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tv   Squawk on the Street  CNBC  October 6, 2021 9:00am-11:00am EDT

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telling number the ten-year has been something to talk about in recent sessions, along with oil becky, i don't -- you yankees fan? >> no. >> it didn't quite work out. >> not this time. tonight, cardinals/dodgers, who do i pick? >> you're going to pick the cardinals, right >> cardinals. make sure you join us tomorrow "squawk on the street" is next good wednesday morning i'm carl quintanilla, with jim cramer david faber is at the active/packetive investor summit in new york city the premarket is red, but off the lows putin says russia is ready to help stabilize the market for nat gas.
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that leads us into our discussion, really the morning sessions are being driven by global concerns. >> i leave here, i don't know, at 6:30, futures are fine. nat gas goes up. it continues to restrain and withhold nat gas from western europe we trade off that? we have the most abundant natural gas in the world than maybe kuwait we're trading off their natural gas? honestly sometimes you have to say the market can be stupid. >> remember, they refuse to criticize the russians by the
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way, where is president biden talking about releasing from the reserve. he should do that right now. look t natural gas, we can only export 10 billion cubic feet we produce 90 billion. we are flooding the world. the natural gas price in canada is $3. this is a manufactured problem, by our inability to transport. we have so much natural gas in marcellus, and the uttica. we're potential the larger provide in the world you know issues here are issues
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of coal,h, by the way, were not set up, because people decided not to anything on coal. issues of what i would regard as sustainable energy that's not sustainable when it's not sunny our windy. the idea that we are somehow linked to europe remind me of when we were linked to banks in europe when we were linked to deutsche b bank, that was a false construct. >> i think the idea that perhaps this link -- it was yesterday morning, guys, the uk gas futures went through the roof. there was probably a margin call it's only october. we've been talking for at least a week or two about energy places in europe, jim, consistently, the lack of coal, for example, the lack of wind bizarrely in the north sea, and/or not enough rain for hydropower it's hard to go through a number
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of different things that impacted them, but your point is an important one that said we're not going to increase coal production anytime soon in this country, are we >> i get this from one of nigh best sources ever, the coal will be limited in near term, though demand domestic and overseas, there's an uptick in volume, but no, we're not going to be able to do anything i was thinking i should push the rails here union pacific will have an up tick, as is csx, but it's just not going to move the needle, david. we have significantly underinvested in coal for 18 months i'm not saying coal is dead. i'm saying the start-up of the big coal engine in this country is not something we can do with a flick of the switch. >> power generation assets, and also we're talking about oil, which is a different subject in the sense of, but similar that
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we've been talking about the lack of investment despite the high price of crude right now, jim. >> but it's deliberate. >> they companies would typically have put more money back into the ground rather than returning it to shareholders. >> i remember the late aubrey mccleansen, he used to say everybody in the world has a marketing department except for oil. that's changed aubrey would be very proud of what's happened. a big piece in the times on that industry, basically asking the industry why they're not pouring investments in >> rick moncrief i think would be universally the smartest person he just said we're done with this we're going to look at our balance sheet, we're going to act for the shareholders
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we're not going to be wildcatters. that game is over when when i was in a helicopter with him, it was just the opposite, there, there, we'll drill there that day is over are we back to watching red count closely. >> i watch it closely. he look at the recount like when i was at goldman sachs this is what you want to look at there's no real up tick, no one using this advantage, except for maybe occidental. your general point is why are we trading off energy prices half the world away? meantime the seven-day average of cases beround 7k, the first time since august. >> we trade off what is most negative we're obviously trying to find a bottom next week and this week are the worst two weeks of the year.
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but the calendar isn't about sentiment. this is just what happening. this is looking for a bottom we're knot there yet i watched a netherlands person talk about windmills today no, i refuse to trade off the windmills. no, i will not trade off -- don q. ixote may, but -- that was a wonderful cast mark zuckerberg strikes back in a blog post the argument that we deliberately push content that makes people angry for profit is deeply illocal kaj jim, he says we make our money from ads, and tightsers
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consistently tell us they don't want to be placed next to the content? >> that's absolutely true. i think the issue is can you do third party now now that apple has changed the system i think the blog post which everybody should read addresses how they do a lot of stuff they're not sitting there idly if you look at the website and look at what they value when you join them for ecruiting. be bowl, focus on impact, move fafs, be open, build social value, creating real valuable. i think the market has to say, at least in one of these is truth, safety. if he says these are important values, put them in the list of values i don't see it i've been over this website. i keep looking for truth i keep looking for safety. i think when he comes on, he has to say the highest value is
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truth and safety come on the show we're trying to find out what the truth is, and he does say, look, we see all this research, because we want our service to be as safe as possible ly personally oversee this, as i have children myself he addresses that somewhat in his blog post. let's get away from industry leading. he is the world's largest media company and just stress the highest values are trust and safety, and right now, because of what is going on, nothing else matter. he thinking, i've done this over and over and over again, i've heard this story is he being arrogant or tone-deaf? no, what he's not saying is it's a core value he needs to -- right now he has to switch and say it's the core value. we hear what's happening we are about safety and truth. put it in the top five when you're recruiting people, say, listen, this is the most
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important, but before we be bold, be safe. he has to change i don't know if he's looking at this. >> the street is trying to make sense of the hearing yesterday b of a today, despite the extensive press coverage, we don't expect a material impact on facebook/ig using they reiterate a buy this is something we've talked about in the past few days. >> many times, of course the question is, once again, is this focus on facebook and practices in terms of diminution of its business. ms. haugen was a good communicator and certainly articulate yesterday, during our show, you indicated a potential for you to exit the position, i guess, in your invest club now, right? ing there anything over the last 24 hours or from her testimony or from mr. zuckerberg or his
