome back to "squawk box. billionaire investor jeffrey vinik is shutting down his hedge fund after just eight months, and leslie picker joins us with that story now >> good morning, andrew. vinik's decision to close his eight-month-old hedge fund can be summed up from this one line he sent out in the letter. the climate for raising long-short equity hedge fund assets has been more difficult than i expected.

when he decided to return to the industry after a six-month hiatus he expected to raise quickly $3 billion he joined us on "squawk box" to explain why he was getting back into the game. >> i think this is an incredible opportunity for, you will know, old-fashioned stock picking. you know, we've had decades or maybe ten or 20 years of active managers under performing passive managers all these trends have kind of ignored the fundamentals behind companies, quantitative trading, too. i think there is a great opportunity now. >> but it quickly became clear to vinik that the industry had evolved with the rise of passive investing, quad funds, heightened cop petition in the industry he was only able to raise 1/6 of his target l the fund generating 4.8% return on a net base versus 6.9% in the s&p in that time period investors in his fund will be redeemed by november 15th, guys. >> all right, leslie, stay with us we're joined now by the

aforementioned jeff vinik, c.e.o. and cio of vinik asset management it's only eight months, jeff 4.8, you're almost matching the averages what was actually your decision to not give it a go for a little bit longer >> yeah, well, thank you for having me on this morning. you know, this has nothing to do with performance actually. i was quite pleased with my performance over the last several months given the challenges of the market, the under performance of international small cap and all. i actually felt good about performance and where the fund was headed you know, i thought as you guys said, i thought i was going to be able to raise $3 billion right off the bat. obviously i did not have a goo understanding of the hedge fund industry of 2019 not only did i fall well short of those goals, but here we are in october, and i'm sad to say there's no, you know, it doesn't look like we will get any money at the end of the year

and despite the fact that i've had dozens of good conversations with asset allocators, there's no sign of money coming in one thing i think i've always been good at in the financial markets is selling when a position is going against me, and, you know, when this certainly did not workout like i planned, but, you know, we move on and, you know, try to do the best i can for my investors and my employees over the next few weeks. >> you would have got more satisfaction out of managing 3 billion than a half a billion? you certainly don't need the money. it's not like you need whatever it is that your fees were going to be for that you could beat the market and do what you love to do with half a billion. probably do that with your own money. i guess that's what you're going to do. >> i think that's a fair question but the fact of the matter is to have a really good thriving business for myself, my partners, my employees, i told my investors right off the bat the beginning of the year that we needed at least 2 to $3 billion to make it worth my

putting in 75 hours a week, which i have i mean, i've done everything i can to work as hard as i can to perform for investors and staff. but we just didn't get to the level of assets that -- to be, you know, to justify that. and even more importantly, there's no sign of getting to that level of assets when i started 60 years old and i told investors again, if we get the assets we need, i will work as hard as i can the next five years to give you all i've got for great performance. the fact of the matter is, 630 years old, getting close to 61 with no sign of the money coming in, it really doesn't make any sense for me to work that hard for another two years and then have assets come in. >> do you think it finally came home to roost to investors that -- i've said this a thousand times past performance is no guarantee of future performance. why the really high fees sometimes you think about with hedge funds that sometimes deliver average or less than

average performance. people finally -- it just they're out of favor or is what you're trying to do much more difficult now with what you mentioned, with the quants and passive investment and everything else? >> one of the painful parts of shutting down is the fact that i still believe active stock picking is very much going to be successful going forward the last year or so, we've had an amazing bear market and economically sensitive stocks, smaller cap stocks we've had an amazing bull market in defensive stocks and economically, you know, non-economically sensitive stocks that rubber band has been stretched and stretched. and while that's going on -- and i've had a bet more on the economically sensitive companies. that's why i'm very pleased with performance having done well starting in september, that rubber band started to go the other way. so as we're moving forward here, i'm actually quite positive on the financial markets. you know, directly ahead, and

i'm very positive on stock picking and the return i guess you could say value investing. i think we're a month into that trend. so shutting down when the investment thesis i've had for the last three months and survived it in a difficult climate, shutting down at a time where it's just starting to happen and work is very, very frustrating. >> so, jeff, as you were having conversations with potential limited partners, i think you said that you had spoken with about 75 people or so as you were raising money for this fund what was it that they were telling you was the reason for not investing? was it the strategy? was it just that, you know, they felt like this market was not ripe for stock picking right now? >> yeah, you know, i think it's several reasons, one of which i did not anticipate at all. very different than, you know, ten years ago, 20 years ago. just the process by which they vet managers and do their work was much longer, much more thorough than it was when i started in the business where

literally i made the runs in new york and a couple other places sold that on the fund. >> is that a good thing, jeff? >> yes and no. let me finish here the other thing is that the long/short hedge fund equity performance has not been good the last five to ten years so asset allocators are very leery of putting any money to work in that particular class. and i think that's the other thing. i had a number of conversations, pretty much -- most every conversation i felt went really well while we did raise several hundred million dollars, what we heard back continually was we don't like this asset class, we're not putting money with long/short asset managers. we're not convinced your style works. i am convinced my style works. and we want to see some time and some track record before we put money with you so, you know, frank lyft i hly a rude awakening january, february as the money comes in, i didn't want to spend a lot of time on marketing and i didn't

you know, it's -- i've done a lot of things in my life i've taken risk. i've been fortunate that most things have worked and this one didn't play out as planned. >> so, do you think that this is a warning shot to anyone and everyone out there that might want to open a long/short equity fund in kind of the traditional way? is there anyone out there that can still be successful or do you think this is essentially a dying strategy right now >> you know, hedge funds have been out of favor for -- i mean, the peak, relative peak asset hedge funds was ten years ago. long/short hedge funds and macro hedge funds have really had poor performance over a period of time i actually think that it's a lagging indicator and the fact that it's so hard to start up a hedge fund these days is because performance has been bad and asset allocators are looking in the rearview mirror they're not looking ahead. but if i had to talk about the years ahead, you know, based on where valuations are in the market and the fact that i do believe we have a good economy

for the foreseeable future with ups and downs, i think it's going to be really good for stock picking, for companies that can grow their earnings but, frankly, when they heard my story, asset allocators, ask just don't believe it, don't believe me >> what are you doing, going to disn disneyland, universal studios? you have an island >> first of all, come november 16 after we shutdown, i have plenty to do with the lightning and stuff going on in tampa and renovation we're doing i have nothing short of building between now and november 15 i have two things in mind. doing the best i can for investors as we wind down the fund and we're already 70% cash. and taking care of employees and several lost their job and finding them good opportunities and taking care of them. >> thanks for explaining everything to us, jeff and good luck. i'm sure we'll see you again soon cnbc contributor might be beckoning for you as well. we can talk about that a little bit later. doesn't pay a lot. >> okay.

