Transcripts For CNBC Squawk Box 20131121

As for todays market agenda, there are a number of key economic releases to be watching. At 8 30 this morning, we get weekly jobless claims plus the Producer Price index. Later this morning, theres manufacturing pmi, the philly fed survey and leading economic indicators. In earnings central today, retail is once again the key them this morning. Companies reportsing before the bell include target, dollar tree, Abercrombie Fitch and game stop. Well be watching closely after what we heard about walmart. Andrew, over to you. Thank you, becky. We have Corporate News this morning. The government rejecting fair homes recapitalization proposal of fannie mae and freddie mac. Heres what happened. Obama adviser Gene Sperling arguing the only way to revamp the home loan market is through what he calls proper Housing Finance reform. He didnt directly refer to fair homes proposal, but he did say that the administration cant allow fannie and freddie to be recapitalized in the current corporate form. Last week, bruce berkowitzs firm announced it wanted to buy the Mortgage Backed security insurance businesses of fannie and freddie by bringing in 52 million in new capital. A trading slump in Goldman Sachs now tied to a currency trade in the Third Quarter. A bet on the dollar is said to have gone very wrong. The wall street journal reporting that the previously indus closed trading mishap played a big part or at least a part in the revenue slump that led Senior Executives to defend the firms trading strategy. Yum brands will combine the u. S. And International Versions of kfc and pizza hut. Sales at yum china restaurants have taken a hit since chemical residues were found in chicken from some of its poultry suppliers china late last year. There was a restaurant called chicks in pies. Kind of gross to me. I dont believe thats what the Real Organization was going to be. The question is, where is the jacket . Your jacket. Over there. Why, though . You go on for the first time in the history of show over there without a jacket and you do it without comment . I do it without comment. Can you tell me, what were you thinking . I didnt think the jacket was looking great. You are so vain. You didnt think this one looked as good as your other jackets can it you, this says more about you than about andrew. Because im obsessed. You are obsessive compulsive. The first time in two years. I said to myself, i dont like this jacket and then i took it off and what was the end of that. Thats how it happened. It is big news. By far. Ill tell you, the must read, i love the headlines. My favorite thing today is the very top story, very first headline in the journal the fed released policy minutes saying they do plan to stop bond buying. At some point. You said it was qe. So is it possible that there was a proposal on the table to continue this . Forever . Is this really news that they still plan at some point to pair back their bond purchases . Did someone write that with a straight face . Its hard to write a headline that sits in there. Dont write a headline that you know, this just in, were all going to die actually, this just in, you need to breathe to stay alive. Lets see what weve got here. Maybe we can repeat some of the journals profoundness here. In washington today, the Senate Banking committee is expected to back the nomination of janet yellen as the next fed chair. That nomination will then be sent to the full floor for confirmation and then well get started. And i guess the real question, does the bernanke, does he get it going in december . I think he should. I think theres a very good possibility for this. He said no. If you get another good jobs report not anytime soon. Im saying soon. But i am although the futures this morning being up 52 well, the market was down 70 yesterday. 66 points. Come on. It was down based on what they said. The idea that this is like the longest threeday losing streak in two months its horrible. Gut wrenching. Whatever. Its gut wrenching. It should go up every day. It could go up every day because theyre never going to end the bond buying. The futures this im still i dont know. I count on things, you know . Some things, i count on you and your but its just in your mind, so you walk past the mirror. Thought, i dont really like the way my jacket is looking today. Im going to go without it. That was pretty much the assessment. It didnt take that long. I realize i do like it when you do it over there. Because the two of us in a two shot look like the same person. Because youre wearing the same ties. You know what i almost did this morning . A bow tie. This is cable. I tried to put it on. But i was running out of time. Thats what you were talking about because in makeup, you told the girls i was playing with it this morning but i couldnt get it to work is what he said. He said that. And i turned around and i went, oh, my god. This squawk ward moment has been brought to you by joe kernen. That is joe kernen. I had the hair dryer on so i missed the first part of the conversation. I turned it off and i hear, i was playing with it this morning and i couldnt get it to work. I go, did you wake up your wife . Did you consider that . Because she knows how to tie a bow tie, right . Very good. Lets go to the market. I get a kick out of myself. There it is. But you know that. Up 48 points this morning. You said 60. Or 50. Its 48. It was 50 a minute ago. Well see what arent we getting some claims numbers and stuff today, too . Yeah, we are. 8 30, initial jobless claims and that could very well be some of the data the fed is watching. I could help you, by the way. With his bow tie . Yes. Anyway, lets check out the oil boards this morning. Oil has been weak. I can, yeah. No, i cant. Ive got something for you. Anyway, you can see it, 93. 76, down 9 cents. Its well below 100. Well see whether all these guys that say oil can never go down again, see whether theyre right. Are we at 1. 34 on the euro . Ten year first. That is. You saw that yesterday. It happened immediately. And the euro immediately went under, which looks like whatever they said was more hawkish than what people thought. Its time for the Global Markets report and Ross Westgate is standing by in london where i would say a higher percentage where bow ties, over here, people that do it look like Orville Redden babacher. Over there, its still done, but by a higher percentage, too. But not by you. I would say, actually, nearly everybody that i interview now wearing a bow tie are american, joe. Thats weird. Ive seen americans go over there and start calling it rubbish and say ive been standing in cue. Aluminum. Yeah, yeah, like madonna. Suddenly shes british. Geez. Isnt she from chicago or something . Detroit. Yeah, from detroit. Now she speaks like, you know, like princess di. Anyway, so the americans are the ones that are doing it. Thats funny. Yeah. I cant remember the last time i interviewed a brit that actually was wearing a bow tie. And in the city where you thought you i dont see any. I think its sort of gone. The only time you see it is at a black tie event. Well, thats okay. And, you see, im with you. With the tux, i think the other ones you look like an actor. You look like he didnt think it was important enough to put on a formal to put on formal wear. Do you think its okay . I think that looks much a tux looks much better how do you feel about a mandarin collar with a stud . Do you remember when Denzel Washington used to that . Ross, i didnt know and becky is not up to speed on this that at a truly formal dinner, the casual dinners, you wear a black tux. But at a formal dinner, theyre still uppity, someone wore a regular tux and people were whispering about it, look how he shows up here like hes living on the streets. Hilarious. It was the butler. The driver is now part of the family. It was him and he had some you know the guy im talking about, right . Yeah. Yeah, yeah, yeah. The chauffeur. The chauffeur. Not butler. The younger daughter who died and yeah, yeah, yeah, oh, thanks. Im so far behind im insulated from but this person who dont tell me. Get the box set, becky. Im going to. And sit down for over a weekend. Im going to. You might get confused because she die necessary childbirth and she comes back like no, that doesnt were mixing. Walks out of the shower and nothing has changed. That was a different series, wasnt it . Sorry, ross. But we digress. Here we are. Lets move on. We are 6 to 3 just about, decliners outpacing advancers at the moment. But were up at the best levels of the day. Data today has been the focus of european equities ahead of the u. S. Open a little later. Mainly out of the eurozone. Slightly mixed in some ways and a growing die vern die vergeanc. What we saw was german pmi ticking up for the month of november and the flash estimates better than expected. The french number, very disappointed. It was 50. 5 in october. The French Economy contracted in the Third Quarter, down 0. 1 . And if activity levels stay in negative territory, theres now a fear france might be tipping back into recession which over here is defined as two quarters of contraction. But that is now the fear. Growing divergence between those two economies, we have growing data out of the uk. It improves not quite as much as we thought, but there is now a chance that the uk will borrow less than originally forecast by the office of budget responsibility. Take a look at the sector breakdown. Theres some reaction today to the chinese pmi data. The hsbc data, pmi at a twomonth low. Weaker than we thought. Basic resources down as a result of that. And thats just about it for me. Apparently the director is telling me weve got some treat. I have no idea what it is. There we go. That is me doing my whoa. Wow. Be still my beating heart. My bbc impersonation. Seriously, ross. Looks like rhett butler. Hes handsome. Youre more handsome there than normal. Is it the moustache or what, do you think . The way he has his eyebrow cocked. You see, thats a letdown there. Really, that was rhett butler. Very nice. Frankly, my dear anyway, okay. We cant be we need a johnny quest. We need your lips moving in that shot. I wish we could do that. See you later. Thank you. See you, ross. Oh, this is yours. We have some other news this morning. Butler, yeah . Really . While you guys study ross butler, we have news this morning on tesla. Consumer reports saying that the model s has taken the top spot in its car Owner Satisfaction rating. Owners of the tesla model s gave it a 99 out of 1 his 100. Ive heard that number before. You heard from Consumer Reports about a month or two ago was actually that they had the highest safety record. 99. And i believe it was a 99 or something. This is about satisfaction. But, of course, this comes as the car is also under some government scrutiny. Phil lebeau caught up with the head of national highway safety, the safety at Administration Late yesterday about its investigation into the tesla s. Once we made that decision and once we talked to tesla about that decision, they were more than open about saying we want the highest level of scrutiny, we want to cooperate with you on every level of this investigation. They feel very strongly about the quality and safety of their vehicles. We have a lot of questions to have answered. Theyre willing to step forward to the plate and be collaborative is very positive. Thats a very positive statement from the government. Usually its much more contentious. Take a look at what strictland had to say about how long the investigation might take. No time frame. We really want to get this done right. Sometimes investigations take a week, sometimes they can take several months. I have no notion or real indication how long this will take. But with tesla being willing to be proactive, hopefully it will be on the shorter end than the longer end. There will be a lot of volatility around this trade for quite a while. The stock now trading at about 120. 50. It was off, close to 200 earlier. 99 on both of those. Its like you know, do they have something on these people . Consumer reports, thats thats pretty good. It is. And thats why im anxious about they cant i cant imagine i mean, Consumer Reports, like my dad for toasters, everything. Everything. He used Consumer Reports, you know . U. S. Regulators have blocked automakers from promoting Vehicle Safety ratings of more than five stars. This comes three months after tesla touted an outsized for its model electric car in a press release. The announcement adds to tensions between the national highway Safety Administration and tesla. They seem to be singing kumbaya together. You know what i mean . Theyre happy campers. Happy campers. What our cliches can we use . Kumbaya, thats why i used the happy campers. Its yours . Yes, it is. Sears holding just came in with quarter le results. It looks like the retailer lost about 5. 03 for the Third Quarter. That was wider than the 3. 