Transcripts For CNBC Power Lunch 20140128

Pipeline. Thats one thing lots of people are focused on. Durable goods numbers. I worry about these numbers every time they come out. They came in very weak today, down 4. 3 . It brings up a question. How durable is the u. S. Economy right now . We are going to answer it with the help of liesman and more. And its freakin freezing, folks. From the north to the south, the weather is look at that jet stream. I always wanted to do this. Some parts of the country are getting hit with record low wind chills. 3,000 flights have been canceled so far, 4,000 delays. Air travel, a mess. And sue is at the New York Stock Exchange. Sue . Its really cold down here as well, ty. You mentioned the fact that apple is having a pretty horrible day. But interestingly enough, the nasdaq is not. Right now, the nasdaq is up just a fraction on the trading session. The Dow Jones Industrial average is up about 73 and the s p 500 is up eight. So why is the nasdaq not doing quite as badly when apple is a real drag . Heres why. Because many of the biotechs are really moving smartly higher today. Biostar, look at that, up 7. 5 . Isis is up very sharply, up 6 . A 6 gain for onconova therapy and ventrus by so sciences up about 4 . Kindred up about 8 . Some other big movers today, sun power, jamba, pretty decent advances on a point basis and percentage basis. Its a very different story for apple stock today. Its off better than 7 . Josh lipton joins us live from san jose with some of the details. Yeah, apple reporting and disappointing. The big issue, iphone unit sales at 51 million. That was well below what the street was looking for. On the conference call, apples ceo tim cook pinning the blame on carriers in north america, verizon, at t, changing their upgrade eligibility from 20 months to 24 months. But bernstein saying theres really a broader trend at work here. The disappointing number from apple coupled with weak unit volumes from samsung points to an increasingly saturated high end of the smartphone market. The worry is how much apple can really grow its iphone business which remember, accounts for 50 of the companys top line. Its now more important than ever, analysts say, for apple to create new Market Opportunities for itself. Tyler . Thank you very much. Tim cook says apple is still on track to release a new product category this year, not just a new product. A whole new category. So what is in the pipeline and how long until that new product category comes to market . Insight now from re codes senior editor. We have a content sharing partnership with them, we should point out. Good to see you, welcome. What do they have in the pipeline and what is mr. Cook hinting at when he talks about a new product category . Well, in terms of categories, apple hasnt really introduced a new category since the ipad. So really, investors that have sent the stock so high are betting that apple can do to some other category what its done to the phone, tablet and pc market. The fact that they are saying, even though they arent saying what, that they will be in a new category does bode well for their future. Everyone talks about a tv, some kind of personal tech. Ill tell you my favorite move for them would be to create an iphone that has a bigger screen to compete with the samsung products and those of htc and others. Is that in the pipeline . Well, that may well be. What they said is that they are going to do some things in the categories that theyre in. So the phone market, clearly apple has kind of maxed out what it can do with the existing iphone. So the question is do they expand it, do they reach more price bands. The 5c clearly hasnt been a success and didnt really hit any new price categories. It just gave them a second new model. So i think to your point, they may need to go bigger but they also might need to go broader and attack more of the phone market than they have so far. Thank you very much. Sue, down to you. Breaking news in the bond market right now. The two year note went up for auction today. Rick santelli is at the cme. What does it look like . Cplus on the grade. 32 billion in two year notes at the screen, not a lot of volatility in the one issued market. The offer side was 38 basis points. Thats where we price, 38 basis points. The ten auction average on bid to cover, 3. 30, chasing every dollars worth, securities available by the treasury. That was exactly what this auction was. 28. 5, close to ten auction average. On indirects, 22. 4, almost smack on ten auction average for directs. Dealers take slightly less than 50 . Cplus and no auction tomorrow. On thursday, due to the fed meeting, we get both fives and sevens at 11 30 and 1 00 eastern respectively. Sue . Rick, thank you so much. Lets go uptown to e. C. And Sheila Dharmarajan for a market flash. The New York Stock Exchange is out with its list of most shorted stocks for the first half of january, and guess what, after a temporary drop in the last six weeks of 2013, Short Interest rising nearly 30 from the end of december. Here are the most shorted individual stocks in the s p 500. Cliffs natural resources, of course, today some big news from the company. Hedge fund taking a 5. 2 stake in the company while calling for changes. Gamestop, u. S. Steel, Adt Corporation and frontier communications, just a few more companies on the list. But for the full list of the most shorted stocks in the s p 500, head over to cnbc. Com. Tyler . Thank you very much. We have an all tech power rundown. Before we leave, well have you take a picture of john and mikes shoes. Apple shares having their worst day in a year, down about 7 , 7. 