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memo, that changes your pin? >> i think that's a great question i think i'm still not getting enough on safety for instance, the memo is really about, to some degree they have industry of leading checks, and they are but they need to do more than that they're the most powerful media company in the world that comes with great responsibility the responsibility has to be what mark says in his note, which is he's a parent he's concerned himself he needs to make this his personal spot. if he does that's correct i keep the stock. the only thing i'm more concerned about is apple's changes are very significant, but we expected a slowdown because of apple's changes if he goes further and says, listen, in my statement i want to make it clear i am a parent, i'm done with this i'm going to work with anyone who wants congress, parents, whoever, just because i'm industry leading is not enough
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it's not my number one value you can change people can change. look at what vlad tenev did at robinhood. when he got in trouble, he recognized his number one concern. >> i hear you, but i have the same conversations with assets managers, hedge fund manager you own the stock, and you have teenage girls, yeah, this is horrible would you sell the stock you know what they say why would i ever sell the stock? it's cheap. >> it is inexpensive look, i want more. >> then there's the added question, if it's content that makes you feel angry or depressed, how is it different at a news network website. what is illegal? >> remember when nbc had a movie about a woman who was raped with coke bottles, and then someone did it so nbc went to the supreme court, they won't, they didn't
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have to change, but the fcc said, we're done with that, there has to be family hour. he is playing with fire. what happens if the ftc said we need a special master? >> we'll see there's more reaction from blumenthal on tape. you can get into the new investing club just point your point for the qr code on the screen, and that will also take you there some interesting tough on the retailers which we'll talk about in a moment. we have a downgrade of the airlines at goldman, morgan stanley's kitie huberly cutting hardware a lot more after the break
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dow announcing investment plans to deliver more than $3 billion, a clear path, and i mean it, to zero carbon emissions. this customer hosted an investor day. there's a lot of breakthrough stuff for you. jim, i always love it when you're here, but today, when you announce the plan to build the world's first zero-emission,
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this is real. >> this is real. we'll take our ethylene production at alberta and triple it, and take the off gases from the new cracker and existing cracker, and convert them into circular hydrogen, and use that for carbon capture and sequestration, and we'll make all the plastics low to cyro carbon. >> that puts you on a path to do what >> 30% co2 reduction, scope 1 and 2, by 2030 20% of our global ethyl lien will be zero, and then to zero by 2050. >> at the same time i'm seeing ebitda numbers well in excess of what wall street thinks you can do what are they thinking about >> our trough to peak was 6 to 12 bill chron.
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we're announcing another 3 to $3.9 billion, so that would take it to 9 to 15. we have strong demand right now. i don't see that abating i mean, as soon as we can keep up with the consumer demand, we have to restock the inventory pipeline i think we'll be doing that most of 2022. >> people are concerned with what it means because of the china cutting back i keep telling people, are you not looking at what they're doing. hurricane ida, plants coming back online, u.s.-based and canadian-based natural gas we are not stuck with $16 natural gas here >> this is why we say we knee all of the above plan. you can't do it with just one fuel right now china is tight they don't have enough coal supply natural gas can't replace all that coal right now.
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now, the good thing for us is the americas, canada, north america, latin america, middle east, willal be advantaged through this, because they have reliable sources of natural gas. if you have cut yourself out of all of the above policy, and just for you cussed on renewables, you are not ability to keep up, especially in the wintertime we keep insisting, you have to look at the whole supply we are very fortunate in this country to have all of the above. we need to keep it that investment in canada is exactly why. >> i know existential. you got into dow to build the best plastics. you have watched what has happened in the world. you have now changed how you spend money, because you feel committed to the planet. some may say, well, listen, he makes plastic. we have to make plastic. it's necessary. >> it's the right thing to do. for many, many years, the whole
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idea was to make the lowest cost product possible now we're trying to make the lowest cogs and lowest co2 i don't have an employee that's not all in on making this happen we'll be able to take the entire footprint to zero, scope 1 and 2. we're working with scope 3 with our suppliers. the biggest part of that is shipping all of our shipping partners are wrapping their hands around it to make it happen. this is a great opportunity for us right most post-consumer recycled plastics, those sales have tripled in the last year. this is going to go crazy. zero carbon, polyethylene plastics will be a game winner >> we know there are things like
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peanuts made of cornstarch people are thinking every minute do you have something in your planning stage that makes it so plastics disintegrates, that plastics becomes an amazing great material that also doesn't end up in a landfill >> we have a host of things. we announced about ten partnerships today we're going to showcase what we're doing in that area, everything from mechanical resickling to bio-based feedstocks which come out of the process of making wood and wood pulp products, and we're working on how to make plastics more recyclable in the next ten years, it will all by 100% repsychable. the challenge on recycling, you're talking about take a diffuse waste source and bringing it back to manufacturing scale. that takes time. so i'm talking about building the scale of alberta, that's
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like on the energy equivalent scale of 850-megawatt power plant. these are on the scale of 20, 25 megawatt power plants, right it takes a lot of small projects to get there. >> i thank you for changing the way we have always thought dow is you're making so it's much more environmental and not, not by any means fiction. it's fact. >> we turn 125 years next year and we're turning into a low-carbon, sustainable world. we're going to set the standard. >> thank you, jim. ceo of dow futures are still in the red, though off the early morning lows more "squawk on the stre" en rurn.etwh
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let's get to cramer's mad dash, looking at some housing? >> no one is better than eileen zellman that understands more about housing. they did not give you the substance of why last night, so here we go it's about lead times, appliances typical lead time is two weeks, now it's seven to eight weeks. cabinets okay. doors now two to ten weeks insulation now two weeks, now eight weeks. plumbing four weeks, now eight
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weeks, except at my house where it's been eight months what i'm saying is basically there are core things that go into a house tharthar taking too long it's the ports, it's lacking people to take the containers off and get the stuff into trucks we keep hearing the same theme i wished we could have talked more with jim fetterling, but there's a lot of people who don't understand that retirement is amazing people in their 60s just exited the workforce. basically it's just every other industry we could have talk to go pepsico, it's the same thing but you difference is that pepsico has huge pricing power, and they can raise prices. the price of houses are up, but they just want to build. they want to meet demand.