39 share loss than analysts were expecting. Revenue was shy of estimates, as well. Down 4 in the sears chain. If you look into this release, theres a lot here. Eddie lampert is talking about how they are trying to change this into a member centric retailer. I dont know exactly what this means, but if they are trying to make this whole thing into a Membership Club like a sams or a coastco where you pay a membership fee that comes in. He does say they are spending lots of money, millions of dollars, trying to transform transformations of this scale are challenging, but we believe were making progress and were seeing how many years has it been . Ten year increases. A lot of years. The poster child. They are going to these places. I have to say, when you walk into these places, they for years have not reinvested in the store. Its hard to find someone to help you if you have questions. This makes it sound like theyre reinvesting, but its definitely going to hurt their earnings. But it had been years and years since they have properly invested in these stores. And it catches up over time. Its like casino business. If youre not constantly putting money back into it, people dont want to come. Apparently theyve done very well on line. Well, the stock is here. You saw the stock, right . Market cap of yeah. Its done better from 45, but remember how much it went up on what supposedly was going to be unlocking the real estate . They never did that, no. All right. Here we go. Coming up, why American Airlines says getting an upgrade to first class could be as simple as making an online bid. But first, as we head to break, alex wallace joins us from the weather channel. I dont even know how to follow up with that. Lets talk about the forecast here. Weve got some snow this morning in and around denver. Light snow, pretty cold. Could make some slick spots this morning for the commute. Ill be watching the area from the rockies into the plains. The risk of snow continues today. Tonight, we see that shift farther south. Potential icing conditions, panhandle of texas, including amarillo, back up across parts of the southern plains. Active weather here in the middle of the country. Well be watching the temperatures drop quite a bit. But then tomorrow morning, 20 degree drop in temperatures. So folks on the east coast want to be looking at this closely, including new york city. Here is how youll fare as we head on through the next few days. By monday, expecting highs in the low 30s. Thats your national forecast. More squawk box coming up next. 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Tdd 18003452550 we have intuitive platforms tdd 18003452550 to help you discover whats trending. Tdd 18003452550 and seasoned market experts to help sharpen your instincts. Tdd 18003452550 so you can take charge tdd 18003452550 of your trading. Announcer india, with 94 of workers constantly checking Office Emails and voice mails. Welcome back, everybody. Right now, its time for the executive edge. This is our daily segment focused on giving Business Leaders a leg up. A group trying to encourage Washington State to keep up its fight to secure work on the new boeing 777 placed an ad in the Seattle Times yesterday. But there was one problem. The top of the full page ad shows a picture of an a320. Thats a plane made by rival airbus. Boeing executives have been meeting with officials in the states interested in landing work on the new aircraft after the companys Largest Union rejected a Contract Offer last week. The funny thing is, this ad says the future of washington but its an airbus plane. Theres two pieces to this story. One is the screw up that was a picture of the plane. The other is whats going to happen on the ground, which is whether theyre going to build the 777x in washington or the elsewhere. Thats what the ad is about. Thats what the ad is about. But its funny that they put but guven whativen whats go with the union, its possible they could go to other states. Its a plane. Its got wings, windows. But youre talking about in seattle where you have a lot of people who work for boeing. Its a more advertised plane there. But it was an ad agency there, isnt it . Im sure. They tried to get comments from the people who placed it or who did it. Someone messed up along the lines. For people who werent watching the last time around, it was brought to a union vote. Boeing said they would stay in seattle, but they wanted some pretty big concessions from the union in order to do that, including giving up their pensions. And the union voted overwhelmingly not to go along with that. Immediately, boeing officials started going to other states to see if they could get a better deal on somewhere else. Its funny. I mean, i dont want to laugh too much. Were over 20 years being here, theres funny things that happen when you order people with the same names and youre talking about some important stories. Same names. You know what was done. Weve done the taj mahal casino and put up the taj mahal. Really . I missed that one. We often get the wrong face. The worst was Goldman Sachs and we put up a picture of ron goldman who died. This was a long time ago. We were talking about i. R. A. S and there was a terrorist that we put up for like an individual retirement account. Theres things that, you know, can happen. Im so glad we did this segment. This was long ago, this was the old management and old none of these people were here. I dont even remember any of these issues. Yeah, 22 years. I remember and you know i dont forget stuff. Thats true. We know you dont forget anything. You are an elephant when it comes to memories, joe. Which is also the symbol of the republican party. They have we have andrew. Its an just kidding. Is it a donkey . Its a donkey. Who picked that . I dont know. A weak and meek animal. Let me tell you guys about American Airlines. It is testing the ideas of allowing customer toes bid for upgrades to the first class cabins. Some of those premium cabins, they say up to six days before the flight, passengers can submit a bid to the website along with a credit card number. The email will send a number to check in to let you know if you won the auction to do these things. Its not guaranteed anyone will get a seat and its not guaranteed that youll get a first class meal if quick, was that an airbus or boeing . Boeing. I dont know. Its hard to do. Yes, but we arent in seattle where a lot of people would big planes with fuselages and wings and they look sort of alike. The question is a cheap traveler. I dont know where you stand but are you a cheap traveler . Im the guy who likes to buy the coach seat and hope and pray and sweet talk my way up front if i could. But would you be willing to put a blind bid in and say i would pay 100, 150, 200 . I dont know, they go to ebay inspect. No, it directs you to price line. Theres ways to gain price line. How much does it cost you to upgrade or not . Its nice not to have to walk all the way back. But the food, no one would pay first class for the food. Im just buying leg room, space. But you guys would do it . We have to cut that out for the rearend reyearend reel. Im just buying leg. I do pay i call it poor mans first class, the exit row. I pay for that, too. I hunker down next to the window a lot of times. I dont want people walking by hitting me with their luggage. You want to be the person who wakes up everyone when theyre trying to go to the bathroom . For like the eighth time. Im the same way. Id rather be the waker than the wakee. On that note, when we return, were going to talk about going beyond the fed. Plus, a market watcher identifies the most undervalued s p sectors. First, as we head to a break, lets take a look at yesterdays winners and losers. Good morning. Im joe kernen along with becky quick and Andrew Ross Sorkin. Making headlines this morning, the bank of japan is keeping Monetary Policy steady today. The boj maintaining its view that the economy is recovering moderately. Policy members are hopeful that the continued strength in the domestic demand will offset head whipped from soft overseas growth. Hopefully you didnt see the carbon emission news coming out of japan, andrew, abandoning targets because of the economy. Also australia just trying to repeal the entire carbon tax. A couple of setbacks. Unless you like South Carolina weather. Which i happen to like. But anyway its a little warm. Also, a little bit of washington weather, too. The Obama Administration warning the government would likely begin defaulting on its obligations within a month of february 7th if congress did not raise the cap on government borrowing by then. Becky. A u. S. Congressional panel has approved a bill targeting patent control. Thats a company that buys licenses or patents from others and files infringement losses. Theyre going to go after all those patent trolls. I like that. Its like squatters on someone squatted on you for a while on your domain name. You have a squatter. Someone is on mine, yes. Becky quick. Com, not twitter any more. Theres still someone on my twitter thing, i think. How about joekernen. Com. Is anybody on that . I think someone does own that. Not you. Not me. Youve heard the gloom and doom and the frothy markets. But our next guest, it says here, is not worried. Im going to take the teleprompters word for it on this. Hes identified the most undervalued sectors. Mi mike tohompson at s p iq. And the founder of the entire news organization. No, no. You would not be here working if and theres not a p in thomson, either. No. And you had a job there for a while when you would make phone calls. Mcgrawhill. Anyway, is that true . Youre not worried . Im not really worried. Its a Historical Perspective here. You know about that. Basically, we have on the basis of forward 12month basis, the valuations arent all that rich. And this actually this was an Interesting Research insight that came out of and conversation with an investor would says, you know, boy, the markets have really moved up. This is what people are saying. So when youre trying to get people into new strategies and new funds, this is what youre up against. You have to come up with a rationale as to why they dont have to were. Really, the question is how far have valuations come since 2008 . And what was surprising is when we look at it on a sector basis, i was surprised to see that the biggest increase in valuations, the perceptions of what investors really want are in the Consumer Discretionary sector. Doubling. Youre over 32 times next years earnings, almost 100 increase in valuation. The leading sector and not even somebody close. Youve got to wonder why is that . Why are investors valuing these companies so much more than other ones . This those start to go make it look like energy are the most undervalued based on this . That is not right. Energy is the second most biggest increase. Im not sure if the chart is articulating it well. But what i will say is theyve seen the increase up about 25 . This is an absolute stock price or in multiple expansion . Multiple expansion. Most investors we talk a lot about Earnings Growth and we talk about absolute price. But the metric that investors are focusing on and what all the analysis comes down to is how are they trading on valuation . And in the last five years, what was the multiple five years ago and has most of the growth been fueled by earnings . And thats where it gets to be an interesting narrative. You have to rationalize it, right . One, i think what we talked about, and this is a pretty robust discussion, people value brands at a time when its less i guess the value or the uncertainty around other things, they liked quality around known brands, existing companies secondly this coexists nicely with the fact the one sure thing in the u. S. Economy over the last five years, the steadfast recovery that we have seen, what recovery has been because consumers have been continue to go spend. Retail sales, this stuff tailed beautifully with that, that cool concept, because theyre going out and theyre still going to darden restaurants, theyre still going and basically theyre going on cruises. Theyre buying on amazon. Its remarkable. And i think i would add one more thing. They have implemented the technology that was basically developed ten years ago into ecommerce. And its amazing how retailers have improved their margins largely because theyve taken brick and mortar and created a hybrid where now they can make a boat load of money through other things, through the cheaper cost of goods and things like that. But theres a whole confluence of things driving this if you take a look at the rationale. But whats startling is Consumer Discretionary, this is not information technology. And then the rub of it all is the biggest contraction in multiples is in information technology. Down 23 . Investors valued them 23 less than they did five years ago. And theyre probably the enablers of a lot of the other sectors, you know, benefits. So the thing that and then i want to talk to you about something because i just thi thoug thought of something. But profit margin webs thats the thing people are talking about. Weve had peak Profit Margins and theyre bound to come down and that would be a stumbling block. Does that make you consider look, this is one perspective. Theres a lot of things that could make generally, even the market is up about 14 on a pe basis. So if you look at the s p 500, youre trading at 17. 