Transcripts For CNBC Squawk Box 20131101

S p up by just under 2 points. In Global Market headlines, chinas Manufacturing Sector strengthened further. Mixed signals in important areas, including export orders suggest that any recovery will be gradual. Take a look at what happened overnight in asia. Youll see that shanghai and hang seng were barely higher. The nikkei was down by 0. 8 . The big news out of europe this morning, royal bank of scotland, rbs announcing it will move 61 billion of toxic assets into an internal bad bank. The early european trading this morning, youve got some red arrows. But thats only down by about 16 points. Well see what happens as we get further into the trading day. Well have more from Ross Westgate in just a few minutes. Andrew, over the to you. Thank you, becky. We have Corporate News this morning, as well. Aigs corporate earnings top wall street. Some analysts were looking for better results in the companys consumer line business. The ceo was on the closing bell yesterday talking about the economy and the broader business environment. It was lacking is enough confidence to take risk toes create jobs. I think thats the big issue here. But people are maximizing what they have. Theyre not doing a lot of new things. So for aig, we continue to grow. We continue to grow across the board, both in the United States and around the world. But its a matter of our clients are a little bit more cautious. But i dont know that this quarter or next quarter that youll see any effect on our business materially. And stores products retailer Container Store, they raised 225 million. The ipo was priced at 18 a share, the top end of its increased price range. Stairs are set to start trading on the New York Stock Exchange today under the symbol tcs. Microsoft cofounder paul allens fund is suggesting microsoft spin off its consumer business. This is big news. The man who manages allens fortune is now suggesting that microsoft search and xbox business res deextracting from the Software Business which drives earnings. So i mean, paul allen and bill gates, i dont think theyre theyve been spending of time together these days, anyway, joe. No. And the roys. These guys found or fund companies, whatever it is, they dont i dont know, over the years, things happen. I think well always be together. Well always be together. I saw a picture of gates on the ft today. Interesting. Which is more important, connectivity or a malaria vaccine . If you think connectivity is the key thing, thats great. I dont. It is interesting, i think. You went for halloween last night, andrew. Did you pick one building and just did you finish it . Yes, we did. Did you just pick one . We picked one building. We went up and down and up and down. I was kidding. I was kidding. Honestly, you picked one building . Yes. Because by tend, max . Henry, they were tired. They wanted to go home. And i mean, to get a pumpkin, you had to rent a car to drive to a pumpkin patch. We like those pumpkins from yesterdays show and thought that was the coolest thing. I still think that was the coolest thing. Come on, you didnt actually put that out, did you . No, no, did not put it out. But we had a couple of people who came over after for pizza and they saw them. Becky, you want to do what you did. It was pen nell penelopes birt. I brought her the picture of me on a pumpkin. Heres your present. It has a thing, you can light it up. I wanted her to put it in the window so people would come and say oh, my god. What a jerk. What a jerk. And as you said, pass out instead of candy, signed head shots. Here you go. Here you go. Wow, huh . Huh . Anyway, its we didnt have it was raining, so there wasnt a lot of people that came by. We only had two. We have a lot of candy left. We do, too. I was going to bring it in here. Have you ever lifted how heavy it is . Yes. And then you know whats next, thanksgiving and then christmas. I know. This is a very you know, this is where i do get mad at you because youre so thin, you have to problems with oh, no, no. Andrew can eat six doughnuts and get away with it. Not true, not true. Anyway, lets check on the markets this morning. And then well get to some of this other stuff thats been happening. Like what . Joe biden. And i believe those guys. Well talk about it in a second. But up 31 points on the dow. Its been a great im still going back to i dont know. Suddenly im remembering that i said the market would be up 35 in 2005 and im bitter at people that laughed at me. So were up like not you. Theres other people that tweeted and i agreed. I know you did. How much are we up, 60 since 2012 . I dont know. Anyway, were up a lot. Lets look at oil. Today i yelled at the guy at the gas station and said why didnt you i dont like it when they dont top it off because then i have to get it too quickly again. And it was only the price that you paid i said you didnt top it off and i looked at the price and its like 60 cents less than it used to be. Your ocd is coming out. It is. But it was 3. 30. This is a tax cut for everyone, but its not good for exxon, as we saw yesterday. Do you think its coming back, or no . Oil . I hope not. Even walmart said its a tailwind, but offsed by the headwinds of higher im still forecasting 20 a barrel. Im hoping for that for our friends in the midwest. Lets look at the tenyear note. Friends. Saudi arabia doesnt even like us any more. 2. 56 now on the ten year. You can do it for your friends on the l. I. E. If we get down to 20, well that the. Which is you when you rent a car to go out and get a pumpkin. This is Getting Better because germany is messing up with their export driven economy and theres no inflation. In fact, theyre going to have to try and engender some inflation. One of the lead stories today is how low inflation in thor row zone is right now, which is, you know, raising the specter of and fear of deflation, which isnt good for anybody. I guess well go to europe first before we talk about all this other interesting stuff here. We have to talk about your friend, randall. Here is the guy with the inflation problem today. Its all red behind you. We are starting to maybe the do the day of the dead over here, which is a mexican holiday, i think. Yeah, a mexican holiday. Were starting to do that here. But you dont even do you do halloween over there, ross . Yeah, we did. When i grew up, joe, halloween didnt really exist. And now as far as i can tell, we special a fortune on it. My children, i was out with them for about an hour last night, dressed up, collecting sweets. Its become a massive commercial event. I blame you guys for this. Yeah. Do you have any Good American candy over there . Do you give that inferior i dont know, what is it . I guess you guys did chocolate. We have some great sweet companies. Like round tree and cadbury. All right. Nobody is hanging out sfp. Kraft. Nobody is handing out hagaths and bangers or mash, theyre not putting those in kids bags, right . No, no. We might do more of that next week. We get november the 5th fireworks celebration. Youre all messed up. Why would you have fireworks on november the 5th . Because thats when guy forks tried to block parliament . Thats when what . Guy forks tried to blow up he tried to kill king james i way back in the 1700s. We still celebrate. That holiday is older than this country. Youre still talking about something that happened in the 17th century. Pathetic, isnt it . Yeah. I think its cool. Fireworks were for july 4th. Which is a great day. Isnt that when they showed his mash with the moustache . Is that it . Is that right . Isnt guy like a white mask with the moustache that sort of represents him now . Yeah, there is that and what you do is you make a guy, you stuff you get some old clothes. You stuff it with paper or whatever and you put him on a bon fire. Is this like the topless woman that puts the moustache on her . Have you seen her . No, no, this is what it is. You know its legal to be topless in new york now . Its legal . She got 40,000. She got all of her expenses, all of her legal fees paid. It was weird. Anyway, sorry, ross. Go ahead. We digress. Just a little bit. We are to the down side, not by much, joe. It looks worse on the heat map. Around about 6 do 3 decliners currently outpacing advancers on the Dow Jones Stoxx 600. The ftse yesterday was down 46 points. Fairly slim losses this morning for the uk market. Just off six points. There is some focus on the part nationalized rbs. Its creating an internal bad bank to separate 38 toxic bounds of assets for the rest of the business. Rbs stock, though, it is down. Now there was a consideration over whether they would split the bank in two. Thats not happening. But the stock off 4 . The lender is in worse shape than we thought. The losses narrowed in the Third Quarter, but its setting aside another 200 Million Pounds for a pension. Its warping of a substantial full year loss, though, asset spikts combat and litigation charges to continue. The French Market is down, dragged lower by renault today, off 5 and renault is down because of its partner, nissan. The auto giant reported earnings and has cut its profit outlook by 20 for the year. Nissan was expected to put Second Quarter earnings on two. They brought it forward. So not great news. Thats dragged renault down, as well. You caught up with the euro. Wanted to look at this move weve had on euro dollar over the last few days. Remember, the twoyear high we reached at the end of the last week. 1. 3533. At this timier we were trading above 1. 37. The biggest oneday fall we saw in around about 16 months. Core inflation in the eurozone is running at core 18 , which is the joint record low. There are some concerns that the eurozone is facing deflation. It will be interesting to see how the ecb responds to this next week in their meeting. Some houses are saying they should be cutting rates as a result. Quick look at where we stand with bond markets, as well. Bund rates today, pretty steady at 1. 67 . Thats where we stand right now here in europe in the last trading day of the week. Back to you guys. All right. Thank you, ross. Ive got some washington news. Well do it all now. Dismal debut numbers for healthcare. Gov. Documents released by the house overknight sight and government Reform Committees show just six enrollments managed to make it through the system in 24 hours. Notes from a center for Consumer Information and insurance oversight, war room meeting on october 3rd say a total of 248 enrollments had been processed by that morning and that contrasted with the Obama Administrations reports of more than 6 million unique thats a big i understand why they dont want to give out the numbers. The health and Human Services department has said it wont release enrollment figures until mid november. Theyre probably better off that way. Thats what sebelius said. Mid november, id do jan 1 . Yeah. Mid 2015 and see what happens. We have other news, president obama has reportly ordered the nsa to stop eavesdropping on joe kernen. No, stop eaves dropping on the headquarters of the imf and world bank. The order is said to be the latest move, of course, by the white house to demonstrate its willingness to curb at least some surveillance in the wake of weeks by former nsa contractor edward snowden. A number of comments about janet yellen starting to come from the senate. Richard shelby says he would oppose efforts to block her nomination with a filibuster unless some disturbing disclosure emerge. His comments come after senator rand paul said he instead to withhold her nomination. And senator Lindsay Graham has vowed an effort to block white house nominees until the Obama Administration comes forward with more information about benghazi. Shelbys comments are important because democrats would need to pick up only five republicans vote to clear procedural hurdles and bring yellens nomination to a full senate vote. Yellens nomination needs only a simple majority. Joining us this morning from washington is eamon afterers. This is getting back to some tense times in the senate when it comes to these nominations. We thought we had averted these issues. Mccain threatening to pu put a whole here on janet yellen in the United States. They wanted to see more of these documents related to ben fwazzy. They wanted to see the survivors of benghazi testify on capitol hill. They would like more information as to what exactly happened there. They dont have any particular animous towards janet yellen herself. This is just the leverage they have to get this done. Its been a very bad week for for obama admin appointees. Yesterday, the senate rejected mel watt, the Housing Agency nominee for the Obama Administration. Its a very rare thing for a sitting congressman to be rejected. But they did that yesterday in the senate. Its a tough time here for obama getting his nominees through. We expect that yellen will go through here. They can break these holes with a 60vote margin. We expect that thats doable or that this will be negotiated and resolved before we get to crunch time here. But its something to keep an eye on, definitely. Yeah. You know, when i first saw senator mccain, it was like, you know, we tried obama care with the Government Shutdown. Now year doing benghazi. As much as id like to have info on benghazi and the way that whole thing was handled, but i dont i cant see the connection here. I was fascinated by the biden story. If you remember that first debate, obama was just, like, he was on not interested, like why am i here, do i really have to do this . And biden came in and saved i dont know when those conversations were taking place and for anybody who didnt hear it, it was reported that they thought about dumping biden for Hillary Clinton. But what were finding out and the report is from a new book called double down. This is a sequel to game changer 2008 campaign book. They have done another book going inside the 2012 campaign and theyve come up with some blockbuster details, including the fact that they were looking at replacing biden as early as 2011. And daley said i dont know if the prt weighed in on it. The president , i dont think he knew. He didnt know about, you know, the nsa with merkel. He didnt know about any of that irs stuff. He didnt know about the problem with the whistle all i know is hes mad. He is mad about well, hes mad about the merkel thing. Hes definitely mad about the irs. I think hes still mad about the website. Nobody is madder than him about the website. So i figure hes probably mad about this biden thing. But to be not consulted young he was consulted on the biden thing . These people are making all these decisions . Im sure he was consulted on the biden thing. This would be one of those things, joe, where theyre poll testing. These campaigns are big, sprawling enterprises. A lot of people running around. Eamon, thats praet big thing. When is the last time a Vice President was dropped after the first term . No question, no question. Its a huge thing. And, you know, clearly how far do we think it goes . Thats my question, how far does it really get . And i have to read the book to see what theyve reported. But the question is, how far did it get or was it something at a lower level, at a daily level they looked at and disruchted. Just a second, eamon, do you think sdulzs like that take place without anybody running it by the president. Good i think its