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>> mortgage apps were down six this week. you don't think it's a rate story? >> i wish people would not i have a 3.25, believe me and it's not favored treatment. i do not have a regular so-called paycheck i'm a contract employee, so i get what everybody gets. you're fighting for the money, plus the process is four months. it used to be four days, now it's four months they asked me what did you make in september i'll give you everything you need it's not enough. it's not enough. take a look at the open here, a pretty weak breath here. the big court is regal rexnord, at the nasdaq nuvei celebrating its ip:the we'll be led lower on the s&p by some tech, specifically seagate which katie
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hu huberty talks about accelerating ceo spend, and cuts it back to cautious. >> that was a rough, rough note she did. a bit like "war & peace" >> yeah. but there's the cloud transformation, looks poised to sustain. if you stick with cloud and digital, you don't go hardware, you're going to come out okay here that's why i continue to come back with the workdays, service now, salesforce. that's what you buy. i also think she would say, look, the apple situation is good the apple situation is good. there's a lot of commentary. >> the demands are definitely holding up, though this f.t. piece about suppliers and the energy crunch in china, we haven't seen a lot of supply-chain worries from the
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street. >> we have people directly refuting that. i'm getting that that is sloppy reporting, because there is u.b.s. evidence labs says no material supply chain. we may laugh about that, but they have a lot of smart people there, and they're saying that's not a fact >> we'll keep an eye on it there's a lot of stories in autos today. tesla rising prices on both the 3 and the y. in fact you'll pay more for a 3 now by about 13% than you did in q1 >> yeah. >> also the gm investor day, which we'll watch. >> look at housing people are paying a quarter more for housing than last year i think it's a more reasonability price. i went to look at trucks this weekend. $60,000 for an f-150 that's five years old. i mean, that's crazy this is a message to farley. i don't care, beg, borrow and
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steal, get the semis you've got to get more mexico, tight at a drum because of the semiconductors. david, we know that these issues keep popping up, yet are we going to be talking about this next year because nothing is being done >> i don't know. from what you have told us, no, we're not most likely going to be talking about this, because things are being done. i would point out, in support of your view, at least overall, when it comes to stocks, and ford has been the best performer this year of some 60-plus% followed by gm, which is up today, and tesla has been the laggard. we know over other periods of time, that's not been the case jim, is ford still sort of the name that is your go-to? >> yes, absolutely the street doesn't recognize
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this, ford was determined before farley got there, to make cars and trucks everywhere. that's always been the mantra. henry ford, henry ford ii, and forte is done with that. ford will bill and make where they can make money. if not they're losing $2 billion in india it's over. if they're losing in latin america? it's over. next year we'll see the ev lineup, that's so exciting, can power yourhouse, do so many things, but i'll give you the other side i've been trying to get my maverick i'm sick of my wife driving me to eagles game i ordered the maverick in april, now suddenly it arrived. you cannot get these vehicles because of the chips >> german car registrations last month down 29. you've got the atlanta fed
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looking at q4 gdp with a one handle. >> it's true i'm going to to pueblo in a few weeks, which has the largest auto factory in a world. if that place is shut down, we're dead bmw is there, mercedes is there. i have a place there -- and that's destination right there they can't get the part, well, what good is it? now, global foundry is coming public gallon foundries may have answers. i understand the malaysian covid rate has come down that's very much after choke point. gm knows that. ford is actually doing alternates better than gm in malaysia, but it's semis
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i do want to get you on bitcoin today, five-month high, jim. these discussions about the debt limit will make their way to the white house, as the president hosts a meeting with jamie dimon, brian moynihan, and some others >> yes, we met -- the investment group for my charitable trust, we met on this this morning. we feel that the discussion can be are not -- the janet yellen discussion was a major reason to buy bitcoin. if you parse what she's saying, and if it comes true, what -- the dollar doesn't seem to be as valuable as crypto now, that is -- weds jamie dimon say there's no value i go to jamie dimon and say, what value is the dollar >> there's a whole white house blog post called "life after default" which is about what markets and the dollar and stocks would look like if this does not go well
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>> yeah. i think we can spend an awful lot of time about what things look like, and they would not look particularly good most market participants are very skeptical we'll ever get anywhere close to that point i think it would be something of a surprise if we're sitting here one morning and looking at our watches counting down the hours, guys it's still urn clear if the democrats will have to act by reconciliation to get that debt ceiling raised, carl we will see, about you that does seem to be the expectation, one way or the overt, it will get solved, as it always has in the past. >> moody's yesterday, a stable outlook. we'll just have to watch the clock. >> you can't argue right now, if we had the s&p, if you're listening to yellen, don't you have to downgrade in advance
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because that would seem right. let's say it was a stock, and we hear this talk i mean, would you talk it -- maybe they would -- >> speaking of hold to still, goldman cuts american to sell, and jetblewue to neutral. i think it will create indio sin crattic reasons on some of these car carriers. >> they did that with steel today. i thought it was outrageous. they went with cleveland cliffs from hold to buy if steel is that good, it sells at two, three times earnings, but they downgraded nucor. i will respond to this, i think nucor is best in breed i think that they don't factor in best of breed nearly enough cleveland cliffs, as much as i like them -- i had the ceo on a bunch of times -- nucor is doing
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good things. if you get an infrastructure bill, you will regret selling that i know i would be pilloried if i did that why not own up, saying we missed the top, we're late. you had a great e-mail in your investing club last night around three games, costco, walmart and aeo, all of which you think you're waiting for prices to get good enough, or looking to hole on to what you have >> costco, you could argue, has moved so much, it's crazy to still own it i think costco is best of breed, with an amazing model. walmart has fallen 13 straight points look, i think if i were there at walmart, i would say, are we doing anything really wrong? i think they did make a replacement, a chain on a
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supply-chain issue in terms of their hierarchy, and then american eagle outfitters, i think the stock has come down so much you have a compete that matthew spent a lot of time on, reiterating just now it's good some people are concerned about denim prices, cotton this is the foremost growth name in them all, and i think to give up on it now i think is i ill-advised. >> we don't want to get to david at the active/passive investor summit today >> thanks, carl. it's something to actually be somewhere, for all of you are, including the entire crew. it's been a long time since we've actually been out somewhere at a conference. i'm happy to be joined by alex denner we were trying to figure out,