5 now. Investors are saying what have you done for me lately and will a new product solve some of their problems. John, what is the single most important thing apple needs to do right now . Probably a new product but look, i dont think thats going to get them all the way there. You see the iphone, 50 of their revenue, huge margins. That is clearly maturing with developed markets, actually scaling back a bit. Its going to take a lot of volume on a new product and a lot of profit margin on a new product to make up for that. Carl icahn has been a big voice in apple stock lately. Hes still above water in the shares since he started buying them about a year ago. He put another half billion dollars in today. That makes the third 500 million tranche hes invested in this year. My question is does this have the potential apple, if they cant get going, to be a kind of morasse for mr. Icahn . Its not now, but could it be . Listen, he clearly is very loud and long on this stock, and making his case but you have seen apple obviously pushing back against the activist investor. As for what apple can really do, listen, i agree with john. I think they have to come out, its either new products and or new services but the big headline here was the miss on the iphone that accounts for 50 of the top line. More than ever, that company has to find new drivers, new opportunities, whether thats a cheaper iphone or larger ipad. They got to look for different ways to grow that top line. I feel slightly frustrated on apples behalf here. They only sell 51 million iphones and wall street, some traders decide that 54 million is the magic number. Its a record, 51 million. It is. Tyler there is already some built in. Josh, quick. Remember that some analysts were caught off guard here. Thats a big number but they thought listen, this quarter particularly, apple had certain tail winds. They signed up most of the carriers they were missing. That was part of the disappointment here. Lets move on to marissa mayer, revenue down 2 at yahoo over the past year. The stock is up but the recent ouster of her coo there also raising some questions about her leadership style and how much of a firm hand she has on the tiller. But the stock is up. How about her fortunes . There is pressure not only today, i wouldnt say today so much, as this year. This needs to be the showme year. She will run out of ali baba rope. The core business display advertising really needs to grow. Earnings later today, josh. Yeah. Well see how much pressure there is. Obviously that stock has been a monster since she hit the c suite in july 2012. How much credit she gets is debatable. Her game plan has been you buy companies, improve products, attract more eyeballs. What shes done, but that hasnt drawn Strong Financial results. On the other hand, certainly analysts will say listen, as long as ali babas valuation keeps grinding higher, its pegged at 155 billion, that would be a 25 billion windfall. As long as that happens, and yahoo stock goes along with it, investors wont complain. Lets talk google and google glass. Partnering with vsp which provides Vision Insurance for onefifth of americans. Does it finally legitimize google glass . Listen, its interesting. Even here, in silicon valley, i talked to friends of mine in menlo park and google glass, even those guys say its socially unacceptable to wear google glass. If you cant get guys in menlo park to wear google glass, you have a problem. If theyre changing it up, they change the form factor, the design, maybe its a game changer. Its a little bizarre looking. I got to say. I know a guy who works on google glass inside google and he finds it socially unacceptable. One of the engineers who does. Look, they give it like a 120 subsidy on the glass itself. You still have to pay for the its still going to cost you hundreds of dollars but you get a little bit of subsidy on the titanium frames and the lenses. John is the bestdressed guy at cnbc. Show the shoes here. Can you get the shoes . Get the shoes. Tilt that little thing. Come in tight. Go ahead. There you go. Look at that. We dress together. Good to see you. What are you wearing tomorrow . Ill let you know. Sue, down to you. I feel left out. Im only in stillettos. A really weak number on durable goods today, minus 4. 3 for december. Economists expected positive 1. 6 . Steve liesman is our senior economics reporter. Steve, this follows a disappointing december jobs report. Were posing the question how durable is the economy and the recovery right now . This number certainly raised questions on that. Its rare to see a number come in quite so negative when economists were looking for positive numbers. There are some explanations out there, none of them very good. There is some talk about the weather. That does not seem to hold up. Some talk about mistiming of the counting of aircraft orders. That ones a little bit better. Maybe some issues of the government slowdown and pulling for orders that had to do with an expiring tax break. None of them are very good. When you see a sea of negative out there in what is a volatile number, it certainly raises questions. I dont think its decisive in and of itself. Its timing is interesting, is it not, because that number comes out right as we release, you release your new fed survey this morning. That comes ahead of tonights state of the Union Address. Then tomorrow, theres the fomc statement. This hour we will focus on the survey results as it pertains to growth. Thats exactly where the irony is. What were finding is that economists and the fund managers, the 45 of them who responded to the cnbc fed survey in january, racheting up their growth forecast for this year, last year and 2015. Heres whats happened to the growth forecast for 2013. They started off very optimistic. They came down to reality and then just in the last couple surveys, they have racheted up towards a 2. 3 year over year growth rate. How about 2014 . That racheted up as well. You can see theyre up near 2. 