>> joe negotiating when we come back, earnings -- american airlines and how the company is dealing with the fallout at boeing. the numbers and outlook for the sector straight ahead. plus check out the futures right now at this hour dow up 47 points, nasdaq up 47 points and the s&p 500 up about 7 points we return right after this >> announcer: time now for today's aflac trivia question. in 2016, alaska air bought which airline for $2.6 billion the answer when cnbc "squawk box" continues coach saban we have health insurance. did health insurance pay for everything? no, we still have bills. aflac gives you money directly to help with those. aflac! and your deductibles, knee brace, whatever you choose. aflac sounds like a winner. umhum... umhum... we try. get help with expenses health insurance doesn't cover.

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welcome back to "squawk box. let's look at the shares of two high-profile companies reporting earlier this morning here's what's happening including our own parent company comcast. shares are higher beating consensus on both top and bottom lines. helped by high-speed internet

customers. stock up close to 3%, $47.01 twitter shares are falling this morning as it missed on both the top and bottom lines it did have a higher than expected number of daily users the stock off 20%. we're going to have the cfo on twitter this morning at 8:45 eastern time so lots of questions to ask him about this quarter and where they think they're headed. >> we saw southwest earlier, pretty good numbers. american airlines now releasing quarterly results. phil lebeau has the numbers. hello, phil. welcome back >> joe, just like southwest beating the street the third quarter, so does american airlines earning $1.42 a share, 2 cents better than expectations with revenue coming in at $11.9 billion, roughly in line with what the estimate is out there on the street. so many questions are going to focus on the impact of not having the max because, remember, like southwest, american has been without the max. so they've had to change their

capacity we'll talk about that guidance in a bit the cost in the third quarter of not having the max, $141 million. because they haven't had the max since march, it's cost the company $540 million and as i mentioned, it has changed their capacity plan. so for american it is now lowering its 2019 capacity guidance it will now be up just 1%. previously it was 1.5% guys, you go back to the second quarter, back in april, they expected to grow capacity this year by 2.5% so those are all those seats that have been coming out of the system that they were planning on their full-year eps guidance, they have trimmed the top end of it it is now 4.50 to 5.50 a share previously it was 5.50 to $6 a share. doug parker exclusive tomorrow night, you don't want to miss it, on "mad money. we'll hear what he says about the max and overall, they had tighter capacity as have other

airlines what happens in 2020 i know jim cramer is looking forward to this interview and you don't want to miss it exclusively on "mad money" tomorrow night guys, back to you. >> all right, phil, stay right here we're going to talk more about it the boeing max has ripples in the airline industry let's get reaction to today's results, not only amr, but southwest air. joseph denard i is here, managing director at stifel. joe, what do you think better than expected numbers, but when is the 737-max going to be in the air? >> yeah, i think that's right. it seems like so far airlines continue to see a very healthy demand environment both leisure and corporate, and that's kind of showing up in their revenue performance. but as you mention, i think the main overhang that investors are struggling with now is kind of what the, what the pricing environment looks like when all this capacity that's been taken out this year comes back i would say there is still a fair amount of uncertainty in terms of how it ramps up next year based on boeing's ability

to recertify the max, and then deliver those airplanes. so still unclear in terms of what capacity looks like next year >> that's a really interesting point. capacity is down because this hasn't been there. we heard now from american that it's cost them about $540 million in lost ticket sales as a result i think the number was north of 435 or 50 billion -- $450 million or around that much for southwest airlines but when you have less capacity, airlines are able to raise prices so how big of a deal is this for them how do you kind of net-net all of that? >> yeah, i think what investors want to see from airlines is they want to see them behave like railroads and constrain capacity and get stable pricing power and kind of compete responsibly with one another and they got that behavior really through 2014, and that's when airline stocks did really well since 2015 airline stocks have been relatively flat or worse

because there's been excess capacity this year capacity is kind of where it should be maybe a little bit below gdp, but it's kind of an artificial constraint that's going to go away next year and so we're assuming that when the capacity comes back, that it produces a more challenging revenue and fare environment for airlines it's just unclear in terms of when it comes back and how quickly. >> phil? >> joe, this is phil lebeau. the first quarter always the slowest of the quarters for the airlines might be a good environment for them to bring the max back into service. but i've talked with a number of people in the industry, and i'm sure you have as well. nobody is quite sure what the public reaction is going to be to these planes when they come back into service. how lumpy do you expect that transition to be, and how challenging will it be for the airlines to convince the public, yeah, these planes are safe to fly on >> yeah, i think that's going to be a challenge

i think one of the data points we're looking at is alegiant airlines they had a p.r. challenge a year or two ago when they were on "60 minutes" the implication it wasn't a safe airline was largely unfounded. what they saw after that was a period of, you know, probably two or three quarters where bookings were abnormally soft. and so we're assuming something like that for southwest, and then to a lesser extent american and united so we would -- delta airlines has benefited this year from taking share that southwest has essentially given up we're assuming that that dynamic continues into next year, even when the max comes back. >> so as a result, which stock do you like the best, if any of them if you're worried about pricing

kind of going haywire africa pass it comes back >> the fundamental outlook is not great. assuming the max comes back in a timely manner, you're going to have excess of capacity and airline stocks haven't worked well in that type of environment. our thesis on the industry is airlines are not really airlines, they're marketing companies. they put their logo on the corner of a credit card and clip 2% of the spend on the portfolio, and the market is kind of improperly valuing that like a low-quality industrial. so we're hopeful over time that airlines like delta can better educate the market, help them see that not all of the earnings comes from running a capital intensive competitive cyclical airline that essentially within delta airlines is a business that looks like marriott and should be valued that way. and so that's why we remain bullish. and personally, i think that's part of warren buffett's thesis on the group he's been a.m. ex's largest

shareholder for 30 years it's not impossible to see that am-ex is losing money because delta is making money on the partnership. we're bullish on the industry longer term. i think the assets are just miss priced >> do you like delta better than the others as a result >> delta is a combination of high-quality airline business, investment grade balance sheet, very, very good management team. and then an incredibly lucrative partnership with american express. and am-ex is probably the best bank partner at this point and on the other end of the spectrum, american airlines, their credit card partner, citi and barclays, that gets combined with a low-quality, at least at this point, a low-quality core airline business with a lot of financial leverage and so if american -- if doug

parker can figure out how to improve financial performance at american, there is enormous upside there i think investors are -- they've been frustrated with kind of the lack of -- lack of progress there recently >> joe, thanks for joining us today. and, phil, good to see you thank you. >> coming up, facebook c.e.o. mark zuckerberg as you know by now defending libra the digital currency, his company as a whole yesterday on capitol hill. we'll have reaction to the big hearing. that's coming up and then tesla shares are soaring after a surprise profit. we'll go behind the wheel and the numbers as well in just a bit. "squawk box" coming right back ♪ ♪ what do advisors look for in an etf? don't just track an index, help me meet a client's need. is the fund built to sell or built to last?

etfs are only part of a portfolio. so make it easy to explain. give me a quality fund that helps me get clients closer to their goals. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully. it's the idea that if our mothers were diagnosed with cancer, how would we want them to be treated? that's exactly how we care for you. with answers and actions. to hear your concerns, quiet your fears, lift your spirits. that's the mother standard of care. this is how we inspire hope. this is how we heal. cancer treatment centers of america. appointments available now.