9 times next years earnings. However, joe, back, you know, during the bubble times and in 2000, 99, you were up in the 20s, okay . So in that perspective, it doesnt seem extreme. But, again, if the fed starts to tapering, do you bring the whole market down . I think its fascinating that you have this sublime i get energy being up there because the world is valuing energy and materials because were in a global economy. I really was surprised by health care, joe. The reality is is that with all thats going on, theres not been a lot of about 7 accretion and everybody thought with all the changes going on, youd see more value and more business driven into health care with an aging demographic. Its an interesting perspective. You take it in balance with a lot of other things. So Consumer Discretionary have done really well. Theyve made a lot of money in all this stuff. Theyre not spending, but theyve made a lot of money and income disparity has widened. Correct. Would it perhaps be okay to raise the minimum wage or raise the labor forces . Ive been thinking a lot about that. Participation. Because weve already given all of this upside to the owners of the retail corporation. So the right would say that youre taking jobs away from other people. But would Huffington Post make the point that, look, even rich the shareholders already. Why not share some with the people making 7 an hour. Not an opposed to it as i used to be. But if youve already made all the money and taken the gains in stock price appreciation as the one percenters, whats wrong with shares some with the workers stocking this Consumer Discretionary im just asking you. Its a talking point. The idea that i think is more pervasive is wouldnt that help a lot of these companies, too . Because it should go up the chain. That is the argument. Not necessarily the right argument, but thats the argument. Because if its moved 100 times in valuatiovaluation, any has a retail stock has done very, very well. How about rewarding some of the people that are working every day in those stores . Unbelievable are you setting up a no, im just i think about things and im just wondering as a talking point where that makes any sense. I have been thinking a lot about this. Ive been working with both of you for a while. Some of this is rubbing off, maybe. Wow. Ive got stockholm syndrome, i know. Im glad you were here, mike. What do you think . Thats a ridiculous thats not the way things work, right . Well, listen, its a diversive company as Harley Davidson to darden restaurants. Its wisely said. Its an interesting anomaly. I think you just have to consider it with a variety of other things. I just think its an interesting perspective. Thank you, mike. Thank you. Well, you guys remember the facebook fight between Mark Zuckerberg and the winkelberg twins . A similar battle now seems to be brewing at snap jack. Well explain that when we come back. [ woman ] id be a writer. [ man ] id be a baker. [ woman ] i wanna be a pie maker. [ man ] i wanna be a pilot. [ woman ] id be an architect. What if i told you someone could pay you and what if that person were you . When you think about it, isnt that what retirement should be, paying ourselves to do what we love . [ engine revs ] [ male announcer ] the mercedesbenz winter event is back, with the perfect vehicle thats just right for you, no matter which list youre on. [ santa ] ho, ho, ho, ho [ male announcer ] get the allnew 2014 cla250 starting at just 29,900. Welcome back to squawk box this morning. A Business Insider story this morning included leaked videos that showed that the snapchat ceo is saying the ousted cofounder may deserve something for his role at the company. Three guys who attended Stanford University together are now tangled in a bitter lawsuit over equity in todays hottest startup. Hundreds of millions of dollars are on the line, of course, and Business Insider has videos of depositions from the snapchat lawsuit. They suggest even the defendants in the snapchat case believe their former Fraternity Brother may deserve something for his role in starting the company. Did you come up with the idea for deleting picture messages . No. Did bobby come up with the idea . No, he did not. Who came up with the idea . Reggie did. Business insider says sources close to the company say the likely resolution of the case is a settlement in which snapchats third cofounder reggie brown will receive a significant amount of cash, similar to the settlement that winkelberg brothers got when they sued Mark Zuckerberg over the origins of that network. Dont confuse people. I dont want to confuse people. Coming up, a top ranked nba startup. Plus, tonight, dont miss the Season Finale of american greed. Were coming right back in a moment. Really . The fugitive. 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. At bny mellon, our business is investments. 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. Welcome back to squawk box. Its Global Entrepreneurship week, and the Business School website out with its first ever top 100 mba startups. Joining us is john burn. John, its been a long time, how are you, sir . Okay. Very good. Congratulations on the list. Thank you. Heres the question. Weve had a number of the people of the folks on the list on the program this week. And the question i always have is the entrepreneurship be topped . I dont think its a question of being able to be taught. Why people are going to Business School is to learn the core basics of what makes a business work. But also for the networks. And its kind of interesting that of the 100 top startups, 34 are from harvard, 32 from stanford, 11 from m. I. T. They basically blow away the competition. And when you really ask why, its because the networks from those schools, the venture capitalists to angel investors, the Alumni Networks that get you in the door to get important customer relationships and clients are just unbeatable. And so is it but then a question, is that a selfselection issue meaning both in terms of intelligence and aspiration. You end up at an institution like that and take advantage of it . Or is it Something Else . No, i think youre right, joe. Thats part of it. Obviously these schools are tracking the best and the brightest of 20somethings. Theyre going to be successful whether they go to Goldman Sachs. The best thing now is entrepreneur is incredibly high. At stanford this year, 18 of the graduating class decided to start their own company. Even back in the heyday, the bubble, the dot com bubble in 99, 12 only. Its 50 more at stanford starting their own companies. So its become very hot and a lot of people are very i would say theyre very conscious of what Business School can get them. Right. Our Number One Company sold to google last year for 450 million, started by a couple. They were engaged, one went to stanford, the other one deliberately went 3,000 miles away to harvard because they wanted to take advantage of both Alumni Networks rather than one. So, john, that was andrew earlier. This is joe now. This is your company now. So you took all of your knowledge about startups and now youre going to be like a big mega bucks internet gazillionaire, right . I doubt that, but were having a lot of fun. And youve been on in the past talking about the great welch, right . What do we call him now. He needs a bigger name than jack welch. King jack. King jack. King jack is good. Anyway. Thats true. So this is interesting that you took your experience you were everywhere, right, fast money, business week, following entrepreneurs now you are an entrepreneur. Yes. My company is now 3 1 2 years old. We have three websites, published books, doing digital magazines now. Have you turned down 3 billion from anyone to buy yet . No, sadly not. Not yet. Keep us updated. We will. John, one quick final question for you. Since youve created the list at business week about mbas. In 1988. Your list today is about the outliers, the big winners. Is getting an mba today worth it mathematically . Yeah, no question about it. You know, the employment rate for mbas in the class of 2012 in september was 95 . Wow. Which is unbeatable. Think about how that compares with law school where we know theres an incredible crisis. And its hard to find a job if you graduate from law school today. Its not true with an mba. John, thank you for that, appreciate it. Little secret, i was johns intern 1996. Yes, indeed. Andrew, take care. When we come back, were going to have more of the mornings top stories as well as some picks. [ laughter ] [ female announcer ] each one of us is our own boss. And no matter where you are in life, ask your financial professional how lincoln financial can help you take charge of your future. Can help you take charge of your future. But with less energy, moodiness, and a low sex drive,y first. I saw my doctor. A blood test showed it was low testosterone, not age. We talked about axiron. The only underarm low t treatment that can restore t levels to normal in about 2 weeks in most men. Axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. Women especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. Report these symptoms to your doctor. Tell your doctor about all medical conditions and medications. Serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. Common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting and increase in psa. Ask your doctor about axiron. It is stock picking thursday with super mario. Guest host Mario Gabelli tells us why he thinks his stocks will be winners. Looking for deals this Holiday Season . Can i show you something . I was just browsing. Early hot deals may be great for the consumer. Wouldnt be the Christmas Shopping season if the stores were any less hotter than they are. It is warm in here. Bad retailers and that leads to blurred lines for investors. Cant see the line can you, russ . Nope. Our retail roundup is just ahead. Plus, what investors should take away from the fed minutes as the second hour of squawk box begins right now. Good morning and welcome back to squawk box here on cnbc. If you can hear whats said during the commercial breaks, im Andrew Ross Sorkin and becky quick. We do have green arrows, dow looking like it would open up about 40 points higher, nasdaq close to eight points higher. It is a big morning for retail earnings with investors looking ahead to targets quarterly release. Thats coming a bit later. Sears already out, reporting an overall loss of 5. 03 per share. And when adjustments made, the loss comes out to 3. 13 per share, slightly smaller than expected. Revenue, however, was below estimates with samestore sales falling at both sears and kmart. Yahoo saw Strong Demand for the fiveyear convertible note offering. So much so it increased the size of the offering to 1. 25 billion. Anyway, chrysler anyway. Chrysler has added four banks to help underwrite the initial public offering. Goldman sachs, Morgan Stanley and ubs, according to reiters that says the automaker could go public as soon as december and thats a turn around story. In auto news, Consumer Reports is out with its car Owner Satisfaction ratings and taking the top spot, the tesla model s. Owners giving the luxury allelectric car 99 out of a possible 100. Thats the highest Owner Satisfaction score Consumer Reports has seen in years. Good news for tesla, which has faced some increasingly tough questions after several car fires over the past few months. Launched a safety probe into the model s. Phil lebeau caught up with the head of the national highway traffic Safety Administration late yesterday about its investigation into tesla. Once we made that decision and talked to tesla about that decision, they were more than open about saying we want the highest level of scrutiny, we want to cooperate with you at every level of this investigation. They feel strongly about the quality and safety of their vehicles. We have a lot of questions to have answered and the fact theyre willing to step forward to the plate and be collaborative is a very positive thing. And tesla shares are well off their highs. But you really, you know, andrew you interviewed this dude. Yep. You see an s. And i used to think, wow, is that a jaguar . What is that thing . Its an incredible car. Its not just the shape of the car. They did things like steve jobs. You know, form follows function or whatever the old, you know, architectural strategy. The guy is like jobs to come out of nowhere. Gm and ford and all the others theyve been trying to come up with this for so long. I see what hes saying. If youve got a gas tank with 30 gallons worth of gas and youre in a bad accident, thats scary. But then there are these batteries, apparently and the distributor distributed across the whole bottom. Does any little, you know, does any crash Consumer Reports comes out and says its the safest car theyve ever tested. This is interesting. Well see what kind of conclusions these and you know, when you test cars, you see those, you know, crash dummies and stuff. You see how hard and its scary to watch because even 35 miles an hour. Are they really smashing up teslas, though . Its only the government, we can afford it. Consumer reports. Consumer reports. But when they test. Yeah, well, they, im sure are. Money to burn. Who cares, well talk to janet yellen. They dont care. Our guest host is known as a Value Investing legend. Joining us this morning is Mario Gabelli. And thank you for being here today. Its always fun to talk about stocks. It is. I know youre not a macro guy, but you are a value guy. When you look around and see stock prices have come, is it harder to find values . Well, you look at the dynamics and have to have a vision as to what the economy is going to look like in 2014 around the world, whats it going to be like in 2015 . Cash flows will be helped in 2014. Corporate profits, even if they were constant, they dont have to put as much money into pensions. More fully funded, discount rate is not going to go down any more, its going to go up. And the markets lift to the asset value. You dont find the same margin of safety in stocks but you can pick them. I have stocks that will double in the next five years, 13 , 14 compound return. But mark to market, theyll have a hiccup at some point in time, which is terrific. I want to talk about