6 , 2. 7 for 2014. Then we get our first read of the 2015, and you can see here, 2. 9 . So sequential growth and also increasing optimism for the year that were in right here, 2014. Looking at the possibility of recession, or the probability, 36. 1 it was back in 2011. This is in the next 12 months. It was 28. 5 . Its come down, down, down. Now, 15. 3 . This is the Second Lowest reading that weve had in the three years we have been covering this. So just a 15 chance or probability of recession in the next 12 months. What are the threats to the recovery . Europe has come way down compared to, for example, july. Higher Interest Rates, that remains about 12 or 10 of the survey respondents. Tax and regulatory policies, thats come down a little bit, too, down to 21 from upwards of 30 . The number one threat to the recovery now is seen as being slow job growth, chosen by 30 of the respondents. One more thing to show you. What are the expectations for tapering. 87 , not much of a question out there that the fed tapers. Whats the average taper . Theyre looking for 10 billion taper in january and a split of about 50 50 Mortgage Backed securities and treasuries. Looking for better growth, tyler, right when the numbers seem to be weakening underneath them. Well see whos right and whos wrong. Steve liesman, see you later this hour. On to the state of housing. While some numbers showed strength this morning, another stat may soon bring housing prices lower. Diana olick has that perspective from washington. Well, we are now coming up on eight years since home prices peaked in the housing boom and they are still nearly 20 below that peak. But they rose dramatically in the past year, thanks to a lot of investor activity in the low end distressed market. Thats about to slow down now, because of this new number. 28 . The foreclosure presale inventory, the numbers of homes in the foreclosure process but not owned by the bank yet or not sold at auction yet, that inventory is down 28 from a year ago. There is still 1. 24 million but thats about half a million fewer Distressed Properties out there for investors to buy. So why should you care . Well, because those huge home price jumps, s p shows shiller 14 annually, has been driven largely by investors jacking up prices on low end bargains. Now the bargains are starting to dry up. Take phoenix, which was foreclosure central, but no more. Price jumps were in the 20 range just last summer. Now theyre down to 16 , still high but lower, because sales are down. 27 at inventory, way up, 34 . Im just saying, beware. Price gains are going to slow. Sue . Thanks for the warning. The jet stream is wreaking havoc. Its freezing in many parts of the country. Record low temperatures, record wind chill. And other parts not used to seeing ice and snow are seeing it today. We have road problems, we have flight delays, we have cancellations. The forecast is coming up next. Plus, robert frank and sad times for the queen . Its all relative. Nobody is immune from money problems, not even it turns out, the queen of england. Shes down to her last million bucks. No joke. Whats she going to do . More power lunch in two minutes. Hi, are we still on for tomorrow . Tomorrow. Quick look at the weather. Nice day, beautiful tomorrow. Tomorrow is full of promise. We can come back tomorrrow. And we promise to keep it that way. Driven to preserve the environment, csx moves a ton of freight nearly 450 miles on one gallon of fuel. What a day. Cant wait til tomorrow. In a we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Nwas the most watchedage otelevision event ever. S so, whats next . The upcoming winter games from sochi. Where every second of nbc universals coverage will be available on every device. On tv, online or streaming on the nbc sports live extra app. Beginning february 6th, experience the winter games everywhere. Welcome to whats next. Comcast nbcuniversal welcome back to power lunch. Im Sheila Dharmarajan at the market flash desk. Check out shares of abercrombie fitch. At session highs, up about 5. 5 after the company said it separated the rules of chairman and chief executive officer. The company also abandoned a plan aimed at blocking hostile buyouts. The company did say Mike Jeffries will continue to be the chief executive while the former ceo of sears, arthur martinez, has been appointed nonexecutive chairman. Sue . Thank you very much. If you live in the southeast, you already know its a mess today. If youre traveling there today, think again. This video from alexandria, louisiana, bridges, roads, i49, all shut tight. Then theres the cold. It is freezing. Heres the weather channels alex wilson. Winter weather advisories and winter storm warnings posted along the gulf coast and the southeast coast. We have an ice storm warning around the savannah area. Going to be watching for significant icing accumulations in spots like savannah and charleston. Snow showers further to the north, closer to the coast is where we have the wintry mix. That continues tonight. We will watch areas to get snow around atlanta, sections of central south carolina, north carolina. Tomorrow, some of the coastal spots will be ending up with some snow showers as well. Accumulations, big winners in southeast virginia, parts of north carolina, up to a foot possible there. Five to eight in the lighter purple. Three to five for the dark blue around atlanta, one to three inches of snow possible. Then the icing could be a big problem in places like savannah and charleston. Charleston up to threequarters of an inch of ice possible. Around savannah, up to a half inch. That will cause a lot of road and power issues. Back to you. Thank you very much. A different problem on the west coast. We told you about the record high temperatures in alaska