♪ ♪ welcome back to "squawk box. democratic senators are asking the ftc to investigate amazon over concerns the company

ignored security warnings about a vulnerability that enabled capital one to be hacked this according to the "wall street journal" in a letter to the ftc, senator elizabeth warren said amazon failed to protect its customers from a known security issue where capital one stored information on amazon's cloud. now, the senators want the ftc to review whether the company's failure to address the issue should be classified as an unfair business practice that violates federal regulations it's an interesting situation because when this first happened with capital one, all the focus was on capital one did they have the right -- did they have the right security there was a real effort to sort of push it all into a capital one story. if you remember, though, one of the -- the hacker had worked with amazon -- at amazon on the cloud. so then there was this other question is the cloud itself an aws by the way, google has its own cloud. >> amazon got a pass and we

blamed capital one for not having a firewall. >> the question is where do these things lapped. it's never black and white it's always gray and it's probably somewhere in the middle >> did you see the story on the front page of the "wall street journal" -- >> which one >> other stores shun, they go into that bangladesh factory that collapsed that killed about 1100 people. a lot of u.s. retailers said they would stop buying clothes from factories, amazon was one of them. the journal was able to track down a yellow toddler top and find that it was done in a factory in bangladesh that has no fire alarms the doors are a type managers can lock and keep the workers in they say they're not allowed out until they finish. >> it also showed amazon through the market place -- i don't know this is all through the market place or not, is selling baby formula that's old >> you don't know what you're

getting. and they don't police it the way a retailer does. >> it's the same facebook issue. are you able to look at everything -- >> by the way, i don't want to cast aspersions. walmart also has a market place on its site. i don't know how well that's policed. there are things they're constantly taking down they wish wasn't up there. >> i know when you walk into a store, a bricks and mortar store, you feel like you are getting something checked off, signed off on. >> 100%. >> that is where the questions come back up >> we will continue this conversation and so much more -- actually, the acb, i think -- >> ecb leaving rates unchanged that's the decision we've been waiting for. this is going to be mario drage's last conference he'll be doing as head of the central bank he is going to be officially leaving on october 31st. christine lagarde is going to be there and she's standing by at this meeting today as well she'll be taking over that role.

>> coming up, when we return, we have a lot more to talk about this morning zuckerberg grilled on capitol hill you know it, i know it, the facebook c.e.o. defending the libra digital currency and his company was on capitol hill yesterday. we're going to sneak to senator mike brown about crypto. ned seeinggal joining us on cnbc the stock down premarket at one point it was down 20% we're going to talk to ned about all of it in just a little bit "squawk box" returns right after this as a principal i can tell you this. when one student gets left behind, we all get left behind. this is a problem that affects each and every one of us. together with ibm,

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we want do something that strengthens america's leadership i just think that we can't sit here and assume that because america is today the leader that it will always get to be the leader if we don't innovate. and innovation means doing new things, and that does mean the new things have risks and we need to address the risks and we need to be careful in doing that >> that was mark zuckerberg, of course, yesterday on the hill speaking about libra and how facebook plans on addressing the concerns of lawmakers.

in a letter to the anchorage trust company, senator mike rounds is sounding off on cracking down on cryptocurrency. senator rounds writes in his words, i write regarding concerns recently expressed by a number of my colleagues about involvement in the libra association. my colleagues chose to address your peers in such an ominous tone i feel may put a chill on innovation in the long run i believe that there is promise in cryptocurrencies and digital payments, but regardless of how one views such technologies, it's clear the united states is falling behind senator rounds joins us now. he is on the banking committee would you say that more senators are -- have your viewpoint, senator? are most fairly worried about, i guess what we won't be able to control, currency and dollars? they do look at it as an ominous development where the government i think is losing control.

is that it >> i think most members of the senate, once they've had an opportunity to learn what cryptocurrency is all about, i think at that point then they'll ask questions. but i think there's a lack of information wait sfright now abu what cryptocurrency is we need to explain the technology i'm not a techy guy, but i do understand if you use new technologies and cryptocurrencies do use that, they use technology called blockchain and in doing so, there are some real benefits to using it. but it's also a very efficient way of delivering services to consumers that might not otherwise have banking opportunities. and the rest of the world has figured that out the united states is behind other parts of the world in using blockchain technology and in trying to figure out a way to appropriately regulate it. i don't think you walk away from innovation because you don't have a good regulatory process we haven't really updated this

part of the law since 1933 it's about time we do. and to warn companies that are trying to innovate, because we're not in a position to regulate them, that they should stop the innovation seems to me to be an inappropriate response. companies like anchorage out of south dakota right now have done their best to work with regulators, and they found a way to participate in this new technology i want to see that continue in the united states and not migrate to other parts of the world. i'd like to be a part of, you know, that financial services delivery system in the future. >> i'm not sure what happened yesterday. i mean, in a show of rare bipartisan ship, everybody hates facebook you got the democrats playing facebook for losing 2016 election, conservatives think that, you know, everything that's on the site is anti-conservative. and it all bleeds over into the discussion about libra and, i mean, i watched some of the testimony.

some of the usual suspects that loved to grandstand with hyperbolic comments when the cameras were on, they're there in all their glory yesterday i felt bad mark zuckerberg is like, where am i they wonder why i don't like to show at these things >> what we've got right now is a new technology facebook is part of it but they're not the only members. there are other financial organizations out there right now that recognize that if the rest of the world is doing this, we've got to decide whether or not we want to have an appropriate -- >> senator, about privacy, it looked like it descended into an issue about what shows up on facebook's site. was it 50% libra and digital discussion yesterday, would you say, or -- it seems like it descended right into the privacy issue. >> i have to be honest with you. that occurred in the house and in the senate, we don't pay a whole lot of attention to what they're doing in the house right now. they go off and they do their own thing on it. >> no kidding. >> in the senate, we're trying to pay attention to the day-to-day activities that have

to be done and the operation of government is one of them. but the regulatory processes that we put in place have a real impact on our ability to be financial leaders in the futures -- in the future we can't sit back and allow other nations such as china, which will be rolling out a real significant blockchain technology system platform in the next month or so we can't simply sit back and allow other countries to develop it f. so, we're going to have the financial processes start to move out of our country and into those places where they're actually doing a better job of regulating than what we are. >> senator, your sense, if you were to look at a centralized coin or stable coin, whatever you want to describe libra as, versus a bitcoin or something that is completely decentralized, how do you think about those two things separately the reason i ask is, to me, libra is actually quite

