Transcripts For CNBC Closing Bell 20131211

Twitter isnt the only stock to do that this year. Coming up, well name names and tell you what this could all mean for another huge ipo. Stay tuned for that. We were taking bets on where it will price. See how all that shakes out. It turns out that it is not true that the socalled wealthy pay the most income tax in america. Jane wells has learned that they pay all the income tax. 106 of income taxes. You heard that right. They pay more than 100 . How is that possible . Stay tuned for this stunning report. And lets check the markets right now. The final hour of the day, pretty much a down day across the board for the major averages. The dow jones is actually an outperformer helped by mastercard. Helped by home depot as well in there but down about 87 points at the moment. The nasdaq is still off. Clutching that 4,000 level. The s p 500 has shed 15 points and got below 1790 as we speak. Maryann bartels from merrill lynch, Adam Thurgood and done shriver from wbmi funds. What do we make of whats gone on in the markets the last couple of days . Made a lot of money this year, were exiting a little bit before the end of the year . You may be seeing hedge funds, were certainly seeing hedge funds take some money off the table. If you look at short positions in the dow, in the diamonds and the sem conductor etf, theres very big short positions. So those are being used as hedges. Obviously the markets been overbought. Theres a lot of concern about tapering, but really when you look at the markets from the longer term perspective, the fundamentals, all the technical, it does argue well see higher highs in the market. You think without the fed markets here are 25 to 50 lower. Are you serious . Oh, yeah, because the correlation between fed action and their Balance Sheet and equity prices is at 0. 93 right now, which means theres a near one to one connection or correlation between what they want to buy, when they buy it and how equity prices move. Wait a minute. Thats a very different thing from saying this market would drop 50 tomorrow if the fed werent involved. The structural imbalances in our economy are very serious. If the fed steps back and pulls out of its tapering entirely, not the 10 a month, but if they step back, the markets are 25 below, because they spent all these years injecting. Maybe if they removed everything at the drop of a dime. Exactly. Tomorrow given the current state of the economy, sure, but lets be realistic. That aint going to happen. And when it ultimately does happen, we have to believe that the economy is going to be in a place where it can be sustainable and handle any sort of complete punch bowl being removed, right . I would agree with that. But i would counsel say never say never, especially in this market. We didnt think stimulus would work, we didnt think t. A. R. P. Would work. Yet they have, the economys continuing to bounce forward. And the fed is driving liquidity to the point where the equity markets are going. You have to be a reluctant bull or a cautious bull before the tape is going to bend. This is one of the stronger ones weve seen in the last century. Do you agree with keith that there are now major, major risks . I think there are major risks because the economy is still trying to recover from the financial crisis. You know the fed has done what they can. I think theres a lot of emphasis placed on taper a little bit too early in our economic cycle. Just the economys got to get to an Inflection Point of 3 gdp growth or better for it to start to really heal itself and the whole world is really dependent on the u. S. Continuing to have easy Monetary Policy. I think that there would be a pullback and certainly we might not be as well off as we are if the fed hadnt done what they did. So we do have some concern about the market. Normally low Interest Rate environment is great and investors should look to party during that period of time. But i think there should be some caution here. Adam, russell 2000 falling below its 50day average on an intraday basis. Small caps often lead on the way up, often lead on the way down. Concerning or not . I dont think its too concerning, yet. Obviously if you see more momentum to the down side, you have to be concerned about that, but i want to go back to the prior guests point. I dont think that the market is going to tumble if the fed pulls back on tapering, its indicative of a stronger economy and thats good for stock prices long term. And i dont believe i hope youre right. I dont believe that the feds message has been all that constructive. I mean, think about what theyre saying, theyre saying, hey, the economys too weak to stand on its own. If youre a business leader, youre saying that the economys too weak to stand on its own. So i believe if the fed were to come out with the strongly positive statement and stay we are going to taper in a meaningful way because we believe the economys going to markedly improve, that can have a profound impact on market activity. Rick santelli, i wonder how you read this because its got complications for tnot just for stock market here. You dont believe na the feds making all the difference and you think that their words will make all the difference. Keiths words are still ringing in my ears keith, you get the big prize of the day. Thank you. Because judge, your comment to him is the most interesting point to the day, though. You said well, not like theyre going to stop on a dime. So what youre saying is you completely agree that a lot of this is faux and its how they remove the training wheels. Its not faux. But thats huge. Five years after a crisis, five years after if it isnt faux, it goes straight. It is what it is, right . Its fantasy land economics. Its faux, faux, faux, fee, fi, faux. If you look today, fives were up, tens the were up. The world is nervous because Steve Liesman says the end is coming sooner rather than later. It changed. A few months ago, it was riding pretty high. Watch the dollar index. No one will suggest that its not a liquidity driven real. So then faux economy, it isnt the economy, its liquidity. Thats all im saying. You have to respect the improving fundamentals of the economy. If you dont want to give the fed credit you dont have to. It really isnt about giving anybody credit. Its that i would like to live in a free economy, free, not subsidized economy. Yea, now its my turn. Absolutely. Free economy, free markets and free decisionmaking. I would love to see economy thats justified by the fundamentals that are attached to it. I would love to see the fed step out of the way and actually take responsible Financial Action like giving the markets the impetus they need as opposed to stimulus that politically they want. This indicates why this is the most indicated market rally. When i get this push back with taper, the fed and its all faux, give me a time in history where the fed has not influenced our economy or has not influenced our markets . Probably only before 1997. Exactly. What we fear is the unknown because weve never seen the fed act in this way. Weve never seen a Balance Sheet like this. Not just here in the United States. The bank of england has a Balance Sheet. The ecb is still building a Balance Sheet, now the bank of japan building a Balance Sheet. Theres not a textbook in the world that says how this will end. This can create voltity in 2014, we have that as a risk. Whether the fed miscommunicate, whether the market misunderstanding it. Because we have the vix, we think corporates are going to spend, so thats how were getting the markets higher next year. And i would echo on that that the economy has not performed the same way as the stock market, theres no question that the feds actions have improved stock, but from an economic perspecti perspective, im not sure that at this times done a lot. You can be a market bull and an economic bear. Thats the bifurcation going on right now. You have huge swaths of americans that are hurting. You have diminished sales. People that are hurting the most arent really benefiting, though, not where i see it anyway. The people that are hurting the worst probably dont have a big stock portfolio. Agreed, rick, agreed. If you want the fed to back out, you have to get fiscal policy on the same page with the fed if you want fiscal policy, you have to get the parents that think they know everything to let the kids do it on their own. There you go. Maybe congress would get off of their butts if they dont have a pick set by the federal reserve. And they got to stop worrying about reelection. Thanks for the perspectives from all of you, really appreciate it. 50 minutes to go before the closing bell. The Dow Jones Industrial average is down 86 points, materials is one of the points of weakness, today along with number of other sectors. And mastercard one of the bright spots after announcing a 10 for 1 stock split and a huge buy back in the dividend program. One of the best financial performers of the year. Coming up, if you want to be able to buy more with your mastercard, you should buy mastercard stock, and yes, even at these levels. Bernie madoff was arrested five years ago today. Have his victims recovered in that time . Were going to find out. And are you feeling lucky because friday the 13th might be a lucky day . The Mega Millions jackpot 400 million about the second largest prize in that games history. The drawing is in 48 hours. What would you do with all that money . Tweet us. [ bagpipes and drums playing over ] [ music transitions to rock ] make it happen with the allnew fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Get 200 free trades when you open an account. Ya know, with new fedex one rate you can fill that box and pay one flat rate. I didnt know the coal thing was real. Its very real. David rivera. Rivera, david. [ male announcer ] fedex one rate. Simple, flat rate shipping with the reliability of fedex. Welcome back. Hard to believe but today marks the fiveyear anniversary of Bernie Madoffs arrest for the massive ponzi scheme. And five years later madoffs victims is are still trying to cover. Scott cohn joins us with the latest. The Recovery Process that began exactly five years ago has been unlike any in the history of investing. With some notable success, but the victims are still hurting. We really lost everything except the home were living in now. Now in their 70s, stephanie and her husband have had to go back to work, operating a small limo service. I have to lift 50pound suitcases. Theyve gotten some money back but nothing close to what they thought they had. You dont have that total amount, you only have what you deposited. Under the formula upheld by the courts victims arent entitled to any returns on their money because madoff didnt make any actual trades. The essential theory is that the returns that you thought you were making on your investment were actually just money that was stolen from other investors . Correct. Madoff trustee Irving Picard and his counsel David Sheehan are responsible for rounding up and distributing the money. We understand that people thought they were making mon moneyand thats what they thought they were getting paid. Im sure if you asked people who got other money from other people that they felt were profits, that they felt the others who didnt get their money back should get their money back, im sure theyd agree they should. Picard and his team recovered 9. 