yesterday. Take a look at this new video. That warm weather is destabilizing snow in higher areas and is causing avalanches. The roads are shut down, leading into valdez, alaska, cutting off 4,000 people. Yikes. Ty . That is stunning stuff, that avalanche covering the road. Lets move on to a question about another kind of mess not here in the u. S. Its overseas. Its a big problem for queen elizabeth. Some of her castles are said to be in such bad shape that buckets are being used to catch rain water coming through the roof. The queen has money problems, big time. She is reportedly down to her last million. Robert frank is on the case. Hes the king of his own castle. Cue the small violins. Overspending by the queen is draining the royal reserves. The palace had been given more than 50 million to fund their royal duties last year but overspent by more than 4 million. That forced them to dip into the reserves, leaving a balance of just over 1 million to the end of last year. While the rest of britain went on an austerity diet after the recession, the royals only trimmed their expenses by about 5 over the past five years. They are not exactly headed to the poorhouse, though. Its estimated the royal family still billionaires, worth about 1 billion with the queen owning about half that and all the princes own the rest. But the report says the queen, theyre not keeping up their properties. One solution, getting more paid visitors to the palace. Whats next, tyler . Bake sales at buckingham . I think they should have a raffle, the whole thing. The royal family has a new baby there. Thats probably adding expenses. Thats a lot of royal duties. Just her hat budget is expensive. Sue, down to you. We cant cut into the hat budget. No, no, no, no, no. Its the biggest event of the year for the growing etf industry with over 1500 Investment Advisors in attendance. Bob pisani is there speaking with one of them, many of them, actually, on how to play this roller coaster market. Hey, bob. Look at the glasses. Its 80 degrees down here. We are on the beach in hollywood. Its 80 degrees. We are intently focused on Exchange Traded funds. When we come back, we will talk about what you should be doing with your high yield etf and emerging market etf and maybe we will get interviews with friends on the beach. Thats coming up. Make it happen with fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. So are emerging markets a problem sector when it comes to etfs . Bob pisani is at the one place where all the answers will be, the etf. Com inside etf got all that, bob . Its in hollywood, florida. Its a long list. Oh, boy, that looks nice down there. Its 80 degrees in the sun right now and weve got mike vogelsong with us from boston advisors, 2. 5 billion under management. Uses a lot of Exchange Traded funds. We want to talk about etfs. Its the hot topic here. What do you like about emerging markets . We have a problem with the tapering and currency movement. We see a problem in the last bit. Once we get through that it will be an interesting place to be. One of the things we like to concentrate on is in the consumer area of some of these markets. The traditional history has been in the biggest brick names. I think its time to move beyond that and look for more consumer driven investments. The big one is the eem. Thats where everybody has got a lot of money. Thats primarily brazil, russia, india, china. Buy, sell or hold . I would be a seller there, look for something more interesting. We like a fund called econ. Its basically looking for emerging market consumers. What the investment focus is really on companies that are looking for consumer driven led growth inside the emerging economy. Its not exports, its not agriculture, its not the big basic industry or basic chemical stuff. Its really about the growth of the emerging middle class. Before we let you go, china. Is there any hope . Do you have any money in china . Yeah, a little bit. Chinas a great place. Its just got to be the right time, like every other investment on the planet. Again, we think the consumer strategy there is interesting. Chiq is our favorite, a consumerled, Consumer Investment strategy inside china. Thats all based on consumer stocks. You are buying Consumer Companies that are in china, not primarily other companies that are, for example, in commodity not buying banks or anything like that. We want to talk about whats going on in high dividend stocks and where the high dividend business, buy, sell or hold. Want to bring in kim arthur from maine management. We have all been talking about the fact our viewers have money in high yield funds. What do you think this year they should be doing . I think buy for high yield, definitely. But i would look at a different area than the large hyg that most people are familiar with. The big etf for high yield, a lot of money is in that area right now. Thats right. Thats an indexed product, the hyg. Goes right up against an index. What i like better is hyld, which is down the curve, activity managed, you get an 8 yield instead of 5 yield. Youve got at this point in the credit markets which are fairly valued, you want to have somebody thats got their hands on the wheel that is actively picking credits and actively avoiding certain credits. We have had this debate whether they will outperform indexing. In this case, you think the active managers are doing a little better. I think so. Last year they were up 12 with the hyg up half of that, 6 . You are paying more for it, you pay 150 basis points instead of 50, but again, at this point in the credit cycle, i do think active management makes sense. Kim, thank you for joining us. Appreciate it. We have 1600 Investment Advisors here talking about where you should be going next and what you ought to be doing. I will be here the rest of the afternoon. Anything new, i will pass it on to you guys. Put on sunscreen, robert. I will. Its hot out here. Aw, poor baby. Well see you later. Bob is live at the big etf conference all day today. Check out our cnbc special report at etf. Cnbc. Com. We will also find out where bob bought the sunglasses. Gold prices closing now. We have a little bit of downdraft in the gold market, down 12. 