controllable bitcoin is completely uncontrollable >> yeah, you make a really good point because part of the neat thing about any type of a chain in the middle of this thing here as we're working our way through, this is something that we can actually regulate and we can work with. and the organization, libra, has actually offered to try to work with us to develop the appropriate type of regulatory process in place law enforcement has a lot more opportunity if you're talking about blockchain technology to being able to follow through and to follow financial transactions rather than the way that things are set up right now with other cryptocurrencies but remember, our goal here is not to pick winners and losers within this, within this innovative approach that's being used by a number of different companies. it's rather to layout what the groundwork should be, the framework should be, and then allow the companies to be able to innovate as long as they follow a set of new regulatory

processes that allow us to figure out who the bad guys are and whether or not they're illegally moving money around, whether it be for inappropriate activities >> i was thinking about asking the same question, just in the sense do you think libra is more attractive to people like you and government because it's based on the dollar. i don't really think any government wants to lose control, as you say, of the currency so i think in that way, maybe if you guys are looking to just in your own self-interest, libra might be better than bitcoin the cat is already out of the bag. tooth paste is out of the tube >> the blockchain technology that libra would be based on does not necessarily mean that it would be centralized. it does mean that you would have a platform that could use a new technology that we could still regulate, but it has a lot of the benefits you find in cryptocurrencies >> i thought republicans didn't

like regulations >> limited regulations, fair playing field only >> all right -- no, it's not, you're right senator, thank you great to have you on we'll see you. >> still to come this morning, tesla is shocking the street the numbers, the market reaction and what is next for the electric car maker that is straight ahead don't miss our guest host for the hour mike novogratz he'll be joining us in a few minutes. "squawk box" will be right back. . they're changing by the nanosecond. that's why cognizant created a unique engineering approach to design and build new digital products. learn how cognizant softvision designs experiences and engineers outcomes. ♪ cool. ♪ cool.

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earnings alert twitter shares dropping sharply after quarterly results fall short. we will talk to the company cfo live >> tesla in the fast lane. shares soaring after the electric car maker surprises wall street with, of all things, a profit >> plus, our market news maker of the hour. investor michael novogratz joins us on set 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. i'm joe kernen along with becky quick and andrew ross sorkin and you've got to see this our guest host this hour, galaxy digital c.e.o. and chairman mike novogratz. is that new or is it an antique or -- >> i was in the army a long, long time ago. so this is an homage to those days >> but it's new. but it looks like an -- it's got -- looks like it has unforgeable value like bitcoin >> you have to pay extra for that >> it's a unique item. >> last time you were on, you were a little too conventional, i think. now you are stepping out >> i had to come back. >> we're all -- >> back to my roots. >> and we're all benefiting from it, i think. what do you think, julia >> i think it's cool the term is not antique, it's vintage. the question is whether it's vintage or -- >> vintage, that was my point. vintage you can manufacture as much as you want antiques you can't

they have to have age. it's like -- i don't know. anyway, but we digress we're going to talk about all these things >> distress. intentional distress >> you don't have to wash your jeans. they come that way you have jeans >> got jeans, got sneakers >> he's comfortable. >> no golden goose you have a golden goose? >> you can't talk about what's going on under the table he has no shoes on i have junky shoes on. >> u.s. equity futures, you can see, are in the green today. 57 now on the dow. the nasdaq sharply higher, up 51 i don't know whether that's lamm, tesla to some extent s&p indicated up about 8 >> we are looking at a tale of two earnings reports this morning. tesla shares soaring while twitter's stock plunges. you can see tesla up 18%, twitter down 16% we have complete coverage of these major market headlines julia boorstin is watching twitter. phil lebeau is watching tesla.

>> disappointing financial results and guidance, both of those falling short of projections. advertising growth at twitter decelerating as the company warns that technical issues with the product reduced its ability to target ads. an issue it says could continue to impact results over the course of the rest of the year now, twitter's earnings of 17 cents per share were 3 cents less than analyst expectations while revenue of $824 million fell $50 million short of wall street expectations. that number particularly disappointing for the street because twitter has topped its own revenue guidance in 17 of the past 21 quarters fourth quarter guidance also falling short with the company guiding to a revenue range below analyst consensus. the one bright spot here, twitter did grow its daily use faster than expected 6 million active daily users in the quarter, that's double the number than expected ending the quarter with 145 million daily active users twitter's call is getting

underway right now we'll be listening in for any more insight from jack dorsey into what's ahead for this company. >> julia, thank you very much. in the meantime, we're going to be checking back in with julia after that conference call and then later this hour, twitter cfo will join us live at 8:40 eastern time. ned segal will also be on the call but then he'll be coming straight to us we go fra rom red arrows to gren arrows phil lebeau joins us with numbers from tesla >> reporter: they're trading premarket. first time we've seen the stock over $300 since march. wow, what a day yesterday when these numbers first came out, i think a lot of people were saying wait a second, is that accurate a surprise profit of $1.86 a share. the street was expecting a loss of 42 cents a share. revenue coming in just a smidge under expectations at $6.3 billion the question is how did they do it a big change in terms of what people were expecting versus their operational expenses they came in with much lower

operational expenses and in their guidance in terms of what they're expecting for the fourth quarter and then going into next year, that's some of the optimism that you're seeing reflected in the stock moving higher. the china plant beginning limited production and that plant, it is expected to ramp up going into the end of the year and that's when they're going to have some deliveries in china. exact amount remains to be seen, but the model y deliveries by the summer of next year. that's ahead of schedule here's elon musk during the conference call talking about the optimism about the plant in shanghai >> shanghai will become a template for future growth we plan to build model y in shanghai, of course, and build a factory in europe. and we hope to announce the location of that giga factory -- in fact, we will announce the giga factory location before the end of thisser . >> there you go. we'll hear where they're building in europe before the end of the year. they reaffirmed their guidance saying, yes, we will hit at

least 360,000 deliveries for 2019 so that's further optimism for tesla goals. guys, this stock has been on a quiet -- and i say quiet because we focus so much attention on tesla. but a quiet move higher over the last three months, but it really rocketed higher after yesterday's call of 18% on a surprise profit. >> back above 300. phil, thank you very much. and by the way, folks, tesla's chairman is going to be joining us live on "squawk box" tomorrow morning. there she is, robyn denholm. a big investor in tesla will also talk to us. >> we want to get to twitter, markets so much more galaxy digital c.e.o. mike novogratz, we'll talk bitcoin with you as well you invested in story stocks, if you will i would put tesla and twitter -- tesla definitively in the story