possible, yeah. Thats a huge undertaking. Its not an undertaking at that point. Its just an idea. Although the risk about when it gets out what happens if theres one or two strategists sitting around in a room but its not. Theres polls that were taken. What if they say were putting together a poll for tomorrow night lets throw a question in there and see what happens. If it comes back that we should look at something else, well sxlorp it. In the excerpt that ive read of the book and i havent read the whole book but daley is quoted in reaction to this saying, look, in 2011, the president was politically cratering, having a difficult time and we looked at a lot of different ideas. Thats the way he described it and that seems to be what happened here. But it would be an astonishing thing to throw out a sitting Vice President , especially one that has been an asset to the team the whole way through. If there was a scandal or a problem, you could see it. And this is the only guy willing to work with republicans. And andrew, if the president didnt know, at least the next time he sees joe, he can go, geez, i dont think if he did know. What if biden ever does reappear, i dont know where hes been, but my question is, when did biden find out about this . Is he finding out about this at the same time we are . Yes. Has he even heard about it yet . Where is he . Exactly. He might pick up his paper this morning and say oh, my god. Where is he been . Hes still in the dog house gore going around harry reid and negotiating that budget deal. The last time i saw him, he was wearing ivaters in the white house driveway and going out to eat with president obama. Ive developed a liking for him recently. He was wild eyed and shook up that got the president back on track. They needed that. They needed performance from biden in order to get the president focused again. Absolutely. No question. Look, biden is somebody who has been hes a target of a lot of abuse and some mirth. But hes somebody who has been rock solid for the president. The one thing that the obama people really dont like is that biden got out ahead of the president on the gay rights issue and gay marriage issue. They dont like that. Thats something the president tsh. That helped the president a lot in the election. They should be thanking him for that. It is a huge issue and biden has become a real hero on that issue with that political base. And thats something that portends to bidens future. Dont count him out entirely for 2016. Hes somebody that will take a look at this, absolutely, especially if Hillary Clinton knot in the running. Compared to hillary, his numbers arent good. So that was not a white house trial balloon that he put up on Marriage Equality . You think that was offthecuff . Thats amazing. I think it was offthecuff and i think its how he truly felt. Good. Because we never hear how anyone else truly feels in most administrations. No, you dont. Honestly, you dont. You hear a lot of poll tested stuff in this town is very carefully crafted and massaged and messages. They say in washington, it is a gaffe when you accidentally blurt out the truth. When their lips are moving, you know theyre probably not telling truth. Anyway, thanks, eamon. Coming up, if you get nationwide with this one, and i get in trouble for this one, we have a story for you. New faa rules you get annoyed with them . They get annoyed with me. I get nowed with them. Its annoying. Were going to talk about it. First, we have a little bit of squawk sports news this morning. The dolphins blew a 173 lead in the second half blew a 173 lead but eventually beat the bengals in overtime. Sorry, joe. Andy dalton was tackled in the end zone for a safety with 6 38 left in overtime to give miami a 2220 win over cincinnati. I saw the first half. As we head to a break, take a look at the weekend forecast. Weve got to weather channels Reynolds Wolf back in the house. In a jacket. Look at that. How are you region reynolds . How are you doing . The eastern third of the country is going to see some form of rain and winds. Winds very strong in parts of the northeast at times. Showers across northern plains. Desert southwest, california, no problems out there at all weatherwise. For the weekend, snow showers are popping up. Parts of the eastern great lakes. Maybe some through portions of ohio. Nice and cool through portions of, say, the midatlantic. And let medical at the you today, its not going to be too cool in terms of travel. Could have some backups, maybe even into new york, as well. A moderate backup day for you in both location necessary atlanta. Maybe some volume issues later on, but by now, smooth sailing. Folks, more on squawk box coming up in just a few moments. Sit tight. [ male announcer ] at optionsxpress, our clients really appreciate our powerful, 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 18882800149 now. Optionsxpress by charles schwab. Time now for the executive edge. Some controversy surrounding obama care is hitting close to home on capitol hill this week. Lawmakers are being forced to decide whether to move their staff into the new insurance marketplaces tied to the Health Care Overhaul or keep them on their existing plans. Introduced by Chuck Grassley more than three years ago and included in the legislation requires lawmakers and their age to purchase Insurance Coverage on the Online Marketplaces by a deadline at 5 00 last night, lawmakers had to decide whether to fully follow that requirement or to exploit a loophole that allows them to keep certain staff on their existing Health Insurance plans. The latest i had heard was that pelosi and boehner had decided to move their staff on to the actual plans, the insurance plans. I think there were some democrats who were considering keeping some of their staff on them and some republicans, too. I like the idea of a dose of your own medicine, right . Yeah. Its supposed to be a good thing, andrew. Youre acting like its a yeah. You think its great when you have it. No, no, no. The point is thats what the republicans were thinking. When grassley introduced it, he was like, you like this, democrats . Now youre going to have to use it. Everybody in washington should feel the way everybody in the country feels on everything. Thats the only way theyre going to be able to let me know when you give up your comcast im very happy with my well, if you liked your plan, you can keep it. Im very happy with my plan. I am not working for the government. If you like your plan, you can keep it. The congress is exempt from a lot of rules that they pass. Some of the ocsea laws dont apply it was weird that grassley introduced it to try to put the heat on his democratic colleagues to have them have to do it. Now all of his people have to do it. Well see where the rest of these stories come down. Also, though, we should tell you about the Treasury Department announcing americans who use flexible spending accounts for heths care costs may now be able to carry up to 500 of expiring money into the next year. Traditionally, if you had an fsa, you faced a use it or lose it deadline of december 3 e. This was your money. You could put up to 2,500 aside. If you didnt lose it, though, you lost that money. This is a big deal. For 500 bucks. Yes. Theres people all over the country losing this money regularly. The big question becomes Companies Like wage works and others wageworks stinks. That administer these programs, the money for them is in taking the is in the money that you dont use. I know. I dont do this any more. Wage works is a terrible program. I dont do it any more because they try and go after you. Its your money that youve set aside, but they give you such a hard time about using it. They wouldnt allow me when i was in the hpt for having a baby, they were giving me so much grief when i was on maternity leave, they were giving me a difficult time about using it. I never ended up using any of it so i canceled it and never went back. Now that theyre going to have this patrolover program, what does it mean wage works gets to keep the money that you dont use . Thats my understanding of the sure. Thats the entire proposition of why it works for them. Thats why they give you so much grief. But hold on. The other piece of it is is Companies Like a comcast dont pay too much to wage works. They may pay nothing. I dont know what the arrangement is because effectively, the profit the Business Model is in is getting you not to use it, which is why all of a sudden after we had wage works for a year, the second year they stepped it up and they wanted notes from your doctor on every single thing. It wasnt just enough to provide receipts. I got in a massive argument with them. I was in the hospital having a baby. They were accusing me of having Plastic Surgery or something. It was unbelievable. Im sure theyre thrilled that weve gone this segment. Yeah. You stink. Lets get to this last one. The faa is loosening rules on electronic gadgets during flights. You will soon be able to use ee readers, smartphones to your trip. And voice call res still being banned during the entire flight. Andrew, i know youre hold on. But theres good and bad news here. The good news is you can use your device to read or whatever you want to do, listen to music, things like that. The bad news is you have to put it on Airplane Mode so you cant use the internal. What i dont know you cant use the internet . What if you use wifi. Sf hello. You can use wifi once you get to 10,000 feet. But on the ground, theyre going to tell you to put it on Airplane Mode. So all these people, including people like myself who are always hiding at the last minute trying to send that last email, was going to happen before they could tell you to put it away. Now i dont know how theyre going to police this. And the policing, as you know, can get very complicated and get a little tricky. My entire take on this is i dont think i didnt think of any of those things. Really . No. All i thought of was so airplanes. Im on airplanes all it is time. All this time they were saying you definitely cant use this. Because well, we think it might do something. You know, we dont really it just might do something. Now we think it probably wont do anything. Were pretty sure it probably wont, but what was this all about for the past 15 years . Control. No, no, seriously. Does it does it mess up . Do they knot not know they have a single instance where it messed up the electronics . Were they waiting to see it . Theres two issues. There was a lot of anecdotal evidence by certain pilots who would file reports saying that they believed there was some problem or something happened as a result of something on the plane. Also, older planes and when i say older, planes in the 70s and earlier than that, and im sure theres aviation experts who will disagree with this, but there was an argument that the planes werent shielded in the same way. Meaning the electronics of the plane were not shield. If you were going to outlaw them, you would have an idea if there was or wasnt interference. They banned them back in 1966. Theyre still saying this is a reflection of government bureaucracy, too. So we were doing it was so important that you would get in arguments with Flight Attendants and alec baldwin and it was like, well, we dont really know. Theres concern that it could be interference that come from cell phone towers. And now theres not. Were pretty sure. We dont know for sure. Hopefully nothing happened. I have been told one other legitimate reason for all this. Which was the safety thing. Which i think is actually still real, which is on takeoff and landing, you dont you have to put your laptop away. You still have to put it away. But you can keep headphones in. There was a view they dont want you i wouldnt see using electronics. He said that yesterday. They may have to . I just think the whole thing is so were pretty sure that it might have been doing something. Now were pretty sure its not. It was just so you should know these things. And it should be to know that you should know the physical 3r079s of what youre doing. You should be able to say with certainty, either and if it wasnt doing anything, what was this about for 12 years . And now is it is it definitely not doing anything or were pretty sure its not doing snig . Im confused about the whole thing. Youre just thinking about your last email to who . To whom . Oftentimes to my wife. Oh, good answer. Good answer. I do. You know what . I dont play any more, so i dont care if i have to take it off. Thats the only thing you missed from your blackberry . The only thing i missed. Or those emails im sending to you. The epithet is deleted. You guys continue your lost fest over there. When we come back, the new apple ipad air goes on sale today. One was just delivered to our set. Were going to get a sneak peek right after this. But first, are you looking for weekend reading . Go to squawk. Cnbc. Com for the latest edition of the talking squawk blog. It features our sidewalking dead halloween special, plus an apple a day and team danica invades the squawk set. It was wonderful. Bravo. I love that. It was great. It was pretty good. There were parts of it that werent very good, though. I didnt really like it. It was pretty terrible. It was bad. It was awful. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. But it sure feels that way. Because with power ports. And wifi. And inseat entertainment, for everyone on board, now when you fly, time flies too. Flight Attendant sir, were about to land. vo were adding a brand new plane, with all this, every week. Its just one way were building the new american. Maestro of project management. Baron of the buildout. You need a permit. To be this awesome. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. aaron purrrfect. vo meeeow, business pro. Meeeow. Go national. Go like a pro. So you want to drive more safely . Of smart. Stop eating. Take deep breaths. Avoid bad weather. [ whispers ] get eight hours. [ shouts over music ] turn it down and, of course, talk to farmers. Hi. Hi. We are farmers bum pa dum, bum bum bum bum [ female announcer ] youre the boss of your life. In charge of long weekends and longer retirements. Ask your financial professional how lincoln financial can help you take charge of your future. Welcome back, everyone opinion its time for your squawk planner. On todays agenda, we have Quarterly Results before the bell and after the bell, Berkshire Hathaway will release its numbers. Analysts will Pay Attention to how much the Government Shutdown impacted auto sales. And apples new ipad air goes on sale. It is the thinner and fastest ipad today. At t extent one to us on set. Andrew, its in thebly lighter. Noticeably lighter. I know it was 1. 