5 billion out of 17 billion. And theyre optimistic theyll recover everything. Less clear is the fate of thousands like daphne and mark, who lost 4 million through a madoff feeder fund and have to rely on recoveries by the justice department. It felt like quicksand. We were in the funds because of actions of family and family friends. And theres a certain level of trust there that was violated. It was supposed to protect us, the sec was supposed to protect us, nobody protected the small investors. This is president of cipc. Should people be concerned that this is a game . The fact of the matter is if you allow what is owed by people to be judged by the last imaginary statement that Bernard Madoff pulled out of thin air, then youre letting the thief determine who wins and who loses. Legislation is pending in congress to reform sipc, but he says that would have enormous n unintended consequences. Picard said hes on track to make returns to investors every few months. Tonight on cnbc prime some of the best reporting out there. Scott cohn, while weve got you, do you remember where you were when that news broke, what your reaction was . I remember that, like a lot of us, i didnt know who Bernie Madoff was. It was a name that you heard kind of in passing over the years. He obviously was a big deal on wall street, but not somebody who was a big publicity seeker. So the name didnt stick out, but the money certainly did. Right away were hearing 50 billion ponzi scheme, actually 65 billion on paper. In the midst of everything we were dealing with was mind boggles. I do wreb where i was. Where . I was a nasdaq reporter. I was sitting in my office at the nasdaq when the news broke. Like scott, madoff wasnt a familiar name to me. The number was certainly astounding. And then sort of when i learned that he was a former nonexecutive chairman of the nasdaq, pick up the phone, try to make a lot of phone calls, try to find out exactly who this guy was, how long was heed a nasdaq, a memorable day in that aspect. We were so focused on whether the lines would be on the next day in the economy because this was the very height of the financial cries and whats interesting to me is at the time, 50 billion seemed like we dont have time to talk about that right now, were talking about a 15, 16 trillion economy and were not sure how it would close business every day. That economic crisis that ultimately would have brought him down. You wonder if he would have kept going if the economy kept going . He was supposedly the only one making any money. Right. If you needed to get some money out you make the money out of madoff and thats what brought it all down. Happens never financial crisis. Scott cohn, great reporting following this as well. I caught up with somebody else from the crisis period today that weve never heard from on cnbc. The former copresident of merrill lynch. A lot of people have sort of pointed the finger at him for a sizable part of Merrill Lynchs near demise. He now runs a Restaurant Group and a very profitable and successful Restaurant Group with 13 restaurants. And he left merrill when . Many, many years ago. He had said in a print interview that i saw at one point that he had regrets about the situation. So i asked him about what sort of personal responsibility he felt for merrills problems. It was a regretful period. We all have things we would have done differently. Certainly with more information, i might have known or others, you know, you would have made different decisions that would have been different for the shareholder and the clients, hindsight is 2020 these have thousands of people in audit, hundreds of people in risk and in compliance and still things ultimately happen. Thats ahmass. Interesting to hear from him, five years after the crisis on what role, if any, he thinks he directly played in what happened at merrill. There are plenty pointing to the team that was around as personally being responsible as opposed to being a systemic or corporate wide issue. That debate will continue. A lot of people made a lot of mistakes. Now hes reinvented himself away from wall street. And quite successfully. The dow is now down 113 or 0. 7 . The size of losses greater than the other indexes. Mastercard, visa, im sorry, mastercard home depot are helping to offset. The lows of the day. As kelly just said, mastercard shares are charging higher after its big stock split dividend buy back announcement but is it time to take some profits . Well have both sides of that debate next. Twitter has doubled since its ipo price. Well round up the other ipos that have produced a socalled double play this year that double vision tdd 18886486021 there are Trading Opportunities tdd 18886486021 just waiting to be found. Tdd 18886486021 at schwab, were here to help tdd 18886486021 bring what inspires you tdd 18886486021 out there. In here. Tdd 18886486021 out there, tdd 18886486021 there are stocks on the move. Tdd 18886486021 in here, streetsmart edge has tdd 18886486021 chart pattern recognition tdd 18886486021 which shows you which ones are bullish or bearish. Tdd 18886486021 now, earn 300 commissionfree online trades. Tdd 18886486021 call 18886486021 tdd 18886486021 or go to schwab. Com trading to learn how. 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Tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. Do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. Do not drink alcohol in excess with cialis. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, seek immediate medical help for an erection lasting more than 4 hours. If you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use and a 30tablet free trial. Welcome back on this day when stocks are sharply lower. The dow off 105 points. The s p at 1785, down 1 , the nasdaq down 1. 3 . Jackie deangelis wrapping up the stocks drawing down the market. Well begin with labcorp of america. After the medical Testing Services provider said that its 2014 Earnings Guidance would miss expectations this on tepid demand. Its rival Quest Diagnostics it fell on sympathy as well. A tough day for avon. Its moving lower after saying it halted the rollout of a new order management system. The Pilot Program in canada rumted in significant didnifign disruptions. Auto home, the owner of the chinese auto websites rising as much as 83 after being priced at 17 a share. And the company is an oil and gas pipeline producer formed by refining giant valero energy. We end with mastercard soaring after the Company Announced a 10 for 1 stock split and a stock buy back worth 3. 5 billion. Guys, back to you. Jackie, thanks very much. So the only good reason for a company to do a buy back should be because it thinks its own stock is undervalued. Take a look at the oneyear chart for mastercard. Does that stock look undervalued to you . Lets brawl it out. He sees strong tail winds while up Capital Management says its already gone too far too fast. Anton, clearly management doesnt think so. Yeah, so, the stock has been a great story. Up 80 in two years. 100 Dividend Increase last year. 100 Dividend Increase april of this year, now another 83 . Thats great for shareholders but the topic on hand now is what do new investors do . Is it now time to get into the stock . And were seeing a lot of high valuation, it has a trailing 12month p e of 25. It is only 25 . Youll be buying this stock more for appreciation. Investors need to look at this stock with the runup its had, meteoric. Well see if it continues to go. Anton, just to be clear, do you like mastercard . Would you buy mastercard or no . So at this point i would be not buying mastercard. Theres two issues that i have with mastercard. You look at its Fourth Quarter earnings in the last three years has always been its lowest earnings. They make their announcements in january. Also, its Dividend Announcement that id made last year in april, the stock sagged nor five months after that. I would be paying attention, i would be looking at the stock very carefully, i wouldnt be buying it at this point. Jason, i think anton makes a pretty interesting and compelling point here. When he makes the distinction between new and existing investors in this name, if youre an investor in the name already, what do you do with it . Do you take some profits . Well, thanks for having me, first of all. We buy more, actually. This is the best fundamental story that we cover in the space. We have tremendous secular tail winds globally that are not abating, we have incredibly powerful modes here that make the entry extremely high. No company we cover that has such highly visible eps growth, up in the 20 range. And so when you step back and you look at the valuation, yes its trading north of 20 times, modestly north, if we look at forward estimates, but what other stock deserves a peg multiple, p e relative to the growth than mastercard . So were keeping on buying this stock. And jason, an interesting point and one that, again, and theres perhaps a distinction here between the retail guy that might feel comfortable with the shares here and whether mastercard itself should be buying back shares on the premise or indication that theyre undervalued because were talking about currently 25 times the 2014 earnings projections which are already 17 higher than what mastercard is expected to make this year. Yes. So theres a lot priced in here. The stock has run up considerably, why is that a shareholder friendly move to use some of the cash to pay a higher price for those shares . Mastercard has tremendous confidence in their longterm business for good reason. We think there will be considerable up up side, meaning the p e multiple are not as high as they rape appear on paper. When you have no debt to repay, no real need to do major acquisitions return to cash to shareholders as well as dividends to enhance the yield makes complete sense in our view. Anton, if not mastercard, who . I mean, do you like visa which has liked mastercard on a yeartoyear basis pretty considerably . Thats a great point. But look at the chart of visa versus mastercard, visa has been underperforming mastercard, but theyve caught up to each other in the last 30 days. Visa has a an earns per share trailing of 7. 