Transcripts For CNBC Closing Bell 20121219

Day on fears that a deal to avoid the fiscal cliff may actually be a lot further away than we thought. More sparring today. Deal, i dont know. If you listen to what they are saying today, scott wapner in for bill griffith. The president calling for compromise in a News Conference today, but here on wall street there is a bit less optimism for the deal than weve felt in recent days. See where we sit right now. The dow is down 56 points. Nasdaq and s p under some pressure as well right now as we there you go. Nasdaq is down six and the s p, maria, selling off as well. Mr. Jobs, more jabs being exchanged on capitol hill today. What was supposed to be a president ial press conference on gun control quickly transformed into a discussion about the fiscal cliff. With the majority of questions focusing on the issue. Washington correspondent john harwood at the white house right now. John, perhaps no one has followed the twists and turns as much as you in all of these negotiations. Why now does it feel like things are not in as good a place as we thought . Because theres a lot of resistance within the republican caucus, maria, to the idea of raising taxes on anyone so that the concession that john boehner made toward the president , while it didnt go nearly as far as the president wanted, is one thats very difficult for him to maintain within his caucus. Weve heard the club for growth come out this afternoon and owe poets speakers plan b even though the Grover Norquist group, american for tax reform, says its not an increase, but that balancing act is making it difficult for john boehner to respond to the offer the president laid down so he walked away, said that the president s offer was not balanced, didnt have enough spending cuts, and the president in trying to drive home the case that the speaker needs to cooperate with him and compromise with him, came out today and said hes going to veto that plan b which would only raise taxes on incomes of 1 million or more, so weve got a difficult situation. It is always possible, as you know, maria, that the public sparring, the loud out in front of our faces sparring conceals some private negotiations that are going on, but duelling press conferences today by boehner and the president certainly make it difficult to seem optimistic at this moment. What about the spending cuts . Whats the conversation there, john, because once again the tax part of this story is dominating the conversation. Well, the speakers plan b doesnt have any spending cuts, simply deals with the tax issue and tries to take that off the table and fight later on spending cuts. The president s proposed nearly 1 trillion, 900 billion in spending cuts. The speaker says thats not new. The problem, of course, is that the spending cuts that are contained in that going after entitlement programs, medicare and Social Security, are very unpopular with the american public. The speaker has not spelled out specifics beyond what the president has offered. He just says he wants more. Thats whats a difficult situation here because the tax part of this is the popular part. The spending part is the less popular part. Theres a lot of spending cuts. Only a few hundred billion dollars apart which is a lot of money in reality, but over a tenyear budget deal is not something that smart politicians cant get around if they can get their caucuses to support it. John, the speaker seems to be suggesting that he has enough votes to pass his plan b in the house. Is that public posturing . Does he really have the numbers . I would assume that he would not say that, scott, unless they had done a very good whip count and concluded that the resistance to any tax increases whatsoever was not so great that it would take down, but, remember, if democrats stay united in opposition, you only need 18 republican defections to take this down, so it is certainly a a close call, i would expect, but i i wouldnt think the speaker would have made that statement were he not reasonably confident from his whip organization that he could get the 218 votes. All right, john, thank you so much. We are waiting on a press conference from Minority Leader Nancy Pelosi. As soon as she gets to the podium well take you there live and see what miss pelosi has to say about all of this. If the house is going to plan b, should investors have a plan b now . We find out now in our closing bell exchange. Luds lets go to minority leader pelosi. Theres still time for us to come to an agreement, and i hope that that time will be well used. In the last 24 hours the question that i get from my could you cause and from some of you is what is the speaker trying to prove by going to his what we call plan b befuddled . Is he trying to prove by bringing the two bills to the floor tomorrow that the republicans are here to protect the wealthiest people in our country at the expense of the middle class . If so, he will do that tomorrow. Is he here to prove that he doesnt care about going over the cliff . If so, he will do that tomorrow unless he leaves from that debate and goes into the room to negotiate with the president. Is he here to prove that he doesnt care about sgr, the rate that doctors are paid for medicare patients . If so, he will prove that tomorrow. Its really very interesting to see what his proposal does. It raises about up to 300 billion, nearly half a trillion less than the president s current proposal, and what he suggested earlier, he himself, the speaker, suggested earlier. It takes it gives people making over 1 million at least a 50,000 tax cut. People making over 1 million still get a 50,000 tax cut. It has another 120 million 1 billion in revenue by protecting the wealthiest