4 pounds and now its 1 pound. That doesnt sound like a big different, but when you hold it in your hand, it is. And also its still smaller. If you stick knit your purse or briefcase or something, lights light per. And the screen is better. I dont know if its better, the screen it doesnt seem any smaller. Same size screen. Im diagnosing it. Are you going to get one . No. I cant really tell. You cant really tell . Are you kidding me. Yeah. The weight has never been i have it in a case and i put like a but you dont bring it with you everywhere. No, i dont. For me, if im sticking it in my purse, its a big deal. You need like six devices. You need one with a keyboard, you need one with true. Right . Youve got two devices. An iphone works really well, an iphone 5. If im at home but i dont carry one of those things around. Were going to just give you a quick update in our last oh, yeah. We talked about the fha should have never done this. The wage works and the whole situation. Apparently its not wage works that keeps the money. Your mroer gets to keep the money. Traditionally, they use that money to pay wakeworks for the administration fees. Is that how is works . Yes. My understanding is you can use the money for three things. Donate the money to charity. They can split it up among the workers who participated in the health plan or they can use it to jau set the cost of administering the program. So basically thats how you pay them. And thats how you pay them. They cant give them back to the employees because that would invalidate the funds Tax Exemption status. But its still ridiculous when you have to prove to them how youre using the mope. A receipt should be enough. You shouldnt have to have an itemized receipt and a note from your doctor on top of it and triplicate copies of everything. Im still on the you must turn that off. The pilots, it can influence the readings in the come pit. Oh, never mind. Never mind. No, its okay. I agree with you. However within there were like 4,000 its probably okay. Go ahead, use it. That is the most bizarre my kids are so happy. But when i heard it, it was like, is it or isnt it . Ten years youve been yelling at us to do this and oh, never mind . Thats weird, andrew. Im not going to disagree with you. Youre just happy. Im just happy. We are going to go to a guy i was just on an airplane, actually. The failure of the obama care website continues to grab headlines, our next guest says we have to address other health care issues. Dr. John is the president and ceo of the mayo clinic. And its good to see you this morning. Thank you, andrew. Good to be here. We can talk about wifi on airplanes later. But on obama care, if you could run this thing or fix this thing, what would you do . We would recommend that the way physicians are paid and health care is reimbursed is modernized and reflects Better Outcomes at lower costs and deals with technology and helps us take what we know and share it with others in a more efficient way. John, how anxious are you about this technology . Well call it a glitch. I dont know if thats the right word, even, and whether you think were going to get through this or not and how long is it going to take . You know, i think its hard to know how long its going the take. Its a technology problem, but below that, we have to get back to how health care is reimbursed. Right now were reim busing volume of care, not efficiency of care. So we look forward to seeing that revised. This week, the Senate Finance committee and health ways and means have put an outline together that moves us on the First Step Towards recognizing value and quality and health care and thats a good thing. It is a good thing, but the conversation weve been having for a very long time and we have not made much progress. Why are you more hopeful today that we are on the right path . This week, we see some bipartisan and bicameral movement in that direction to recognize the need to pay for Higher Quality care and more efficient care. Its the first step. Doctor, you probably heard that practicing medicine is a its an art, really, not a science. And when doctors are trying to even diagnose things, sometimes its the you know, they prescribe a few things and then they realize what you had after something finally worked. I dont see how it can be pay performance like a job and a normal business where, you know, hey, if you do well, you get paid. If you dont how could you design a system, really, thats totally dependent on favorable outcomes . It seems like a difficult thing to do in practice. El with, i think it is difficult. But our current Payment System doesnt begin to look at the complexity of care or the range of outcomes. Theres nothing in there to really motivate and stimulate moving towards a more efficient system. In nearly 30 years of practice as a neurologist, seeing patients with complex care, probably 30 of the patients say were misdiagnosed and had the wrong tests done and some were treated inappropriately and that causes a lot of waste. Do you get your money back from the doctor if that happens or the guy loses his license if he does it enough times . I dont see how you do it. I think this is a stepwise approach to say how do we measure outcomes . How do we look at readmin rates, rate of infection and then have a transparent database that patients can look at and say who gets it right more often and wa contribute toes that . So i think thats where we need to go. Doctor, one last question. Does obama care deal all the with the reimbursement issue . Does the reimbursement issue get better or worse under the program thats being implemented . The Affordable Care act is basically insurance reform. Eligibility and access and basically theyre going to pay for that by reducing the reimbursement. It doesnt mannerize how we drive to Higher Quality care. It doesnt change the reimbursement at all. Doctor, thank you for wake up early with us this morning. Appreciate it. He went right to the the glitches. 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Still to come this morning, president obama calling for an expansion of Foreign Investment into this country. We will talk to the president of seemans usa about that topic right after this. I love having a free checked bag with my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. Bny mellon combines Investment Management investment servicing, giving us unique insights which help us attract the industrys brightest minds who create powerful strategies for a countrys investments which are used to build new schools to build more bright minds. Invested in the world. Bny mellon. Were talking about investment in the United States this morning. Joining us now is the president and ceo of seemans usa. And running through the entire thing were doing here, eric. And even this entire summit, i just keep reading about fracking, natural gas and energy. And its a huge opportunity for this country and other countries investing in this country. Absolutely. I think a lot of people have talked about the fact that this is a game changer. But i dont think people really understand the magnitude. Were talking about the biggest single area of investment in the world. And just in the fracking in the upstream, probably 80 billion to 90 billion rising to about 230 billion by 2025. Then the midstream, all the pipelines, trucks trains, upgrades. All the manufacturing coming online. The single biggest growth opportunity, Investment Opportunity for countries in the u. S. And around the world. So theres people that are actually involved in the production and transport of it. And then theres the manufacturers where the input of energy costs are going to be so much lower that it makes the entire area more competitive in terms of, you know, since labor isnt quite as important if your input is that low. It just spreads out. And these are all sort of collateral areas it could benefit too. Yeah. Absolutely, if youre in an Energy Intensive business. Chemicals, steel, fertilizer, aluminum, this is great news for you. In fact, were seeing, i think, theres Something Like 90 billion to 100 billion of new plants already online. And five or six years ago, who wouldve thought wed be building chemical plants in the u. S. Or even steel plants, but those things are happening now. If you supply to those things, its good. But if youre in those businesses, its good. Big advantage over europe. You see the ceos in europe saying were at a big advantage. Our electricity costs are twice that of the u. S. And our gas prices, Natural Gas Prices are three times as high. So if youre in one of those businesses, the u. S. Will be a great place to invest. Theres a lot of carbon hysteria in europe, as well. And theres laws that may or may not stay on the books. The one in australia may or may not stay on the books, as well. Let me ask you a frank question. Is it ironic that the white house is behind this push that has to do with all this hydrocarbon production . Are they comfortable being big proponents of this whole new area of energy . Well, i think if you take a look, you know, Foreign Direct Investment is down. It was rising coming out of the recession coming out of the recession, but it dipped this year. Going to be much lower, 160 billion, 170 billion. I think theres real concern about not only domestic investment but Foreign Direct Investment. And energy is the obvious place. I mean, its the one big thing that theres a tremendous amount of money being spent. And if things get opened up, were going to see a lot more spending. I think its an obvious thing for the president to get on board. It wasnt that obvious five years ago. Hopefully theyre not being dragged kicking and screaming. Im reading the headline. Team up to court Foreign Investment in fracking. Absolutely. Thats a headline that just drips with irony. Anyway, weve got to end at this point. We appreciate your time this morning. Thank you very much. All right. See you later. All right. The economy, the taper and much more when squawk box returns. [ male announcer ] at optionsxpress, our clients really appreciate our powerful, 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 18882800149 now. Optionsxpress by charles schwab. A hawk spreads his wings and lands on the squawk box set. Joining us for a special onehour event. From the budget issues facing america to the next opportunity to taper, the central banker holds nothing back. And gives us his assessment of where america stands in the global economy. The second hour of squawk box begins right now. Good morning and welcome back to squawk box right here on cnbc, im Andrew Ross Sorkin along with joe kernan and becky quick. Take a look at the futures. We do have some green arrows across the board of the dow looking like it would open up about 35 points higher. The s p 500 looks like it would open up over two points higher and nasdaq up over seven points higher. Morning headlines this morning, as well. Apple rolling out its recently announced ipad air. At t brought it over, its available in Retail Stores around the globe as well as in apples online stores. This is the first time, we should note, this has happened in china and japan theyve been included in the firstday retail launch of an ipad model and, of course, the numbers on monday will be studied closely. This is a live picture of the apple store on fifth avenue in new york. Consumers there lining up, the device goes on sale at 8 00 eastern. No other product category in the world has its raining. Right, its raining and theyre waiting outside. Its just an unbelievable situation. Also, retailer giant walmart. Im not sure people are waiting in lines for them. But they arent waiting until black friday to launch the Holiday Shopping season. Its offering online at walmart. Com beginning after midnight tonight. The deals remain in place as long as supplies last. Walmart didnt say if those discounts would be repeated during the thanksgiving weekend. Probably a surprise tease to get you there. And retail is a story on wall street as well today the Container Store making the New York Stock Exchange debut after raising 225 million in the initial public offering. The Specialty Retail sold 12. 5 million shares which was at the top end of the already raised expected range. So theyve got to be happy campers this morning. In washington news. Dismal debut numbers for healthcare. Gov. Documents released show that there were just six enrollments that managed to make it through the system in the first 24 hours. Notes from a center for Consumer Information and insurance oversight war room meeting on october 3rd say there were a total of 248 enrollments that had been processed as of that morning. The numbers contrast with the Obama Administrations report of more than 6 million unique visitors having logged on to the site over the same period. It will not release enrollment figures until mid november. A number of comments about janet yellen starting to come from the senate. Among the latest, Senior Senate Banking Committee Richard Shelby says he would oppose with a filibuster unless some disturbing disclosure emerged. His comments come after senator rand paul says he plans to place a hold on the nomination unless Senate Leadership allows for a vote on his fed audit legislation. Apple doesnt fall very far from the tree in this case. And senator Lindsey Graham has vowed in an effort to block white house nominees unless we get more info about benghazi. Which i said earlier, that makes me wonder whether we learned anything a couple of weeks ago. When we couldnt really figure out what the Government Shutdown had to do with obama care and debt ceiling. Can you explain yellen, what that has to do with benghazi for me . Whats weird is when i talked to senate youre Steve Liesman, right . Im Steve Liesman. They say the benghazi thing is more worrisome than the rand paul thing because the benghazi thing is more out there in the Public Domain and more likely to gain i dont think it was handled well. But the connection, even though the rand paul thing makes more sense to tie yellen to the fed audit thing, benghazi and the fed and yellen, i dont really see the connection. Considering you said where do we draw the line, is 50 trillion too big . You mean on the feds Balance Sheet . Well, you asked what is the number . I did ask rhetorically what is the number. Thats what im talking about. Why talk to me . I dont know. I think the same of you. Lets start off 7 00 in the morning with quite a few insults. You know what i mean, though. If were going to talk about something, we thought we were priming the pump. We didnt know the economy ran on qe forever. We didnt. Wipe dont we bring in our distinct guests. Did you know that . We dont just prime the pump. Let me interrupt and say its taken me, what, about ten years to get charlie to come to the table. Lets all be nice. He said no because of you. Hes on our side. Hes on our side. Thank you very much for joining us here today. Its already fun. Great to have you here. Thank you. You know, we have been going back and forth about what the fed did or didnt do, what they didnt do back in september was to start the tapering process. Youve vocally been a critic and said you thagt they missed an opportunity. I think from my perspective the economys outlook hadnt changed that much since june. I think the fed can do little about the near term. I think its important to keep our focus on the intermediate to longer term. And if you look at the forecast, our forecast for, you know, 2014, 2015 really didnt change very much. Yes. I thought we kind of missed an opportunity to make a small gesture to begin signaling that, in fact, this is a dial we can move and we can adjust it and fine tune it, if you will. But im worried that might be i think the difficulty of us doing that in september, signals may be using or thinking of qe3 as some kind of thing that we can move around with some precision or fine tune, maybe a very difficult thing to do. Seems to me the fed was setting a higher bar for pulling back any sort of quantitative