6 , a dividend yield thats almost three times mastercard and its been on a tear the last 90 days catching up to mastercard on a twoyear return. You take a look at the two of them, the other thing thats been talked about, the federal reserves announcements next week. Both these companies are very consumer dependent. And right now were in a situation where the economy is just barely moving along. Its dependent on the federal reserve. If we see changes in monetary poll sis and consumers stop spending both of these Companies May be at risk. We got to leave it there. I understand that thats a point of debate on the Consumer Spending side, but i want to get further down that worm hole, guys. Thank you both for being here. Scott, whether this is the most shareholder friendly thing to buy eps. But ill leave it there. Dow, look at this. Coming in half hour before the closing bell, down near the session lows, down about 120 points, 19 off the s p 500, the nasdaq currently 6 points above that 4000 mark. Heres a breath of fresh air, lawmakers in washington working together to get a budget deal done before another Government Shutdown, but the details of the agreement could signify something very important about our economy. If you think rich americans pay most of the nations income taxes, think again, they actually pay all of them and then some. Jane wells explains how on earth they can pay 106 , yes, 106 , of the nations income tax listen to the money talk see, i knew testosterone could affect sex drive, but not energy or even my mood. Thats when i talked with my doctor. He gave me some blood tests. Showed it was low t. Thats it. It was a number. [ male announcer ] today, men with low t have androgel 1. 62 testosterone gel. The 1 prescribed topical testosterone replacement therapy increases testosterone when used daily. Women and children should avoid contact with application sites. Discontinue androgel and call your doctor if you see unexpected signs of early puberty in a child, or signs in a woman, which may include changes in body hair or a large increase in acne, possibly due to accidental exposure. 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Taking a live look at markets here in the final half hour of the trading day. The dow is now down is 25. The nasdaq shedding more than a percentage point is just barely hanging on to that 4,000 level. One of the big stories of the day, congressional negotiators reaching a compromise in place to prevent another Government Shutdown. John harwood with us out of washington. Do you get the sense that the left and right sides of both parties are going to sign off on this . Well, i get the sense that enough on the left and right sides of the two parties will sign off on this, but theres been some flack. We saw some last night when marco rubio, the republican in the senate who wants to run for president in 2016, came out and said he was opposed to the deal. The clubs for growth said theyre against it. They said they would score it which is important for their supporter opposition and primaries in particular as well as general elections. John boehner, the house speaker, called it a modest deal last night. Diplomat like that at all. He blasted back. You mean the groups that came out and opposed it before they ever saw it . Theyre using our members and theyre using the American People for their own goals. This is ridiculous. Listen, if youre for more deficit reduction, youre for this agreement. That is significant pushback from the house speaker. Now weve seen that house leaders have overestimated their ability to pass legislation, but people on both sides have told me they believe they will get enough of the Republican Caucus and Democratic Caucus to pass it in the house this week and in the senate early next week. But well see when they have to put the votes up on the board. Thats for sure. John, in new york, stay right there, by the way, on this point we want now to bring in Maya Maginnis joining us from the nations capital. Whats your take on this agreement . I keep reminding myself, baby steps, baby steps. This is a congress that hasnt been able to put into place a budget in a long time or do anything in a bipartisan manner. This deal is well short of the big deal we need with entitlements and taxes but a step in the right direction. Just to have republicans and democrats working together and confronting some of these hard choices, not the real hard ones, but some of them is something we need to start getting in the habit of again. I think its very important that we move forward on this and keep working on these issues to confront the larger deals as quickly as possible. You say baby steps, that may be generous. Seems like even maybe a baby crawl, right . Does this seem to you as though it does anything other than avert a shutdown . I mean, theres no dealing with entitlements, theres no talk about new taxes or anything like that. It absolutely leaves out the biggest issues that we have to deal with on health care spending, on the aging of the population, on reforming our tax code, raising revenues, it doesnt do any of the real hard issues, but it does, as you said, avert a Government Shutdown. Doesnt deal with the debt ceiling. We still have to confront that, but it takes a step in rationalizing some of our policy choices. Keep in mind the sequester was always put in place because it was so dumb we wouldnt let it hit. This will replace some of those spending cuts with more sensible savings and some that will generate longer term savings into beyond a second decade not really enough to make a real difference, bau start, a little start. Scott, yes . Think in terms of our washington redskins. If you put in place a regulation that insured the team would stop fumbling, stop throwing interceptions and stop getting the quarterback sacked is, no that would not move the ball down the field very far, but a heck of a lot better than what youve been doing. What dong is congress is doing s deal is take a no harm approach, not subjecting markets and businesses to the uncertainty about shutdowns and debt crises. That is a positive in and of itself given how badly washingtons performed. I dont think we should lose sight of that even as maya said the kind of deal shes been looking for for some time is still years away. Thats a fair point. John, did i pointed that you had to bring our redskins into it. Disappointing enough, but it is what it is. We have a market thats in the midst of a pretty big selloff. Maya macguineas, thank you for being here. The s p 500 is off almost 20 points now. So we have a sizable selloff across the board. Yeah, thats right. One we havent had for some time. Just a couple of quotes to put this in context. The fiscal drag will move to zero, Monetary Policy wont be able to hide. Thats the kind of rhetoric we got on the details on the bupt agreement, even if it doesnt do anything dramatic. One of the key issues in asking the question we did network wide yesterday whether the crisis trade was over, this plays into it, right, that they at least are willing to have a budget deal to avert another shutdown. So its check the box of another positive for the stock market, well see what the Lasting Impact of it is. It does pay to read the fine print. Thats just what jane wells did when a congressional budget report landed on her desk and she found stunning information on who is really paying income tax in america. Jane . Guys, inside this mind numbing report on tax burdens from the cbo this week is a nugget on page 13. The cbo broke the country up into five tiers of wage earners. Each groups share of individual income taxes, the top two groups of wage earners there at the bottom, add those together, they paid 106 of individual income taxes in 2010. Thats the latest numbers the cbo used. The bottom two groups, the least earners, added together, negative 9 . The top earners are paying the whole enchilada, those left are paying less than zero. How do you pay less than zero . You get a negative tax rate. The Lowest Income Group made on average 8100 in to 10 thats below the level of paying any income taxes but those in the group also received 25,000 each in aid and more than a quarter of that group, the cbo says they paid negative 15 of individual income taxes. Now, dont worry, the rich are not going broke. Theyre not making as much today with the market down triple digits. The cbo says it saw its income grow much faster than anyone else in 2010, no surprise coming off the market bottom. Generally speaking, those who thing that those who make more should pay more in taxes but in the case of individual income taxes based on this report top earners are not only paying their fair share, theyre paying everyones share. Back to you. Jane wells for us, as she digs through the guts of that report. As mentioned there now about 20 minutes to go before the closing bell on this day when wer seeing the dow up 125 points. Pretty weak day across the board. But coming up, an ipo daily double. Twitter officially doubled in value from its ipo price today. Dominic chu will check in. Whats the next that could do the same . Could it be hilton . Well have the latest on the hotel chains pricing scheduled to happen any time. The Biggest Hotel ipo. My double vision gets the best of me 123450r those dres, theres justo way were going to let them die. Like they helped millions of others. By listening. Planning. Working one on one. Thats what Ameriprise Financial does. 