states and wealthiest states in our country. I think have you all of these numbers what. It comes down to is democrats believe that our democracy depends on a thriving middle class, that our economic security, for their families and for our country depends on us having a bold, balanced and big package to put forward. What is sad about what is happening tomorrow, unless theres some other actions that accompany it, is that it takes us over the cliff, it does not avoid sequestration, it does not end the possibility that our Credit Rating will be downgraded. It does not create jobs. It does not instill confidence in consumers and in the markets, and it does not provide us with the down payment that we are told is necessary by the markets to instill that confidence, tonight down payment for us to go into the next year and address the tax code for fairness and a tax code that will energize our economy, to address our investments while making wise spending cuts and by prolonging a life of Social Security and medicare by addressing those issues again in a bipartisan way after the first of the year, so this is i dont know what the speaker is trying to prove, but if he thinks hes trying to prove that by passing a highend tax cut and leaving town that that looks like some measure of legislative virtuosity and try to put it at the president s doorstep who is a champion for the middle class, who has fought this campaign on the middle income tax cuts, then the republicans would leave town giving highend tax cuts without ever even addressing the other needs that we have, other decisions we need to make again to avoid the cliff, to avoid downgrading, to avoid lowering confidence in our market. Theres nancy pelosi speaking right now about the possibility of John Boehners plan b. We want to get into this and see what this means. Scott, do you think were going to get a deal after hearing that . The public is so sick and tired of this fighting back and forth, and i know, you know, nancy pelosi is trying to pin it owl an john boehner, but i dont think the public buys that. I think they think its both partys fault. Over the last couple of days there was more optimism in the market that we would have a deal. Remember, were on the backs of tripledigit gains for the Dow Jones Industrial average on both monday and tuesday, so the market was trying to sniff out a deal. Jim byanko from byanko research and stephanie likes with us as well, here at the new york stock exchange, Rick Santelli with us and sandy vallari with us as well. Sandy, ill begin with you. As were sitting here, i dont know how you feel about the market and the cliff. Yesterday one tone. Today seems to be weve reverted backwards. So frustrating. Here we go again. I think the market does have a lot of support at 1420. I do think they will get a deal done but i dont think it will happen this year. I think it happens into january and they can make things retroactively back to january so everything happens from that point. So frustrating weve got to go through that again. Does name pact the economy and sort of the fundamentals of this market if we go into january, go over the cliff and then we actually have, to you know, reverse things . I mean, youre beginning the year with more uncertainty. Ceos are already they are holding back on hiring. They are doing all these other things so ultimately, no, it wont have a fundamental impact because i think it will all be retroactive for january 2013. Hard for people to hire in such an uncertain climate for everybody. Ry, over the last couple of days ive been asking the question whether we were object cusp of this great rotation out of treasuries into stocks. There were sniffs of it. Again, tripledigit gains on backtoback days for the dow, and then you have Something Like this happen, and i wonder what your thoughts are on that as were all trying to figure out how best to position our money given the negotiations. Well, after that very succinct argument from nancy pelosi, im sure that i feel much clearer about both sides positions. All i can say is we have a u. N. Problem, okay . We have an unsustainable spending issue that to address is unpopular. You know how i read those two uns, were not going to get anything done in a timely fashion. You know, listen. Im a fiscal conservative, but i never would have believed that you could have so many people dancing on the top of a pin. Did you hear anything about any entitlement reform . Once the discussion is on 6 to 7 of the problem. I just dont see anything done. The other question rick, this is an equal opportunity mess. Its coming from both sides, let be fair. Theres little progress being made. You know what, 7 versus 93 is not a balanced argument on our channel, or any channel, okay . The discussion is clearly been about taxes, okay . Tell me thats what the discussion is. Its disingenuous. What does it mean then for the bond market and for equities . Ng nothing for the bond market. Nothing . People over the last two days, rick, have been asking the question whether were about to get a big rotation out of treasuries into stocks. Well, we had a big rotation into treasuries and out of stocks all year. I just think this is a yearend event. This is a himble compared to the bucket when it really starts to change a number of years down the road where the fixed income market is forsaken. I dont think were anywhere near that. Okay. So here we are with the reality at hand. Weve got seven trading days left in the year. No deal on the table. Everybody is digging in once again. Stephanie, what do you want to do here . Tell me how to allocate capital in the midst of all this craziness. Unfortunately, this is a binary event, and it looks like if we do get a deal it will be at the 11th hour of this year, or if not we have to wait until january. I think you have to either ignore this totally and look for opportunities in the volatility or you have a little bit of extra cash on hand, just in case we do sell off, because well sell off if we dont get a resolution. Have a little extra cash on hand and thats into the big rallies youve got to take some profits and take some money off, but at the same time when you get the selloffs you have to be buying. Pretty decent valuations at 13 times forward estimates and very low Interest Rates for a long time globally as well, and i think you also have encouraging data points in china, stabilization in europe and the u. S. At 2. 