stock category >> last time i was on here there was a bunch of talk on tesla he hadn't done my homework coming into it don't short elon musk. you don't want to short big ideas. today proved out you don't want to short big ideas. >> i mean, here's the question this is a story stock. part of the reason the stock is moving the way it is because he has now reset expectations about when the shanghai plant factory is going to come on board, when this model y is going to come on board. historically, he hasn't hit the deadlines that he puts out there, and yet -- so what you see oftentimes is the stock moves on the announcement that something is happening on a specific date, and then turns around and goes south when he doesn't nail the date. >> yeah, but if you look at the broad trajectory of what he's doing, he is building a world class company with the best cars on the road. and so, yes, he over promises and under delivers a little bit, over promises and under

delivers >> what if you can take one drop of blood and do all the tests that you need for all your clinicals -- >> just get in the tesla and drive it >> i'm not comparing -- i'm not comparing elizabeth holmes to elon or tesla. i'm just saying -- >> can that be used in other -- >> the big idea sounds great but if there's no chance of -- >> but he's proven time and time again he does deliver. >> totally different >> look at what he's doing with spacex >> i'd like to know if the big ideas are actually real and actually are based on reality. and i don't know if that one ever was people got caught up in elizabeth holmes and george schultz and clinic and that's frightening the way the big idea took over everyone's imagination there. >> you're not a twitter shareholder, but you're definitely a twitter user because i see you quite prolifically do you have a take on this company? and why don't you own it >> it's a good question, i use

it so darn much. i probably should own it >> do you have your own name, pierre delecto >> he's himself. >> are you sure? >> there's a lot of fake me's out there. >> joe kernen favorite >> i spent most of my life in macro. once in a while i own stocks >> do you still own uber >> no. >> you were an uber owner at one point? >> at one point i was. >> in this sort of space and world, do you thplay on an individual basis >> on the private there's a lot of nervousness going on. i marked my portfolio down 25% just because -- >> across the board? >> if you think about the two big winners, juul and wework, wework goes down 75, 80% on what looks to be a complete and total break down of corporate

governance, like no corporate governance juul, everyone knew there was fda risk with juul it hit them right in the jaw so if you think about the market cap of the private portfolio, that's a whole lot of money coming out of it i think it's got people nervous about the rest of the valuations >> what do you think about the rest of the valuations >> listen, i was at a dinner with some really bright guys there was a big debate on this and i think for a while they'll go down. some companies will do well and will be fine if they have a business plan that really does work i don't think venture capital money is going aways i don't think money chasing privates is going away privates are so much easier for people to get invested in. they don't go mark to market private equity has crushed public equity the last 20 years. >> because you think it's so much more long-term oriented or because it's levered, by the way. >> it's levered, but it's also not mark to market

you don't suffer the volatility. you should suffer the volatility, but no one changes their marks. private equity looks expensive to me relative to public equity, but i'm not sure that's going to change >> are the marks real? >> the marks aren't real no one changes if you're an endowment or pension fund, you sleep much more comfortably, you know >> isn't it a fake comfort >> it is fake comfort. that's okay. people -- that's what happens. >> giants of industry that we think of, they really know how to run companies and they should get that carried interest tax break because they're so good at what they do really it's because it's not mark to market they know better than anyone else >> in the long run they need to exit to get there. >> make money to make money. elizabeth warren might be right. >> what about private companies in cryptospace there are so many, bitcoin the biggest in that space. >> it's hard to mark them. coin bases -- last one done $7 billion when tiger global

invested my guess it's not worth $7 billion right now >> what do you think it's worth? >> no idea >> how much of it is correlated to the value of bitcoin, for example, or correlated to the value of the theorem, whether it's going to happen or not? >> it's correlated to the excitement in the space. it's correlatearket in the space. when you can look at market cap volumes, excitement coming down. >> we talked about mark zuckerberg's testimony >> we're going to talk about it in a little bit. come back to it. coming up, taxing wealth, are politicians crushing the f-ing american dream f-ing -- i don't know. it's good to see it. by proposing some new taxes. that debate is next. ♪ ♪

billionaire investor lee cooperman told us elizabeth warren is, in his words, killing the american dream with her tax proposal now senator warren is firing

back and robert franks joins us. >> it started on "squawk box" when investor leon cooper man called the investor tax baloney. >> stop portraying billionaires as criminals our economy would be better off with more billionaires just tax them. >> this week he went further with politico's ben white, what is wrong with billionaires you can become a billionaire by developing products and services people will pay for. i believe a progressive income tax and the rich paying more, but this is the f-ing american dream and she is blanking on it. >> okay, i got it. >> you got it? >> i got it. b.s. >> now, last night warren fired back on twitter -- this is where it's getting good -- saying, leon, you were able to succeed because the opportunities this country gave you >> he didn't build that. >> why don't you pitch in a bit more so everyone else has a chance at the american dream, too. you might remember last time

cooperman got so much attention defending the wealthy in 2011 when he sent that open letter to president obama, accusing him of class warfare and creating a gulf between, quote, the downtrodden and those best positioned to help them. >> okay. our guest host galaxy digital mike novogratz people have come to some agreement on higher taxes are the way to go, but maybe not wealth tax do you think -- >> i don't think wealth tax is the way to go to be clear. my comments i made a few nights ago, the energy of people -- >> we should back up a minute for those who aren't aware mike, you've become -- you've blown up on the web because of a line you said -- >> went viral. >> went viral saying that, look, billionaires, you're not victims, you're the luckiest people in the world. people took that to mean that you were pro-warren. what they didn't read was the second part of your comment which was initially when you heard about her campaign, you felt she was divisive.

you said, quote, how are you going to heal the country by saying all rich people cheated so where do you come down on her overall agenda >> listen, i think she's pivoting i think she could win the election because she's smart she is witty she seems to be the best candidate on the stump she's not my top choice. she is pivoting. i think her recent language is a lot softer than all billionaires cheat. my point was lebron james just seems to be better at basketball than everybody else. i don't think he's cheating. and so but i do think if you step back, you know, for 40 years the rich have been getting richer for lots of reasons not because they're cheating there is' lots of structural reasons. we have a wealth gap in our country that doesn't make sense. 60% of america can't afford a $5,000 hiccough or $500 hiccough we need better taxation. people complained in the obama

era. the rich got richer. not one of my friends' net worth went down. it went up >> leon cooperman was the son of a plumber from the bronx he was the first kid in his family to go to college. he really is the american dream. this idea that because you're a billionaire, a, you're the reason so many people are hurting. and b, therefore, you can't have a voice because once you say anything in this environment, just because you're a billionaire, you're discredited. do you think leon is right or is elizabeth warren right >> that's rubbish. there are lots of billionaires with lots of voice paul jones has a voice people listen to him, he has an opinion. >> the point is elizabeth warren doesn't think he should have a voice. >> and he's helping her. by the way, what he said just galvanized her base and she couldn't have asked for a better foil >> this is all a reaction to where the country is, right? just like donald trump, no one ever thought donald trump would be president or could be