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the last time was at the new york stock exchange, but neither one of us have been at the conference. >> this is the first time i've been out, so to speak. >> hopefully it's a reflection of where things stand right flow well, you know, alex, something i've wanted to hit a bit more on our network, has been the private market you and i were talking prior to this interview a bit about that. it's a focus for you as well a lot of hedge funds invest in privates now many of them are, in fact making their year, have been significant outperformance. >> exactly. >> when it comes to your area of the work, which is farmo, biotech, medicine in general, what are you seeing? are you concerned at all perhaps of overvaluation >> yes, we are the private markets have been very robust. biotech goes in cycles, as we
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all know it was sort of heading up into a cycle at the beginning of a coronavirus. with the coronavirus, people realized, well, the solution here is medical research and, you know, companies like moderna and pfizer kind of came through on that. a lot of money came into biotech. so i think it's sort of super-charged the end of the last cycle here. one of the mechanisms through which a lot of the investments are done are on the private side if you look at, say, biotech, there's a lot more being done in terms of dollars of capital in private than ever before the market structure has changed a bit. it's getting, in my view, quite frothy so there are good investments still to be made it's not that everything is over-valued. >> what would be an example broadly speaking or specifically >> you know, one of the things
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that i think is interesting to follow is, a lot of these companies are based in cambridge, massachusetts the market for lab space in that area, in the boston area has gone off the charts. so, you know, companies are having to do road shows with prospective landlords, to try to get a space. believe it or not, at some future time in a building, which is kind of absurd. >> competing to even get the lab space. >> competing to get the lab space, on top of it paying more than $100 a foot >> so how sustainable is this? you've been a investor in this sector how do you benefit from it as somebody who is allocating assets >> we're watching it closely i think the valuations are too high it's important to sort of note that most of these companies are
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very high-quality companies with good people doing intelligence things that are worth doing. it's what valuation is being placed on that, right? because the reality is most of these enterprises will fail, for the ideas that they're going after will fail. if you look at clinical -- if you -- in fact, most of these companies are preclinical, but even clinical work, once you get through the hurdles to human testing, only one in ten drugs work most of these companies don't very have candidates for human testing. >> even in the advances, is it still a similar percentage to what it was? >> you can't argue -- i actually would say, i think it probably will go up kind of somewhat over time, but it's not going to -- in my view it will not go up by some giant factor. it's mortgage of sort of at the margin that we'll see improvements, smarter experiments being done lead to go higher probability of drugs
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being approved i don't think that will be a dramatic thing unfortunately drug development is really, really difficult, as we know. and we wish for all humanity that it was easier, but it's a really, really hard problem. there's a lot of enthusiasm into the sector and a lot of money coming in, and a lot of people are not focused on what stage the company is in, and they want to invest with a good team, but they want to be careful about the valuation to get a return over time. >> a lot of them are using the marks to help the valuation in the private market does that have to change before a lot of these private -- and again, are you shorting some of the names that you can in the public markets >> so, i think that -- i don't know what's going to change first, but i think all of those things have to come down over time it doesn't have to be
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calamitous it can happen in a more orderly way. i think there will be lots of opportunities to consolidate if you look at a, given, say a vents tur capital firm in their portfolio, they typically do not have the capital to support all the companies that they have going forward, to they assume there will be some rate of attr attrition. even with that attrition, they can't support all of them. they depend on other private market investors, or a spac or ipo, whatever. if those valuations come down, basically this musical chairs will end. >> but at the same time you have this wall the liquidity that just keeps coming. it's not just biotech, but all other parts of technology, where we're seeing extended valuations, but nobody is willing to say it will end soon. >> i hear, and some areas are
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even more valued, and we'll be having inflation, in my view, so to some extent the markets are looking forward -- >> what does that mean from your perspective as somebody running a hedge fund. >> so there's a few things going on on the activist side, what we do, you know, there's been a big bifurcation of the market. though there is a lot of stocks up a lot, if you look at our portfolios, the number of names in our portfolio trading around, so, you know, there are companies have had some missteps, not missteps in our view -- we think the dcfs are meaningfully higher than what we're paying, but people -- the stocks that are doing well, the private companies doing well have improving fundamentals. there's always hiccups, or
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almost always things that go wrong, and those companies are getting punished a lot we think there's a lot of investment opportunity in that area, in the public markets, and then in the private markets, i think there will be frankly some consolidation. there are many companies that have been founded. it's hard to keep track of the names of all of them there's literally so many, and there will be a lot of synergies with some of them working together that will be forced when capital becoming more constrained. >> alex, we're out of time for now. always nice to catch up with >> wonderful to catch up with you, be healthy. thank you. let's move from stocks, the dow is down 217 to bonds ten-year got to 157, currently backing off, even a bit more as u.s. nat gas futures are down.
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>> yes >> keep your eye on some german and italian yields finally a look at the dollar index, as the dow is down about 230. we're back in a moment you founded your kayak company because you love the ocean- not spreadsheets. you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit
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well, despite that back off in yields this morning, breath continues to be remarkably weak. every sector is red. got the vix off the morning highs but still above 22 we're going to get stop trading with jim in just two minutes the, she'll say she's got goals. and since she's got goals, she might need help reaching them, and so she'll get some help from fidelity, and at fidelity, someone will help her create a plan for all her goals, which means suzie will be feeling
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so good about that plan, she can just enjoy right now. that's the planning effect, from fidelity.