7 gdp growth is a little stronger to handle this, so thats why i think you want to be buying on this. Everybody wants to buy. So many people you want to be bullish, but these guys in washington, and gals in washington, give you so little reason to actually be bullish. Youre right. The corporate sector you know, loaded with cash, fundamentals turning positive. But this is the big difference from last year, last summer where the economy was so fragile. We were in such a fragile state last suggest so it was easy to tip us over. Now were a little better here in the states but a lot better in china, and a little bit better in europe. Weve got to get to jim. Because of the contrarian view, jim, is once we get a deal, we sell right into the deal. Yeah, thats right. Im going tonight skunk at the garden party here, and im geg going to tell you i never thought wed get a deal. Throwing rocks at each other. More likely we wont get a deal. The economy is as bad as last summer, looking at 1. 5 growth for the fourth quarter, maybe the same kind of number for the first quarter. Were going over the cliff in january. That means were essentially in january because of the fiscal drag will be greater than 1. 5 growth. The only question is how long will it be before we pull out of it . My fear is that it will be february at the debt ceiling when well finally get a deal. Well have a crisis before that. The markets will look like they did during the debt ceiling debaste august of 11, so, yeah, im not optimistic right now. Nothing i saw today suggests that were going to get a deal. As rick said, were talking about a small part of the deal, taxes on the rich. Not talking about spending or entitlement reform. Were just throwing rocks at each other, and theres really to be optimistic on right now. Unbelievable. All right, thanks, everybody. All right, guys. Have about 45 minutes to go before we close it up here on wall street. The market is at the lows of the day right now. Maria, the dow is down 63 points. Nasdaq is off by about six and the s p 500 is weak. Weve definitely weakened since weve had this sparring match in the last hour or so, boehner and then pleasy. These are the lows. Lows of the day heading into the close. One point of agreement. President obama agreeing with republicans to tie Social Security benefits to a more accurate measure of inflation which will effectively slow the growth benefits. Our next guest says that could be a dealbreakner talks to avoid the cliff. Representative Charlie Raquel and Donna Edwards ahead. And medicare is paying as much as back braces like this than they should be paying. Before we cut spending and taxes, should we be focus on eliminating waste and abuse . Instagram, the latest Battle Royale and backlash is intense so stay with us. [ male announcer ] with Wells Fargo Advisors envision planning process, its easy to follow the progress youre making toward all your financial goals. A quick glance, and you can see if youre on track. When the conversation turns to knowing where you stand, turn to us. Wells fargo advisors. Omnipotent of opportunity. You know how to mix business. With business. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above. And still pay the midsize price. I could get used to this. [ male announcer ] yes, you could business pro. Yes, you could. Go national. Go like a pro. Yes, you could. Come prefilled with problems. Enough is enough. Introducing the chase liquid reloadable card. With chase liquid, theres no waiting and no fee to activate you can load cash and checks at any chase depositfriendly atm and there are no withdrawal fees at over 17,500 chase atms all for one flat fee of 4. 95 per month. Get rid of prepaid problems. Get chase liquid. Welcome back. Were told lawmakers are trying to find Common Ground on a debt deal, but one key Sticking Point for democrats is a proposal to link Social Security benefits to something called chained cpi. Many economists say that this would bring the cost of living adjustments to a more realistic adjustment of inflation because it more accurately amends peoples spending behaviors. House Minority Leader Nancy Pelosi says she can live with it but my next two guests arent sold on it. Great to have you with us. Thank you. Congressman rangel, ill begin with you. If most economist say the chained cp sy a more accurate way of measuring inflation, why are you against it even if the white house is for it . Because if youre saying youre out there to save money, the most Vulnerable People that we could possibly have in the United States of america, old folks whose cost of living is going up, whose health care have increased, and now we have a formula that was original designed to find out what was the cost of living so that the Social Security check will be able to be increased to meet the cost of living. Now were doing it backwards. We find out how much money we want to save. Incidentally Social Security was never supposed to be involved in this procedure. How much money do we want to save, and then we say