president, and he touched to this anger in the united states that 60% of the people have been left behind. elizabeth is touching the same thing. she's being a politician i don't think it's good. >> what do you attribute the malaise in the eight years, the wealth disparity, why not attribute it to an economy that never kicked into high gear? you didn't get any wage growth at the bottom. you wanted more redistribution, you think that would have helped >> go to the eight years before that when you had george bush, the rich got richer versus everybody else and the eight years before that. still progressional -- >> you can't just talk about these things in a vacuum and say here's a cause and effect. to me, because the feds stayed at zero for so long, we tried to engender a wealth effect the policies were so bad that the people who had assets, they got marked up. but there was no growth at the bottom -- >> the question is -- >> now we're starting to see it in terms of wage growth at the

bottom and the middle. >> i'm not for wealth tax, but the question is, sure, we did that on the fiscal side. the question is on the tax side or the -- do you try to solve for the other -- >> i just asked, if you do -- we do raise taxes you don't want to pay down any of the deficit, you just want to expand entitlements even further? >> wealthy people pay 20% lesson capital gains than income tax. almost all my income i made in 20 years was funneled into capital gains. >> right >> and so my -- >> you built something self-loathing? where are you? >> i have a whole lot of fun out there. my point is that we should -- given that we have a world that's in disequilibrium, we have 60% of our population -- it's one thing -- >> you want to redistribute. move it or do you have something good to do with the money you're taxing is >> we need to redistribute >> just redistribute move it over -- >> in a perfect way like redistribute on a digital wallet i don't think government actually spends money

efficiently. >> you don't even want to improve education or -- why don't you equalize opportunity why don't you redistribute opportunity instead of redistributing -- >> mike, what do you mean when you say you're opposed to a wealth tax but you want to distribute it? >> i would take capital gains and move it right up to income tax, close the gap you already get the benefit of deferred taxes if i buy a stock and hold it for ten years, i'm not paying tax until i sell it. i'm getting two benefits i'm deferring my tax because i'm wealthy enough to hold it that long and i'm getting a much lower tax rate you don't need the double dip. >> compounding >> yes there are lots of ways to raise taxes to pay for some of these programs that seem to make sense. >> that's different than bernie sanders just capping wealth at a billion dollars. >> i think he's reasonable you look at -- >> and by the way, leon cooperman said the same thing. he would be supportive of

bringing capital gains to the same rate -- >> he doesn't know -- >> he also says work for 50%, six months a year. >> work nine months a year for uncle sam and keep the last three. you're fine, nothing can hurt you, mike. >> i don't think we should work more than six months a year. if people actually paid 50% tax, you'd be shocked how much more tax -- >> they're trying to raise your taxes. >> then why would i even be worried about it >> that assumes he's not worth $50 million. >> don't assume. makes an as out of you and me. >> thank you, robert this morning's top stock movers. you have to see what's happening to twitter stock it's getting crushed and we'll talk about tesla as well on the flip side, doing very, very well in the next half hour we'll talk to the c.e.o. of twitter about what's taking place here their earnings out ned segal. stay tuned you're watching cnbc

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still to come, breaking economic news on jobs and manufacturing. twitter c.e.o. will join us

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we're just seconds away from weekly jobless claims and durable goods. we have 15 seconds futures right now indicated up 61 points. has 3m improved? that was going to hurt the dow to some extent we have jim. he's got more -- i need to buy a consonant. jim iuorio >> last time they looked good. it was mostly defense spending on aircraft. the number comes in as down 1.1. we were expecting down 1.7 so worst than expected last time was revised up a hair to plus .3 ex-theranos pour ta ex-transportation is down 1.3. nondefense comes in as negative .5 which is a hair better than expected so the number, again, is being a little bouyed by defense spending last time revised down 1.6 to

down .4. claims come in at 2.12 we're treading around historic lows and jobless claims indicate a tight market initial -- continuing claims comes in as 1 million 682,000. a little tinier higher than expected stock market was up 5. it's mostly up -- what's not called qe, the feds coming in the repo market with 125 billion. the stock market likes that. the ten year was 1.75 coming in. 1.748 now. back to you, andrew. >> thank you for that. we've been talking a lot this hour about twitter and tesla, but there's some other numbers and stocks we want to tell you about this morning want to get over to don chu i think is waiting on us to tell us some of this morning's movers >> one of them is going to be 3m as well. i know joe was asking about whether or not those 3m shares have rebounded they were off the worst levels in premarket

manufacturing giant behind everything from scotch tape to post-it notes, aerospace paints. down about a percent or so it's roughly 30,000 shares worth of premarket volume. it posted profits that came in better than expected, sales fell short, though, of estimates. 3m cut its full year profit forecast due to slow demand in china. the shares, by the way, if you look back here are about 24% down below their previous high so we'll watch 3m shares as well also shares of stanley black & dekker up fractionally off their premarket lows up about a percent at this stage. a mixed report profits topped sales that narrowly missed the market it cut its full year forecast as it embarked on a cost cutting campaign up 39% since the lows in december it's been a nice run for stanley black & dekker we're going to end on shares of comcast which are up 2% plus, roughly 30,000 shares premarket.

the cable broadband and content company and, of course, parent company of this network posted a profit in sales beat thanks in part to the addition of more high-speed internet customers. comcast stock also, the december lows, it's roughly about 38% since that time. so those shares of 2.5% gain premarket some other stocks to watch, guys. i'll send things back over to you, joe >> all right neat how you do that, dom. you have other colors or just green? if it's going down can you do red? >> i can do red. these things, if they're green, it will show you a green chart if it's red it will show you a red chart. my writing is always yellow on this that kind of stands out from the blue >> all right, all right. very good. thanks, dom. >> you're very welcome >> the other big tech story, facebook chief mark zuckerberg getting grilled from everything digital currency to privacy issues good morning >> good morning. zuckerberg testified before the house financial committee

yesterday in a marathon six-hour hearing. now, he took a lot of heat from both sides of the aisle and he admitted that facebook has made a lot of mistakes. but bottom line, he said that users can still trust his company. >> every day billions of people come to our services because they trust that they can share content, messages, photos, comments with the people they care about and more than 100 billion times a day people do that they share something with a set of people because they know that that content is just going to reach the people that they want it to. >> now, the hearing centered on libra, he wanted to cast it as a competition global dominance between the u.s. and china things got a little testy when one person tested him over his personal commitment to libra >> would you leave behind your children's inheritance in libra? >> congresswoman -- >> do you believe in what you're building >> yes, i do