some of the stocks you see. Before we get to some of the specifics. No, in terms of the macros over the next, youve got 24 days till christmas. Youve got 20 odd days left until the end of the year. Window dressing, you have to think about what happens in the middle of january with regards to the debt ceiling. What does happen, how does the market react to that . Well, clearly, you know, will we have a compromise . Will we fix it for the next two years . The markets on a wait and see. We patched, kicked, will we fix, we cant fix in a month, in terms of the structural deficit. Give a little give and take. How is the market going to react if Interest Rates go up. I remember in the 70s and 80s, volcker would come in and change the game. Will yellen do Something Different . But volckeresque. Exactly. Shes been the one orchestrating this whole open communication. Agreed. She wants to get elected, nominated, i mean. There will be a surprise. What is the surprise in 2014 . Will it be saying i cant trust somebody else negotiating my Country Security . Will it be some other political dynamic . Will it be terrorism . Theres no margin of safety necessarily in the broad market but stock specific but is the fed doing something that covers up a lot of problems with companies at this point . Carl icahn said this week or last week when he looks around, this is the liquidity driven market and all of that is covering up for poor management. Well, you know, there are 90 of the companies in the United States, the ceo comes to work every day trying to figure out how to increase the intrinsic value. Driving profits and helping the stock price. Yeah, theres always 5 or 10 of those that are just laid back. And we have several of those. In fact, management changes. Management changes are an important part of a catalyst to drive values. For example, federal mogul, he changed management. Those are important elements. Notwithstanding that on a global basis, theres some really easy ways to look at business. The rising middle class of china and india. Enormous, high propensity to travel as they increase the gdp. And real disposable income. So theres a great runway for commercial aviation, which weve talked about when i was on last time. And we just finished a conference where airbus presenting and boeing is coming out of dubai and looking at their ship set deliveries. Do you like both airbus and boeing . Or is there one you pick over the other . Well, i like the vendors of both of those. I have no problem with them. We talk about the big puppies, the airplanes, dream liner and a350 and so on. But really the 737 and the a320, you have a great rampup in production and the whole vendors are going to do well and youre going to now who are some of those vendors . Well, the companies, kman, companies that supply parts, theres an array of them that can do well. Part of them are also tied to military and sequestration, round two could have a hiccup. At the same time, the japanese are likely to kind of going to start spending more on military expenditures, more money spent on in the middle east. Youll have a navy, the saudis are looking at something to do with their own navy. Have the japanese spent anything on military in since world war ii, really . I think its a small part of their gdp, but clearly they send some fighters over the islands. They send fighters over the islands. The point is, theres an opportunity. And if we can neutralize sequestration. Meanwhile, the defense stocks which everyone thought would do poorly. Everyone thought would do poorly in 2013 would be brilliant even with the sequestration. Well, im looking at the vendors to boeing, particularly commercial aviation. The part thats missing is the private aviation market. And there you can have a wild card with regards to the military and china. Will they open up the air space . And theyre going to have to. Theyll open up the air space. Well, you have it, not as much as here. How long have you been playing that . Thats probably only been about two years. Im not playing that. Cessna dropped from 25 to 9. And its back to 30. And demand for private aviation has not picked up. How many people theres a lot of people in china. How many people could since there are so many, even though the percentage is lower who could afford a private jet. How many individuals you think in china could afford a private jet . 600. 600 what . 600 families, 600 people . Is that all . No, if you increase demand by 600 or 1,200, youre only going to sell 1,400 theyre only selling 1,400. How many could afford a private plane in china . Well, the forbes 400, joe, in five years are going to be asians. Right. My point. So it is its funny because there are people over there that arent just like wearing the people that arent communists. If you want to fly from shanghai to isnt he a billionaire . Theres billionaires. When you talk to warren buffett, ask him. Aviation in china is going to at some point in time in the next five years, its going to accelerate. Its going to do as you try to move and time is money, you have to go from point a to point b. On the cover of Fortune Magazine this week, they had a big story about how chinas trying to build their own aviation industry. Well, theres no question does cessna boeing or air bus win that game or gulfstream or somebody else . Well, theyre a large aircraft. And when you think about boeing and the dreamliner and the learning curve and airbus. And the chinese are going after the single, that will happen. Theres only two or three Engine Manufacturers in the world, rolls royce, ge and whitney. Thats where youd make the investment . Or in the . We are basically doing the following. Whats going to happen over the next three years in terms of vendors to boeing and vendors to airbus. And which ones have staying power. I would own rolls royce today, not the car company, the engine manufacturer. I think youre going to make 50 to 100 in the next three to four years. I think youre going to have significant returns as companies have taken over in this industry. Flatten out sequestration so the military portion of some of their businesses hold up. And then youve got Industrial Gas turbines. Dont forget you have natural gas sells at 3. 61, and you basically have money moving into Industrial Gas turbines in the country. Can you just buy ge and throw the rest of your crappy stocks away . Joe, dont talk about my portfolio that way. Maybe your portfolio. And im delighted youre also buying comcast. Only thing we can buy. We own ge. I thought jeff had a challenge with regard to the capital structure. Hes migrating, selling off a piece of the commercial of the consumer product. Ge at 26. 80, wherever it closed yesterday. Will he do Financial Engineering . Probably not, but they have very good industrial products, a good dividend, theyre buying back stock. Its not its got a 220 billion market cap, what is it 10 billion shares at 27 . My advice is to ignore the unloved, including andrew and joe. Theyre unloved but we still like them. Thank you. Im glad youre here for the next couple of hours. Ive got to keep them busy. Keep them on their toes. Within that framework, you know, where is china going to go . Their onechild policy and looking at that is an example of where theyre trying to drive consumerism. Right. Clearly, and so those are some of the other issues. And i think Northern Europe will do at the margin increasingly better as well as southern europe. All right. Were going to talk a lot more about this. We do have mario with us for the next two hours. Hes our guest host this morning. Up next yeah, its me. Since the passage of obama care in 2010, Health Care Stocks have outperformed the s p 500, up 75 compared to about 50 for the s p. Will that run continue . Amid website glitches and policy cancellations. Did you read theres an s in that i saw 50 to 100 million corporate plans in the next year are going to fall by the wayside from obama care. Well shine the sector spotlight according to a study were going to put the spotlight on Health Care Stocks. Health insurance stocks have been performing quite well despite all the confusion surrounding the debacle that is obama care. Will the sector remain hot if problems persist . Josh raskin at barclays. Let me summarize what i think youre saying. That with a lot of individuals losing initially there was the thought that could affect Insurance Companies and the president said, all right, were going to allow another year for some of these. Did that actually help the stocks because people thought theyd be able to keep some of those canceled plans . Sure. Thanks and good morning. Thanks for having me here. In terms of the rescissions getting rescinded again, i think this is actually a slight positive for most of the health Insurance Companies. The way were looking at it is the margins and exchange based products are probably going to be a little bit lower. Additionally, the insurers have more flexible off the exchange right now. So to the extent they can keep those members and not have them transition into lower margin and, you know, less attractive benefits in the exchanges, thats actually a positive for most of the health Insurance Companies. I thought that its still up in the air how many state Insurance Commissioners are going to let it happen. Its unclear whether the company 20 have said yes so far, 5 have said no. And how many have the companies themselves have the ability to go back to what they thought they werent going to need anymore and they designed all these new things. Is it feasible that what percentage will be able to keep what we thought was canceled. 50 . Yeah, its a good point, you know. If you saw the Lobby Organization for the Health Insurers. They said theyre not sure if its a good idea. And if youre going to change the rules with a month and a half to go before the exchanges open, theres got to be other concessions to be made. To your point, the Health Insurers are not exactly sure what exactly would be, you know, in the best interest of the industry. You know, some of the estimates were about 5 million or 6 Million People would receive those rescission notices. I think 2 million got them in october. You know, at this point as you mentioned, a lot of this is up in the air. Joshua, if a lot of small to medium sized corporations decide theyre going to allow itd be easier to pay the penalty and let their employees go on to the exchange, that would help these private insurers that you cover are on the obama care exchange. So theyd get they wouldnt be losing the employer coverage because theyd be gaining it on the other side because theyre in the exchanges, right . Yeah. Its not a net negative, is it . Ive seen estimates at 50 million to 100 Million People that are going to lose it that arent individual plans, theyre in employer sponsored plans that are going to go away. Yeah, my first instinct is that 50 to 100 million is way too high. Youre not going to see that. In the shortterm, almost no employer dumping. And the reason is because none of the employers believe theres Viable Options for their employees to buy in the exchange. Their plans they are in right now arent up to snuff on what the government is going to require them to cover. Theyre going to have to change something. Right, there are some changes that will be required, you know, off the exchange in a small group and not really in the large group but more in the small group market. Over time, theres chance to see migration from small group into the exchanges. That would create some market share shifts certainly because, you know, our expectation is the plans that are the most attractive and exchanges are not necessarily the ones commanding the largest market shares today. Josh, what are you not buying and what are you buying in terms of stock specifics given that overview . I think the market had this wrong for a couple of years they thought obama care was going to be a huge negative for the health care companies. Broadly speaking, i think the industry starts to thaw in terms of multiples. I think youll see appreciation in the broader group. The names wed stick with were names like United Health and aetna where theyve got significant market share off the exchanges and theres not much risk in terms of participation on the exchanges. The interesting names are the names like senteen. Theyve got a lot of tail winds behind them from a revenue perspective. And if they can maintain even very modest margins, theres a huge opportunity for smaller companies, as well. Can you help me out . When you were talking about how the margins and exchanges were lower margins, what the companies are dealing with existing plans they were told to cancel and told to bring back. Is that because the Insurance Companies are greedy and have higher margins in these plans . Or because the people in those plans, they actually are healthier people who dont get sick and dont use the benefits . Yeah, i think the Insurance Market functions like insurance off the exchange. Theres underwriting capabilities, et cetera, so the health plans can underwrite the products and, you know, earn when i talk about better margins, youre talking about single digit numbers here. On the exchanges, therell be adverse selection, for sure. Some of that will be mitigated by reinsurance and corridors. Its very difficult to create pricing differentials when everybody sees the exact same numbers when they go to the website on the exchange. All right. All right, thanks. United health care and aetna. All right. See you later. Thanks. When we come back, Steve Liesman reads into the fed minutes. And when it dials down into their easy money policy, hell tell us when that may be coming. Plus, big savings around the Holiday Season has been a huge selling point for retailers. But this year, seems that retailers are pushing it much earlier than usual. Courtney reagan has just that story in a moment. Your grass waters itself. Your dishes wash themselves. So why dont your floors. Clean themselves . The Irobot Roomba vacuum cleaning robot. Irobot. Do you . Customer erin swenson ordebut they didnt fit. Line customers not happy, im not happy. Sales go down, im not happy. Merch comes back, im not happy. Use ups. They make returns easy. Unhappy customer becomes happy customer. Then, repeat customer. Easy returns, im happy. Repeat customers, im happy. Sales go up, im happy. I ordered another pair. Im happy. both im happy. Im happy. Happy. Happy. Happy. Happy. Happy happy. I love logistics. No two people have the same financial goals. Pnc works with you to understand yours and help plan for your retirement. Visit a branch or call now for your personal retirement review. When we come back, were going to read into the fed minutes. Steve liesman is here and what markets should take away from the minutes. Qe is here forever or not. No script today . Stay tuned. And then the retailers pushing early sales, they could be in for a christmas surprise. Squawk box will be right back. Broken immigration system, r there are signs both Political Parties in washington get it washington is lagging behind the country on this. This issue has been around far too long. And yet, we wait. Reforming our immigration system would dramatically reduce our nations debt. Grow the economy by 5. 