well get a formula, and the formula will save us that much money over ten years. Its just not fair to do this to old folks, most of whom are dependant on their checks completely or in part. Congressman, why should Social Security not be part of it . People arent stupid. We all know what the three major drivers of our debt are, medicare, medicaid, Social Security. Social security hasnt been changed. All thats been changed is they changed the eligibility age and thats about it. The only reason that it is not supposed to be a part of this because it was agreed that it didnt have any impact on the current deficit that the United States is facing, and all of the parties had agreed. Yes, Social Security has to be dealt with, but not with this socalled fiscal fall. At one point it was completely off the table. Now its coming back, and we dont know how long its going to last on the table. Congresswoman edwards, the president himself says this will save more than 100 billion over ten years. Isnt it true that the lowest income folks and the oldest seniors would actually be protected under this . They may actually see a bump in their benefits . Isnt that being lost in this whole conversation . No. I think one thing that youve lost, is first of all, Social Security is not a driver of our debts its the three largest drivers of the debt, medicare, medicaid and Social Security. Let me just be really clear, maria, please let me speak because this is really important for your audience to understand. Number two, as a cost of living indicate orthoreason that the cpi, the chained cp sy not appropriate for seniors and the disabled is because they dont real very any flexibility in terms of the way that in terms of their income. That means they cant do things others of us who work every day do with the regular cpi to substitute thing, substitute chicken for beef or white bread for wheat bread. Seniors drivers of their Health Care Costs and housing dont have the ability to do that which is why the cpi for the elderly is a more accurate reflection of a cost of living indicator, and if we dont use the cpi for the elderly what, that will mean is over the lifetime, a recipient could see a reduction of 9. 2 . You know, 650 a year, which is really significant for some of our for some of our seniors. It absolutely is significant, and im glad you brought those numbers up. Congressman, let me ask you a question. If we continue to pay into Social Security at the rate we are today, what is the year it will go bankrupt . I think its Something Like 2027, but what were talking about is the december 31st of this year, and im not saying that Social Security problems should be dismissed. Im saying that its urgency, especially as its relationship to the increase in the deficit, is not an issue thats before us today. What about medicare . Let me say this. Medicare will be incorporated into the president s health bill, but let me say this. If you can just stop and think, youre saying that you want to save over 100 billion over a tenyear period, and so you have now picked the class of people in the United States that youre going to do what, cut their benefits . Now you can make any formula you want for any issue and increase or decrease the benefit. Im saying why do you pick people who are the oldest in our communities, the most ill in our community, and it used tonight poorest. Now its our children, but it used to be had it not been for Social Security the ones that i said earlier who can actually see their payments go up. I think it would actually be appropriate to use the calculator congressman rangel and congresswoman edwards. We need to do this again because the public really needs to understand this. I assure you the public wants answers and they are waiting for those answers. They are wondering if you guys in congress are incompetent at this point. Thanks so much. All the Social Security with all due respect, weve got seven trading days left in the year, guys. Weve got to get to a deal already. All of the Social Security beneficiaries are listening to you. Lift the cap on Social Security and youll make it solvent. Im sure you and the president will have many conversations in the days forward. 35 minutes before the closing bell sounds for the day. A market under pressure, down 57 points, shy of the low of the afternoon. Just like a zombie movie, research in motion and nokia seem to have been resurrected recently, but have either of these red hot stocks risen too far too fast . And when you save more money for retirement if you could actually see what you looked like in old age . Bank of america says yes, and wait until you see who they made look 40 years older than they are now. You dont want to miss this. Back in a movement [ engine revs ] [ male announcer ] oh what fun it is to ride. Get the mercedesbenz on your wish list at the winter event going on now through december 31st. [ santa ] ho, ho, ho [ male announcer ] lease a 2013 e350 for 579 a month at your local mercedesbenz dealer. Military families face, we understand. At usaa, we know military life is different. Weve been there. Thats why every bit of Financial Advice we offer is geared specifically to current and former military members and their families. [ laughs ] dad dad [ applause ] [ male announcer ] life brings obstacles. Usaa brings advice. Call or visit us online. Were ready to help. Welcome back. Shares of nokia are slightly higher today after speculation that nokia could enter the tablet space. After a 40 increase this month, is there still room to buy in, and what about the other Device Company left for dead and making a comeback and, of course, thats r. I. M. The Company Reports earnings after the bell. Well take a look at the stock. Talking