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time for jim and stop trading. dprrs >> they picked up very big on an army wing sell track citi says it's not a new contract, despite the headlines. palantir is a very good company, but the desire of the mean people and i mean people overly enthusiastic about stocks. it makes it so you end up paying too much for something and
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institutions take advantage and drill your bids. >> it has been stuck in the mid-20s for what nine/seven months? >> in the meantime, shouldn't you have bought service now? buy a cyber security company, like palo alto net that has done so much better but this is something that these mean people, they get stuck on something. you need discipline and that says caught your tie to palantir and go to palo alto. geez, i'm on a hot seat. consolation, which is regarded as being a mixed picture because they have some good, some bad. people are worried about denim and cotton i think chipper knows more about this than anybody. i've got an analyst meeting. talk about being on the hot seat
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about what's going on with chips. nobody knows more than matt murphy he's like an ironman i've not done those. he does not, by the way, have qr he did not have one of those >> you've always got that. >> i'm all aces. >> we'll see you at 6:00 and as the dow's loss is worse than here, 373 to the down side and we are once agaiok h40.n lo
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good wednesday morning welcome to another hour of squawk on the street david's at the active passer investor summit in new york city we did get short-term relief on u.k. gas prices and the 10-year yield but stocks have not responded in kind. we're down 400 again and south of 4300 in the s&p >> here are three of the big movers we're watching specifically we're going to start with
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constilation brands, although revenue did break forecast and as you can see, those shares are trading flat right now plus, apple moving to the down side it's down around 10% in the last month of trading it's basically in correction territory. with apple suppliers warning overnight that further disruption to energy supplies would threaten the company's supply chain you can see apple is down about 1.5% palantir has been rallying after saying it's been selected to progresses to the next faces of an $830 million earnings contract to provide data and analytics software under a program called capability two pallen teen will, quote, support army and intelligence users worldwide with a data fabric and analytics platform, whew, spanning multiple classifications. but this is amid uncertainty of
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another government contract with ice that is set to expire next month. nonetheless, the shares today have turned positive on the year again with the move today. keep in mind, up something like 145% since going public just over a year ago. carl >> morgan, stocks, as we said, retreating in these early sessions joining us this morning, morgan stanley wealth management cio. talk about the chop we've been work working through good morn pg >> good morning. >> it's hard not to think of morgan stanley's long-standing call for most of the year and we're moving between cycles. i wonder if you think the recent action shows that is coming home to roost >> look, as you noted. we have been trying to sound a
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little bit of caution, really starting in may and again about two weeks ago. speaking to the fact that we felt that the market was really relying on earnings and earnings revisions to come through but with downward estimates for thirds quarter gdp and continuing pressures all around cost items, whether it's supply chain related commodities, energy related or quite frankly, labor and wage-cost related. we just weren't sure that these numbers, that the market had come to rely on in terms of earnings estimates, were going to be able to power through. >> where do you think the market is in catching up to those narratives and at what point do things begin to look
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interestingly when conference call season gives us hope in the look forward to q 1, q 2 >> for us this is about the index undergeing a little bit of a mix shift, if you will we've been talking about the fact that investors have relied on owning that s&p 500 and the nasdaq because of this belief that some of the tech stocks that dominate those indexes are just resilient to all of these issues in our humble opinion, we think that belief is just going to be called in question during q3 earnings our guess is that might mean, at the index level, maybe another 5/10% down from here but right now, we're actually active stock pickers whenever you get dislocation in markers, there's opportunities and we think there are some
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great things for investors to be buying in financials, in industrials, energy, materials, in some of the sectors that are more prosickliccal, will likely rebound in the fourth quarter and in the first quarter of next year and whose valuations aren't stretched. where earnings estimates have already contemplated the slowing in the top line and pressure on costs. >> just in terms of that procyclical thesis, where do you think thingsgo into 2022 >> our belief has been that, certainly, during most of the past quarter, the treasury market has benefitted disproportionately from extraordinarily strong technical. we think what's happening now is that the mark is starting to recognize that those tacticals
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are going to lift at exact ly te same time the fed begins its tapering program and the risk premiums associated withtia nan gans in washington, whether it's raising the debt ceiling, running more higher debt than deficits all of that needs to be discounted we're looking at the 10-year backing up to 1.8% by the end of this year. >> so where, do crypto currencies fit into all of this? and i asked because morgan stanley, and you specifically, were early in looking at providing products where the asset class is concerned to your clients. so, how does that fit in a portfolio? >> so, look, we have thought about the whole crypto currency ecosystem, if you will as an asset class. we believe it's an asset class
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and it's one that's most appropriate for speculative investors. and thusz far, we've seen crypto's behave as hybrid somewhere between a commodity and a currency the implications of that are that volatility has been four times that of stocks so, you've got to size your positions accordingly for most of our clients that means don't own it at all but for those that can afford to have a portion of their portfolio allocated to something that is as speculative as crypto remains, we've said somewhere between 1/2% and create some inflation protection, create 1 some potential for capital inflation.
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>> i was looking at a note from june, where you said we believe a more dubbish fed means it will need to tighten faster later we think they go that and will discount proactively, rather than waiting for cues from the bond market. how good of a tell is it the bond market at this point? >> so, look, the bonds market has continued, we believe, to be influenced disproportionately by the fed and by fed buying, as well as some of the other technical factors that we've eluded to. we've continued to believe that the composition of returns, where it seems it's believing the fed that inflation will be transitory and we haven't really seen inflation expectations priced in that market move much over the summer, despite what we see as a radical shift in the data
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so, you know, our sense is that perhaps the bond market is behind the game here and we are going to see catch up and sell off as the rates make their way towards march at 1.8% and stocks have to absorb that move in price earnings lower multiples >> it does appear now that the market is ratifying. what you have been saying for a while. good to see you. >> always good to see you guys thank you. well, after a week of scrutiny, facebook ceo, mark zuckerberg, claiming, quote, the argument that we deliberately push content that makes people angry is illogical i want to get your take, right
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now, with facebook shares back under pressure this morning, not only the testimony we heard from the whistle-blower on the hill but the fact that zuckerberg did respond in a memo to employees that he then reshared on facebook it's really the first time we've heard from senior leadership at facebook since all of this has come to light in recent days and weeks. >> i think there was a compelling case that there needs to be more change in the system and across social. this isn't just about facebook but about snap and others, as parents that look at our kids on these platforms. there needs to be more controls. that being said, advertisers that we speak to are not changing their course. they're spending the most money on facebook and unless that targeting changes, they're not leaving. i think right now, you have effectively more things that facebook needs to do to control the overall system but i think ultimately, the
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advertisers are the ones that vote and pay and they're voting right now to stay and users are staying with them. so, ultimately, i think this is going to effectively storm that comes through. and in past storms, this has been a great line up this is a stock that trades multiple turns below google. trades in low 20s on an earnings multiple and has visibility of 15 to $20 of earnings power and all you have to do is put a low 20 multiple on it investors are going to wait until the october 25th earnings date i'm sure they'll pour cold what thorn forecast like they usually do and that will be a great opportunity. so, short term, there's no question there's going to be duress around the stock and digital advertising. but ultimately over time, this
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has proven a long time on regulatory, we've been talking about this on your show. this is an opportunity >> yes and we have been talking about the possibility of regulatory risk quite literally for years brent. but the testimony we got yesterday, the thousands of pages of documents that were taken from the company in the process, that doesn't move the needle at all on the regulatory landscape and the standstill we have seen? maybe that potentially moving forward where congress is concerned. and if so, is that too far away to be considered right now >> i think you have to look at the industry you can't take, for example, one team and say it's regulated and this is their rules and the other team has this. the overall internet industry needs a playbook so, this will impact snap and others the as a parent, i opened snap yesterday and i was alarmed at what you see on the front page of snap.