80 on the gold market at 1250. 50 on the trading session. Some of the other metals also basically have been on the down side in todays trading session. Lot of the focus is still on equities and also on the bond market, because Interest Rates of course have been lower at this point in the year than many people thought they would be, rick santelli. Also, you have been watching the yen for us too. Absolutely. On both scores, you are correct. If you look at a two day chart of the ten year note yields, there is a slight upward drift but doing a lot of work around 275, makes sense, a twoday fed meeting. We are down 23 basis points from the year because basically, we close at the highest level since july of 2012. The last charts dollar index two days, also very sideways. As for the yen, its a little weaker against the greenback today. For the most part, a weak yen is not the norm for the last week or so. Back to tyler and sue. Thank you very much. A huge story in the world of College Football today. One Big League Team is trying to unionize. The papers have been filed. The story is next. Plus, sara and seema on two different takes regarding emerging market spreads. There are some companies that dont see emerging markets as a threat. They see it as an opportunity. Find out how they are playing emerging markets and how you can play them. Emerging markets dont seem to be throwing everyone for a loop today but that does not mean it is completely safe to go back in the water. I have three things you need to be watching before its too late. Im talking hot spots and headaches in the emerging markets world. Ok, heres the way the system works. Lets say you pay your guy around 2 percent to manage your money. Thats not much, you think except its 2 percent every year. Does that make a difference . Search cost of Financial Advisors ouch over time it really adds up. Then go to e trade and find out how much our advice costs. Spoiler alert. Its low. Really . Yes, really. E trade offers Investment Advice and guidance from dedicated professional financial consultants. Its guidance on your terms not ours thats how our system works. E trade. Less for us, more for you. Go [ male announcer ] its chaos out there. But the mclass sees in your blind spot. Pulls you back into your lane. Even brakes all by itself. Its almost like it couldnt crash. Even if it tried. The 2014 mclass. See your authorized dealer for exceptional offers through mercedesbenz financial services. See your authorized dealer for exceptional offers nwas the most watchedage otelevision event ever. S so, whats next . The upcoming winter games from sochi. Where every second of nbc universals coverage will be available on every device. On tv, online or streaming on the nbc sports live extra app. Beginning february 6th, experience the winter games everywhere. Welcome to whats next. Comcast nbcuniversal welcome back to power lunch. We are watching salesforce. Com. Shares at session highs right now after positive comments about the stock. It sees upside guidance to q 4 and the company has signed several multimillion dollar deals at the end of the fiscal year. The Company Maintains an outperform rating on the shock with a 65 a share price target. Northwesterns Football Team is asking to be represented by a labor union. Its the first time this has happened in the history of college sports. Team representatives made that announcement just a short time ago in chicago. Official paperwork was filed at the Chicago Office of the National Labor relations board. 30 of the team had to be in favor to file those papers. The next step is a formal vote. Going to be a very closely watched story. Yeah. And it goes to the question of whether those players are actually labor or something completely different. At any rate, we will be following it. Turkeys central bank holding an emergency meeting today in an effort to stop its currencys plunge. This comes amid the steep emerging markets selloff thats taken place over recent days. The turkish lira has dropped to record lows against the dollar and weakened sharply against the euro over the past month as well. Our chief international correspondent, michelle carusocabrera, is live on the ground in istanbul covering that big Central Bank Meeting and will have all the breaking News Headlines as soon as they cross after the closing bell today. Its a late night meeting there in istanbul. Sue . A closely watched one that i know michelle will be covering for us like she always does, so beautifully. To sara eisen now at the floor of the nyse with me on what might be the next shoe to drop for the emerging markets. We are watching turkey but what else are you watching . Watching the calm, the relative calm in emerging markets right now, but still, a number of risk factors to keep an eye out, to see if the calm will last. Number one, Central Banks to the rescue. We have already seen this starting to play out overnight with Indias Central Bank surprising markets, raising Interest Rates to fight the rising threat of inflation and currency weakness. In turkey, high hopes for a big rate increase there with that emerging Central Bank Meeting happening at midnight local, 5 00 p. M. Eastern time. So these moves to stop the bleeding. Also, watch for downgrades to Economic Growth now that emerging markets make up nearly half of the world economy, whats going to be the hit from all this financial carnage . The imf has