numbers. Technical the technical and fundamental side of the story. Good to see you both guys, dan, let me kick off with you. Which one do you refer, nokia or research in motion . If you lump both of these stocks into the Technology Base we like both of these stocks long term. We think nokia edges out rim, you know, on a slight potential basis just on the upside here, trieding in the low 4 raping and looking at a downtrend line dating back a few years. That sets up the potential for 20 , 30 . I would just caution that on a shortterm basis both stocks are very overbought. Rim looks especially heated. Thats an overbought stock. Its risen sharply after the last couple of weeks and come into our resistance, in our opinion, trading under 14. Hold on one moment, let me jump in, dan. I agree these are the last two folks on the parking lot to pick on your team, but no doubt about it. I dont see the 30 upside in nokia. Theres a lot of pressure on this company. Lets look and talk some numbers here. Today they got knocked off the pedestal. They were number one globally. They got taken out and they have gone down 20 in the last year. Samsung is the leader. On top of that they have a 6. 14 dividend that they expect and were really looking to see both of these stocks. Specifically not seeing nokia to perform at all. Dan . Look, the fundamental thats fine, but what were really seeing underneath surface here is a broadbased rotation into technology proper. This group has been a lagyard f for some tile. Youre going to continue to see sector rotation in this group and next Year Technology will emerge as a leader. The stocks coming off the bottom. Jump in again, sorry, listen, youre looking at it from the wrong pspective here. Let me finish. Go got them, merry christmas. I believe you r. Let me finish. Youre talking about money flow into the stock coming off major, major loews after a multiyear downtrend. Look at stocks within the Home Builders that have been dogs for years. Kbh is up 150 this year. We see that type of potential certainly for 20 , 30 return on a lot of these stocks. I would agree on a shortterm basis they are overbought and will come under profittaking but still plenty of upside potential in these names as the street continues to gravitate towards this group. Let me answer this question. It is my turn. Is there one friend of yours, do you have any friends that has a nokia unit . The answer is no, please dont answer, still my turn. Dont put words into my mouth. They are johnny come latelies to this. They cannot compete and are losing market ground. Im fading big time nokia. Thats what makes a market, but that was pretty funny, jeff. Thanks so much. Merry christmas to you. Scott, over to you. Talk a little numbers and a street fight breaks out. Go figure. Lets get to Mary Thompson back with breaking news at hq. Mar . Morgan stanley Wealth Management is dropping John Paulsons advantage and advantage plus funds from its retail broke rang menu. Of course, paulson is the Hedge Fund Manager who made a killing during the housing crisis. Now in an email sent to Morgan Stanleys Financial Advisers yesterday they changed the status of the funds from watch to redeem saying its client should pull the money from these funds. The company citing the funds weak performance. Two umbrella funds for paulissen basically employing a number of his strategies, and they have had a hard part investing in gold where hes not done so well. The Advantage Fund was down 5 in november, advantage plus down 5. 6 . Back to you. Mary, thanks so much. Mary thompson for us with the breaking news. Face it, were all getting a little older, but if you actually see what you look like when youre older, will you take saving for your retirement more seriously . Thats the bet of bank of america right now, kayla. Well, scott, its a bet with some Science Behind it. A study out of stanford said people who met their future self were more likely to save and b of a took those findings literally. We visited the banks headquarters to give a test drive t. Digitally ages you through the decades, not at traditional 65yearold retirement age since more americans are working longer to make enough to retire t. Forces people to literally face the reality of what retirement looks like and the results aint pretty. I did it thats me at i believe 107 years old. Behind those digital wrinkles, guys, the costs of retirement which could get very real. For instance, when i retire at 67, a loaf of bread will be 9 bucks, at 87 a wedding will be about 208,000, not, and at age 107, a gallon of gas will be 57 adjusted for inflation, its going to cost me a lot to fill up my buick at that age for sure. Established Wealth Managers like schaub and did i felt as well as startups like learnvest and future adviser have all been catering to milienals as well as boomers with assets below 250,000. Holding one big key to our financial future, two men in particular. First, House Speaker john boehner, which youre looking at right now. We decided to take a look at what the coming years of negotiations are going to look like for speaker boehner. Can you see he doesnt look too bad, if he makes it to 107, looking okay there with the chiseled cheek bones. The president looks like hes aged less actually than the first term. Seen all the pictures of him with the gray hair after the first term as president , but i would have to say that both men to make it to 107, scott and maria, not too bad of a feat inde indeed. I dont think thats what youre going to look like in your 60s, kayla. Something tells me that youll look a lot younger than those pictures show. The president and the speak remember probably going to feel like 107 by december 31st. Probably feel like that