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this isnot a facebook-only issue. this is an industry issue. if the rest of the industry goes through this, who's going to out perform and have better targeting? i'm arguing look, things need to change i'm a parnlt and i want my kids to be safe ultimately the industry is going to change and i think ultimately, you're going to see they have to shift and that facebook will out perform the industry on the shifts and that's really what i think needs to happen. does that impact the entire industry we have internet valuations at 20 times earnings. we have software multiples at 50 times revenue. i would argue a lot of them are already embedding a lot of over hang the coast is clear and it's amazing. there's certainly things that we need to get through. you look at when zuckerberg was
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in congress a few years ago. stock is up 100% we want to address these issues and we look at how do investors make money usually when stock gets hit, that's when you made a lot of money in the stock >> we had sort of this discussion a while back but it was on gdpr and that's when regs are changed for the whole industry, it tends to effect the giants and facebook would end up with a relative gain, i guess i don't remember any other company mention the hearings yesterday. >> i think ultimately, there's a lot of analogies for this. and there's a witch hunt for one right now. the industry is liable again, you go through and look at all these other applications out there, tiktok, snap, i would say there's even a far greater
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danger to our kids on some of the other platforms than the facebook platform. i think ult mimately, again, ths is the focus i think the industry needs to change and it doesn't mean again the rest are out of the woods here i think they're all viable and need to do more. >> all roik. finally, before we let you go. just had an army win how big a deal is it for that stock, especially given the fact that, while may be up triple digits, it's been under quite a bit of pressure in recent weeks and months >> the army is an extension. this is obviously -- we've seen a demo of the army build it's an incredible ability for anyone in the army to uses the system it's a great testimony for palantir's success of we build software no one else can build, and in extension of what the army is doing.
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they need to show, beyond the government, in the commercial business, they can get bigger wins and more diverse wins when tesla came out with a car t was a high-end car for a few it went downstream and now they're going more mass market palantir needs to go downstream and so they can effectively address the broader commercial market i think investors are keenly focussed on this commercial opportunity. government's been carrying the day. but they've got to show that thugger engine of growth to take on for the stock to reach its next level >> all right brent, thanks for joining us today. >> thank you still to come this morning, an exclusive interview with jeff smith, revealing his new ideas and a big show ahead with stocks coming off the early lows of 400 or so. dow's down 369 and wre oe'nce
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welcome back to "squawk on the street." the active pass of summit here at midtown manhattan passed us as we are thankfully every year. unfortunately, it's been a while since it's been in person. a year ago it was remote, everything was remote.
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i think it was cortava a year ago. both performed quite well. in that auditorium, you came up with three new ytds. one in the press and three haven't. the first name, animal health. you say, jeff, you believe it has a similar opportunity to zoettas, particularly in the -- [ inaudible ] >> first of all, thanks for having me. nice to be here in person. it's been a while and it's nice to be back doing business in person so elanco, we've known the company for a while and invested in the company it was rumored but we never said anything for the last year and we recently increased our position dramatically. there's an opportunity the company came public, spun out of eli lilly years ago and there was a lot of hope that they were going to be able to
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follow the blueprint, and be able to dramatically improve their margins. it's a great business. it'sanimal health in both pets and farm animals unfortunately, it's been a bunch of false starts. but they did a merger recently or closed a merger recently with bear animal health, which gives them more scale. we believe the market's been disappointed by the execution as it relates to that because they initially said they were going to get to 31% margins in 2023 than when did the merger, said we can get there by 2022 and whether the deal closed, they said 2024. but that's water under the bridge we look at is it today and say we get to buy into the company, great business, at roughly the same value as when it spun out
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and came public, except it's a much better positioned company we think it's set to succeed we need to see the execution fall though promise. >> when you say execution has d disappointed and credibility has eroded, that makes me think this is a situation where you're not just paying close attention but you might do something down the road is that true >> we've had conversations with them off and on for a while. we debated whether we should nominate directors last year we've had conversations with management, with the board we agreed we should give them more time and see the execution. that execution hasn't yet developed again. so, we ramped up our position, the conversations. i had a conversation with the board a few weeks ago and went through a very similar presentation just to make sure everybody's level is set we want to make sure the whole
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board understands the opportunity, which i believe they do but also understands that it hasn't played out yet. that it's been slower than the market expects that even though there are reasonable reasons why it's taking longer that we need to demand accountability, not only for shareholders but for the share holders. during this period of time -- >> what do you need as a sign they are because you're always operating with surtden nominating windows and periods of time you want to act. >> we need to see progress against the goals and there's a huge gap between them. they're able to expand their margin so, the gap has grown more
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the company's promised 300 basis points of expansion this year. we need to see them be along that path. and as we've said to them, do better if you come out with 300 basis points, beat that. do more and sooner, as opposed to less and slower and hopefully they can do that number we make is happier. we just want the company to succeed. >> another company that has been in the press is huntsman you said in your presentation, unfortunately positive changes have not led to meaningful shareholder value creation again, why the interest and what exactly is it that starboard is going to do to try to get meaningful value creation out of this team? >> huntsman's a great company. it's a chemical's business, trying to replace their
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manufacturing footprint, their technology, their know how is almost impossible. terrific barriers to entry unfortunately, since the ipo, the stock hasn't done anything the company has. because when they ipo'd, it wasplore of a commodity-chem chemicals company and therefore, i think they've operated more like a commodity chemical company and the shareholders have treated it like a commodities shareholder company. but they revamped their portfolio to move up the value chain and they've focussed more on value-added chemicals and systems what that should mean is their margin should go up. and with that, the multiples go up unfortunately it's not reached the higher margins and they've not grown to the levels they
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like, which is high teens. and because of that, they're still trading at a multiple commensurate with a value player >> what is it they're doing wrong, in your opinion i assume you've had conversations. what did they indicate >> i'm not sure we can diagnose that yet we've had good conversations with the company we're going to see them in person again this week which is relatively new for us, in terms of virtual. i hope it's around the corner. what i fear, as relates to lots and lots of companies, is sometimes they're more complacent and think good enough is good enough, as opposed to getting to the next level. we'll see. we have to conversations in management and find out where they are on their journey to improve their value, increase
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revenue growth but it has all the make tings to do that. >> when it comes to complacency, do you think companies, particularly those operating remotely to some extent, if not largely, are patting them selves on the back for doing as well as they have but perhaps don't have the urgency they once did? >> there's been a big learning -- or reaffirmation for this through this and that's that leadership matters. more than ever, leadership matters. you see it in sports team, leadership matters you see it with companies. in the board room and ceo. especially this time of stress, great ceos are not sitting gak back. they're seeing this as an opportunity to leap fraul frog competition. and others not as great, might be happy to get along to get by to get through it.