4 . And take bold steps to secure our borders. On this, both parties say they agree democrats. We are very very strongly in favor of moving immigration reform. And republicans. We do want to make some progress in reforming our broken immigration system. And yet, we wait. Amicans are tired of empty rhetoric. It is time for every leader to come through on their promise. And fix our broken immigration system Tell Congress the time is now. Fix americas broken immigration system. Welcome back to squawk box this morning. Weve got a lot of headlines, key economic reports ahead. Why do you do the music that way . Because you heard that one yeah. Now lets do the other. Whats the other . Is there a pause . Thats like a pregnant pause. We just did this one, remember . Its awful. They picked it. The same people picked it. All right. Lets take a poll. Well take a poll. Do the other one again. The other one we did the other day. There we go. Thats you selling a vacuum cleaner on an infomercial or something. Or a blender. And infomercial time. Thats like a game show. These poor guys have to listen to this . Let me tell you whats going on in the news. Well get the weekly jobless report. Do you think the same people picked that . Well get the october Producer Price index which has been delayed. Jobless claims seen falling slightly and economists expect Producer Prices to post a decline of. 2 . Later this morning at 10 00 a. M. Eastern, were going to get the latest Philadelphia Fed survey as well as the conference boards index of leading economic indicators, and then the Senate Banking committee, its also going to be voting today on the nomination of janet yellen. Shes expected, of course, to win approval, her nomination would then go on for the full senate to the full senate floor to get a final vote. Were also watching shares of Abercrombie Fitch this morning. However, the teen retailer also said it expected a samestore sales drop in the low double digits for the current quarter. Target last time last time, but last time, i dont know. Last time the analysts, some of them had something included, some of them didnt. The gap numbers 54, the adjusted numbers 84, and the estimate is in between at 63. To get an idea, the stock at this point now is indicated lower. It initially was traded higher as people were trying to figure out. Its higher than expected dilution related to the the revenue numbers below. Whats also concerning is if you look the the samestore sales, you talk about the comps. 0. 9 was the comp store sales. They say this reflects strong execution in the u. S. Segment. What do they mean . What do they mean by that . Below expectations as a result of higher than expected dilution related to its canadian segment. Did they do something up in canada . They exit something . Or related to the expected reduction and the asset. Okay. So theyre doing something with their the dilution was higher. I dont know if you would point to that as an operating miss, necessarily. Whats more important is what they say about the consumer. The bids down to 64. 25, the ask is holding up okay at 66. 19, but the stock does look like its headed lower. Whats amazing is they dont say much at all about the consumer. Walmart came out and told us there were concerns and it was going to be a very high sales area for the Fourth Quarter. Im looking through and trying to read through the entire release. Heres a Fourth Quarter estimate, becky. 150 to 160 adjusted, the estimates 145. Weve got the same problem, though. G once again, the same kind of fiscal year scene adjusted 459 out of 469. And i dont know, that makes no sense because its only 3. 86. So, we need its a blended i think you use something between gaap and adjusted. Steve, what were you saying . It was a note here. Becky may have seen this already. Results are e flekt continued strong execution. Just one line. One line. All said about it. Im looking through the rest of the results and talking about canadian and interest expense and taxes and capital return to shareholders and accounting considerations. They talk about just about everything but the strength of the consumer with the exception of that one line. In an environment where Consumer Spending remains constrained. That doesnt give you a whole lot to hang your hat on if youre looking for the antiwalmart remarks here. But it reflects strong execution. Strong execution and weak environment. And this is an odd release because normally the retailers will tell you a whole lot about what theyve been seeing in terms of the latest trends in the stores. Whats selling well, with whats not selling well. This is filled with accounting stuff and, you know, the u. S. Segment results. Heres the its 29 cents for canada. What if you add owner of retailers right now . What if you add 29 to 54, what do you get . We owned macys for an extended period of time, we did move a little bit at several of the others. But we own retailers that do car. Oreillys part store. They sell parts for people with cars. Youre scared of the big boxes right now . That has no relevance, andrew. Think about oreillys. Why wouldnt you want to own it . Its got a market cap and there are big boxes. Because of the earnings. Thats true. But im focusing on what im going to make he doesnt have a car. Thats true. Thats a separate issue. Thats a separate issue. These guys have theres 250 million cars on the road in the United States and they need repair work. Driving the car and buying gasoline in new jersey at 3 a gallon or less, you have a do it for me and do it for yourself. You can focus on target. My target is oreillys, genuine parts and thats how were going to make money with conviction. Got it. All right. Well continue this conversation but also the feds minutes out yesterday pointed to a pullback on the feds Bond Buying Program in the next few months. Thats what made the market sit up and take notice. Steve liesman is here with more on how to interpret that. I dont have a script, what do you want to know . Are we right to think it could come as early as december now . I think decembers on the table. I think the bar is relatively low. They used language they used back in june that made the market think it was going to happen in september. So were within the realm they said it could happen in the coming months if the forecast turns out the way we expect. So that means accelerating growth. I dont think they can prove accelerating growth in december. If they get a really strong jobs report 200,000, perhaps. But right now the way the gdp forecasts are working, looks like youre going to do about a 3233 in the first quarter. And now im seeing 1. 4, 1. 5 in the first quarter. It would be hard for the fed to make that argument. They could do it if they wanted to. But its not the most, you know, slam dunk argument to say, hey, the economys accelerating, were going to report a 1. 4 gdp. How important is the so why could you do something until they get a better handle on what fiscal policy is going to be and sequestration . The feds political forecasting was better than the economic forecasting. What im hearing now is they dont think the next go round is going to be quite as whats the word, rambunctious as the last time around. In fact, yesterday, joe, they said they see the effects of the shutdown as temporary. What effects . The effects such as they are such as they were. As temporary and not so does that mean they didnt say severe but they didnt see and they also had an emergency meeting. Did you appreciate this headline in the journal . I saw the one you were talking about. That was the earth shattering news from yesterday . That they do still plan at some point to stop the bond buying . They do. Were you heartened by that it was not going to be a Permanent Program . I dont have an opinion either way. But i think beckys right, its a small space and we writers, joe, over the years have learned to blame headline writers. All of the problems that i was never 20 years ago when becky was eight and started covering the retail beat for the wall street journal. I did not start 20 years ago. 15 years ago. Mmm she was 8 when she started. 8 years old and she was covering the retail. Two cubicles down from me used to tell me about what was going on steve was covering the economy and i was covering the retailers. Those overlap. Are you okay with you didnt have a script. No script. Because of the amount of coffee i needed this morning to wake up. Can i ask mario how much it matters, mario . How much are you thinking that stock market is levitated by bernanke and the qe. Theres no question theres a sugar high and its dealing with the policy a year and a half ago when he was in jackson hole saying i have to reflate stock market and Housing Market and its worked. The market is a function of earnings and multiple. Youre seeing okay earnings and increase in multiples. Now you have to maintain earnings in 2014 if baucus can pull it off and have a reduction in tax cut in the Corporate Tax rate, thats going to add nicely to the cash flow and earnings of domestic companies. And in addition to that, if Interest Rates trick up as they are, theyre up to 279 today on the ten, youll have a little head wind on the multiple, but the earnings will offset that. Youre an opportunist. Youre bottom up and top down. You look at all sides of it. We dont buy were not buying etfs. You view world and valuation. You cant ignore the world and you have to go in and pick stocks specifically. Been doing it for 35 years. Just real quick. Back to target. Its really down now. And did you see this stuff . Theyre now saying that fact set was using 54 cents versus a 64 cent number. Thats 10 cents shy. Now for the next quarter, 150 to 160 is actually above the 147 for the next quarter. However, for the year, for the year, it reflects 459 to 469, but thats probably because of the 10 cent miss in this quarter. Again, i cant remember ever seeing a retailer. But looks like its down 10 cents. Never seen one on accounting on segments, on Different Things and doesnt mention the consumer. They wrote off a lot. A lot of weird stuff going on in here and dont say how the consumer is doing, what theyre going to do in terms of competing with walmart and the deep discounts in the Fourth Quarter. They dont look at the basic issues you would judge a retailer on and this accounting stuff leaves a lot to be desired. They wrote off a lot of excess inventory in canada. Are they adding more stores in canada . Its that confusing. I understand wanting to explain this. But you didnt give us a whole lot to go with. And this is a little unusual. Fourth quarter they didnt lower. But for the year. They have a call coming up this morning . Yeah, they do. Trying to explain some of this. Hopefully youll get more information on this. Maybe they figure its not your problem to tell you about the consumer. Well, if thats what youre giving me, this is a mess. And if thats your explanation, i dont understand whats happening in canada. Well try to decipher some of this if we can. In the meantime, though, coming up next, increased promotions could provide an early preview of this Holiday Shopping season and courtney will be here with that story next. Well talk to her about target. Also, programming note tonight, catch the Season Finale of american greed the fugitives airs at 10 00 p. M. Eastern and pacific. Squawk box coming back after this. 