and -- >> would you leave behind your children's inheritance in libra? i think it's a fair question because you've proven that we cannot trust you with our emails, with our phone numbers >> zuckerberg eventually did say that he would be willing to leave his inheritance in libra because it would be backed one to one by sovereign currencies guys, at the end of the day, no one on capitol hill seemed to change their mind about facebook or about libra after this hearing. back over to you >> all right, ylan thanks we're going to continue this conversation i don't know if you've got anywhere to go, but with mike novogratz listening in so, yesterday based on the tough questioning of libra, i think bitcoin dropped about -- i don't know how many percent. >> 500 bucks >> 500, down to 7500 or so last time you were on, i think, i think bitcoin had run up to about 14,000 from 4. and it had come back down to

about 10 and at that time i think you said that you wish you had sold some at 14 and by that time i had started building a little like mini position in bitcoin like every week and every week since i've been adding a little bit to it, almost like what, a college fund or something >> savings fund. >> try to buy a little as it's come down -- i mean, it's scary sometimes i feel better because i'm not paying 12,000 for a little fractional pieces of a coin. it's down at 8500 or 8,000 or whatever based on what happened yesterday, was that because of the tough questioning of libra can you control bitcoin like you can control libra? should people be worried >> like any commodity, any asset, there are lots of input that drive sentiment and drive price. there's been a bunch of negative things that have happened recently one is the telegram ico being stopped in its tracks by the sec. the sec about two weeks before telegram was going to launch

their coin -- telegram has 300 million users. they sent a cease and desist letter telegram is now pivoting and figuring out what to do with this that was a kick in the stomach to the overall cryptoeco system. libra, unfortunately, if facebook and libra had come out originally and said we are building a global payment system, i think there would have been a lot less angst, but they came out and said they're going to build this new currency everyone turned their hair on fire it feels like they're now pivoting you know, i think zuckerberg makes really good points about what china is doing. and so we'll see what happens. >> is china a threat to bitcoin? is libra a threat to bitcoin or is there a reason it goes higher when libra -- >> they are additive to bitcoin. what china is working on, a digit digital rim mb, or some version of that, are payment systems,

are currencies where bitcoin is gold. gold is not a threat to the dollar nor will bitcoin be a threat to these payment currencies >> you look at charts. at this point you figure bitcoin could go back to 4, 4,000? >> i'm hoping it holds here. >> hoping it holds -- >> 6500 would be the next downside i think you've got to get back through like 8200 first, then if it gets back to 8200, we're in the 8,000, 10,000 range. it's going to need new energy to make the move. some positive things are happening. the new york stock exchange is back, just got set up. there's a futures exchange starting to get volume they have a custody solution which is coming online have to get approved -- in a world class custody which allows more and more people to feel comfortable with it, people are setting up funds, including ourselves to allow people easy access to bitcoin. >> you're going to have a fund >> we will have a fund in time

>> what does that mean >> just a fund that takes care of custodying. takes care of pricing it you know, it's got one week liquidity. and so it just allows people to invest in bitcoin without setting up a coin-based account without worrying their phone is going to get lost. >> so you think part of the issue people need to be able to invest it through a fund to the point where you own it individually >> we thought if there was an atf people would have more access the bulk of the money in this country still resides in older people's, you know, brokerage accounts >> right >> the youth doesn't have the money yet. the youth love their phones and love bitcoin, don't have the money. >> youths. cousin vinny . >> so giving access to that bulk of money where the fidelities live, the most bullish thing that could happen is for abby

johnson to say, hey, all my 26 million users can now buy bitcoin on the platform. hasn't happened. >> hasn't happened she does like crypto she's fascinated by it >> she's a crip toyptobeliever >> given the conversation of facebook all mourning and mark zuckerberg and twitter, social media, their earnings, scrutiny surrounding facebook could impact the business. this comes from activates. average user engagement with the social user has dropped dramatically they are calling it a social splinter joining us with more on the trend and what we can expect with social media impact in 2020, michael wolff, activate co-founder good morning, michael. >> good morning. great to be here >> this news is not promising for facebook and frankly looks much worse than some of the data that's come directly from facebook itself. >> when you look at what's happening with facebook's engagement, this is the amount of time that people spend per

month with facebook. when you add facebook and messenger together,facebook's overall engagement is up about 2% over the last two years when you look at facebook proper without messenger, it's down over 25% and a lot of this has to do with the fact that facebook's own users are using other social networks like instagram. and, yes, a lot of their time is being spent on messenger once facebook separated off messenger from facebook proper, then you've got to expect there was going to be declines in usage oncor facebook but something more importantly is happening, which is that people are using many more social networks today and they're using them for specific reasons. and if you look across all of the other big social network platforms, engagement is way up. so when you look at the others, two things one, you said people are using

instagram, instagram owned by facebook, of course. if everyone is using messenger, maybe that's okay. the question is can you monetize both insta and messenger in the same way you could classic facebook but then you look at the other platforms, twitter, we can talk about their earnings in just a second just coming out this quarter snap people talk about tick tock. where do you see all of the engagement moving? >> so, when you look at the other large social networks, twitter is up 13% in terms of overall time spent it's -- when you look at linked in, linked in is up 13% also if you look at all of the other platforms, the amount of time that people are spending with them is going up the tick tock is a total rocket ship tick tock has gone from practically zero to an average over the last two years, today on average, the average tick tock user is spending 10 hours a month with tick tock

>> and so -- well,er there is an existential question about tick tock do you think given its ownership structure -- by the way, there's some u.s. funds in it as well. i'm talking about the relationship with china. you think there's actually going to be regulation on tick tock? >> i don't know if there's going to be regulation around tick tock there are so many -- we could look at so many other of the social networks or messaging services, where they come from there's always a speculation -- i think the most important thing to look at is where are people spending their time. >> michael, real quick before we go, if we had this conversation a year from now and you were looking at engagement across the board, who is the new winner we're not focused on >> i think that we're going to continue to see growth in tick tock i think that we're likely to continue to see -- actually instagram will continue to grow, especially as people are able to do more with instagram do shopping directly out of instagram. a lot of other things are going

to happen with the big social networks i think the big winners are going to be smaller social networks like citizen and next door and relative to people's day to day lives >> michael, it's great to see you. >> great to be here. >> thank you for bringing this news see you soon >> when we return, twitter's cfo ned segal is going to join us live we'll talk to him about everything we've heard, just getting off that conference call with the street. but we'll talk to him about why the stock is down, what he ayn.ks about the reactio st tuned you are watching "squawk box" right here on cnbc most people think of verizon as a reliable phone company. (woman) but to businesses, we're a reliable partner. we keep companies ready for what's next. (man) we weave security into their business. virtualize their operations. (woman) and build ai customer experiences. we also keep them ready for the next big opportunity. like 5g. almost all the fortune 500 partner with us.