easing. What will change, though, is the voting makeup of the fed youre not a voting member, but you will be in january. That will be enough. A different set of people voting around the table . I dont think that really makes that much difference. You know, the language and the nature of the discussion. Building a consensus for actions. Not always successful at that. And you can build a majority. And thats always going to be the case. I dont think it matters that much at any given year what the voting composition is. You talk to Richard Fisher all the time, i know as one of your colleagues. Do you remember was it two years ago when he he comes on quite a bit. We hope you come on quite a bit too. He comes on and he said, look, we have done enough. Weve done it was like two years ago. We have primed the pump. Weve done enough. Now its up to the private sector and banks and everyone else to start doing what they need to do to get this going. Was he dead wrong two years ago . No, i dont think so. I have not been i have not been a particular fan of the qe. I dont think its terribly effective. Ive said that way back when we did qe2. Qe1, i think is a different story about the motivation and the rationale for that. But qe2 i was not a big supporter of. And we have to remember that the current program, what they call qe3, the sort of Ongoing Program is now in terms of how it increases the Balance Sheet is already 50 bigger than qe2 was. You must be very nice and very collegial because given the fact you didnt think qe2 was necessary, you must be going crazy now with 85 billion. I am very collegial. Must be very nice. Lets talk about the way forward. The fed, the board it seems, or the committee, seemed to give us three tests for how they might satisfy the conditions for tapering. I dont know, actually, if you subscribe to those three tests and those were confidence in the outlook Going Forward, no concern about fiscal restraint was the second one and the third one wait, am i going to have a third . There we are. And financial restraint. Now, looks like you satisfied the financial restraint one. Do you subscribe to these . What is the timetable for meeting those three . Im not going to offer a timetable. We have to think hard. The committee has made clear, we like for our policies to stay contingent. Contingent on the economy. And thats been hard to do with qe. And i think the evidence i was alluding to in september suggests how hard that is for us to sort of react to data on a regular basis. I think thats difficult to do and very difficult to communicate. Its easy to say were data dependent, but its much harder to say more precisely about how. We havent been clear about that. Im beginning to think in september was an example of how hard this is going to be to fine tune, if you will. Im actually leaning toward the view that, look, qe2 and qe1 for that matter. Qe2, we announced a volume of purchases. In that case, it was 600 billion. We said we were going to buy 600 billion and then were going to stop and see what the economy looks like and then make another assessment. Im actually leaning to believe maybe thats a better way to get us out of this box of fine tuning and adjusting by putting a number on it . Putting a number on the size of the Balance Sheet or how big this program is going to be and say were going to weve already bought almost 1 trillion. How much room would you have to give yourself on what that number is . Because the second you announce that number. Removes the data dependency. Well, we havent been able to describe very accurately how were being data dependent. We know how does the qe program supposed to work . Its supposed to work about the size of the Balance Sheet. Its how much assets we totally buy. The portfolio balance effects that creates and so the theory is its the size of the Balance Sheet this providing the accommodation. So the logic of qe2, you say im going to increase the Balance Sheet and thats the amount of accommodation youre providing. So would you symptom right here . Well, i didnt want to start. Thats kind of a moot question. No, the train is moving. Youve got my point is, i think it would be worthwhile for us to consider how do we get out of this box . How do we get out of this program in a sensible way without confusing it with our Interest Rate program, our Interest Rate forward guidance. And weve known for a long time how to move Interest Rates up and down and the public, the markets kind of understand that. We dont know much about how to move asset purchases up and down. And were discovering how difficult that is. So and the committee was struggling over the summer with the confusion where the committee was trying to explain to the public, look our Balance Sheet tool is different from our Interest Rate tool. Seems to me the fed keeps putting itself in a box, though. What im suggesting, maybe we ought to think about disentangling those two by saying, heres the announced size of the program. Were going to do it and were going to buy this much, whatever that amount might be the committee can decide on. And then when thats done, well look at the economy and well decide, do we need to do more or not . That would disentangle these things in a way that might be very beneficial. So its just an idea to think about as a way to sort of make some progress because obviously its very hard for us to change course on this sort of the way we try to do in september. Very difficult. Were going to take a quick break. Well have much more from charles right after plus, why at ts ambitions to expand in europe can run into trouble. This is a big story. Because of the nsa surveillance. But for American Companies writ large. They cant come over here. And watch whats happening. First, looking for a little weekend reading, go to squawk. Cnbc. Com, the latest edition of the talking squawk blog. Features our squawking dead halloween special. Plus team danica, shes hosting the Country Music awards. Squawk will be right back. [ female announcer ] what if the next big thing, isnt a thing at all . Its lots of things. All waking up. Connecting to the global phenomenon we call the internet of everything. Its going to be amazing. And exciting. And maybe, most remarkably, not that far away. Were going to wake the world up. And watch, with eyes wide, as it gets to work. Cisco. Tomorrow starts here. Welcome back to squawk box this morning. Making headlines. At ts desire to expand into europe apparently running into unexpected hurdles. The wall street journal pointing out that the growing outcry over the region over the nsa surveillance is becoming a problem. The paper says that german and other european officials said any attempt by at t to acquire a major wireless operator would face intense scrutiny. And many expect at t to make a play for vodafone as early as in the first half of the year. Theres been a lot of sort of signaling theyd want to do this. I think its a big issue for all American Companies who want to expand abroad because of the nsa. And by the Way Communications company. Communication companies. The flip side is we were talking about it during the break. Lenovo is now interested in blackberry. By the way, president obama uses a blackberry. You have to imagine that theres going to be a conversation about whether the chinese are going to be able to spy then and you have a blackberry z10. A canadian company. What can obama say about canada . Personal computers manufactured by lenovo have been banned to used by Government Networks United States, britain, canada and new zealand. There you have it. The point is, this is going to become a big back and forth. Lets get back to this hours special guest. Philadelphia Federal Reserve president charles plasser. Oils down, no inflation in europe. No inflation here. Stock markets at new highs. Whats wrong with having the tenyear back at 2 1 2 and having mortgage rates, the housing market. If youve seen no negative consequences, have you been wrong . No, i think the problem is we dont know yet. Thats the whole point about thinking about policy and Monetary Policy as having long run consequences is sometimes the costs are out in the future somewhere. And theyre uncertain. I mean, the fed often times talks about Risk Management. And we do. We think about what are the risks to the economy and what are the consequences. And we try to anticipate what those risks are. And many people think its very important that we manage Monetary Policy with regard to those risks. I also think we have to think about the risks that our policies themselves cause. Theres a Risk Management issue there. And its not because that we know whats going to happen. Its because unintended consequences or the buildup of risks can be very important. I think we have to balance, not just the risks in the economy, our own risks that were creating about down the road. And i think many people myself included im not alone in this are beginning to worry about the consequences of how we unwind ourselves from all this stuff. I would think so. And i think thats very important. And we have to understand there is a risk there. I would think lets say youre a u. S. Corporation. If you didnt think qe2 was a good idea and then, i remember when qe3 was announced and we were all just dumbfounded it was going to be 85 billion. So was i. I just in im surprised you dont go up to some of your colleagues and shake them. Who knows. Go you think theres any chance we go up from here if the economy doesnt cooperate . I think it would i think that hurdle rates probably very high. Very high to increase qe. I think its very high. Very high. So, yeah, i think the fed in fairness is frustrated. Wed like to see the economy growing better. Wed like to do what we can. You know, i mentioned earlier that qe2 was 600 billion and the accommodation provided by that is measured by the increase in the size of the Balance Sheet. Now were at 1 trillion for qe3. We havent seen this breakout in growth that we would like to see. Seems to me, you can ask yourself a couple of questions. El with, either we havent done enough and the 50 increase on top of what weve already done didnt help very much, or perhaps its not working the way we would like to see it work. Either one of those what if murphys law exerts itself and weve been in recovery for five years. What if unemployment stops going down. And what if theres a slowdown globally. What if its not our fault. Were stuck. Would you change . As one of the reasons when i alluded to the fact earlier that maybe we ought to think about qe as what, how much total do we want to buy as a program. That would be a huge because then, suppose youre right. Suppose you have the bad scenario where unemployment kind of gets stuck at 7 . Im not suggesting thats my forecast. No, i know. But if you tie qe to some sort of Employment Unemployment rate or labor market thing and things dont you could be in this thing for a very long time. They change the parameters at any point . If you dont set the parameters in something your willing to live by, then you undermine your own credibility. So you have to be very careful about how. Like not tapering. Perhaps. Charlie, how much of whats holding back the economy is from the other side of washington, the fiscal side. And how much of what the fed is doing now because at least the majority of the board feels like its forced essentially to carry the water for the fiscal side . Well, i think theres certainly some of that. And theres certainly some feeling among my colleagues thats what important right now. I do think, though, Monetary Policy has to be careful about the way it interacts with fiscal policy. And i think we have to be careful because we we could easily find ourselves in what some people have described as a fiscal dominance regime where Monetary Policy becomes totally driven by fiscal policy. And i think thats not a good place. How much of that is the conversation inside the room . When you were thinking about what to do in september, for example. How much of the conversation was, well, you know, were going to get into this debt ceiling fight and there could be a Government Shutdown and who knows whats going to happen. We knew that was coming in june. It wasnt a surprise. We knew there was going to be a debt ceiling fight in the fall that was on the calendar. So it wasnt it wasnt new news in some sense. And, you know, i think, for me, the fiscal side i dont believe the shutdown is terribly inconsequential in terms of the economy in the short run. Theyre going to be small and temporary. And what and the debt ceiling is another issue. I think the problem on the fiscal side is not those decisions, per se, but the inability to deal with the long run fiscal sustainability. Right. These two keynesians want another stimulus program. Anyone on the fed who wants to borrow more money and spend it on jobs . I dont. But i cant speak for anybody else. Oh, carrying the water for the Congress Wont spend any money for us. How much of this is having to read how much of your job is having to read the political tea leaves as to whether both sides will get along on a specific issue . Well, i think theres some of that that people think is important. I tend to try to want to minimize that because that puts the fed in terms of how it goes about conducting Monetary Policy in a very bad spot from my perspective. It did make undermines our own independence. Did make the fed look smarter for not tapering. Gave them cover for that. Little comfort. Hes not nodding, hes not take a shot of him, dont take a shot of me. If nothing else, charlies very consistent. Yes. They wont let us build anymore highspeed rail between cities joe, thats not what what are you saying . Longterm entitlement reform . Im saying do no harm. I do not want to spend more money. Much more still ahead from the Philadelphia Fed president Charles Plosser, plus more top stories. Squawk will be right back. So i c an reach ally bank 24 7, but there are no branches . 24 7. Im sorry, im just really reluctant to try new things. Really . Whats wrong with trying new things . Look mommys new vacuum cat screech you feel that in your muscles . I do. Drink water. Its a long story. Well, not having branches lets us give you great rates and service. Id like that. A new way to bank. A better way to save. Ally bank. Your money needs an ally. In our headlines today, gambling revenue in macau surging to a record high. There was a week Long National holiday that boosted visitation for big spending mainland gamblers. We will have more comments from fed president Charles Plosser when squawk box coming back. Yo, yo, yo. Aflac. Wow. [ under his breath ] that was horrible. Pays you cash when youre sick or hurt . [ japanese accent ] aflac. Love it. [ under his breath ] hate it. Helps you focus on getting back to normal . [ as a Southern Belle ] aflac. [ as a cowboy ] aflac. [ sassily ] aflac. Uh huh. [ under his breath ] i am so fired. Youre on in 5, duck. [ male announcer ] when youre sick or hurt, aflac pays you cash. Find out more at aflac. Com. At bny mellon, our business when yois investments. Rt, aflac pays you cash. Managing them, moving them, making them work. We oversee 20 of the worlds financial assets. And that gives us scale and insight no one else has. Investment management combined with investment servicing. Bringing the power of investments to peoples lives. Invested in the world. Bny mellon. Sometimes they just drop in. Always obvious. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Welcome back to squawk box this morning. President obama reportedly ordering the nsa to stop eavesdropping on the headquarters of the imf and world bank as part of a review. The order said to be the latest move by the white house to demonstrate its willingness to curb some surveillance in the wake of leaks by edward snowden. I dont know if you feel better theyve stopped now all of a sudden. Or if you believe that theyve stopped. But nonetheless, also this morning, microsoft cofounder paul allens fund suggest microsoft spin off the consumer business. The Financial Times reporting that the man who managing allens fortune suggest microsofts businesses are detracting from the Software Business which, of course, drives earnings. Also, take a look at u. S. Equity futures as we speak. Weve got green arrows across the board, dow looking like itll open up about 44 points higher. Real quick, we should also note headlines which have been flashing this morning, jpmorgan disclosing for the first time publicly that they are being investigated over their hiring practices in china. This is a story weve talked about a lot on the program and have been reported. Being investigated here in the United States or in china . No, my understanding is the doj here in the United States s is all theyre saying is the doj is now looking into this this is something thats been reported. But i dont believe they had publicly acknowledged in any of the filings before, but im going to do more work on that. Okay. Great. Our whats working series continues this morning with a cautious Investment Strategy aimed at minimizing loss instead of maximizing gains. Joining us right now is the Portfolio Manager at International Value advisers, thank you for coming here today. Thank you for having me. Tell us about your strategy. Youre looking to minimize losses. Thats right. We manage mutual funds as if they are family trusts, basically and pay more attention to the Downside Risk than the upside and we try to compound at a reasonable rate over a full cycle. Thats a strategy that people probably flock to a lot more years in 2008 and after that. Thats correct. When you say markets taking off like they did last year, how do you kind of weigh the two . Well, people still remember the crisis. I think weve done a very good job educating our investors. They understand the bull market will lag a little bit. But this year with only 55 in equities, weve managed to catch about 80 of the upside in the index and the absolute performance still very respectable, you know, more than 16 . Is it a lot harder to find values, though, when the stock markets have risen so rapidly . It is. And we are raising cash at this point. We believe that all Asset Classes tend to be fairly expensive today. Its probably towards the late inning of a great bull market. I wouldnt call this a bubble yet because we dont see disruptions. We see different Asset Classes or being 10 , 15 overvalued, but its not crazy and we dont see the dislocations you usually see with bubbles. We do see easy credits in the high yield bull market. We see more in flows into equities. We see variations. Its time to be a bit more cautious. There are still opportunities out there. We have president plosser with us. Weve been talking about the fed strategy. Is it impossible to fight the fed at this point . Well, you know, we are not macro investors. Were trying to determine the value of a business, what a business is worth. And whether Interest Rates or shortterm Interest Rates or zero, 1 , 2 , 3 , doesnt change the businesses, it can change the valuation in the stock market, but not the values. And their fundamental values will be being reflected in stock markets. Lets talk about a stock you do like, devry. Yes. Its misunderstood by the market. Those stocks have suffered mightily in the last few years. Theres reform. Reform long overdue to make the product better to make sure that students dont default on their loans and get a proper education. Its definitely the right thing to do. As a consequence, these businesses had to shrink their top line. Also, an interesting company, they do very well. If theres a recession, more people go back to school. Theres a mix of more regulation. The wrong part of the cycle for the stocks because more people are going back to work. Whats not understood about devry is you have medical schools. And in the medical schools, there hasnt been any problem whatsoever. No defaults. The number of students continues to go up, the number of campuses, they continue to open up. And you look at that segment alone, its almost worth the stock price and you get the rest for free and the rest will eventually come back. Did you relocate over here . Are you a citizen here now . I am applying for my blue passport. Do you still pay taxes in france . No, i dont. Its unbelievable, isnt it . It is crazy. You only got 7 of your assets. Im surprised you have that much in france. French companies are global. Second, theyve been beaten up so much. No, no i got you. You have no access to capital. So the only very good businesses have survived in france. Theyve got to be good. Thats right. Thats right. So they dont need much capital, they usually have brands, more towards the Services Side of things, theyre very global and as a consequence, you do find great stocks listed in france with very you went to a French Business school. Yes, thats an oxymoron. Thank you for playing along. Thanks for coming in. Thanks for having me. Lets get back to this hours special guest, philadelphia Federal Reserve president Charles Plosser. Youve heard of guys that build like bomb shelters and stock it with canned goods. There are people in the past that said once the government puts in a policy or program during a crisis, its very hard to get out of that program. The people that are really sort of fanatical about antifed programs think this program will never be ended. Is there any chance thats a possibility . And weve painted the scenario of if murphys law doesnt allow us to lower the unemployment rate, youre stuck in a box. Yeah, i think we will end the program. Theres no possibility this wont end . No, i dont think so. I dont think thats the case. I think theres a big question as to when and how big itll grow and therell be debates of that some that will depend on the state of the economy. One of the reasons i liked my suggestion about lets put a number on it. And then if the Economic Conditions when that time this is the way we did qe2. It wasnt disruptive at the end. We didnt do anything for a year. Gives us the opportunity to reevaluate the state of the economy at some point. Im trying to think of the negative things, this is a news business, we want to scare ourselves. So if rates do ever normalize right. And the fed has this huge amount of bonds that its olding, ive seen numbers of the kind of losses that the fed could take if rates went to 3 to 3. 5 . What would that look like . How would that hurt the country . How would that hurt . I think there are two ways to think about it. One is that, you know, the fed has suggested at some point, we may not sell the assets, well let them mature. Can we do that . You can, you can. I think one of the risks, though, we take is we dont know with a Balance Sheet and as many assets as we do have what the path of Interest Rate is likely to do and whether the tools we have can suffice to manage the outflow and credit in the economy without selling. We think we can, but we dont know that for sure. One of the things i always used to teach my students was, if you dont have plan b, you dont have a plan. And i think we as the fed and as a central banker have to think about what could go wrong and how are we going to manage in a world if things dont go nice and smoothly like we expect. And thats a challenge. Thats going to be a challenge. And thats one of the risks i think we face. Have you been surprised that inflation has been so low. No, in fact, if you believe some of my colleagues in the way they think about the phillips curve and the people that talk about, its a surprise that inflation is as high as it is. So i would yeah, im a little bit surprised, but ive never said inflation was imminent. We created over 2 trillion of excess reserves sitting on the Balance Sheets of the banks. Just sitting there, not inflationary. It will be inflationary when that starts to flow out of the banking system. Thats when we were going to have to start worrying about inflation. And not until then. Im not predicting inflation really soon. What were you worried about with qe2 and qe3. Because the difficulty of preventing that from happening when the time comes. Still is inflation down the road . Yeah, thats one of the things, absolutely. A lot of extra tinder sitting around. Its like kindling in a fire. Not burning it and it wont burn until it gets lit. And our challenge, the feds challenge is going to be managing that process at that time. I wanted to ask you about the communications policy. Just how the sort of steady march towards more and more transparency. Do you think thats a good thing . Do you think it is a healthy thing for the markets for the economy . Do you think its creating undue pressure and undue influence on things . So as a general proposition, i think transparency is a very good thing. We live in a democracy. Its important that the central bank be accountable. And one of the ways is to be as transparent as we possibly can. Between transparency and what people call discretion and policy making. Transparency requires you to be clear about how youre conducting polgconduct i ing policy. And if you cant be clear because you want to be a highly discretionary policy maker to do what you think is the right thing at the right time, you cant describe that because its discretionary. So you have this but you cant be discretionary and at the same time be clear particularly about the future path of policy. Whats the answer then . I think we need to be more systematic in our policies. And exercise less discretion and more transparency. Thats my less discretion. That gives you less flexibility. Were going to talk more about this. We have some time much more liesmans going to be back. We have more with president plosser still ahead. Coming up, stocks to watch ahead of the opening bell and then final thoughts from Charles Plosser and dont miss squawk box on monday, our guest host is going to be another fed president , st. Louis fed president jim bullard. Back in a moment. Over the next 40 years the United States population is going to grow by over 90 million people, and almost all that growth is going to be in cities. Whats the healthiest and best way for them to grow so that they really become cauldrons of prosperity and cities of opportunity . What we have found is that if that family is moved into safe, clean Affordable Housing, places that have access to great school systems, access to jobs and multiple transportation modes then the neighborhood begins to thrive and then really really take off. The oxygen of Community Redevelopment is financing. And all this rebuilding that happened could not have happened without organizations like citi. Citi has formed a partnership with our company so that we can take all the lessons from the revitalization of urban america to other cities. So we are now working in chicago and in washington, dc and newark. Its amazing how important safe, Affordable Housing is to the future of our society. When we have a fed president , we usually bring back the animal orchestra. Bullard loves the animal orchestra. Hes a regular. He is. Well play the animal orchestra for him on monday too. We figured wed roll it out early. Well take a look at a couple of stocks to watch. First solar reporting better than expected Quarterly Results, among the catalysts, the companies begun recognizing revenue from a major project in california. However, the company also cut its Sales Outlook for the year and its saying revenue from some projects may be pushed into next year. The stock is still trading higher. Nissan announced the chief operating officer, which stepped aside from the number two post at that company, which is launching a management makeover as it grapples with quality issues in an ambitious drive to boost market share. He has set aggressive expansion targets from nissan to boost Global Market share and its operating margin to 8 by the end of march 2017. But multiple recalls and a sales slowdown in china have cast a shadow over the plan. And in an announcement today, nissan also cut its next year profit outlook by nearly 20 . And there is competition from, andrew, that Korean Car Company that Korean Car Company hyundai. However you want to do it. Hyundai. Hyundai. Rhymes with sunday. You merged it with honda. I had some conversations when i was in asia which was particularly embarrassing when youre in the area no, i was in the area. He said hyundai. No, i asked him. What did he say . However i said it, he said it was right and ill take that to the bank. Okay. All right. When we return, well ramp up our conversation with Charles Plosser. Also, you looking for weekend reading, you can go squawk. Cnbc. Com. Plus, an apple a day and team danica invading the squawk set. The address is squawk. Cnbc. Com. Right now as we head for a break, check out the tenyear note this morning yields at 2. 