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We repaid every dollar america lent us. And gave america back a profit. Were here to keep our promises. To help you realize a better tomorrow. From the families of aig, happy holidays. Welcome back. Weve been telling you about the weakening stock market that weve been looking at here really deteriorating in the last 25 to 25 minutes. The dows at the lows of the day got the biggest twoday selloff. And weve been mostly talking about this market sort of creeping higher. Right. And then all of a sudden yesterday was down, today down 135. What are we talking, materials week, amongst some other on this day where its not as if we saw a big move in the tenyear, but a little bit business arz. This is something art cashman has been talking about for days. There are anomalies in this market. Shouldnt read too much into it. Look at the nasdaq, off almost 1. 5 . If it falls below 4000 a lot of hand waving if nothing else. Again will set off the chartists a little bit. Microsoft is down pretty good today as is intel as kelly is talking about some of the Technology Stocks selling off here towards the close. Heres something worth tweeting about, twitter doubling its ipo price boosted by a huge run monday and tuesday, a run that seemingly came out of nowhere. While twitter may be the most recent stock to increase its value twofold, dominic says there are others who have done the same thing this year. How about the first one . Today the debut of auto home, the Chinese Internet Company thats basically like an auto retailer. It is well on its way towards doubling just its debut in trading today. Take a look at some of the other big ones, twitter is up 103 . It just ipod on november 7th. But sprouts farmers market. The Natural Foods grocer debuted in the beginning of august. And its up 103 as well. Then noodles and company, the restaurant chain. That stock is up 114 . Yes, a double. It debuted back in june on the 28th. The container store, a more vent one, november 1st. A 120 pop and were only a month into it for them. Then theres voxeljet. Youve been talking about the printing companies. These guys are up 201 . They debuted basically in the middle of october. High flying names, but like you guys said, this is all a preview, if you will, for what could be one of the most massive ipos in recent years. Ali baba . Im not talking ali baba. Talking hilton. I was looking at the video. Were not talking about a 10, 11 million Share Offering like for these smaller companies. What you are seeing there are tangible assets, tangible things that you can see, touch, whatever. This is a lodging giant. Remember back in 2007 blackstone bought it for 27 billion. This was a black eye for them for a while, but if this goes off at the top end of its range, this could be huge for blackstone. Give me ali baba. Dont know when that will happen. Pension costs for retired Public Employees are mounting while resources continue to decline. 140point selloff in the Dow Jones Industrial selloff. Keeping a close eye on that. The california state teachers retirement system high risk, chief Investment Officer will join us to respond. Tonight at 6 00, do not miss mad money. James cramer talks with frank blake. He doesnt do too much tv. Dont want to miss this one with jimmy. announcer at scottrade, our clients trade and invest exactly how they want. With scottrades online banking, i get one view of my bank and brokerage accounts with one login. To easily move my money when i need to. Plus, when i call my local scottrade office, i can talk to someone who knows how i trade. Because i dont trade like everybody. I trade like me. Im with scottrade. announcer scottradeproud to be ranked best overall client experience. You stand behind what you say. Theres a saying around here, around here you dont make excuses. You make commitments. And when you cant live up to them, you own up, and make it right. Some people think the kind of accountability that thrives on so many streets in this country has gone missing in the places where its needed most. But i know youll still find it when you know where to look. Welcome back too the floor of the new york stock exchange. Biggest drop for stock over two days and two months. Nasdaq is about to go below 4000. Bob pizenny on the floor. Whats the talk here about this twoday selloff . The markets only had one good day in the last two weeks, one good day. That was friday, the jobs report. Other than that that 200 point move goes far. Exactly why we held up so well. Ism had a note this morning saying the possibility of a taper the 35 . Thats pretty high, actually. A lot of people are worried about that. If you look at the russell 2000, heres something i would look at, down 4 from its historic high. Thats where you get a lot of the growth names people are playing around with. Look at the midcap index, thats also underperforming here. Thats where the Home Builders are. Thats where the airline are. Bob makes a good point, david, in looking at the small caps. The russell is below its 50 day. Small caps lead on the way up. They tend to lead on the way down. Are you worried based on the last couple of days . Scott and bob, we have always said that the small caps, the transportation stocks and the banks are the bodyguards of the market. If theyre having trouble, difficulty, then its possibility a leading indicate theyre the markets path of least resistance is lower. Wed watch this very carefully. The russell 2000 got up to 26, 27 times earnings which is market sells for 15, to 16 times earnings. We came out with our forecast for next year of 16. 4 times 122. 90 of 2015 earnings which well be looking at this Time Next Year give us at the end of 2014 which is up 11 . We see this drifting off as healthy. Weve only had a 1 1 2 correction in june, 3 1 2 in the syria weapons thing in august. What is their taper mean . Nasdaq just dropped below 4000 for all of those watching that nice round number. 3999 and change. Steve liesman thinks its a bigger than 35 chance theyll do it. Theres a good chance. Its rising as the day goes on. Volatility is low. Youve got the bullishness is relatively elevated. The ism numbers both the manufacturer and nonmanufacturer have been good. I want to give a shout out to mary barra the new ceo. Youre always giving shoutouts. Well be back with the closing countdown right after this. After the bell, hiltons about to set the price. Switchgrass in argentina,cer ]d change engineering in dubai, aluminum production in south africa, and the Aerospace Industry in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 70 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. 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Get realtime market scanning wherever you are with the mobile trader app. From td ameritrade. Were back on the floor for the closing countdown. Want to show you the major averages because were in the midst of the worst twoday selloff in the market in two months. There it is. The dow jones is down 130, just about at the lows of the day. Nasdaq this week briefly broke below 4000 a moment ago, its retaken that amount. S p 500 is under pressure today. Earnings they were soso. Let me show you costco. Earnings not viewed all that well. Stock is down 1. 25 today. Also the tenyear, were focused on the rising rates. Theres the tenyear note, 2. 84 . You can see it right here afternoon rates creeping up, Market Selling off. A familiar story that weve seen. That will be the conversation in the days ahead as the taper draws ever closer. Terry dolan from benjamin and gerald brokerage is back with us. What do you make of the twoday selloff . I feel like the market is creating a bit of a trading range here at the end of the year where its getting pushed around a little bit. A little hard on the down side. I expect them to rally from these levels here on forward. You think the old playbook is going the take hold just wait a couple days . I do. I think in this case kind of near the bottom of the trading range. I think well trade back up and see a close above 16,000 for the new year. Having that been said, the issues with the tenyear, it will creep into the First Quarter of next year as rates continue to rise without the fed doing anything. The next fed meeting is like the 17th and 18th. So its right here. Yeah. What happens if they taper, what happens if they taper 5 billion, 10 billion . The market will probably welcome a prudent move right now. The key indicator is inflation. At least investors that are purchasing paper and looking ii the paper right now can look at inflation and say were still pretty low on our Interest Rates. Thats going to be the key right there. Take it way down to the ground level. Right. The minute the announcement is made that the fed is tapering and if that announcement comes in a week, what happens to the stock market . Well, actually, i think the trouble is that the fed is overcommitted right now to its nontapering stance. The market would be shocked by that right now and it would be a very negative move but only because of their overcommitted stance to continue this quantitative easing going out into 15. Market shocked, youre talking a pretty good decline. A shock in terms of complete a round about face in policy. I dont ning the job numbers warrant that. Theyd be looking at 260, 270 before theyd contemplate it. Thats it for the 3 00 hour of the closing bell, with ten seconds to go before the bell and there it goes ringing right now. Youll pick it up on the other side. Hello and welcome to the closing bell. Im kelly evans down here at the new york stock exchange. A sea of red. Heres how were finishing up the day. Still counting the orders. Dow jones off about 131 or 0. 8 . It was the better performer of the three indexes. Nasdaq is the one to watch. Broke the 4000 mark just before the close. Looks like about 56 points or 1. 