already warned, saying the growth gap between the emerging markets and the developing economies will be the smallest since 2001. Also, watch the politics. Elections, 44 elections will happen in the emerging markets world this year, including biggies like brazil, south africa, turkey and india. Of course, watch for warnings from corporate america. Emerging markets now driving 15 of sales of companies in the s p 500, according to the deutsche bank, so watch those results. Ford, for instance, telling phil lebeau today this could be a headache, especially in latin america. Analysts say that if you look at some of the Consumer Companies, its currency volatility right now thats going to be the biggest source of risk Going Forward instead of commodities cost which was previously a big headache. Just watch that emerging markets. Of course, watch the currencies as well to see if this will be continuing. Absolutely. Thank you very much. How much of a threat are emerging markets to the u. S. . Right now, we have the dow up, it was just up 90 points. We welcome back to talk about that joe taneus from Jpmorgan Funds and jeremy ziren at ubs. Welcome to both of you. Joe, have you changed your forecast on growth here in the united states, or your suggested allocation for clients based on what were seeing in the emerging markets . We still think that growth here in the u. S. Will be a little stronger in 2014, especially relative to what we saw in 2013. I think we will probably see a three handle averaging throughout 2014. As far as the emerging markets, the story is really about being selective. We mentioned some of the things the central bankers are doing in india. Of course, in turkey, trying to control the run on the currency but in the end, i suspect that with the fed tightening liquidity in the u. S. , that will have an impact on some of the emerging markets. You need to be very careful where you put your money. Would you agree with that, jeremy . You know, yesterday, everybody thought it would be a big down day, it wasnt. Just a modest down day. Today, we have been up 90 points, now up 70 points. There are those who think that the crisis in emerging markets actually makes the u. S. Market look much more attractive. I would broadly agree with joes comments. I think the growth trajectory in the u. S. Will be largely unaffected by whats happening in the e. M. In terms of the currency markets right now. We are also pegging gdp in the u. S. To accelerate from a bit under 2 last year to about 3 in 2014. I think a couple things to keep in mind. Sara mentioned that 15 of profits come from s p 500 profits come from emerging economies. Still 85 of profits dont. What were seeing this quarter during earnings season is that s p 500 Earnings Growth is on track to be up between 9 and 9. 5 year on year, the fastest rate of Earnings Growth we have seen since the middle of 2011. So the profit cycle is actually strengthening. I dont think that the issues right now that seem to be a bit more idiosyncratic and really appealing to some of the smaller e. M. Countries will be really widespread. But then on the other hand, te the elephant in the room is china. Are you confident that china will be able to kind of circumvent any meltdown in its Financial System . Theres no question china is one of the big wild cards out there. We continue to see this evolution from an investment driven economy over towards a consumption driven economy, trying to control the growth in credit and of course, clamp down on the shadow banking activities in some of the Wealth Management products. I think while thats a good thing for chinas Growth Prospects in the long term, near term it may cause bumps along the road. You want to think about your exposure, for instance. A lot of the commodity players, which may weaken a little. Think about your exposure within china and really focus on china capitalizing on that consumer, whether through public or private equities. Jeremy, speak to the china question, if you will, because i think it is a worry to the market. However, most people that i talk to down here and elsewhere do think that china will be able to contain any kind of problems that they have in those Wealth Management products or elsewhere. Yeah, i think that boringly, i agree with joe with that general consensus. I think china will continue to grow, over 7 , we are pegging 7. 6 and a little above 7 next year, and the ability of the Chinese Government to continue to support the Financial System and the Banking System in china really does limit Downside Risk in terms of having a credit bubble per se like we have seen in the past in developed economies. Joe gave us some ideas of what to watch out for and maybe where you want to look to put your money to work. I will give you the last word. Where would you be looking . I think this year is still going to be, you want a preference for cyclical over defensive sectors within the u. S. Market but the nuance is that you want to shift your focus away from the consumer led cyclical sectors to the sectors that benefit from a pickup in Capital Spending which has been lagging in this recovery. That means more industrials, more tech, more financials, and lighten up on consumer discretionary. Thank you both. Ty, up to you. The growing gap between rich and poor said to be a major topic for president obama and his state of the onion address tonight. Union, of course. We have solutions to bridge the gap. There are Red Solutions and blue solutions. I found a surprising number of purple solutions. Solutions agreed to by both sides. We will talk about that on power lunch. Coming up on street signs at the top of this hour, so apple is sitting atop a big old mountain of cash and shareholders are holding out their hands. What is stopping apple from delivering . Herb is over there in the house and he has been checking the big ups and big downs in herbalife. The battle continues over their stock. And one guys very personal journey through job loss, job regain and what advice he can share with all of us. Lots of things coming up on the show. Make sure you tune in. Back to you on power lunch. Thank you so much, mandy. See you at 2 00. In todays Yahoo Finance question of the day, we asked the Postal Service Inspector General is issuing a report saying the agency should expand into financial services. Do you agree . 