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. For all those who sleep too hot or too cool, for all those who sleep now theres a solution. Sleep number dual temp, the revolutionary temperaturebalancing layer with active air technology that works on any mattress brand, including yours. Its only at a sleep number store, where this Holiday Season, the hottest sleep innovations make the coolest gifts including sleep number dual temp. Discover dual temp at one of our 425 sleep Number Stores nationwide. Sleep number. Comfort individualized. Welcome back to squawk box. Early promotions a gift for consumers, but could be a slippery slope for retailers this Holiday Season. Courtney reagan joins us with more. We also want to talk to you a little bit about target, as well. Lets talk about these margins first. Shoppers count on, but this year, the discounts are deeper and the promotions are running longer than they have in years past and retailers could be paying a hefty price in the long run. Naturally the further the prices slash, the smaller the profit. Discounts are a Necessary Evil to win sales and traffic. But it also trains the shopper not to buy at full price. So far, even the stronger retailers are coming up short. Of the retailers, macys has probably issued the strongest Earnings Report and guidance so far. Share price was rewarded for the sales growth. Gross margin did fall. And a drop in merchandise margin. The key is that macys reined in the expenses so the bottom line got a cushion. If its upping the promotions gain, you know jc penney feels the pressure to double down. Its got to pull out the stops to win back that saledriven shopper. He says, hes, quote, not giving away merchandise, adding the discounts are no deeper than they were in 2011, remember that was when we had the comparable promotional model. Later said in some cases jc penney has had to sell items below cost to clear merchandise brought in by ron johnson that hasnt been wellreceived. That doesnt help profitability or lack thereof. Now, jeffreys says its tough for almost all apparel retailers to drive Margin Expansion right now with heightened promotions ahead of the holiday. Thats just going to be the new norm. What is the i havent been to a jc penney since the sort of transition. I was there under the under the ron johnson transition. Whats it like now Walking Around . It depends on the stores, different sizes, different formats and different cities feel different. The one in new york feels different from the one in dayton, ohio. I send my mom, shes my secret shopper. Last night she got on the phone with me and said you know what, it doesnt look so empty. Last time i was in there, felt like they were going to go bankrupt any second. There were completely empty parts of the store. She says its more clear where things are. So it does sort of look much more like the old jc penney. The floors are fuller, theyve got the Center Aisles with the displays, big sale signage. All that stuff and changed the merchandise. They have, again, which is a really hard thing to do. We should talk about the stuff thats happening right now. Sure. Target and dollar tree out with concerning comments, as well. Is this the beginning of the end for the Holiday Shopping season when youre talking about the lowend of the market . Its really, really hard. And we sort of laid out the naughty and nice factors a couple of days ago. And its sort of hard to tell how this is going to shake out. Weird combination of head winds and tail winds. But the lowend consumer is struggling. Jobs and job stability is very top of mind. The reduction is going to be huge. Thats going to hit walmart, the dollar stores. Target maybe but not as much as probably walmart or dollar stores. I think theres a lot of concern. Cash would help, eventually. It hasnt. But just recently got down to what . If you save 40 cents a gallon, thats 40 billion after tax going right into Consumer Spending, its not a big number, but at the margin its psychological too. The health care costs, you know you have to make the first payments before right around christmas if i know the dates. So you anticipate the big spending you didnt have before. Dollar tree too, though. That stocks down. You have tens of dozens of people courtney, tens of dozens of people dealing with that. Tens of dozens . They were able to get the new insurance, right . Thats true. Talk about confidence and sentiment, it doesnt make you feel good about whats going on. You dont know what you have to pay. All of that makes people very uncertain if you dont have a lot of money to spend, you dont know if its going to be gone. It goes to the Corporate Office as well as their shopping in terms of deals. Same thing. Ghost towns, dayton at the malls, cincinnati is so frightening. Empty, stores they cant get tenants. On big days like black friday, ill be there and the malls are super, super packed. But it takes a very takes something very, very no tenants where i lived in cincinnati. And the anchor tenant, the jc penney or target how about commerce, going to be a big season . Yeah, double digit there. Terrific secular growth. Still to come this morning, were going to take a closer look at small investor, banking and the fed. Td ameritrade cfo joins us when we come back. Up next, whats working for mario . I have stocks that will double in the next five years. We talk Value Investing and names you should be buying. Right after the break. 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. Lets get some top picks from our guest host, Gamco Investors chairman and ceo. Youre a busy boy. Well, you know what, we look at the ignored and unloved so you have to travel a lot around the world and find good ideas. And you know what, the harder we work and ive got a great team. Portfolio managers, some of you who you met. Yep. Had them on the air. Absolutely. In that regard, we like Financial Engineering, subset of that, andrew, is a shrink. Time warner, down 50 , secondly, newscorp dropping stock, viacom shrinking substantially. Recovery, each of these stocks because of the rising middle class around the world and the notion of having that mobility in their hand and want content, youll see the stocks double. Hold on, time warner. I like all four of them. Newscorp, viacom and discovery. Theyll all crumble. Okay. In five years cbs . I like what hes doing but for a different reason. In the broadcasting area, like consolidation, media general which has already tripled this year will again double in the next three or four years. Media generals going to double. Hold on, now weve got five. Oh, i give you more. These are all going to double. Time warner, newscorp. Total return of 14 gives you a double in five years. So combination of dividends and cash flow and the stock prices in part driven by the use of cash flow to buy back stock. Another one, when a management change, you talked about ohio. Ill give you one from akron and canton, ohio. A management change. This is no long you are your grandmothers security company. Things you want with regard to Cost Reduction and a management change. Has 63 million shares sells at 33. And essentially if they pull it off five years from now with the earnings we look at you can see a stock and total return of a double. In this market where the market may not do anything for 33 years, theres a lot of significant companies. I think genuine parts will give you a 14 for five years. Youre marking to market daily, youre not going to feel comfortable during time periods like this. Let me ask you a couple of questions. I want to go back to time warner and newscorp. Do you need to break. Some people have talked about whether you want to split up hbo, put that aside. Do you have to do a lot more at each of these places . The model that theyre following is simple. Can we given our revenue base of subscription revenue, grow ebitda and take the incremental ebitda and take the leverage that we go and buy back stock . And its not complicated. Have i been pronouncing it wrong . How can you know about the company if you cant say the guys name . Stop. He doesnt know how to say gabelli. Les mundes . What . Its les moonves. I like the cable business. Ilike what theyre doing. Were going to go to break now. Thank you. Thank you, sir. I know not to bite the hand that feeds me. Steve burke when we come back, were going to welcome back bill gerber for the remainder of the show. Squawk box will be right back. Its estimated that 30 of the traffic in a city is caused by people looking for parking. Thats remarkable that so much energy is, is wasted. Streetline has looked at the problem of parking, which has not been looked at for the last 30, 40 years, we wanted to rethink that whole industry, so we go and put out these sensors in each parking spot and then theres a mesh network that takes this information sends it over the internet so you can go find exactly where those open parking spots are. The collaboration with citi was important for providing us the necessary financing; allow this small startup to go provide a service to municipalities. Citi has been an incredible source of advice, how to engage with municipalities, how to structure deals, and as we think about internationally, citi is there every step of the way. So the end result is you reduce congestion, you reduce pollution and you provide a service to merchants, and that certainly is huge. Losing thrusters. I need more power. Give me more power [ mainframe ] located. Ge deepsea fuel technology. A 50,000pound, ingeniously wired machine that optimizes raw data to help safely discover and maximize resources in extreme conditions. Our Current Situation seems rather extreme. Why cant we maximize our. Ready. Brilliant. Lets get out of here. Warp speed. Return to the retail investor, with indexes up 20 yeartodate. Well ask the cfo where individual investors are putting their money. Saying healthcare. Gov runs on code that is inefficient by looking at the website, we can see theres fundamental security principles not being followed. Well talk to a Cyber Security ceo who says he wouldnt put his familys personal information on that site. Plus, celebrities on the attack. Were going to tell you why Ashton Kutcher and kanye west have a beef with walmart and zappos. The third hour of squawk box starts right now. Hit me with your best shot hit me with your best shot fire away welcome back to squawk box here on cnbc, first in business worldwide. Im joe kernan along with becky quick and Andrew Ross Sorkin. U. S. Futures up about 50 points, thats where they were. So the news from target and dollar tree which i dont know whether we i guess we throw it in the walmart camp, dont we . Not in the home depot camp. Not in the home depot camp. There are big issues happening with the Discount Retailers and thats played out in earnings to date. Lets walk you through some of the earnings that have come out that have been disappointments. This is why the street is acting this way. This is a walmart camp, no ones been able to distinguish themselves from what was happening with walmart talking about concerns with the consumer, talking about how theyre offering a lot of discounts to try to get people into the stores. None of that adds up to good news. Take a look at shares of target this morning, the company came in with Third Quarter profit of 54 cents a share. This was on a gaap basis. This is kind of a mess. A lot of moving parts going through it. Probably the bigger concern when they started talking about comp sales. Thats a little disappointing. If you take a look at what theyre also saying about the consumer. They didnt say much at all. They did say it is a very difficult environment out there. They say the performance is related to the dilution from the canadian segment. But again, take a look at shares from target. It did not do that today. That stock is down by just over 4 . Abercrombie fitch. They came in with numbers that Beat Estimates by 7 cents with quarterly profit of 52 cents a share. But they also said they expect to see samestore sales drop in the low double digits in the current quarter. Abercrombie fitch the teen retailer. And dollar tree as joe mentioned, missed estimates by 2 cents. Revenue was also a little light of conconsensus. They said a very cautious consumer environment is what theyre looking at out there. They said the numbers that did come in, they had new customers coming in, new traffic. Increased customer traffic. Creamed. What you saw from both sears and target there was a lot of moving different pieces. They lost 15 cents a share for the Third Quarter. That was a little smaller than the 3. 