587 . Here we are, me and you on the road and we know that it goes on and on [ female announcer ] youre the boss of your life. In charge of making memories and keeping promises. Ask your financial professional how lincoln financial can help you take charge of your future. Oh, oh, all the way oh, oh just by talking to a helmet. It grabbed the patients record before we even picked him up. It found out the doctor we needed was at st. Annes. Wiggle your toes. [ driver ] and it got his okay on treatment from miles away. It even pulled strings with the stoplights. My ambulance talks with smoke alarms and pilots and stadiums. But, of course, its a good listener too. [ female announcer ] today cisco is connecting the internet of everything. So everything works like never before. I got this. [thinking] is it that time . The son picks up the check . [thinking] im still working. Hes retired. I hope hes saving. I hope he saved enough. Who matters most to you says the most about you. At massmutual were owned by our policyowners, and they matter most to us. Whether youre just starting your 401 k or you are ready for retirement, well help you get there. Welcome back to squawk. You are looking at a live shot of apples Flagship Store in new york right now as we speak. Going on sale in less than ten minutes in the eastern time zone. The air is nearly a third lighter than the previous ipad model. We were playing with one on the set here before. Its amazing people will stand outside in the rain for a product like that. It just doesnt happen in any other concert tickets. I liked it. I wouldnt stand in the rain for it. Its cool. Its a little lighter. I dont need it today. Its a little lighter and a little better. Were going to get back to our guest host this morning, philadelphia Federal Reserve president also Steve Liesman returning to the table. I want to get you have a question. Mocking all day long, its so great. Charlie, the gdp has been in a 2 flat kind of muddy range. The stock market is soaring. Is there a disconnect between wall street and the economy right now . And is it you . Does the level of stocks right now, does it bother you . You know, im not a stock picker and im not i dont like commenting on the stock market. The stock market is what it is and itll continue to be what it is. And i dont like to think about Monetary Policy in terms of the stock market. What about the concern what the fed policy is creating a bubble that is an externality or that it was intentional to juice the wealth effect. So i dont like bubbles. And i dont like using bubbles because i think we never know its a bubble until its too late anyway. I think thats one of the big problems. But the question is, is how will this economy play out given the way asset prices and other prices have moved over time. And will we find in ourselves in an uncomfortable situation in a year or two down the road. If it turns out that all this stuff gets unwound in some way. Are we creating the possibility of volatility down the road . Is it okay to manipulate the Mortgage Market . We havent got time for this. Ive not been a fan of buying mortgage back securities because i think its fiscal policy. I could get you to say all kinds of stuff. Yeah, okay. Its amazing. Thats scary. Thats why youve got to be can i try a new one . Well, we havent talked about two things. One, is get your comments on too big to fail. Where are you on where we are . I dont think we solved the problem of too big to fail. I havent i dont think i think dodd frank kind of declared victory and moved on. And what should the role of the fed be in solving that problem . Well, i think the feds role is to get itself out of the business of bailouts and so forth. I think part of the problem is, theres some corners of the market where people said we solve the problem because dodd frank takes the taxpayer off the hook. But bailouts are not about it doesnt matter who pays to bail out. Would you raise Capital Requirements so high theyd effectively become smaller . I would be in favor of higher Capital Requirements, simpler Capital Requirements, focusing more on leverage ratios. And raise Capital Requirements would be my preference. Before we let you go, we have to ask you about janet yellen. What she going to do to change the whole game. I worked with janet yellen a lot. We served a lot together on the communications committee. I was engaged with her getting our 2 inflation target. I think shes a bright, capable how is it going to change . I dont think its going to change very much. I think shes very engaged thats the bad news . Well, im not making a judgment here. I think she is i think she will be will she be able to lead by consensus some people say ben has or hasnt . I think she is very good and very thoughtful and will lead by consensus and will listen and engage in conversations with all of us. Were coming up on the end of the year. Give us your best forecast of how next year plays out in terms of growth and in terms of what the fed does next year. Well, of course, it depends on a lot of different things. I think growth will pick up somewhat next year relative to this year. How much . 2 1 2 or 3 next year which i think is a reasonable guess. I think the unemployment rates going to continue to drift down slowly. Just as it has for the last three years. Its not going to speed up, particularly. And i think thats where were going to be. And we could very well be, you know, at 6. 5 by the end of next year. When you come back in october, is the fed still buying 85 billion of assets this Time Next Year . I certainly hope not. I hope the economy will pick up enough. Were going to leave the conversation there. Thank you for being here. Pleasure. Thank you for being here. My pleasure. Terrific. When we come back, the Economic Impact of the Government Shutdown and the new Health Care Law and how you should invest around that. Well talk about how obama care could impact your Companys Health plan. Two federal rule changes that could make your life easier all coming up on the 8 00 hour of squawk box. Stick around, well be right back. [ male announcer ] at optionsxpress, our clients really appreciate our powerful, 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 18882800149 now. Ptionsxpress by charles schwab. Afghanistan in 2009. On the u. S. S. Saratoga in 1982. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation because it offers a superior level of protection and because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Obama care off to an awful start. Reinforce the takeoff ramp . No, we didnt have time. Well talk to two policy experts about how the law could change your Companys Health plan. Changing the rules, your use it or lose it health plan could roll over year to year and you could use Electronic Devices during your airline flight. I just always leave my phone on and nothing happens. Yeah. Plus, cnbc wealth editor robert frank doing hardship duty at the ft. Lauderdale boat show. Its easy to grin when your ship comes in and youve got the stock market beat. The man worthwhile is a man who can smile when his shorts are too tight in the seat. How american yacht makers are challenging the european establishment. The third hour of squawk box starts right now. Welcome back to squawk box here on cnbc first in business worldwide. That was your homework. Did you ever watch it . Yes, years ago. Caddy shack. The producer gave you that. Its essential information. Im joe kernan along with becky quick and Andrew Ross Sorkin. I need to rewatch it. You need to rewatch it, exactly. Do you remember what he named the book . I christen you, i think the flying wasp. Anyway, were up about 43 points on the premarket. Every day, it seems like the the 85 billion, is it the earnings, what is it . Little bit of both. Little bit of both. Well take it. Well it for now. For now until it turns around. Hopefully it doesnt. Well show you a quick live shot right now of apples Flagship Store in new york, apples ipad air officially going on sale in the eastern time zone at 8 00 a. M. The updated device goes on sale as we speak. And the air nearly a third lighter than the previous ipad model. Twice what . Nothing. And also, well, see, now the question is how long that line will ultimately be in the next our or two. But a little bit other Corporate News this morning. New quarterly filing by jpmorgan noting the u. S. Justice department is investigating the banks hong kong hiring practices. We did know this, but this is the first time were seeing it disclosed this way. The sec was probing that situation. The firm adding to does closures of todays filing. Other headlines from the filing include that the bank recorded this is not a pretty number. 9. 3 billion in Legal Expenses in the Third Quarter including litigation reserves. Now, that compares to the kprashl doesn comparable doesnt make sense. For litigation reserves in the same period ago. Thats been the problem if there is one. Jpmorgan says authorities are questioning the banks currency trading, as well. And government investigations are in the early stage and in the filing, the bank says it is cooperating with probes. I will say looking through some of this on the hiring practices, it says that the firm has received subpoenas and requests for documents from the secs division of enforcement regarding among other things hiring practices among candidates referred to the bank by clients, potential clients and government officials. Affirms employment of certain employees in hong kong and the business relationships there in the asiapacific region. Thats what the story is. Lets talk about some washington news. Dismal debut numbers healthcare. Gov. Government Reform Committee show there were just six enrollments that managed to make it through the system in the first 24 hours. By october 3rd, there were a total of 248 enrollments that had been processed. This was according to notes for a center oversight war room meeting. That number contrasts with the Obama Administrations report of more than 6 million unique visitors for having logged on to the site over that same period of time. The health and Human Services department has said it will not release enrollment figures until mid november. They say it takes a little longer to enroll. But again, it shows you how difficult it can be to get through that process. And markets coming off a strong october. Joining us now with more on the markets, is the chief Market Strategist and senior Portfolio Manager and on the economy, wow. Were you confused, austin, you thought november 1st means its employment friday. So were not doing that today. I got up early, i came over here. What is going on. I know. Can you come back next friday . Well have you next friday. Okay. Well talk to you today. Professor of economics at the university of Chicago Booth School of business former chairman of president obamas council of economic advisers. Hey, austin, were you able to were you watching Charles Plosser, do you watch squawk box or squawking dead. Yeah, weve known each other for a long time. And you are an economist, right . What was that question . Why did you put a question mark on there. No. Its because, its like the economics, nobel prize for economics, you can be opposed in your viewpoints. And i think about the makeup of the fed and he definitely disagrees with a lot of what has been happening. Do you where are you on this . Do you think weve stayed a the this, at the well a little bit too long or the punch bowl too long with qe . Well, you know, you might think i disagree with everything you said, but i dont. There are many things i agree with. On the punch bowl point, though, about the fed, i think if you backed up the clock ten years ago and told people were going to have been going four plus years with a growth rate of 2 , unemployments 7. 5 or thereabouts or above for four straight years and core inflation well below the 2 target, every economist in the world wouldve said, well, obviously you should loosen Monetary Policy if youve been dealing with that for four years. Theyre trying to figure out how to loosen Monetary Policy when the Interest Rate is zero. When youre already at zero, exactly. Most of them would probably have said, well, you need to stay at zero and may not have thought of this creative way to do it. That might have surprised them to some extent. Let me get since were on the subject, bob, do you think the stock market is moving higher because earnings are doing well and the prospects are good for Corporate America . Or is it because of qe3 . You know, its all the above, joe. Can you give percentages . Yeah, i wish. Look, i think weve had a decline in oil prices, weve had a move down from 3 to 2 1 2 in the tenyear treasury. You add that to the mix you talked about and stocks will go up when lots people have tons of cash getting zero. I talk to a lot of Retail Investors and Financial Advisers and their clients are just tired of getting zero, watching the stock market go up. What would happen if the fed started to taper tomorrow. I know theyre not going to. When the fed says its about to taper, does that create panic in the market . Look, the fed has already shown us once in september, they will only do it when the conditions permit. So i dont want to act like it can win both ways, but in a sense i can. If they keep providing all this liquidity, thats great for the stock market, and if they begin to taper, it will be because the economys doing better than i get a better e on my earnings front. So, you know, im reasonably sanguine. At this point, its more of a lack of viable alternatives than discounting better Economic Activity . I think thats right. Look, a lot of us have been talking about an improvement in u. S. And Global Growth now for a bunch of months. We havent seen a lot of evidence. I think the prospect is still there, but stocks have moved up in the meantime and its got to be about i lost money in bonds this year, im getting zero of my cash, i dont have enough stocks. Austin, how do you you just talked about the four years. And you know what an incredible forecaster youve been on jobs fridays. Youve taken credit for it many times too. Are we why are we still so weak . And do you think what happens between now and the next debt ceiling issue, do you think what we do makes a difference now . And what should we do . Yeah, look, those are both important issues that you raise. Lets take them in reverse order. The last for whatever reason, every time we have a debt ceiling fight, Consumer Confidence plunges epic amounts. The one in 2011 is the biggest drop in the history of the series except for leemahman, bir than 9 11, bigger than iranian hostage crisis, and it took five months before Consumer Confidence returned to the dumpy levels it was before the 11 debt ceiling. This time, you saw a big drop in Consumer Confidence. If we get into another shutdown fight within the fivemonth period, i fear this thing could essentially turn into just a permanent thumb pressing down on Consumer Confidence. Im definitely worried about that. And you think thats a real possibility . I mean, handicap yeah, i do think i was getting heartened to see Mitch Mcconnell say there was definitely not going to be another shutdown because it went badly for republicans. Right. But i will say with the troubles of the health plan and the rollout of the website, you got to think that the same group that said lets demand to turn off obama care or to delay it, otherwise we shutdown the government. Each day that goes by without the website up, those guys are coming back. And in january, theyre going to be saying, no, you know what, health cares a winner for us. Lets again insist they turn off obama care. Austin, on the issue of the tapering, 85 billion a month was one thing when the federal budget deficit was a lot bigger than it is. It shrunk a bunch. Continues to shrink. Is there a limit to that in your view . Is that one of the reasons they may begin sooner rather than later . Its an interesting point. Obviously theres a limit of 100 . But i dont think that will push them to taper sooner than the Economic Conditions warrant. Even if theyre taking a bigger and bigger share of the total. I think the deficit came down quite dramatically. But now were getting essentially to the spot where the conditions are approaching something more normal. So its not going to the deficits not going to keep shrinking at that kind of rates it did over the last year. So i dont think thats going to be playing as much in their mind. But i do think its an important point. So weve got to go, austin, but since you left, weve had the shutdown, benghazi, the irs scandal, the obama care rollout. Does this am i making clear two hours after i left, they downgraded the u. S. Government. Youre on to something. Can you are you available to go back . I mean absolutely not. Look on the tv, theres no way theyre getting me back out there. Is this a coincidence . Did everything hit the fan as you stepped out . Its not a coincidence at all. Thats what im trying to tell you. All right. Good to see you. Thank you. Dont make any plans for next week, next friday. Were going to see them next friday. If you cant make it, well get zandi or both. Tlan thanks. Good to see you. How will Company Insurance plans change under the new Health Care Law . Weve got two policy experts weighing