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and what we think is going to happen, as you come out of the pandemic, you're going to see a growing gap between those companies that have great ceos and leadership because they've taken advantage of the opportunity in their competitive set and the ones that sat by and were complacent are going to lose share and ground even more. it will create more opportunities for us in the future but leadership is a big deal >> it certainly is and something we focus a great deal on let come to your last idea here, which is colfax 2367 you seem to endorse them >> this isn't a criticism. they're separating them think welding. and the other is med tech. so, braces and performance enhancements for your joints, as well as actual replacement
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joints >> so, striker and -- >> right so, terrific businesses in their own right but obviously they don't belong together. we've seen this time and time again, if you can liberate those businesses, you can liberate the management team to just focus on their businesses the existing leadership is going with the med tech business and we believe the med tech business has an opportunity to, in particular, grow its revenue growth and its margins more than where it is. so, there is an opportunity for operational improvement and we believe when you value the company, based on its parts. if you look at the fab tech business, at a lincoln -- we think you're getting the med tech business at a almost half value with the opportunity to improve that business. so, we're very excited about it. no, we're not criticizing management
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we're somewhat endorse ing management >> i can think of vaux or acom are you frustrated you settled the way you did. i mention those twoin particular, because the stocks havant done much do you wish you could go back and have fought harder sgl >> it's always a debate. media, bankers, attorneys, everybody wants you to think about how to settle something and work together and move forward. it's human nature. trying to figure out where the right line is where, the settlement is, rather than push harder to get more is always a debate we settle 90-plus percent of the situations and overwhelmingly work out well.
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so, i think that's okay. we also run proxy contests and they don't go well and that's still okay it forces managers to make promises to their shareholders that they'll do better would i want to settle for more? sure but there's sometimes we settle and we're incredibly happy so, very hard to judge in hindsight. with box, the stock is up 60% from when we bought it we're not unhappy. we're happy but do think there's more to be done and the company is promising more. >> glad we could be in person for the first time in a couple of years jeff smith from starboard. back to you. >> great stuff, david. frrg thank you we'll see you in a few time for a news update
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fr . >> reporter: president biden is back at the white house. he turns to the nation 's debt limit. he'll meet in person and virtually with ceo, including of j.p. morgan chase, and citi. they'll talk about the catastrophe facing the country if the country defaults. and kellogg says it's ready to continue negotiations pay and benefits are at the center of the dispute. and princeton's david mcmillen is sharing the nobel prize >> cool. all right. thank you. as we head to break, take a look at shares of ginkgo bio works.
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calling it a quote, scheme and noting just 40 million in annualized synthetic revenue. and set up where they're stripped out sit ron argus there is little material evidence to support and we've reached out for a response we'll let you know when we get that
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despite the red arrows, we did get the nasdaq briefly positive hey, josh. >> so, let's take a look at the xlk, the eetf tracking also look at some of the big names.
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facebook about 15% now from its high still a lot of fans on the street for this one. 35 buys, nine holes, just one sell amazon about 15% off its high as well basically flat for the year. the team at j.p. morgan telling its clients to buy the dip and some of the worst performers down about 15% in the week now down about 85% from the january high stitch fix down about 10% in the week and 70% from its high and the real reel down about 10%, 60% off its high morgan, back to you. >> josh lipton, thank you. as we head to break, take a look at natural gas we're going to show you the u.s. futures contract for that. pulling back sharply right now but keep in mind we're still up 130% just for this year. and just for the u.s the crisis we're seeing play out in europe and asia
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in europe, specifically, we're seeing that ingas prices pulling back after jumping earlier those prices are up seven fold this year. russia is saying it's goring to help boost supplies to europe. it all speaks to the inflation debate and supply chain bottle necks across the globe we're back in two. ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪
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well, if you walked in this morning and saw futures way down, that was definitely ratified at the open when the dow was down 400 plus and we went below 4300 on the s&p but you have that ingas prices in the uk and europe come off the boil as russia said they were standing by to help stabilize the market and we were looking for 425.