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♪ ♪ welcome back, everybody. twitter is holding its conference call right now. julia boorstin is back with what she heard. >> jack dorsey highlighting faster user growth missing expectations on technical issues that impacted ad targeting he says they're on the right track. take a listen. >> unfortunately we had some missteps, some bugs in our map ads, admits greater than expected seasonality in july and august despite that we saw strong

september results and good advertiser momentum. our goal in rebuilding our core map and technology stacks is to address exactly these sorts of issues and increase engineering agility. because of this work, we are much better equipped to identify and fix issues we come across today than we were just one to two years ago. still painful, but no longer existential as it was in our past >> now, dorsey says they are making the service more user friendly they are enabling users to more easily find and follow the people and topics they care about. he also says they are cleaning up the platform, pulling down offen offensive tweets much faster how they are looking to block misleading information around elections. that's a big priority right now. also make political advertising more transparent they were asked a little about privacy. he said they want to make everything transparent about data they want to make it clear what data they are using to targets those ads. becky? >> julia, thank you. when we return, we have twitter's cfo who will join us live straight from the call.

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. all right. welcome back, everybody, twitter shares down sharply after the customer missed estimates and

lower guidance joining us is ned segal. he is joining us straight off a conference call. ned, it's great to see you >> hi, thanks for having many e. >> let's talk a bill about what's what's happening. in terms of your daily active users, you outperformed. you beat expectations on that. that's usually what the stock trades around. clearly that's not the case today. twitter shares are down 17%. what do you think happened here? are you surprised by the reaction >> there are a few things this quarter, mda grew 17% this quarter. we broke out of this range we have been in 9 to 15%. we act sell rated our da growth third year in a row. this was improvements over a series of the quarters continuing to benefit people helping them find what they find on twitter faster and come back more frequently. the second issue is although advertiser sentiment remains strong we had a up can him issues this quarter. one was more pronounced

seasonality in july and august two was product-related issues where settings didn't work as expected we look at all of this as a validation of our strategy the work we're doing on our consumer product, these are the right places for us to be spending our time right noud and to advance the things we saw the quarter. >> let's talk about those two issues we had an analyst on earlier who said additional seasonality. that's what seasonality is it changes from season to season what happened in july and august that caught you off guard? >> well, one of the great things about twitter for advertisers is they come to launch new products and services and connect with what's happening whether you're warner brothers and showing the "joker" trailer where it was seen twice as much open twitter than it was on any other service in the first hour after they showed it, eighth great place to show it when you add it up from july and august, when you compare that to the double digit growth we saw return led by the united states

in the month of september, we look at it as a more pronounced seasonality than we had expected an example is the world cup. for the men in 2018, where we combine that with the women's world cup in 2019, still a great event respect not one from an advertising perspective brought the same amount of revenue >> let's talk about some of the issues you had with the platform, particularly some of the advertising bugs that existed. open the conference call, you talked about a bug that read user's device specific settings while they were personalizing their time lines, even though some of those users had opted out of that collection what happened, what was that >> that's right, becky that's a great example of one of the few things that came up over the course of the quarter. we discovered that settings were not working as expected. so we asked people a series of questions before we put them into a time line when they were new to twitter we want to be transparent. we want to make it clear their data belongs to them

one of the questions we asked is, can we use your personal device experience? we were using the device setting to show ads to them. when we realized that we both tweeted about it so people were aware and an effort to continue to be transparent, we also stopped using that setting there is some revenue impact when things like that happened >> that caused three or more points of a negative impact to revenue in q3 and we think it will impact q4 by four more points. >> just on that particular bug, is the problem that you have as to fix the bug or is the problem when you actually listen to users saying i don't want to be marked, you will just not get the advertising dollars? it doesn't exist >> it's a great question there are lots of inputs that we have when we figure out how to give people a good experience on the service, whether it's the tweets they see if their time line, the accounts they recommend they follow or the ads that they see. so we'll have to adjust how we

assess which ads to show people and how to best give them their experience, where if they ask us not to use their device settings as an example, we won't be able to incorporate that anymore. so that takes some time for us to adjust and learn from that's why there is ongoing impact on it >> just to put a fine point, so the viewers around current investors understand, the reason why, the costs that you are talking about the quarter and into the next quarter is because of the advertising is, you can't charge a prem number on that advertising i don't remember because it's unclear it will be as effective because of the tracking issue just explain more specifically if you could. sure, andrew so we run an auction and so advertisers decide how much to pay for the audience that they want to target with their ads. and the more that you know about what somebody might want to see, the more compelling an ad or the more relevant an ad you can often how is them. and sho when you have to change

the inputs that an advertiser can use to assess how much they might pay in an auction, sometimes they will hold back on the advertising, sometimes they will choose to pay less. sometimes they will choose to target different people and we also will do the work to remediate these things, to figure out how to make sure we can give advertisers the opportunity to reach people, woo ill still respecting the settings and making sure they work the way that the people who opted one way or another expected them to work. >> you know, that's a fine line to walk. we've seen what's happened with facebook they got called up on capitol hill again they were supposed to be talking about libra, privacy concerns continue to come one lawmakers i go es the question is, can you monetize to an extent that makes your business as profitable as you can be respecting and still respect that privacy what's the answer? >> well, we grew revenue 9% this quarter despite all these issues we delivered 8 million of revenue most of that from

advertising. we feel really good how we carefully balance our principles around data privacy. around how privacies a basic human right, being transparent with people, how it will use their data, with giving them a good experience on twitter again it's not about the ads they see, it's about the tweets we show them and making sure they're relevant and having a good experience finding the things they're looking for on the service. in the end, we come back to our principles despite or because of regulation and discussion around regulation that happen all around the world, we feel like so much is in our control and we choose to be principled and transparent in how we use people's data and we feel we are able to grow the experience over time as well. >> it's bad to be up at 5:00 a.m. on a conference call. after the call, the stock is down 17% are you surprised? >> you know, i don't know how to judge the share price from one day to another but when i look at our

performance over long periods of time, we feel really good about the progress we're making. when i look at this quarter, as frustrated we are about some of the things that happen in our control, as much as we wish we foresaw some of the more pronounced seasonality we saw, with reso proud of the dou growth, we are so proud of getting the world to use twitter. it validates our strategy, by innovating faster on the consumer product by helping people find who they're looking for and coming out with a better version that we will be able to deliver even better for people over time. >> we are almost out of time one analyst says he needs to see more consistency if results. do you see delivering that can you become more consistent >> we are really proud of the consistency we deliver >> i said up to this quarter i should clarify. >> even when we think about this quarter in the context of consistency, whether it's the consistent growth in our headcount against our top

priorities, the consistency of our strategy and our prioritization, the consistency of dau growth and despite these issues, the way we were able to continue to deliver for advertisers, we feel really good about the progress we made, yet, we still accountable for the issues that come up and we intend to address them. >> ned, thank you for your tomb, good to see you. also our thanks for michael n o novogra novogratz. thank you for joining us right now it's time for "squawk on the street" [ music playing >> good thursday morning him welcome to "squawk on the street". i'm carl quinta nilla. futures are up as the s&p is .7 from a record high we got green arrows in europe,