in next. And later, americans buy more than half of the worlds yachts but only make about 10 of them. Robert frank is going to join us. What an assignment with a company trying to change that right now. Take a look at the october gains in the market. [ male announcer ] what if a Small Company became big business overnight . Like, really big. Then expanded . Or their new product tanked . Or not . What if they embrace new technology instead . Imagine a companys future with the future of trading. Company profile. A Research Tool on thinkorswim. From td ameritrade. Hey [ male announcer ] when we built the cadillac ats from the ground up, to be the worlds best sports sedan. People noticed. Something like a phenomenon, baby youre Something Like a phenomenon [ male announcer ] the cadillac ats, 2013 north american car of the year. Lease this cadillac ats for around 299 per month with premium Care Maintenance included. Welcome back to squawk box. The troubled rollout of obama care raising concerns about Employer Sponsored Health care plans. Will Many Americans see a sharp increase this fall . Thats the question. An the american institute. Hes the founder and ceo of abalir health. Hey, guys, thanks for joining us. What are we going to see in truth . Weve already seen a number of Big Companies get rid of spousal care or insurance for the spouse. Is that going to be a trend . Or is it going to get even worse . Well, for starters, that was the trend before obama was elected. So i think youve got to take it back a little bit and youll see employers reducing the amount of coverage they give. Youll see them increasing premiums, adding copays and deductibles and that started a long time ago in truth. Joe, whats the reality in terms of how much cost will ultimately go up for people. It could be pretty substantial. The fact is that obama care requires plans to be more generous. And yet in a couple of years, theres going to be a penalty called the cadillac tax if you have a plan thats too expensive. So you have this movement and employers and employees are caught in the middle. Joe, policy question, though. If it costs more for people on a yearly basis or monthly basis, is it is it ultimately going to make Health Care Cheaper because its going to force people to make decisions that they otherwise would not make . Well thats what this is all about at some level. Right. I mean, the big question is, are these increases going to actually cause the Health Sector to become more efficient and cause people to make more cost efficient decisions . If, in fact, all we get is cutbacks in benefits, then that isnt necessarily driving efficiency. If, instead, we get health plans, we get employers saying to insurers, look, we want value based insurance design. We want our employees to respond to the financial incentives, then were liable to make some progress. You did a great job laying out both sides, but which side is it . Well, eventually well have to become more efficient. I dont see the Affordable Care act moving us in that direction at all. All its doing is adding costs and adding regulation. We need to cut back on regulation and give the private sector a chance to find a solution. Dan . Im going to disagree on this one. I think what people are really missing is that this law fundamentally changes the way that Insurance Companies make money. And they are structuring tighter networks, excludeing the expensive Academic Medical Centers from these networks. Its causing major changes in the delivery system. A lot of doctors are getting squeezed out of those networks and i think its going to reduce costs significantly. There are really significant changes in the marketplace right now as a result of this law. And the law also gives hospitals and Insurance Companies a direct financial incentive to score well on quality metrics, which, again, is something that a lot of people have really not focused on. Dan, you look like a young guy. Thanks. Thanks. I dont know how old you are. Im 49, every minute of it. Excuse me . 49, every minute of it. 49, every minute of it. Do you believe that young people are going to actually buy into obama care . Yeah, they will eventually. This is a generational shift. And you cant judge this law on the basis of one month of enrollment. Fact is, this is a major purchase. And people need to go online, they need to understand the offering, they need to search. But in the end of the day, there are a lot of people. People with chronic illness, heart disease, people with, you know, other kinds of diabetes, other kinds of illnesses who have not been able to purchase insurance in these markets for years and theyre going to go out and buy insurance. Joe, let me ask you this, theres been a lot of debate about whether Congress People and senators will be put on this plan or put their aides on this plan. Do you think thats going to change what the law will ultimately look like . Not at all. Thats a little political gainsmgain gamesmanship. People who have health conditions, people who need health care are going to sign up for insurance. Thats a good thing. Obviously thats the case. The big problem with the president s health plan is that the Young Healthy people are going to be looking at the premiums and theyre going to be saying thats not such a good deal. And, dan, before you say those are cheap premiums because of the subsidy, remember whos paying the subsidy. Its the taxpayers and the people who are already buying insurance seeing their rates go up. Well, that really varies, actually. I think whats more important for consumers as they start to look at these plans is they understand the full out of pocket costs theyre going to face. I mean, in a lot of ways, this is a Republicans Health policy dream. These are deductibles of 2,500 for silver plans, 5,000 for bronze plans. These are high deductible plans. The kinds of plans as you were saying will definitely be shifting costs back on to people who are making the Health Care Decision making. So i think looking back on this five years from now after its already rooted. And i think it will take root. You will see the Health Policy establishment of the Republican Party thinking this is not such a bad deal for us. A quick question. Gentlemen, i know youre not macro economists, but it seems to me that the fall in Consumer Confidence has to be somewhat related to this. Theres massive uncertainty here. The stuff were talking about here is not simple for the average guy on the street. Does the lingering effect on that have an effect on the economy . Does it become a big issue in the election next november again . Any thoughts on that . Yeah, there are theres a lot of uncertainty. Employers. One of the reasons we havent seen a lot of reporting on what employers are doing is theres uncertainty here. And they didnt want to make big mistakes. So theyre probably waiting things out. But the reality is that theyre also a lot of firms who have lower wage workers are cutting back on employment are reducing hours to avoid the problems of the regulations. I dont see this as i dont see this as a Macro Economic issue. I see this more as a political issue. I think from a Macro Economic standpoint, all these cancellations notices going out, thats a relatively small number of people. Most people get their insurance from their employer. And the employer insurance is relatively stable. Its still, you know its relatively small but its 14 million people. Dan, i just i havent read this quote to any true believers. And im glad youre here because we have one. This is thomas, he says and someone sent this to me. Its amazing that people who think that we cant afford now to pay for doctors, hospitals and medications somehow think well be able to afford to pay for doctors, hospitals and medication and a government bureaucracy to administer it, as well. This is primarily being done through the private sector. And i think its important to understand that you have Insurance Companies, the same Insurance Companies that offer you your care who are out there now competing to get the care wait a minute, the private industrys running some of the maybe some of the private websites. Not running this debacle were seeing play out in washington right now. Im not makie ining excuses the website. Thats a mess. I think the website. In general in general, now the governments going to have a lot of say and a lot of things. There will be a bureaucracy. Is that going to lower costs or increase costs . You know, again, most of this is private companies that are competing. So, yeah, theyre supposed to feel this website and cant get it up. That is really not the most important thing. The most important thing is these Insurance Companies are structuring theyre exclu excludeing the highcost providers. Weve got to leave the conversation there. Thank you for joining us this morning. My pleasure. Is that covered . What you just said . Was that covered . Anyway, coming up [ 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. [ male announcer ] the parking lot helps by letting us know whos coming. The carts keep everyone on the right track. The power tools introduce themselves. All the bits and bulbs keep themselves stocked. And the doors even handle the checkout so we can work on that thing thats stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. So everyone goes home happy. It is november 1st. But the fed will have to wait an extra week for the october jobs data. When we come back, well talk to greg ip from the economist and former fed governor larry meyer about the time line for tapering and the Economic Outlook. And then on monday, two hours with jim bullard. Stick around. Squawk box will be right back. G faster than ever, creating new opportunities for those who stand ready to seize them. In a time when the biggest risk is playing it safe, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, our flexible, collaborative approach helps forwardlooking companies not only run better, but 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 now more than ever, the future belongs to those who challenge the present. Therell be the usual presentations on research. And development. Some new members of the team will be introduced. The chairman emeritus will distribute his usual wisdom. And you . Well, youre the chief life officer. You just need the right professional to help you take charge. Welcome back to squawk box this morning. Chrysler is the first of the u. S. Automakers to report october sales figures. Up 11 compared to the same month last year. Slightly better than expected. We should be getting fords numbers in about an hour and General Motors about half an hour after that. Lots of automobile data coming at you. Were also watching shares of netflix this morning. Baird upgrading the stock to outperform from neutral based in part on the increasing commitment to original content. We like that. Content creators ourselves. And also Madison Square garden reported quarterly profit of 31 cents per share. 9 cents above estimates, revenue also beating consensus. The company which owns the name sake arena as well as the new york knicks. Although, entertainment revenues were slightly lower. Theyve redone msg over the past two years and its a lot nicer than it used to be. Remember the mystery barge in San Franciscos bay we discussed you reca eed earlier there were all kind of stories. Turns out it might be the best party boat ever. A local San Francisco tv station reporting itll feature luxury showrooms and a party deck for the tech giant to market google glass and other gadgets. Access will be invitation only. The project is reportedly personally directed by google cofounder. And said to be googles attempt to upstage rival apple and its chain of Retail Stores. Some people thought this was going to be some kind of massive floating data center. But this is for google glass. Yeah. This is something. One way to market it. Absolutely. And some websites said there were on some coasts there was google barges. I wonder if we have a barge in new york as well. If so, we should probably do the show from the barge. How about that . You do the show from the barge. Ill do the show from the barge. Ill do it from one of Robert Franks yachts. The faa is loosening rules. Youll soon be able to use your electronics throughout your trip. But connecting to the internet will be prohibited when the plane how are they going to know . They have things. How are they going to know whether you actually turn, go to Airplane Mode or not. And think about all those fights its going to create. If i see you violating, i will raise my hand. Youre going to raise your hand . How do you feel about those people, by the way . Tattle tails. Youre a serial abuser. I am and ive had people next to me well, im kind of those people. I think youre a jerk if you violate those rules. You think youre above the law. And then i get in these awful conversations where i try to explain to them that you are above the law. That its not going to hurt the plane. Thats what i say to them. And they say, but the rules are the rules and then i say okay and youre not under a magazine or something. And you keep typing. Thats amazing, youve admitted youre not comfortable flying that much. I fly a lot but i dont love it. You dont love it. But i would think if you thought you were influencing but i dont think im influencing. How do you know . Now you know. Now i know. You used to tell us you were. They told us. Heres how i knew, all those flights on the gulf stream where the pilot never says anything, i figure on the rare occasion i have to fly, you know, with the regular people i like the way youre saying this like its not true. Dont think its a good tact. Thank you. The time line for fed tapering still not set in stone. Earlier this morning, we spoke to Philadelphia Fed president Charles Plosser. I think it would be worthwhile for us to consider how do we get out of this box . How do we get out of this program in a sensible way without confusing it with our Interest Rate program, our Interest Rate forward guidance. And weve known for a long time how to move Interest Rates up and down. And the public, the markets kind of understand that. I dont know much how to move them up and down and were discovering how difficult that is. Joining us is greg ip, a cnbc contributor and also larry meyer, cofounder of Macroeconomic Advisers and a former fed governor. Im glad we used that sound bite, i wanted your thoughts on it. Larry, as somebody whos been there, what did you think of the idea of changing the parameters . Its about time to look at the opportunity to taper. And i think thats the general view on the committee. The question is, is the data supportive . And the chairman has given a very sensible threepart test having to do with labor market conditions, growth momentum and inflation. Were not there yet. The time line depends on the forecast. The probabilities build as we go out and, you know, is there going to be enough data in december . Probably not. Probably not. January, maybe. By march, i think compelling. I think his point was you can change the parameters by setting this up by saying theres a limit to this. We can reassess at that point and sit down and say if the conditions still warrant it. We can decide to go ahead with it. But his point is its a little easier to say no by setting an automatic cap in. You dont want anything automatic. The