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maybe that means good things for the jobs number. and goldman and morgan sticking with their forecast. now only down about 250. >> and every s&p sector is in the low, led by energy we have the u.s. weekly inventory numbers where crude is concerned and saw a bigger than expected build on that front so, that perhaps is adding 2450 ene this commodity piece of the puzzle and pretty crazy moves we've seen in different materials as well. >> some of the down grades didn't help. even though daily case s, the seven-day average below 100k
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an interesting press release out of uber that rides really rebounded in the second half of september and they include business travel perdavid's conversation a moment ago, regarding return to the office we'll see if that continues. >> and in the meantime, there was an article about how different hotel companies are looking to double down on all-inclusive resorts, given that there are much bigger question marks about business travel and leisure travel there seems to be pent-up demand >> david did a conference and coming off of code, those are two nice data poin points anecdotally and as we dke o e oepuryen the s&p, holding under 4322.
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welcome back to "squawk on the street." and i'm joined by scott gottlieb a man we don't hear from very often. just kidding in fact, board member of pfizer and offer of uncontrolled spread and former fda commissioner. nice to have you in person let start there. they may be able to see people behind you we're actually getting together at a conference in midtown people seem comfortable. why aren't they comfortable yet going to the office? >> they check vaccine status here, they're comcomefortable with people in the masks
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the fda is going to meet october 21st to discuss ages 5 to 11 vaccine and i think having an orally available drug to help keep them from getting more progressive symptoms, i think those are two psychological events a lot of people vaccinated, recognize the risk is low. they're unlikely to have a bad outcome from covid they're worried about bringing a infection back to their home, where they may have young kids or an older relative i think wider availability of diagnostic tests to make sure you're not carrying any symptomatic infection. and they're going to make an announcement of getting more availability of at-home diagnostics to consumers >> they're very important as well for the successful uptake of the viral
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you want to take it early on, onset. the only way to potentially know if you're asymptomatic is by testing, right >> we've had a whoelg cultural change in the area of diing a naesic tests at one point it was tab oo now we've seen a whole sale change on the fda enablic these tests. i think all we're going to test at home, not just for covid but flu, strep throat. what was remarkable on the data on the merck drug is this is a population of haitians with risk factors for covid and you had advanced deveez. many had add vanced symptoms and you saw profound treatment effect if you move the drug earlier in the course of the infection, probably a more profound treatment effect but 50% reduction in hospitalization and death in a population of patients that were mostly older, had risk factors
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with covid and symptomatic disease, either mild or severe treatments that was a profound treatment effect >> you talk about psychological barriers and people struggle with trying to understand how to behave based on the data available to us for example, if i've been vaccinated, as everybody here has, and i get a breakthrough case, my chances of being sick equal to or wlesz than if i had the flu, for example is there any data to help people process the risk factor? >> certainly if you're vaccinated, your risk of developing severe disease is substantially reduced. and probably your risk of transferring that infection to others is reduced. the best data's coming out of zooel is people vaccinated, had a risk of transmitting infection but it was mostly in the household. that told us the period in time
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where they were infectious was probably short so, if your window of transmitting infection to others is short, your likelihood of transferring it is greater in the household. because who are you in contact with the most? people in your household it's probably the case of people vaccinated on a whole are contagious and less likely to transfer that infection than people unvaccinated. that is what the data is suggesting to us >> but back to the office. you know, are companies being overly cautious in your opinion or appropriately cautious right now. >> right now it is really hard because we're in the throws of the delta wave and the situation looks better across the country because being driven by sharp declines in cases in the south the situation in the midwest and west right now and i think there is a question of whether or not we have more spread here in the northeast as delta works its way through the country. >> you're concerned about that, although it hasn't happened. >> it hasn't happened.
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i think we'll see a pick up of infections you're starting to see it in new england and great lakes region i don't think we'll dodge delta entirely we will see a pickup of infections right now look at new york 26 cases per 100,000 people per day, massachusetts, 20, connecticut 12 those are low levels i wouldn't be surprised to see us get to 40 cases not the 120 that florida was experiencing, but a pickup from where we are right now i think for businesses right now, i think they want to see the all clear and i don't think we'll see the all clear until probably thanksgiving. if i was trying to put an end point on when the delta wave has moved through the country, probably thanksgiving. and then on the back end of that we'll have hopefully a vaccine available for children and at some point before the end of the year, we probably will have the orally availabledrug for merck if things go well and that undergoes review i think those two things are sort of the book end on the sort of pandemic phase of this virus
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and we're going to be entering the more emdemic phase. >> should employers be asking for booster shots already if they're already mandating vaccines for their employees >> anybody should be considering getting a booster. anyone age 65 and older that lives in a long-term care facility for everybody else, judge your individual circumstance. do you have risk factors are you in a setting where you're more likely to come in contact with the virus restored the immune protection that we perceived for the vaccines to have initially but you do derive more robust immune response from getting a booster. if you want to carry yourself through this delta wave, if you think this is going to play out over the next three or four months and get extra immunity going into the last surge of infection, boosters should provide that opportunity >> thank you now i can say i finally
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inter inter interviewed him. ea at the top of the list. down 6% plus as andy jassy says he thinks video games could be the largest entertainment category n'gonyer85 dot awhe.
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welcome back to "squawk on the street." i'm dominic chu. stocks off their lows of the session and seeing a pull back in the energy sector the worst performing sector so far today, you can see there, all 11 sectors, though, in the red. among the biggest laggers there oil services names like devon energy and the moves there come as crude oil slips from its highest level since the year 2014 after the energy department reported a 2 million barrel build in u.s. stockpiles that exceeded analysts' expectations. watch gas prices and oil prices. the energy sector. keep it right here stay with us after this break. we'll have more "squawk on the street" coming up.
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hey google. ♪ ♪ ♪ ♪ ♪ ♪ another quick check on the markets to end the s&p hanging above 4,300 and down 0.5%. the dow also just above 34,000 i want to take your eye to
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cotton futures, though those at a decade high and that is putting pressure on some of the apparel-related retailers. names like american eagle, macy's and urban outfitters as the commodity complex in general is getting attention from wall street that is going to do it from "squawk on the street. "techcheck" starts right now good wednesday morning welcome to "techcheck. i'm carl quinatnilla with john fortt and deidre bosa. all s&p sectors, though, are still in the red our first guest says to catch the dip while you can. facebook is under pressure again after that testimony from the whistleblower. we have mark zuckerberg's response to that this hour and then later first


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