4 . The s p 500 dumped 20 points, 1782 is the level there. Lets get straight to it with our panel. Michelle russo cabrera, stephanie link and andrew bush. Thank you all for being here. Stephanie link, what is going on with this market . I think whats happening here is were still trying to adjust this whole taper situation. Youve got the budget resolution, we still have to get past that, but that paves the away for further tapering. The market is trying to figure out is that a good thing or a bad thing . Im of the mind that its a good thing because the Economic Data has been supportive of tapering. Joy global was not that good. There wasnt a lot of macro data. I was focused on the Goldman Sachs Financial Services conference. Yesterday and today the companies have been talking about a little bit better loan growth, cash flow. Im taking away those are positive hold on. Breaking news, the other piece of action were waiting for on hilton. Simon hobbs, what can you say . David faber hit it on the head. Theyll price it at 20 a share as david reported this morning. What is new and we didnt expect is that it would appear that hilton is intending to increase the size of the offer, which clearly was well oversubscribed. Dont forget theyve brought forwards by one day this process. They were supposed to price thursday night, then trade friday morning. They obviously knew the book. The deal was done as one insider said to me. Not only do they know that its going to be 20 so they know the book very well but they know theyll be able to increase the size of the ipo to an initial 1. 2 billion. A big ipo, certainly the largest weve had in lodging. Possibly the second biggest ipo this year. This is a huge deal. In a couple of different ways. That 20 price, i wonder if they wanted to stay right there, increase the amount of the offering instead of boosting that price. Remember that blackstone is in this for the long game. A private equity move. Theyll basically bring it to market at kind of the price that they paid plus debt to take it off the market 6 1 2 years ago. Within that, they followed the private equity model. Theyve restructured the debt. Theyve increased the value of their equity, the proportion that they own outright from the initial 6. 5 billion theyve put in. But this company will still have 15 billion of debt. This offering wont do anything it will not remove that entirely. A final question, were coming off of a market that just had one of the worst days in about a month here and it seems as though that hasnt really fazed investors too much when it comes to this particular company . No, because its been relatively conservatively priced. But theyre not attempting to bolster the price too much. These investors that are likely to be coming in here are longer term buy side, theyre not just there for the profits, not a social media stock. This is probably one that those that buy did hold on to. Not a chinese hotelier. Simon, well see you later as well. We hope the range, the size increase, this is a big one, guys. Andrew bush, what do you say about this . Hiltons come a long way. Obviously theyve done a lot of restructuring of the company. Theyve dramatically improved their Balance Sheet, they got rid of a lot of real estate. They had really focused on the frequent stay guests. This is a company thats dramatically cleaned itself up and really put it on par with marriott. Thats really good. Not only that they moved their headquarters from california to virginia. Youre looking at 2. 7 billion on this ipo. So this is big deal. I think it will do quite well, obviously. The book said so already. Guys, were adding steve grasso to the mix here, fast money extraordinaire, we should say. Youve got this hilton deal that seems to be in line with the story yeartodate in markets, appetite, investors are interested, the economys doing better, then a market day like today where those signs seem to be weakening. Everybody is waiting for this selloff and usually at the least when everyone expects it. So at this point youve got to stay with your game plan, stay invested in the marketplace and just bear with it. It will get rocky going to year end, it certainly will. Everybodys finally figured out that theyre going to have some tapering maybe sooner than later. Trader, i know they usually go to southampton or wherever for the holidays or the festivities. Kind of cold out there. Theyre taking their chips off the table, saying im not going to wait for christmas. Were taking our profits now ahead of the taper. This was a traders market. What i dont understand hang on, through that whole time even though it was positive, you could say we might have a Government Shutdown in january, we know the fed is worried about that. But no Government Shutdown to be worried about in january. Did i hear anything about a debt ceiling . Im sore se, did i hear anything about a debt ceiling . They just want to get paid more and both houses of Congress Want to pay them more. The budget deal actually. Go ahead. I was going to say the budget deal shows a structure by which both sides can work together. It helps take the debt ceiling off the table come february or march. I think they can do something there. One thing about the markets, everybody is talking about the potential for china to downgrade their growth target from 7 1 2 to 7. Thats why the chinese shanghai was down so much last night. I also think that hurt the u. S. Stock market as well today. At the same time there was talk around the floor here going into the close about a billion dollars on the sale side. I think we grabbed kenny right off the floor, here. Why do you think these sell orders are coming inside . I think todays action is much more driven in washington, much more about the budget deal. The whole taper conversation, people are exhausted. The market has decided they recognize the fact that its going to happen. Whether it happens in january, february, march, makes no difference. Its all about the clarity of the fed. Now weve got a budget demilitarized zone. Youre making progress, thats the whole point. We can ma weve been makin progress for 40 years. Now we can focus more about taper because the economy is actually supportive of taper. Wait, wait, wait. I would just say this. Portfolio managers are for the longer term to position themselves for 2014. You want to be taking advantage of these pullbacks to position your portfolio the way you want it to be. Speaking about stocks specific stuff, just to jump on what steph was talking about, if china growth isnt that spectacular. Look at coal, steel, that have all ran 50 in the last couple of months and maybe lock into profits there as well. I want to talk about the tenyear yield. A big auction, 2. 84 . I guess my point is this, if i were trying to figure out if today was all about the economys improving enough that the fed would exit the picture, you expect that yield to move up. But if it was there were earnings disappointments and maybe a damp squibb. Why didnt this have to be all or nothing . First of all, if the economy starts weakening again, that gas pedal can be depressed once again. This is not something here were talking five to ten to 15 billion pulling out. Kenny, go ahead. Listen, the fed is not going anywhere. Theyve made that quite clear. Whether they start to pull out 10 billion or not, if it starts to turn, theyre jumping right back in and Everybody Knows it. Todays budget deal had zero clarity. It doesnt matter which side of the fence youre on. Im a republican, i make no bones about it. But it doesnt matter. Were making progress there. It doesnt matter whether its perceived progress or not. At 2. 85 tenyear treasury, we had this in the summer. We have seen this movie already, were going to get the tshirt and read the book. We start to see Mortgage Applications slow down. When the only thing going on in the Mortgage Business is cash sales i dont know about you i want nathan to slow down triple for one second. What youre telling me is that now that were at 2. 85 and moved back up on the tenyear the economys not Strong Enough to handle it and we might see a repeat of that situation where just as weve had a record amount of people exiting bond funds this year, perhaps it looks okay in the landscape for 2014 . I think youre going to see the economy slow down again. We keep hearing people say, mortgages are so cheap on a relative basis. Ive got relatives i dont like either. Housing affordability is not keeping pace. Thats a challenge. Thats true, but the fed has made it very clear theyre going to try to alcohol that. That will be the issue if they cant control it. It really does depend on the vel oocity of the trade move. Thats right. I think the market can handle that because i think the data that weve gotten in the last month, month and a half is lot better than where we were back in may. I agree. You look at the global data point, too, all of them are pointing to a slide recovery. Stephanie, the thing is also for the projections out for 2014, youre starting to see everyone look at the United States and its over 3 or its really close to it. But the thing that bothers me about the bond market, it doesnt go up nicely and consistently. It doesnt behave. Stock market valuation wrs we are, as long as we have 3 gdp growth. Ill call you and the stock markets going to behave. The four great lies that we hear about. Im waiting for the tshirt and the book. You can catch steve grasso on fast money. The rest of the panel sticking around. Also im speaking exclusively with california teachers pension chief who overcease one of the biggest Pension Funds, 170 billion in assets. Is he worried that traditional pensions are an endangered species after what happened in detroit. Hilton reportedly pricing at 20 a share. Well cover it in every possible angle. Stay with us. Thrusters at 30 i cant get her to warp. Losing thrusters. I need more power. Give me more power [ mainframe ] located. Ge deepsea fuel technology. A 50,000pound, ingeniously wired machine that optimizes raw data to help safely discover and maximize resources in extreme conditions. Our Current Situation seems rather extreme. Why cant we maximize our. Ready. Brilliant. Lets get out of here. Warp speed. Welcome back. The nasdaq that really took it on the chin today falling below that 400 mark briefly. You know it was really in the last 30 minutes that we saw significant selling over here at the nasdaq. Keep in mind for over a week now the nasdaq has been trading well above 4000, but now once again testing that level. Where we really saw the losses it was across the board. Electronic art, names like yahoo and google also posting losses. Apple trading in negative territory. And social media stocks which have really been a bright stock. Today were seeing red arrows across the screen. Aside from groupon, bucking