39 that analysts had been expecting, but revenue was shy of estimates here. They are spending more money on the stores and thats going to cost them over the shortterm to make those investments. That stocks been under pressure too. Its a big story taking a look at the consumer. How healthy the consumer is, particularly at the Discount Retail end of things. All of the casual dining was last month. You know, that would help to have that. And not just retailers. Now, then you heard macys. Macys they were doing great. An outstanding company. They talked about how they saw the trend improve throughout october. Is this a real macro move . I think the low end is getting hit, getting squeezed. You can write that off to the Affordable Care act, a lot of things. See nordstroms . Thats going to be something the fed watches carefully. Theyre looking for data and this could play into that, as well. Nordstrom, i dont think nordstrom has reported yet. I dont think i dont think nordstrom has reported. But if you look at the chart, it has gone from six its been in a slow little decline on the very righthand side of the chart. Some have suggested even though its in the same category is considered the upscale right. Even though but you are talking about the discounters on a broad base. On a broad basis. Then you see Abercrombie Fitch, a teen retailer thats a little higher. Totally different. Theyve had an id like to know casual dining. I wish they were doing it. Its been a month since. And were really talking about whats happening. Our guest host for the hour is here to give us a read on it. Bill gerber, a member of cnbcs global council. Raked in record revenue and the stock is up more than 17 so far this year, which, i asked bill off camera and he said its really management. The ceo and the cfo basically responsible for it. Really . Yeah. You might as well. If it goes down. So have you one thing weve been talking about a lot is do the stock prices of the social Media Companies reflect a froth thats been nowhere to be seen for the past five years . Seeing that you deal with retail investors, are you seeing evidence that is true . That there is some froth . Or are they back a little bit at least . Well, we believe theres a little froth in there, absolutely. When Companies Start getting priced again on revenue versus earnings. But what about the phone call. Not just your opinion about whether the stocks cheap, are you seei ining anecdotally incrd activity, customers coming in. Do you have a broker of the day . No, not as much. No . No, we dont see the longTerm Investor is really not back yet. Theyre not back yet. Theyre not back yet. We are seeing the people who are active who stay very active. But the longer Term Investor no uptick at all yet . Its very little. What do you think of that . Its very little. Weve been talking about this for a long time. Theres two kinds of people. The people that got burned so bad that were in the market, in the 50s and 60s. They may stay out and young people who say this games rigged from the start. Well, you have to remember that roughly 16 of our clients assets are in cash. So therefore 84 invested. It doesnt mean how does that relate . 16 . Thats actually pretty normal. Normally its between 15 and 20 . What percentage of individual equities versus funds . Equities is probably 60 to 65 . Individual . Yep. And the rest yep. Thats different than i would have thought. I thought thered be more money. These are your existing clients. What metric do you have that lets us know whether youre getting more clients. Whether more people are coming back in to deal with Td Ameritrade . What number would we look at . New accounts . Yeah. New accounts and funded accounts. Where are we on new accounts . Thats up couple hundred thousand in the last year. So we are seeing we continue to see an expansion. Were probably doing you werent as big a player in the late 90s, right . Correct. So we cant use that. In a rip roaring time, what do you think youd be adding a year . Itd probably be at least double that. At least double. And you think thats whats keeping people up concerns . Theres certainly a lot of washington, we continue to hear from our clients, washingtons dysfunction. We get the debt relief and the debt relief is for 90 days and well have another debate coming up in january. And you know, people want to see a longterm solution before theyre willing to invest their money more longer term. Were all in favor of a longterm solution as a company and were really looking forward to hopefully getting something more than a three to sixmonth respite coming this month. But the issue we have, of course, is that were not hearing anything in terms of debate, discussion going on in washingtons never really been known to be a place where its quiet and things are going. Its 2 cents above, it was back on the 14th, revenue was a little bit light for nordstrom and then for the outlook, they went they took the low end up to 3. 65 from 3. 60. So it wasnt anything that noteworthy. Probably more like macys, i guess. And that goes in what weve been saying its the low end. Its a tale of two economies at this point. Right. And that has to be really concerning from the feds perspective. Goes back to this goes back to what we were talking about in the 6 00 hour, right . Which ive been harping on for months, income disparity. And raising the minimum wage. Thats the issue. And the fed, its working for some, not working for others. Yeah. And what do you do about it . Well continue with that Government Program which is increasing the income disparity. And the progressives, their answer come up with another Government Program to take care of the income disparity from the first Government Program and if that didnt work, well do a third one. The question is if you stop the fed yes. Does it hurt everybody . Or what happens . Why isnt the wealth where is the wealth effect . The wealth effect is at nordstroms or macys. In terms of jobs. In terms of jobs where is it . Even worse off . Could be. Do you see Something Like this . Do you see a split . A divergence . And is it harder to attract certain customers . Is that why youre missing a couple hundred thousand accounts . I dont think so, becky, theres a wealth effect, theres been two economies to a great extent for a long period of time. People have assets and people that dont. Are stocks as widely held as they used to be . Probably as widely held, yeah. But depends on how you hold them. Might be could be 401 k . Mutual fund. Right. I dont think theres many people that are just pouring over the stock prices in the wall street journal anymore and picking stocks and, you know glued to the tv set to see what the and that im not saying thats except for the show, mad money and stuff. And that day hopefully is not gone. I just think this is a reflection jim paulson every time he comes in here. Its a generational thing . But the first part is you have to get rid of the idea the world is going to end again. And after five years where it almost ended, there are still some people that are ready for too big to fail 2 which is what you were hoping for for your residua residuals, right . Do you want to do the sequel . Of course. Well be the last to know. Itll be published before we hear about it. Thats not true. Theres no sequel coming, as far as i know. Youre right, it is the stages of getting over a massive loss like that. It takes a long time to feel comfortable yet. All right. Thanks, bill. Well have much more. Looks like it was a good reaction. More throughout the thats a good one. Well have more. There you go. Okay. Here we go. Coming up you want to react . Nope. Tech experts told congress this week that obama care website is cumbersome, nearly 25 times amount of code as facebook and, yes, its vulnerable to an attack. A ceo who advised to scrap the website and start over. And well have squawk market master mohammed elerian. There are signs both political bparties in washington get it washington is lagging behind the country on this. This issue has been around far too long. And yet, we wait. Reforming our immigration system would dramatically reduce our nations debt. Grow the economy by 5. 4 . And take bold steps to secure our borders. On this, both parties say they agree democrats. We are very very strongly in favor of moving immigration reform. And republicans. I wouldnt underestimate the houses ability to pass the immigration bill. And yet, we wait. Americans are tired of empty rhetoric. It is time for every leader to come through on their promise. And fix our broken immigration system Tell Congress the time is now. Fix americas broken immigration system. Welcome back. Cyber Security Experts were called to capitol hill earlier this week to testify on how vulnerable the obama care website is to hackers. Morgan wright told congress that the code base for healthcare. Gov is so large that its going to be indefensible. Good morning to you. Good morning, thanks for having me on. Morgan, really, how bad is this . Were accused we didnt want to spread fear, uncertainty and doubt, but as technologists, were up there. Quite frankly, none of us from a professional standpoint would ever go against. This is our opinion, its not secure, we would not put our family on it. We wouldnt tell anybody to get on it. Not at this time and not in the near future because theres no plan to fix this. Oh, and thats where i wanted to go with this. So obviously the site needs to be fixed simply to make it work from a practical perspective but then theres the security element. Correct. Your sense, to make this site secure, what would you have to do . You know, most of us felt you got to start all over again. We need health care 2. 0. Because the example i gave is back in the 80s we built an embassy in russia is when they almost got done with it, it was just filled with bugs and listening devices. And it cost us 130 million to tear it down and start all over again because it would have cost more to fix it than it would be to start all over again. And thats the position were in here. Theres no good way to fix this plane while its in flight. Youve got to put it on the ground. If i hired you right at this moment, its 8 17 on thursday morning and i said how much would it cost and how quickly could you redo this whole site to make it secure and from the practical perspective actually make it work . Whats the answer . Youve got a better chance of seeing god because i wouldnt take the job. From a professional standpoint youd say, no, too much risk involved. Its not doable. You cant achieve the outcome you want based on the current structure. If your foundation is bad on a building no matter what you want to do, you build a skyscraper and theres cracks. Im saying im giving you full permission to start. We can rewind the clock. You can start right now, though. I need to know how long its going to take and what it would take in terms of cost. It would take people from the private sector, not government contractors. It would you can do this with a team of 25, 50 people and be done in less than a year. But thats youre right, this is a little different than tearing down a building on the ground. This is a plane thats in flight. Right. How do you fix it now that were in flight and youre going along and something that has to be done . I mean, you cant take this down, youve got people who have already bought in on this, lost their insurance who need to buy in on this. This is here, no undoing it. See, thats the political discussion we try to stay away. But to your point, becky, if it costs you 1 to fix it before its lost, itll cost you 100 to fix it off its launched. The amount of code and inner dependencies, this isnt playing checkers or chess, trying to play 20 games of 3d chess at once. Give me a comparable here. You look at a google through my gmail or apple, how much more or facebook or whomever, are they more secure than this . Security is a relative issue. Thats my point. The other sites are just as insecure no, not necessarily, guys. You have to understand in government systems, you deal with regulations that dont affect the private sector in terms of the information you can collect. Facebook has been pulled before congress and had to testify about privacy. But in terms of a major breach of issue, they have not had that. Theyve had security or privacy issues. But they havent had a major breach, neither has google. This site is primed to have a major breach. Primed because you see the whole . You could hack it right now if you wanted to . Yeah, actually, one of the people we had on with us, david kennedy, one of the hackers clearly demonstrated to many of the systems already vulnerable and that it would be very easy at this point to take the site down. Wow. Yeah. Wow. Its not fun news to have but, you know, bad news is not like wine, it doesnt get better with age. If were going to address this, now is the time to address it, now is the time to what would be the cost to start fresh . That would be hard to say, but i can tell you this, it would be far less than the 600 million theyve already spent and the potential billion or dollars more its going to take to remediate and fix it. If we hired eric schmidt and Mark Zuckerberg to create this site. Less than 100 million. We already spent 600, you think the whole thing shouldve cost 100, and now spending a lot more to get it right. Yeah, the taxpayers will spend a lot. All right. Thank you for joining us. You bet. Thank you, guys. Appreciate it. Yeah. Surprising though . No, not surprising. But sad. Coming up on a special squawk box edition of celebrities on the attack, ashton and kanye take shots at companies and arod loses his cool, andrew. Youve seen the new kanye west video, i know. I heard about it. Youve seen it. I have not seen it. Youve seen it. You have seen it. I heard about it. And at 8 30 a. M. No, i have not seen it. And at 8 30 i saw there was an image on Huffington Post. Shes leaning back on his motorcycle just naked as a jay bird. Well, im glad that somebody watched it. No, ive heard this from you. I looked over your shoulder. Anyway, at 8 30 a. M. Eastern, breaking economic data, well get the closely watched weekly jobless claims and the Producer Price index. You like that song . Kanyes song . 