point here is that Monetary Policy should vary depending on Economic Conditions. You dont fix things like that so that youre not being able to be his point was you could go ahead and extend it from there but you would have to vote in the affirmative to extend it. They did it the first time. They set qe2 was completely different. At the beginning, they set a time, its what we call a closein program. Qe2 was an openended program, every meeting, essentially, you have to vote whether to continue it or not. Thats basically what they do. Let me jump in here for a second, becky. Sure. I think that one of the points that Charlie Plosser made was not a controversial one. The notion that you can deliver the same stimulus by leading more heavily on the promise to keep rates at zero and doing a little less by continuing to buy bonds. I think, though, the fed still and by the way, i think thats a sentiment that probably most fomc members can agree with. The problem is theyre still bound to this commitment that they continue the bond buying until they have sustainable improvement in the outlook for the labor market. When december comes, i dont think theyll have that. The data they have will still be incredibly polluted by the Government Shutdown. The recent data on things like jobless claims are not terribly supportive. To start a taper in december absent surprisingly strong numbers, theyd have to come in there with new projections for the economy that have a high degree of conviction. Its possible especially because they consider the biggest negative as the fiscal policy. But that would be a pretty gutsy move in the presence of such bad data. What do you think happens, greg . If its not likely to come in december, which is the same thing larry has said, what are we looking at . Do we know at this point in time . Theres two possibilities. First of all, the data starts to get better in january and february and makes it an easy call. I think she would like it, i think most of the committee would like it. And i think the markets will have been prepped for it. What if the data is as bad as it was for the last few months. Are you still stuck in qe infinity . You have a big effort to review the possibility doing what he referred to. Do we pivot away from a policy that focuses primarily on expanding the Balance Sheet or do we begin guiding people to a more aggressive policy of keeping the rates lower for longer . Gentlemen, i wonder if issuing the word tapering out of their mouth hadnt resulted in 100basis point backup in rates, if we didnt see the carnage in some of the currency markets, southeast asia, india, et cetera, might the result in september have been different . Was it really based on real growth and inflation and the jobs market . Could it have been those things plus the mess in washington they saw coming . Well, let me grab that one, bob. I think you raised a good point. Can i say all three of those factors were involved . Theres no question they were taken by surprise by how much long rates backed up in the United States. And of course, you saw the same phenomenon in the emerging markets. Thats why i think it was significant in the last statement they took out the line about the tightening financial conditions to be a factor not to go ahead with tapering. One of the views inside the fed there was a whole lot of crowded bonds. In some sense kind of vented the speculative excess that was there. That means the path Going Forward is a little bit easier because the hot money has already left. I know theres a lot of skepticism on wall street about that. We had Mohammed El Erian the other day saying hes very concerned about when this process resumes. I was going to say could i say that discrete changes come from surprises, could be data surprises. I think its a little surprising that the big surprises were communication surprises. They happened in june, september, were on a roller coaster. And so i think that was the issue. And i think greg is exactly right. Had a lot to do with market position and market dynamics. The fed was very successful in pushing people into high duration and risky assets. Thats what Monetary Policy does. But it did it to such an extent that made those markets very sensitive and vulnerable to surprises. And one other point, if not now, when . The longer you delay this because youre afraid of the market reaction, probably the more severe it becomes. Right. I would say it hasnt changed, it hasnt gone away. Exactly. Gentlemen, thank you both very much. Well see you both again soon. Thanks, becky. And coming up, stock picks from our host. Well continue our whats working now series. Plus, only a small percentage of yachts are made in america, but a Louisiana Company is trying to capture market share. Robert frank will join us next from the ft. Lauderdale boat show. And if youre looking for a little weekend reading, go to squawk. Cnbc. Com, the latest edition of the talking squawk blog features our squawking dead halloween special plus an apple a day and team danica invades the squawk set. The address again is squawk. Cnbc. Com. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Help the gulf when we made recover and learn the gulf, bp from what happened so we could be a better, safer energy company. I can tell you safety is at the heart of everything we do. Weve added cuttingedge technology, like a new deepwater well cap and a stateoftheart monitoring center, where experts watch over all drilling activity twentyfourseven. And were sharing what weve learned, so we can all produce energy more safely. Our commitment has never been stronger. The ocean gets warmer. The peruvian anchovy harvest suffers. It raises the price of fishmeal, cattle feed and beef. Bny mellon turns insights like these into powerful investment strategies. For a university endowment. It funds a marine biologist. Who studies the peruvian anchovy. Invested in the world. Bny mellon. Welcome back to squawk box. Chevron posting Quarterly Results this morning. The energy giant posted 2. 57 a share. And that was short of the consensus of 2. 71. Sharon, weve seen that repeated with the Big International integrated oil companies. It had been the crack spread and the refining margin which had been weak. More Refining Companies are coming back to america. Are megayachts the next big Success Story . Robert frank joins us from the ft. Lauderdale wow. Why couldnt you be in there . Are you above that . Reporter no, ill be below that in a few minutes. Im going to keep any clothes on for now. All right. We need ratings. Well, listen. Listen, more than half of the yachts sold in the world are purchased by americans, but only about 10 are made by americans. Now, theres one company thats trying to change that, trinity yachts, based in louisiana. Theyre founded in 1988, they have a shipyard that can now build yachts up to 400 feet. It says the quality is just as good as the european builders. Take a look at this yacht, its 190footer. Its got a wine cellar, 3,000 square foot living room. Not one, but two jaquzzis. A helicopter pad and a half basketball court. Now, unfortunately, trinity right now is not selling many of these boats, company had orders of 24 new boats in 2008, last year, they had one. Their workforce has fallen from 1,000 to 150. Wealthy buyers right now, theyre just not confident and they have become media targets. Part of it, i think, is the political climate. You know, youve got to be in the top. 5 not the 1 to afford one of these yachts and theyre being vilified in the press right now. Theyre the wealthy who are taking from the poor and the sad part is, we had a very wealthy american was going to build with us. Started hearing all this and he decided not to. The problem is what people dont realize is the american jobs it costs. Now, guys, they are being helped by a weaker dollar right now which makes trinity more attractive, especially to overseas. 7 of the last 10 deliveries for trinity were to wealthy russians, middle eastern and mexican buyers. Maybe were becoming an exporter of super yachts. Back to you. Robert, you Start Talking about orders coming in and why it dropped off. Is that really something thats just affecting that company . Or has it affected other companies too . Other ship no, Walking Around here yesterday. Yeah, talking to all of the ceos. The yachting industry isnt in a recession. It is in a depression. I mean, if you look at the dropoff in prices, new build volume, this industry is still pretty much where it was in 2009, 2010 at the bottom. It has not recovered. A lot of boats for sale, not many new build. Except at the hype end when you look at sort of 250foot plus like this yacht behind me. Those mega mega yachts are selling, but the middle of the market is still really down and out. Wow. You dont have a monitor. You dont have a monitor down there, do you . Because im not too proud to all of the im not im in the you cant you cant see whats going on, robert, but you know whos in the pool right behind you right now, joe. They got shot there. That guy said the top half of 1 . That guys got to go back and look at some of these figures. People that can afford that are in the top. Yeah. 0 you need scientific notation to afford one of those yachts. Yeah, i think its more like. 01. I think what hes talking about is the market, as well. And thats around 200,000. Did you ever see cape fear. That just happened to me. The end of it where robert its amazing how dry your shirt is too. Yeah. Its a special. Were you hoping id have a wet shirt on . Absolutely. Really . Like a wet tshirt. Come on. Its a morning show. Sorry, bob, robert frank. Sorry, im apologizing to everyone for that. Anyway. You just upstaged. Did i ruin the entire the segment. Do you remember cape fear, hes handcuffed to a part of and hes still. Amazing. He was ripped in it. Do you remember . He was. Totally. Tattoos everywhere. Yeah. Scales of justice. Robert frank, thank you again for hes thats very difficult assignment. Coming up, dont close out the trading week without jim cramers stocks to watch. Were going to head down to the New York Stock Exchange and see whether hes in the pool. Today we brought you an hour with philly fed president Charles Plosser, on monday two hours with another fed president , jim bullard will join us onset. Well ask him about the time line for tapering. His Economic Outlook and a lot more. Squawk box starting monday at 6 00 a. M. 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Welcome back to squawk box. Were going to go down to the New York Stock Exchange. Jim cramer joins us now. Joe, you should know, has been doing cape fear routine during the break. Ive told him that he has a career clearly. 14 years you dont even understand whats going on. How are you, jim . I like the original better mitchem was in both. Ill tell you why i didnt like the original real quickly. Because gregory peck, who is also in both, didnt do anything wrong in the original. In the second one, nick nolte buried evidence that could have allowed the guy the guy had a reason Robert Mitchum was just crazy. Mitchum was such a great actor. Wasnt he . He was the best. We can go a hundred different places. My question because its the story im fascinated by this morning beyond cape fear, is this vodafone, at t nsa situation and whether you think well get into a big problem that u. S. Companies that ultimately want to use is going to become a problem when they try to buy stuff outside the United States, Telecom Companies and also talked about linova trying to buy blackberry. I think there will be a problem. Europe is obviously more political than we are. Not more divided but more political. There are going to be hearings when there shouldnt be hearings. So if you are in at t, how much of a problem does this represent to your ability to actually grow . There are a lot of companies that cant grow. Their Growth Strategy is an acquisition strategy. They dont have to be in europe. I think africa and latin america are underrated. It doesnt have to be vodafone. At t is a very smart company, theyll find ways to get growth. What did you think of plossers comments . Did you hear any . No, im sorry. The question ill ask around this table is whether you think what he thinks, which basically is hes hawkish, is whether yellen is going to follow any of the things he thinks. Ill ask bob that. I think theyll ignore him. Just ignore him completely . Yeah. His policy, jim, was he likes transparency but on the other side, on the flip side likes transparency but doesnt want to have any wiggle room. I thought it was sort of very unusual. Every time they come up with something more, its a hand tied behind the back. Exactly. Bobs right. Jim, you see the chevron numbers that kind of confirmed what we heard earlier . They kind of did preannounce. It does show you the companies that were able to split off from mining have a better model. Exxon had a really good quarter and it just got overlooked. By the way, royal dutch did not have a good quarter. There are great nations here. I think exxon its in keeping what they said a couple weeks ago about refining margins. Miami or fsu . No, i like go noles. After what happened with wake . Barely beat wake. The best game of the weekend by far. 8 00. Okay. Theyre plays us out. Well see you on squawk on the street in a second. When we come back, our guest host will give us some investment ideas right after the break. At a ford dealer with a little q and a for fiona. Tell me fiona, whos having a big tire event . Your ford dealer. Who has 11 major brands to choose from . Your ford dealer. Whos offering a rebate . Your ford dealer. Who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires . Your ford dealer. Im beginning to sense a pattern. Get up to 140 in mailin rebates when you buy four select tires with the Ford Service Credit card. Whered you get that sweater vest . Your ford dealer. So ally bank has a that wont trap me in a rate. Thats correct. Cause im really nervous about getting trapped. Whys that . Uh, mark . Go get help i have my reasons. Look, you dont have to feel trapped with our raise your rate cd. If our rate on this cd goes up, yours can too. Oh that sounds nice. Dont feel trapped with the ally raise your rate cd. Ally bank. 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The story is replacement demand from the aging fleet here and expansion in asia. I think they will continue to gain subscribers. They will win more than most in the new enrollment. Im not going to fight that one either. You buy in the low 20s, sell in the high 20s. Good cash flow selling at less than five times free cash flow. What about Time Warner Cable . Second largest operator in the company. Theyre winning as well. New subscribers, in programs, higher prices and the whole mobile tv, et cetera, applications, another leg of growth. You dont get concerned about the battle where they go up against the network, try not to pay some of the its certainly a battle and the issue, i think they win it. Bob, thanks for being here. Great having you. That does it for us. Have a great weekend, everybody. Right now its time for squawk on the street. Good friday morning. Welcome to squawk on the street. Im carl quintanilla, jim cramer, david faber and kelly evans. After two straight months of gains for stocks, a big jump. The 10year yield, some of the fed anxiety pushing gold down to twoweek lows today, going for