the trend. Wells fargo upgrading the stock to well perform, that group is positioned well to continue to take massive share in the local commerce market. Thats the reason we ended lower here at the nasdaq. Not a pretty day there. Seema, thank you, appreciate it. Jackie deangelis has a look at some of those. We have a look at Athena Health getting whacked in the aftersession today. Earnings and revenue below street expectations. Also after the bell, vera bradley reporting better than expected Third Quarter earnings but issued a light Fourth Quarter and fiscal 2014 outlook. The stock was halted in after hours. The fda approving the generic version of eli lillys antidepressant drug cymbalta. Unchanged in the afterhours session. Icahn enterprises. And defense stocks could spur an increase in defense contracts. Lockheed martin, raytheon, United Technologies all to the down side today. So those were some of the big movers for today. But what about the outlook for 2014 . My next guest is from Lpl Financial who actually says thins will look pretty good next year. Tell us about the outlook, what do you see here . We see another good year next year driven by a couple factors. One is washington will get out of the way. That will be nice. When was the last time that we said that washington will be out of the way of politics. We expect a full percentage point growth in gdp, that should translate to better sales and profits. Finally a whole new class of investor coming into the markets to buy stocks. Corporations have been doing the heavy lifting in 2013 as the biggest buyers of stocks. Look for the retail investor, the 800pound gorilla of investing next year to help drive a wind for stocks and double digit gains. We were having a pretty heated debate whether mastercard, a argument that a company can do this with cash is a shareholder friendly move, what happens when you see them continue to buy . I guess i dont mind if they dont have anything better to do with the money, but as we look out to 2014, you actually see important need for investment in capital and in employment. We need more jobs and more capital expenditures. Businesses have been running very lean. If we get a better growth environment businesses like mastercard and others will need to hire to capture that. I love the buy backs as long as its not at the expense of fundamentals in the business. What do you see for the end of next year and what does that imply as to what the fed does during that period of time . Good question. Were seeing a 10 to 15 gain, so that could put you around 10,000 on the s p 500. The fed will begin tapering here soon. Interest rates will be headed higher. What we think that means is more of a flight out of bonds, as Interest Rates rise. Could be at best maybe a flat year for the bond market. Further impetus for individual investors to favor stocks. As you just heard people back and forth about whether the very minutia of either the people on the fed, the kinds of decisions they may make next year are tripping up the market. From what you say, it almost sounds irrelevant. Why is that . Because its almost there. The economy wasnt ready for it. Stocks tanked, bond yields fell. Thats not going to be the case this time, clearly isnt shaping up to be the case. Much better backdrop of economic growth. Were seeing much better job growth in the economy. So a lot of things picking up. The economy in a much better place to handle that rise in rates. Thats why we think it wont be as negative a factor, maybe not negative at all. Thank you for your time this afternoon. 2000, thats where he falls in line. In the days of the cold war, it was the soviet union and no one in their right mind would invest there even if they could. Under putin is anything different in russia today . Well hear from the countrys Sovereign Wealth Fund on whether putin makes potential investors to nervous to put money to work in this country. Open to innovation. Open to ambition. Open to bold ideas. Thats why new york has a new plan dozens of tax free zones all across the state. Move here, expand here, or start a new business here and pay no taxes for ten years. Were new york. If theres something that creates more jobs, and grows more businesses. Were open to it. Start a taxfree business at startupny. Com. [ male announcer ] if we could see energy. What would we see . The billions of gallons of fuel that get us to work. Wed see all the electricity flowing through the devices that connect us and teach us. Wed see that almost 100 of medical plastics are made from oil and natural gas. And an industry that supports almost 10 million american jobs. Life takes energy. And no one applies more technology to produce American Energy and refine it more efficiently than exxonmobil. Because using energy responsibly has never been more important. Energy lives here. Energy lives here. Stick with innovation. Stick with power. Stick with technology. Get the new flexcare platinum from Philips Sonicare and save now. Philips sonicare. But it doesnt usually work that way with health care. With unitedhealthcare, i get information on quality rated doctors, Treatment Options and cost estimates, so we can make Better Health decisions. Unitedhealthcare. Welcome back. Bob pisani joins us from the floor. Curious what people are saying have caused this. Ill tell you what theyre talking about, the confusion. The market is sending very confusing signals. On friday, weve only had one really good day in two weeks, that was on friday. That was in the jobs report. Remember that . Everybody said jobs market was great. Everyone is saying weve got an improving economy, maybe the marketing can withstand some modest, gentle tapering. Remember that idea . Today we get a positive piece of news, the budget negotiations are going well, well get a budget deal and all of a sudden everyone says, oh, maybe the chances of tapering might be going up, we knew that on friday. Why did the market react in a different way today . Thats what everybody is sort of confused about here. Now, if you want to be a technician, for example, the russell 2000 had a terrible day overall. Thats head and shoulders, not very obvious, but a head and shoulder pattern that was perfectly completed with the right side today. A lot of people are sort of talking about the technical aspects of the market. Bob pisani, thank you very much. Again on an afternoon where weve gotten the hilton ipo, 20 bucks. But amid a global rally russia hasnt joined the party. Heres the etf tracking the russian stock market. Take a look at this because you dont see it a lot on this side of the water, its down for the year. Thats right. Many blame russian president Vladimir Putin who some would say is more of a dictator. We have an exclusive interview with the head of the russian direct investment fund, this is one of three sovereign funds in russia. What makes it unique is its designed to get other Sovereign Wealth Funds to invest in russia because they know they have a perception of lots of corruption, big, big problems, is your physical safety going to be all right . When i spoke with this gentleman, we spent a lot of time talking about the problems they face in their image. What about Vladimir Putin who seems to have an ever increasing grip on power there. He said people misunderstand his boss. I would say they do not understand what president putin is doing because they really brought stability and growth into country that was torn by different business plans, that really had huge unemployment, was pretty much bankrupt, over the last 13, 14 years he really brought in stability, growth and really we are now the sixth largest country, sixth largest economy in the world. It came from being absolutely bankrupt to just 13, 14 years ago. So people i think do not understand the trajectory, how democratic was england right after magna carta . Russia needs time to build institutions, to build proper things and the president is a big advocate of Foreign Investment in the russian economy. Hes a big advocate of progress. So implicit in his answer is, yes, we know there are problems and issues but we thing were heading in the right direction. And we need the stability under putin to get there. When we talk about the pope being named man of the year, you could have made the argument for it being Vladimir Putin. Look at syria, at the ukraine, the way hes trying to exert his influence across the middle east, with the olympics coming up, yet on the economic front if their situation starts to worsen, he wont necessarily be able to throw his weight around to the same degree. The price of oil is an explanation for why their stock market hasnt gone far and theyre spending piles of money, 50 billion on the winter loim pibs alone. More than all other Winter Olympics combined. Do you think they can see better growth if moscow themselves doesnt see better growth . Thats been the real slowdown and the real concern. Some will say the south is growing more and the east is growing more and that can kind of make up for it. What is your sense . The bigger issue for them is theyve got to be move higher and hirer on the indexes. How easy to start a business, bureaucracy and paperwork, theyve made improvements, but they have to make a lot more if they have to get the multiple on the market is like four. I have to tell you, that sounds like saying tony soprano is a good family man, too. Really hard to swallow. The only thing i might want to invest in now is smirnoff and vodka possibly. But were doing a good job of making it tough for the russians. Thats why theyre being nice in syria and threatened to play ball. I hope they spend a lot of money on the olympics because were taking the price of oil and dropping it to the floor. I know, different kind of oil, but nonetheless. All the Oil Producers are nervous about whats happening in the United States. Im so happy for that. Your heart bleeds for them. Our Foreign Policy will get so much better now, i cant tell you guys. When i look at the bric countries, i would much rather own an etf in china because it will grow 7 1 2 , but thats better than the 2 in russia. Russia is the r in bric. After the break, the chief Investment Officer for a California Teachers Union how hes putting 170 billion to work. How could a luminous protein in jellyfish, impact Life Expectancy in the u. S. , real estate in hong kong, and the optics industry in germany . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 70 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. [ tires screech ] chewleys finds itself in a sticky situation today after recalling its new gum. [ male announcer ] stick it to the market before you get stuck. Get the most extensive charting wherever you are with the mobile trader app from td ameritrade. Welcome back. My next guest manages one of the largest Pension Funds in the world. Capping out at 175 billion. Whats he seeing in markets right now, wheres he putting money to work . Lets bring in california state teachers retirement investor, thats why they say caltrs. How you will change that for 2014 . We actually like the equity markets. Today doesnt bother me. I see the red numbers and i see everybody get pretty excited about it, suddenly a down day. We used to have down 100 days the on a regular basis. The street has to adjust and not get so excited about a day like today. Markets will trend sideways. A fantastic year in 2013. Im actually a little bit optimistic about 14. We wont have a plus 30 year or plus 20 year. Whats your allocation . 45 in equity, twothirds in the u. S. Were tilting a little bit, taking profits out of the u. S. And tilting toward nonu. S. Equities. Any markets where youre going overweight next year . Market weight in europe and put some money there cautiously. We do believe in abenomics and be a little allocated to japan. A brutal year for them, but were longterm investors so we want to average cost into a market like that and while it wont turn around on a dime, the future will be there. We heard the same thing this year in emerging markets and hard to find performers. With our case, with a 40year horizon, we wont try to pick the bottom or the bottom minute but scale ourselves into that market. We always have a 10 allocation to emerging marketing. All about tactical shifts. If you knew coming into this year that equities would be doing what they are, you wouldnt have to invest in anything else. Over time if you think that the equity market will generate returns north of, say, 5 , 6 or if not, are you going to say that 5 of your portfolio and try to make up the rest with more aggressive investments . The simple answer is no, thats been part of big debate. Bill gross has been talking about the new normal and will equity market returns be five or lower. Were not looking for double digit returns but were thinking over a decade to be close to 7 1 2 . Well diversify around that and put money in real estate, as we have for 20 years. Thats all your fault then, with the credit boom and bust cycle. To some extent there is a need for higher returns. Whats the number you guys have to make each year . I want to take credit for that, lets give the credit to the rest of wall street. Any time you get in a bubble where you loan money to people that cant repay it, then leverage up the system and theres so much bubble talk, bubbles are rare. Theyre going to happen once or twice in our lifetime. People are too excited looking for the next one. We thing this is a good investment market, slow growth, moving economy, so we want to stay invested for the long term. Looking at some of the opportunities that you i guess see for that period of time, its not just about overweight and underweight, its also about where you are coming from. You have to make the math work for these pensions for the california state teachers. How well do you have to do each year to stay funded . Especially when you have this report saying that youre underfunded and you really need to step it up. Were underfunded. Whats sad about teacher Pension Plans across america, historically theyve not been properly dribted to, whether california all the way to the east coast. So you need two things in our retirement plan, whether 401 k or a pension plan, you need contributions and you need investment returns. My job is to generate that investment return. While im shooting for 7 1 2 and i say think about it as a pace per mile in a marathon, so some tough years, some good years but over a 10 to 20year period weve proven we can generate that 7 1 2 return. Id be happy in a 7 1 2 in a marathon pace. Seening whats happened in detroit in which it was basically ruled that pensions arent untouchable, im wondering if theres more of a move to shift this all towards 401 k and privatize it, death nell it for the people managing pension money over time. There are people predicting that for a while. Im going to tell them theyre flatout wrong. Its just part of the bait, weve been battling the battle for over a decade. It will continue to be a debate. Retirement plans are an employee benefit. You want to reward longevity. Detroit will take years to figure out and probably ultimately the supreme court, but thats a city plan and municipal plan. State plans are totally different. Were not going to be threatened by that. The decision would not impact us. Its going to be a constant debate about where you set benefits and how you contribute into a pension plan. California teachers arent covered by social security. Were their sole safety net. The teacher typically works for 29 years and their pensions very modest. You want to reward that career in education. Thanks for coming and sharing your view on the world. Now the wait is almost over. Our reporters have been crisscrossing the country all day to find the most bang for the buck. The winner will be revealed next. Well, its back, cnbcs Million Dollar home competition. Weve seen seven cnbc reporters to seven real estate markets to check out a Million Dollar home with a main street address. Heres how it works. Two 1 million homes go headtohead, only one moves forward. Weve asked reporters not to reveal their location as you take a look, well reveal where they are afterwards. Massachusetts lavish lodge, to to speak, lost to pennsylvanias River Retreat. Now in the final round, that River Retreat will take on the beach bungalow. Touring the homes are Brian Sullivan and our own jane wells. This attached house may sit on a small lot, but dont be fooled. Its in a very artsy, affluent and desirable community. Built in 1875, the house has been renovated and expanded and maintains its historic charm. This 85yearold home on main street is hardly mainstream. It measures under 1500 square feet, bought out of foreclosure, completely fixed up, turned into a triplex so you can rent out parts for income. It features a modern chefs kitchen with nice chefs island and a front and back staircase, make the open design even more flexible. Okay, so the kitchen in the main unit is more of a galley, but everything in here is brand new. And over in the bathroom, again, everything is new, and they stuck to the 1920s decor. The master suite of this threebedroom home has floor to ceiling windows and a great balcony that lets in a ton of natural light. The home office can easily be converted into a fourth bedroom. You have two small bedrooms, one bath as a closet. Second unit has the same thing. In the back, you have a brand new studio for mom. Walk out the front door and youre right in a very cool main street. Walk out the back door and youre right on the river with a private fencedin backyard. The asking price for this river front home 988,000. This place is on the most popular street in the county, walking distance to a codesy town center and spectacular scenery. When you find out where this is, youll understand why the asking price is 998 grand. Wow, all right. We already know the River Retreat is located in pennsylvania. I think janes beach bungalow is probably somewhere in what, the bay area, malibu, california . Im speaking here, of course, of Real Estate Broker to the superrich dolly lentz. Whats the location of that home thats going for a Million Dollars . Huntington beach, california. On a day like today in new york, cold, snow, its looking really good to me. Still, is that really worth the price . But lets look at it another way. There are three apartments in this house. The three apartments rent for over 5,000 a month. Oh, its a rental place . Yes, so you can even use one, rent the other two. Use two, rent one. I love the flexibility and the exit strategy on that. So to me, that really sings a very good tune. And thats so interesting because we know the multifamily, the rental space is indicative of where the country and the buying population has moved today. And im just amazed i guess that it would still cost that much up front to have that kind of location. You know, really a Million Dollars isnt, as we see from all the houses were looking at, a whole lot of money today to buy a house. The market has really gone up. Were up 26, 28 in these areas you see what a Million Dollars doesnt buy you. By the way, financing Something Like this, can the average person, even if they have this kind of money to put to work, they can get financing for this kind of property . The average person, maybe not the average person, but many people can get financing, so its really not that begin an issue. Harder than ever, but doable. I suppose it is time, dolly, its been all day. Weve seen the river houses move forward, the beach bungally. What do you think . Now that you bring up the rental. Im going beach bungalow, but for financial reasons. I think its a total beach bungalow play. I have to tell you again today is a really cold day. It snowed yesterday. And im looking for that warmth. See, i think we need to apologize to the River Retreat, because if we did this in june exactly, exactly. Dolly, thank you so much for walking us through that. Really appreciate it. A Million Dollar beach bungalow wins the main street competition, if we can even call it that. Thank you to dolly for joining us all day today. Now, whats drawing the most eyeballs over on our website, aside from people looking at slide shows is of houses right now, allen wastler. Right now weve got a pretty depressing piece sort of leading the site right now, merry christmas, millions to lose job little benefits. This is tied to the budget deal. Many are saying theyd extend the jobless benefits. They didnt do it. One of our Staff Writers took a deep dive on it looking at how many will be affected and when congress doesnt act. People are eating it up on the website. Our second big right now is tied to the budget deal. Earlier today we had the former omb director sitting down with rick santelli. We wrote down his comments and put it on the site. He called that whole budget deal basically a joke and a betrayal. Thats drawn them right in there, theyre just diving in. He didnt mince words. As he rarely does. But right now weve got a dark horse coming up on those two, it might take the top spot. You had jane wells talking about tax rates and how the top 40 are bpaying all the tax bill an then more. She wrote it up for us and put it on the site. Its getting more than 60 readers a minute right now. That surprises me less, alan, than the fact that the jobless benefits are leading the site. But to see it just kind of on that headline alone draws much attention as it is tells you perhaps it will be more of a Sticking Point for negotiations or for Congress Going forward. Well see. Al alan, thank you. Hilton pricing its highly anticipated ipo at 20 a share, according to dow jones increasing in size. Coming up more with simon hobbs and when to expect when this starts trading tomorrow morning. [ male announcer ] this december, experience the gift of true artistry and some of the best offers of the year at the lexus december to remember sales event. This is the pursuit of perfection. At the lexus december to remember sales event. 