right now. Exactly. Thanks, kayla. Were just off the lows of the day right now. The dow is down 56. The s p 500 and the nasdaq negative with 25 minutes to go before we ring the bell. Check out this back brace. I feel like you need it now. Can you buy it for 250 or less online, so why is medicare paying 900 for it with your tax dollars . And why arent lawmakers focusing more on cutting out government waste than debating tax increases . No deal to avoid the fiscal cliff. Our next guest is worried that a massive compromise wont solve our massive debt problem. She will join us later on the closing bell. Tdd 18003452550 you shouldve seen me today. Tdd 18003452550 when the spx crossed above its 50day moving average, tdd 18003452550 i saw the trend. Tdd 18003452550 it looked really strong. Tdd 18003452550 and i jumped right on it. Tdd 18003452550 tdd 18003452550 since ive switched to charles schwab. Tdd 18003452550. Ive been finding opportunities like this tdd 18003452550 a lot more easily. Tdd 18003452550 like today, tdd 18003452550 i was using their streetsmart edge Trading Platform tdd 18003452550 and i saw a Double Bottom form. Tdd 18003452550 i called one of their trading specialists tdd 18003452550 and i bounced a few ideas off of him. Tdd 18003452550 theyre always there for me. Tdd 18003452550 and ive got tools that let me customize my charts tdd 18003452550 and search for patterns as they happen. Tdd 18003452550 plus webinars, tdd 18003452550 live workshops, tdd 18003452550 research. Tdd 18003452550 whatever i need. Tdd 18003452550 so when that Double Bottom showed up, tdd 18003452550 i was ready to make my move. Tdd 18003452550 all for 8. 95 a trade. Tdd 18003452550 can you believe it . Tdd 18003452550 i love it when you talk chart patterns. Tdd 18003452550 trade up to 6 months commissionfree tdd 18003452550 with a 50,000 deposit. Tdd 18003452550 call 18882923787 tdd 18003452550 and open an account, tdd 18003452550 now with no trade minimums. Can i still ship a gift in time for christmas . Yeah, sure you can. Great. Wheres your gift . Uh. Whew. [ male announcer ] break from the holiday stress. Ship Fedex Express [ maby december 22nd break from the holiday stress. For christmas delivery. Welcome back. We have breaking news right now. Herbalife and kay kelly with the story. Thanks so much, maria. Talking about bill ackmans latest short target which is herb herbalife. The ceo came on our air earlier to refute charges that the company is nothing more than a pyramid scheme. This is about bill ackmans Business Model and appears to be another attempt to illegally manipulate the market by a group of short sellers. Heres what we know and let me give think quickly. An extraordinary number of puts on our stock were due to expire this fry. We previously learned this activity was pegged at some kind of, quote, significant event. Mr. Ackman suddenly announces he will make a presentation on herbalife on thursday. The day before the puts expire. Now we know what this has been going on for in the shadows, as we say, for the last eight months. This has been ridiculous whats happening here. Bill ackman called me shortly after that johnson interview, and he wanted to make a couple of points. First of all, he says he has no put options in herbalife, only a short sale position, only an equity position. He says hes never spoken to another short seller about the stock, including David Einhorn considered to be a short in this stock, though thats never been confirmed, maria, so more questions continue, but ackman strongly denying some of the accusations that johnson has made. Thanks so much. Kate kelly with the latest there. As the debate over the deficit wears on, consider this number. 750 billion a year. Thats how much its estimated that the u. S. Health care system throws away on just unnecessary care, wasteful spending and downright fraud. Take this back brace, for example, medicare pays over 900 for a product that you could find online for less than 250. Well, this is all according to a new government report, and while this may seem like one small example, it all adds up. First a question of what your tax dollars are paying more and theres only so much wasteful spending that can be cut. Diane, first to you. How in the world can this happen . How does medicare not know what in the world they are paying for . Well, i think that when you have a Government Program providing all these things its very difficult to get costs down. Thats why its important to have Competition Among providers of medicare, like with the federal Employee Health benefits plan so seniors can choose a particular plan within medicare, a plan preapproved by the government. They all compete for seniors. They all compete for seniors business. That would get costs down. We also need to cut costs of other Government Programs. Government spending has risen from an average of 20 of gdp up to 25 . Its absurd that were talking about increasing taxes with the fiscal cliff without talks of cutting spending throughout the government, like 12 billion a year for green energy programs. David, you argue that the administration is going after medicare and medicaid fraud, right, but what about the responsibility of medicare to understand what they are paying for, the back brace, knowing that you shouldnt be paying 900 for this product . Yeah, thats crazy. Its crazy. And, you know, the president s latest proposal, by the way, includes 300 billion in cuts to medicare over the next decade. I also want to correct something that diana said, you know, that were not cutting, going after cutting spending. In fact, last Year Congress enacted 1. 