22 say yes, its a good idea to help generate more revenue. 16 say it should find other ways to make more revenue, not offer credit and debit cards. 62 say it should stick to strictly delivering mail. Ty . Very interesting. I think in japan, as steve may well know, the postal savings system is a big way that the Japanese Fund their retirements. Steve is nodding. Maybe i knew something for a change. President obama putting the finishing touches on his upcoming state of the Union Address tonight. He is set to make a major call for the nation to address the growing problems of inequality in america. Our senior economics reporter Steve Liesman looks at possible solutions to the income and wealth gap. Steve . We talked to a lot of people on this. I think we found a lot of agreement but im not sure each side knows how much they actually agree with each other on certain solutions. Do tell. Lets do the problem, then we will do the causes and solutions. Heres the problem. Heres the growth of everybody elses income from 1979 to 2010. Heres the growth of the top 1 . Its 201 . Everybody else, round about 40 or 50 over that period of time. Why is that . Lets look at some of the theories on the causes. Number one, its a zero sum game. Some people say the wealthy gain at the expense of the poor and their wealth is not linked to economic value. Secondly, globalization. You have an idea to profit globally, you have low skills, you compete globally and that keeps wages down along with rising returns to education and a lack of unionization. Finally, social issues, where the gains of the wealthy passed on to the children and people are locked in one parent families which locks in poverty. Okay. Those are the causes. Those are the theories on the causes. Lets get to some of the solutions. The gop ideas, progrowth policies. Everybody has progrowth policies. The gop seems to lean more on those. Lower taxes, less government. Over here, lets take a look. We did the middle one next. Okay. These are the ones in the middle here. Can we do the ones on the right . On the democratic side . Raising the minimum wage, higher taxes as opposed to lower taxes over there, and unionization, especially of Service Sector employees who do not compete. Now we will go to the ones in the middle. Even on the left, they talk about profamily policies because the correlation between single parent families and poverty is inescapable. Education. Both sides seem to think making more opportunities for education, especially vocational and Community College available, could help again lift up the poor. Earned income tax credit. Both sides seem to be on that. Again, the democrats want more minimum wage and the gop wants lower taxes but earned income tax credit has supporters on both sides. Then the issue of redistribution. It seems to me both sides agree there should be some redistribution. The question is how much in the way of taxes that need to be raised to do that and how much of that should be redistributed from wealthy to poor . An expert on this issue says social problems are more highly correlated with greater inequality including infant mortality, drug abuse, Life Expectancy issues and mental illness. One issue we found also. These are very local problems, and robert frank in the 2 00 hour will have look at some of the cities that have greater and lesser inequality. But its a problem that is maybe best dealt with nationally, because you get into competitive situations, where say you help the poor a lot in your city, you can get an influx of the poor, exacerbating inequality. Say you tax the rich a lot. You could get an outflow of the wealthy which would make the problem even worse. The earned income tax credit is a refund, refundable tax credit. Did it take from the reagan years if im recalling correctly . I think sto. It was raised during the bush years. Everybody gets behind it. We got to move but redistribution is a the politically fraught word. The question is how much. Its not like i disagree over the word. The question is how much, you talk to republicans, we will have a top economist on from American Enterprise institute and he will talk about redistribution, about changing how we redistribute what we already gather in in taxes. Steve, thank you very much. Sue, down to you. Shark tank is on at 8 00 p. M. Eastern on cnbc. We have a sneak peek next. The dow is up 90 points. We know were not the center of your life, but well do our best to help you connect to what is. That its given me time toabout reflect on some of lifeseen biggest questions. Like, if you could save hundreds on Car Insurance by making one simple call, why wouldnt you make that call . See, the only thing i can think of is that you cant get any. Bars. Ah, thats better. Its a beautiful view. I wonder if i can see mt. Rushmore from here. Geico. Fifteen minutes could save you fifteen percent or more on Car Insurance. Welcome back to power lunch. Deutschee bank moving the price target on the shares of [ inaudible ]. Shark tank returning tonight at 8 00 p. M. Eastern and pacific. Featured on the show is First Defense nasal screens. This is their product, selfadhering nasal filters. They are 100 american made. The ceo was offered the biggest deal to date by one of the sharks, 4 million. Youll have to