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If youre not happy with one of our participating Investment Advisory services, well refund your program fee from the previous quarter. While, its no guarantee against loss and other fees and expenses may still apply, we stand by our word. Easytouse platform. No, thank you. We know youre always looking for the best fill price. And walk limit automatically tries to find it for you. Just set your start and end price. And let it do its thing. Wow, more fan mail. My uncle wanted to say thanks for idea hub. He loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. [ male announcer ] open an account and get a 150 amazon. Com gift card. Call 18883303136 now. Optionsxpress by charles schwab. Welcome back. As 2013 draws to a close, the market is squeezing out big name offerings before the end of the year. Hilton reportedly pricing its offering at 20 a share just about an hour ago. Simon hobbs joining us with more of the news. Reuters also reporting that 20 a share figure and, of course, lets pay tribute to david faber who was saying that at 9 00 this morning. We also have an idea on the number of shares theyre attempting to sell. 117 million up from 112. 8. Theyve sold 100 million worth of more shares. It takes the total value of the ipo to 2. 3 billion. Ive just been running the math on this, which i think will be quite interesting. Means that total equity in the company is valued at stake at means by my calculation back of an envelope theyve made somewhere in the region of 10 billion through the way in which they have managed this. Remember, this when they first took it off the market 6 1 2 years ago looked very soon like a complete disaster. They paid lets not forget 26 billion to take it off the market at a 31 premium to where the shares were trading on the floor of the nyse and the wholeny turned and pricing went down the drain and went to a conference and said, hey, guy, lets not lower prices, no, no weve got too. And dumped it on travel agencies. Terrible time for blackstone. Huge amount of debt around their neck but the banks as you know stayed with them through that and those banks, all 26 of them and the brokerages are all part of the deal today payback on the fees. Thank you very much for that reporting this evening. A long day, we know. That does point the price at over 30 billion probably for hilton so blackstone which i think has a lockup so it cant jump out of this investment has just sort of stayed involved for the next couple of years. Just want to go to you on this point. Hilton despite the success of this ipo, purported success will still have a massive debt load, 15 billion roughly at least as of the start of year talking about a time in which rates are starting to move higher. Your view, is it not, that well see 3 1 2 of the tenure. Thats part of the problem but part of what it was about was to pay down some of that debt. Ever since blackstone took them over theyve done a good job and increased frequent traveler stays, obviously segmented their brands extraordinarily well and cleaned up their Balance Sheet somewhat. Sold a lot of real estate. The ceo comes from host which was a marriott spinoff so i mean these guys know what theyre doing. The question is this, at that 20 level theyre about a 17 to 20 premium on ebita to other peers in their group like marriott so thats the question. Are they really value here . Thats stefanie, we dont have much time. Do you rec it, do you think Retail Investors should get involved. I like it at these levels up to 23, 24 level. Pricing power theyve got very good pipeline growth internationally so 80 of their pipe is overseas. Thats where the real growth is going to sdmrb that will come from the fact they have the International Brands like embassy swooelts will be international. Thats good but helps, all that stuff about management notwithstanding helps that they didnt build anything. On the blackstone side, 10 billion 6 1 2 years and not bad. Not bad. Could be worse. Guy, thanks to all of you. You tweet by the way putting the best on air. Keep it right here plus what would you buy with a 4 400 million Mega Millions jackpot . Our panel sharing their lottery fantasies coming up. [ male announcer ] how can power consumption in china, impact wool exports from new zealand, textile production in spain, and the use of medical technology in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. 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Now during our seasons best event, get the best offers of the season on our Award Winning products, like the 2014 ats and srx. If every u. S. Home replaced one light bulb with a compact fluorescent bulb, the energy saved could light how many homes . 1 million . 2 million . 3 million . The answer is. 3 million homes. By 2030, investments in Energy Efficiency could help americans save 300 billion each year. Take the energy quiz. Energy lives here. Welcome back. A chart of yahoo today because we barely had time to mention it with Everything Else going on. Potentially important thing with yahoo mail causing lots of users major headaches. Some people anecdotally share theyve been unable to share their mail for a day or more theyre dealing with glitches. We were talking about this on twitter. The shares down 2. 7 , well underperforming the market on this one and people are pretty upset. Heres dan nathan of all people saying i must be one of the last people on earth to hey yahoo stinks. They should pay me to keep it. Meanwhile, rick is saying, wait. There are people that still use yahoo mail for real . I only use it to provide a valid email log in and also jay tweeting i think thanksgiving someone used a new interface. For the next 20 minutes everyone was trashing it. Any of you use yahoo mail . G mail is it gmail, andrew. I had it for awhile until it blew up just like this. So i went to gmail and comca comcast. Net so its just a backup. It might seem like a minor point. What yahoo s strategy and what marissa is focus on the five things people want to do. They want to check their mail, check the weather, sports, check the financial scores, so if they dont get yahoo mail right and stephanie, generally, that becomes a huge problem for them. So we dont own yahoo and i would say right. You have to have the five prongs. If one is not working it wont be great. Google, we are a shareholder of i like to hear were all gmail. They have video youtube which gets no credit and theyve got the ecosystem to capture the advertising. You cant discount the very clean and elegant interface of gmail connected to the calendar and Everything Else compared to the yahoo experience which is so busy and cluttered. Fight espn. Good luck on that. What do we have left of the five . Going after the i cant remember what the fifth one. I think i only named four. Also want a couple of final thoughts. Little time to digest the market action. Is this a quintessential i think the volatility will continue until we get a resolution on the taper. Once you get a taper i think we can focus on the fundamentals and focus on earnings which are going to be coming out in a month so we have that and then i think well have to see but i am of the belief that the economy is slowly gradually improving and encouraged by the global economies, as well and starting to see a pickup. Andrew . The stock market will stay soft until after christmas and start our traditional yearend rally and itll continue into january but after that thats the question, you know, what will the earnings be . I think theyll be okay. I dont think theyll be great then well get into a whole bunch of things like the state of the union and im not sure ive heard of the state of the union i was going to say creating concern about rising Interest Rates but ultimately remember when people are leaving treasuries theyre often buying stocks, right, often making a choice and sometimes why you see rising Interest Rates because they see a better return in equities. Why do i feel you have a p t pithy last word. I think there will be correction. Right now mers cannot both invest and shop at the same time. I think thats why we have these yearend rallies between christmas and new years. Im cautiously optimistic. I got a lot caution but optimist lick about 2014. Thanks for joining me. We have plenty ahead this week. Fast money coming up in just a few seconds. Are you talking macro. Yes, i knew this would warm the cockells of your heart but we are going to tell you the one chart, the one chart that is the most accurate Economic Forecasting tool. Any guesss . I might say like the new orders index or the pmi. Way too geeky. You will have to tune in to find out what it is. Over to you guys. At the edge of your seat. Fast money starts right now in new york citys times square im melissa lee. Tonights lineup. The internet stock bucking the trend but how long will it last and pandoras shares falling like a lead balloon. Its not because of apple itunes but with led zeppelin. Well explain, plus which stock will announce a buyback next . Our traders have a few ideas which could