5 trillion in spending cuts which about half of what that Simpson Bowles commission called for, so congress has made some big steps here. Finally, i just want to flag the biggest not enough, not enough. The juiciest target here is security spending. President obama proposes to spend 8 trillion on defense spending over the next decade. Thats too much, unsustainable. Were really talking about the wasteful spending and the idea that medicare will get a excuse me, maria, i think spending 50 billion on Nuclear Weapons every year when the cold war is over is an example of wasteful spending. Lets stay on topic. Were talking about wasteful medicare spending, 900 bucks for a back brace that costs 200 bucks. Who is running the store . Is it a more Competitive Bidding process, is that the answer in the industry seems to think its not. Well, i definitely think it is, because if you look at laysik eye surgery, cosmetic surgery, things where people pay out of their own pocket. Guess what, costs steadily declining. The problem with medicare they dont pay out of their own pocket, like going to an all you can eat steak restaurant and pay one price. We need to fix the basic problem which is lack of shopping around, lack of competition. Somebodys paying for it, and we know who that is. Thank you very much to you both. Appreciate your time today. Were in the final stretch of trading for the day. 15 minutes before the closing bell sounds. A market off the lows and down 49 points on the dow. The vix is soaring. Up next, two market experts tell you how to invest in the face of volatility. Also, are too big to fail banks getting preferential treatment . Thats what senator david vitter wants to know and hell tell us what he wants to do about it coming up on the closing bell. Bob, these projections. Theyre. Optimistic. Productivity up, costs down, time to market reduced. Those are good things. Upstairs, they will see fantasy. Not fantasy. Logistics. Ups came in, analyzed our supply chain, inventory systems. Ups . Ups. Not fantasy . Who would have thought . I did. We did, bob. We did. Got it. Try running four. Ning a restaurant is hard, fortunately weve got ink. It gives us 5x the rewards on our internet, phone charges and cable, plus at Office Supply stores. Rewards we put right back into our business. This is the only thing weve ever wanted to do and ink helps us do it. Make your mark with ink from chase. Just a few minutes before we close out session, the volatility index is up better that be 10 . Take a look. What does this tell you in the investor we bring into the conversation right now Michael Pento along with brian beleskey from bmo capital market. Thanks so much for joining us. Michael, whats your take on this volatility index . Its been a lousy investment. You cant buy volatility, you have to buy the vxx and like the etfs that wither away and have no value whatsoever. Im just very confused about the complacency in this market. I mean, were supposed to be going over the fiscal cliff in 12 days from now. Everybody is going to be surprised. We have a deal that looks commensurate in measure to the fiscal cliff. Up tripledigits the last two days. Optimism, at least before today. The last quarter we are down, october, november and december, down 20 points. Complacent and flat line. Thats the big surprise. Have you to protect your investors just in case we have a deal thats commensurate in measure to the fiscal cliff. What happens if some miracle republicans agree to raise taxes on these millionaires and billionaires . Thats what john boehner was agreeing to to get a deal done it, seems. Like me ask you about fundamentals. A lot of people feel once we get into 2013 theres so much in waiting to happen. M a transactions, dividend buyback and Meredith Whitney upgrading the banks and expecting dividend increases some march. Whats your take . We believe that all investors give politicians way too much credit, okay. They are both victims and beneficiaries of the psych. The market is up because the market thinks well get a positive resolution to that so lets pass that and focus on fundamentals and investing, and we think what people are Mission Maria is cash. Cash is still king. Corporations are setting on tons of cash and well see a cap x ref hughes in 2013 with all the companies sitting on a lot of cash. Still going to buy back stock and pay dividends and put cash to work. Especially benefits, areas like industrials and energy. Weve heard that before. Whats the catalyst this time . The catalyst is very simple. Asset, meaning u. S. Stocks are the best assets in the world, period. Where else are you going to buy assets hold on a second. Were also going to buy equities, europe, china. Youre going to buy bonds . At some point cap x. Which is machinery, tools. Now were talking about the market. Its machinery and technology and health care and consumer staples. At some point this becomes a problem to have all the cash. The fed is printing 85 billion a month that has to go somewhere. I absolutely agree 100 . Its rotating out of bonds and into stocks. It is going to do that because i was asking that at the top of the show. Thats what happened. I wrote a book about it. Collapse of the bond market. Its coming down in april, and i dont want to tout my own book here. But you will anyway. Can i give you one factoid. Ten minutes away from the close and this market is worsening. Down 78 points on the Dow Jones Industrial average. Okay. No factoid. The cash on Balance Sheets becomes a problem. They will have to put it to work. Yeah. Do i have time . Were out of time. Thank you very much. Make the point. Make the point, already. A 1 increase in Interest Rates wipes out any proposed savings that these knuckleheads in washington have proposed. 