tune in to find out what happens. Joe moore joins us from tampa, florida. Welcome. What does the product do and who is the natural customer for it . Thank you. The product basically filters the pollution and pollen out of the air. Our biggest Customer Base would be allergy sufferers and people who live a lower quality of life due to pollution problems and respiratory problems. These would be people working outdoors who suffer from allergies and this is a strip, adhesive strip that fits right on the nose. Are you wearing them now . I am wearing them right now. They basically peel off like that. They go on and then they seal. People wear them outdoors, indoors. We have a lot of people that use them for chemical sensitivities. We have distribution painters, sanders, things like that. Correct. Lawn care. What is the typical price and how do you sell them, in a packet of 25 or what . Right now, they sell by we supply seven sets. The average cost is usually about 1 a set. Then when we have our monthly members, they get them shipped every month, they are cheaper for them with free shipping. How did business change when you were on shark tank . Since we have been on shark tank we now have distribution over 30 countries. We have about 40 more countries coming on. We have over 45 million in contract, about another 70 million we hope to have done before the end of the year in contract and hope to be global within the next 12 to 17 months. I infer from that that business is growing very nicely. We definitely cant complain. The offers are starting to reflect our true value. We are definitely happy and without the shark tank the exposure that we have gotten, i know we wouldnt be anywhere close to where we are today. Do the nasal screens in any way impede your breathing . I assume the answer is no. They do not. They reduce your breathing by less than 1 . Which you will adjust with your mouth without even realizing it. Very interesting. Thank you very much for being with us. Continued good luck to you. Appreciate your appearance on shark tank. Again, dont forget to tune in tonight at 8 00 p. M. Eastern and pacific to find out whether joe took the deal. Dont miss cnbcs live coverage of the state of the union. That is sandwiched in between there, beginning at 9 00 p. M. Eastern time. There are your players. Kevin oleary will be joining Carl Quintanilla and john harwood to discuss the state of the union. The biggest winners in todays trading next. There are some. [ male announcer ] its simple physics. A body at rest tends to stay at rest. While a body in motion tends to stay in motion. Staying active can actually ease arthritis symptoms. But if you have arthritis, staying active can be difficult. Prescription celebrex can help relieve arthritis pain so your body can stay in motion. Because just one 200mg celebrex a day can provide 24 hour relief for many with arthritis pain and inflammation. Plus, in clinical studies, celebrex is proven to improve daily physical function so moving is easier. Celebrex can be taken with or without food. And its not a narcotic. You and your doctor should balance the benefits with the risks. All prescription nsaids, like celebrex, ibuprofen, naproxen and meloxicam have the same cardiovascular warning. They all may increase the chance of heart attack or stroke, which can lead to death. This chance increases if you have Heart Disease or risk factors such as high Blood Pressure or when nsaids are taken for long periods. Nsaids, like celebrex, increase the chance of serious skin or allergic reactions or stomach and intestine problems, such as bleeding and ulcers, which can occur without warning and may cause death. Patients also taking aspirin and the elderly are at increased risk for stomach bleeding and ulcers. Dont take celebrex if you have bleeding in the stomach or intestine, or had an asthma attack, hives, other allergies to aspirin, nsaids or sulfonamides. Get help right away if you have swelling of the face or throat, or trouble breathing. Tell your doctor your medical history. And find an Arthritis Treatment for you. Visit celebrex. Com and ask your doctor about celebrex. For a body in motion. [ car alarm chirps ] [ male announcer ] we dont just certify our preowned vehicles. We inspect, analyze, and recondition each one, until its nothing short of a genuine certified preowned mercedesbenz for the next new owner. [ car alarm chirps ] hurry in to your authorized mercedesbenz dealer for 1. 99 financing during our certified preowned sales event through february 28th. Pretty decent gain on wall street right now. We were just about up 90 points, now up 81 points on the dow. The s p is up eight points. Thats about half a percent move to the upside. Matching the dow. The nasdaq has turned positive as well, despite the drag from apple. We noted some of the winners in the biotech area thats contributing to the move to the upside in the nasdaq. D. R. Horton, waters and t. Rowe price, three big winners, an almost 10 gain for horton, waters is up 7 , t. Rowe price up about 6 . Pretty decent day so far down here on the nyse. Interesting afternoon. Very interesting week. Of course, the fed Meeting Results will be out tomorrow. We will be watching that. We will join you at that time. Thanks, everybody, for joining us for this edition of power lunch. Have a great afternoon. Street signs begins now. Apple shares are down. The dow jones is up. Is this a sign that apple, while important, doesnt matter that much to the overall market anymore . Hello, everybody. A big day with a lot going on. We are all over Apple Earnings and why shareholders may need to start to get angry about one thing apple is doing or why not. Plus, a look ahead to tomorrows final fed call by ben bernanke and something is happening in the south that is giving ups and fed ex giganti