1 trillion wiped out. Thats the last word. Thats all i have to say. I want to back that up with facts. I want to come back and back it up with facts. Were getting screamed at. Appreciate it. A luxury we dont have right now. Ten minutes until the bell rings on wall street. Lows of the day on the dow are down 79 points. Is a canary in the coal mine the next story . This new banking crisis thats about to happen but this time in china. Were going to look at that next. Plus, instagram is backing away from its plan to sell your photo to advertisers after a huge backlash or is it in the story that has outrage on internet raging at new levels. Well be back in a moment. [ engine revs ] [ male announcer ] the mercedesbenz winter event is back, with the perfect vehicle thats just right for you, no matter which list youre on. [ santa ] ho, ho, ho, ho [ male announcer ] lease a 2013 c250 for 349 a month at your local mercedesbenz dealer. And with my bankamericard cash rewards credit card, i love em even more. I earn 1 cash back everywhere, every time. 2 on groceries. 3 on gas. Automatically. No hoops to jump through. Thats 1 back on. [ toy robot sounds ] 2 on pumpkin pie. And apple. 3 back on 4 trips to the airport. Its as easy as. [ man ] 1. [ woman ] 2. [ woman ] 3. [ male announcer ] the bankamericard cash rewards card. Apply online or at a bank of america near you. Welcome back to the new york stock exchange. At the lows of the day right now, so if there was any optimism over the last couple of days showing in this market, seems to have evaporated a bit as we head towards the close. Meantime, chinese Bank Regulators scrambling to head off a potential crisis after a hoeprofile blowup of a Financial Product invested in a pawn shop. Cnbcs chief International Correspondent Michelle Carusocabrera is here with more on why this could be the tip of the iceberg. A Financial Security known as a Wealth Management product. Gone bust in china. Heres the details. A group of investors in shanghai lost the equivalent of 22. 5 million that they thought was going to pay them 11 interest in only one year. Their money was supposedly invested in a pawn shop, two Car Dealerships and entertainment ven urg. These investors were supposed to get their principal and whopping Interest Payment in november. Instead, they got zero and started protesting in front of the bank for days. The situation is raising alarms with regulators over there because these Wealth Management products, wmps as they are nope, are so widespread. More than 2 trillion worth in the chinese bank is system. Thats equal to 14 of all deposits in chinach the chinese buy them because they pay way more in interest than cds and savings account. Analyst are worried that this failure is tip of the iceberg, more on the way possibly leading to a credit crisis. They also worry because of these headlines investors will stop buying them outright, and some of them are actually good. Yes, these products are often risky, but they do supply credit to small and mediumsized businesses which cant get loans from the staterun banks, so when businesses lose access to credit, the economy weakens. If chinas economy weakens its bad for the world and the u. S. Economy. Guys, back to you. Michelle, thanks so much. Michelle carusocabrera. Entering the final stretch. A market is down 85 points here on the dow industrials. At the lows of the day for the stock market. When we come back well have the closing countdown. Raise your rate cd. Tonight our guest, thomas sargent. Nobel laureate in economics, and one of the most cited economists in the world. Professor sargent, can you tell me what cd rates will be in two years . No. If he cant, no one can. Thats why ally has a raise your rate cd. Ally bank. Your money needs an ally. You can stay in and share something. Or you can get out there and actually share something. The lexus december to remember sales event is on. This is the pursuit of perfection. The lexus december to remember sales event is on. Excuse me, sir im gonna have to ask you to power down your little word game. I think your friends will understand. Oh no, its actually my geico app. See . I just uh paid my bill. Did you really . From the plane . Yeah, i can manage my policy, get roadside assistance, pretty much access geico 24 7. Sounds a little too good to be true sir. Ill believe that when pigs fly. Ok, did she seriously just say that . Geico. Just click away with our free mobile app. Executor of efficiency. You can spot an amateur from a mile away. While going shoeless and metalfree in seconds. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. Now this. Will work. [ male announcer ] just like you, business pro. Just like you. Go national. Go like a pro. Can i still ship a gift in time for christmas . Yeah, sure you can. Great. Wheres your gift . Uh. Whew. [ male announcer ] break from the holiday stress. Ship Fedex Express by december 22nd for christmas delivery. She also likes to ride her bike. She knows the potential for making or losing money can pop up anytime. Thats why she trades with the leader in mobile trading. So shes always ready to take action, no matter how wily. Or weird. Or wonderfully the markets behaving. Which isnt rocket science. Its just common sense. From td ameritrade. Welcome back. On the new york stock exchange, a day that started with seemingly a lot of optimism has deteriorated rather quickly into the close. Take a look at the lows of the day on the cusp of a tripledigit loss for the Dow Jones Industrial average. Im here with brian beleskey, what a change it is and what a change it is, last two days we were up triple digits, monday and tuesday on the dow. All about the cliff . All about the cliff and the comments, and the notion of trying to get ahead by volatility. The vix is really low and ill caution