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. Customer erin swenson ordebut they didnt fit. Line customers not happy, im not happy. Sales go down, im not happy. Merch comes back, im not happy. Use ups. They make returns easy. Unhappy customer becomes happy customer. Then, repeat customer. Easy returns, im happy. Repeat customers, im happy. Sales go up, im happy. I ordered another pair. Im happy. both im happy. Im happy. Happy. Happy. Happy. Happy. Happy happy. I love logistics. Right now its time for a squawk box edition of celebrities on the attack. Ashton kutcher takes shots at walmart on twitter yesterday. He criticized the Employment Practices tweeting, walmart, your profit margin is so important you cant pay your employees enough to be above the poverty lean. He later tweeted, you had 17 billion in profits last year, 260 billion company, what are we missing . Well, the walmart news room twitter account responded and made the retailers case tweeting, we think youre missing a few things. The majority of our workforce is fulltime and makes more than 25,000 a year. Then also about 75 of our store Management Team started out as Hourly Associates and they earn between 50,000 and 170,000 a year on average. The exchange ended with walmarts newsroom tweeting we know we can always get a little better as a company. This year weve made providing more opportunities for our associates a top priority. Ashton kutcher is not the only celebrity taking on a company. Kanye west went after zappos using a fourletter word to talk about their products. This was presumably in response to comments from zappos ceo that kanye should focus on music not on fashion. In is response to kanyes tweets, zappos posted a picture saying, yes, it is true that zappos sells shit products. Thats right. You can say shih tzu, ive done that many times. That gives you i figured it was better to let you plausible deniable. Its a dog. It is a dog. Dont need to worry about that. Say it for me. Shih tzu, its a dog. Thank you. Also in sports news after 12 days of hearings, arod says hes heard enough of his grievance proceedings. Alex rodriguez stormed out after an arbitrator ruled that bud selig did not have to testify in this process. Arod is seeking to have his 211game suspension for violation of baseballs drug agreement and labor contract lifted. Today he slammed his hand on the table and cursed at the chief operating officer. Rodriguez issued a statement through a spokesman saying he is disgusted with the process that is designed to ensure the player fails. He says he sat through the testimony of liars he says there, he was trying to be respectful of baseball he says this cant happen longer. They point out that katie couric in 2007 asked him about roids not hemorrhoids, steroids, and he defiantly told her he didnt do them. And 14 months later, he was confronted with evidence he had failed drug tests years before. We are just a few minutes away from the october Producer Prices and that closely watched weekly jobless claims. Stick around. Well be right back. [ bell ringing, applause ] five tech stocks with more than a 10 . Change in aftermarket trading. All the tech stocks with a market cap. Of at least 50 billion. Are up on the day. 12 lowvolume stocks. Breaking into 52week highs. Six upcoming earnings plays. That recently gapped up. [ male announcer ] now the world is your trading floor. Get realtime market scanning wherever you are with the mobile trader app. From Td Ameritrade. Welcome back to squawk box. We have breaking labor data. The jobless claims number comes out pretty good at 323 from an expected 335. Last week, however, was revised a little bit worse, 344 from 349. Continuing claims a little worse than expected, actually, 2876 from an expected 2870. Inflation data right on the number for month over month. It was expected negative. 2, came out negative. 2. Food and energy came out plus. 2. A little more than expected. Theyre convinced theres no such thing as inflation right now. Stock market lost, basically steady. Came in at 2. 8, the yields gone up a little bit since then. Edged a little higher. Mostly a fairly muted reaction. This is not a bad number in the claims front. Jim, steves impressed with your report, not with the numbers. That was pretty cogent, was it not . Have coherent is the word. Have coherent. No script needed. No script needed. Learn. Im going to go to you now by reading the script. For more on the data, lets get to that dont ad lib. No, only would ad lib our viewers are writing in shtake mushrooms is a good for shih tzu, if you dont use shih tzu. Theres no way anyones going to get you for that. Everyones heard of those, right . I came up with a good one. A cluster bomb. That works. No problem. Give us your report without residential natural gas was done, gasoline down, heating oil down, all the energy components. Jim is right, 0. 2 on the seasonally adjusted core epi. The yearoveryear, that was 1. 4, the fed is not going to be worried about that. In fact, when you do what we do every month, we go up the chain of processing to less and less refined goods to see whether or not theres any inflation in the pipeline. And we see the opposite. Intermediate goods minus 0. 1 on the core minus 0. 4 on the headline. Unprocessed goods, were going from wheat to flour to bread. That would be the final stage in the process there. And yearoveryear minus 4. 9. Crude core goods. No inflation in the pipeline. We talk about this every month, as well. These are relatively good numbers for Profit Margins. These are the inputs, Producer Prices into the stuff that is eventually sold to the consumer. So if these prices are going down faster than theyre either going down or up at the consumer level, that means its more profit for producers there. And the claims numbers, i think theyre under control, i believe were watching out. There was the california technical problems. Were washing out from the shutdown issues. And theyre relatively well contained and suggests you could do another 150,000 to 200,000 on the month with numbers like this. If you remain down in the 320 level. And were resuming the decline the levels before the shutdown. Can i ask jim, jim, whats the forecasting right now on the fed . Are you protecting yourself on december . Or is that a belief or just sort of an option where youre protecting yourself . I actually am mildly impressed with what the fed has done over the last week. And theyve managed to put this notion of taper out there. I dont think its coming in december. I do think long end rates will go up more as the fed keeps throwing out Forward Guidance trying to extend that zeroed out shortterm period. So in a sense, what theyre doing is saying we dont want to exploit our Balance Sheet anymore by continuing to buy a ton. Theyre going to continue for now, obviously, but what we want is the market to do heavy lifting. Managing to stay net neutral on accommodation and plant the seed of taper. I dont think the tape the question is, have they made any progress in trying to get us to separate the notion of tapering is not tightening. And you had bernanke out there in full force. As dovish as ive seen a fed chairman on rates saying we may lower the unemployment threshold. We could hang out, we have time to be patient there. And by the way, hes talking about a time well after hes left office here. Thats really interesting. Its proof it didnt work last time. They were going to be able to separate the two. Now he has to come and try and pivot and find a new unlike other parts of the government i want to make this point. The fed knows it has a problem. And if you read the minutes yesterday which i do not recommend to you because theyre unbelievably complicated. But if you read them, they know they have a problem and theyre casting about this way and that way trying to find some solution to make that solution. And bernankes saying, you know what, we can remain low forever. You were going to say it didnt work the first time back in may. At that time, earn talking about a tenyear yield and never considered the notion of taper. Thats been introduced. Now were a little more willing to handle that news. I think its fine now. But, again, they cant be that transparent because then they run the risk of people front running them and selling the long end. So they have to be a little less transparent than they want to be. You mean volckeresque, a quick move nobodys expecting . Right. Like what they did in september. When they pulled the rug out of the potential shorts, i think that was slightly by design. They cant say were tapering in march because then the markets going to front run them and they might be able to lose control. Is the market desensitized now to this . Is the market ready for a taper in the way it wasnt in september or june . I think its certainly more ready than may. But anyway, go on. I would agree. Absolutely agree. Thank you. Youre good at your job. Fantastic job. Good job, jim. No teleprompter no less. 95 years old, won two nobel prizes, only yesterday, one of only four people. One for sequencing proteins and am amino acids, 22 years later this is an indepth obit in the washington post. Twice going usually they do their best work when theyre younger. Theres data on that. They said he was so modest youre 30 in some fields, youre done, to come back he worked ten years to sequence it and said he was so modest and unassuming thought he would be the caretaker of the lab he worked. Ive got my eye on another guy winning another one. Al gore. Hes going to win another one. Theres an interesting story about that, about People Living and working longer is that theyre keeping people younger from getting that first grant so they can do their best work in their 30s. Exactly. People are not getting grants to do research at the prime of their intellectual lives right now. On that note. Coming up whats going on . Are we over . Jour past th youre past that, right . Im done, are you kidding me . Mohammed elerian will tell us why he thinks the fed is the markets best friend. Plus, dont miss the Season Finale of american greed tonight. Its the fugitives. Tonights episode diamonds arent forever premieres at 10 00 p. M. Eastern and pacific. There are signs both political bparties in washington get it washington is lagging behind the country on this. This issue has been around far too long. And yet, we wait. Reforming our immigration system would dramatically reduce our nations debt. Grow the economy by 5. 4 . And take bold steps to secure our borders. On this, both parties say they agree democrats. We are very very strongly in favor of moving immigration reform. And republicans. We do want to make some progress in reforming our broken immigration system. And yet, we wait. Amicans are tired of empty rhetoric. It is time for every leader to come through on their promise. And fix our broken immigration system Tell Congress the time is now. Fix americas broken immigration system. Welcome back to squawk box this morning. Check out shares of hlogic. Is that how you pronounce it . Hologic. Disclosing the purchase of Common Shares the sale of put options with a strike price on the options and analyst at rbc capital says icahns involvement could accelerate and result in a quicker departure. Hologic. Thank you. A boeing dream lifter landed at the wrong airport last night. This is a weird story. One of the largest cargo planes in the world that landed at airport in kansas. It was supposed to land a short distance away. A recording of a radio conversation with an air Traffic Controller appears to show the crew members were still unsure of their location even after landing. Where are we . There had been reports that the plane was stuck because the runway is far too short for the plane to take off. But earlier this morning an official with the Wichita Airport authority said that the plane was capable of taking off and will do so at 1 00 eastern this afternoon. How does that happen . I dont understand how you land in the wrong place and not know youre in the wrong place. Is the fed the markets best friend . Thats what our next guest at squawk market master says. Joining us now is mohammed elerian. Why is the fed the markets best friend . I know why it has been to this point. Could it yank the rug out from under the markets . It will try not to, becky. The fed cannot get to its economic objectives without going through the asset markets. So the fed feels obliged to continue to support the asset markets, not in itself, but as a means to an end. And that is the economy. Now, theres two things we would stress. One is willingness doesnt always translate into effectiveness. And secondly, remember that we are now entering a more differentiated stage of the qe trade. Wait a second. Okay. Again, i understand why they have been the best friend. I understand why they dont want to yank the rug out from under the markets, but Steve Liesman just said the fed has a problem. Do they . Oh, yeah. Where i disagree with steve. He said i wouldnt recommend anybody reading the fed minutes, i think the other view, read the fed minutes. Because the fed minutes have this enormous contrast. On the one hand, the economic discussion is really boring. Its all about how muted things are, how modest things are and basically theyve done the same thing theyve done almost every time since the crisis, which is lower immediate projections and increase further down. But the policy discussion is amazing. There are so many open questions. When do you taper . How do you taper . Can you dealing taper from Forward Guidance . How do you communicate . Should owe lower on reserves . What do you do with cost and risk . That part, becky, gives you a sense of how complicated the current stage of modern central banking is. Thats important for the markets. Thats why the trade that has worked so well, youve got to be more differentiated. And as mario said an hour and a half ago, and i totally agree, the safety net, the safety margin thats built into risk assets is much less now and therefore youve got to be much more careful in how we apply the trades. Mohammed, peter wrote yesterday he thought this was the key line from the fomc minutes. He says participants generally expected that the data would provide would prove consistent for ongoing improvement and labor market conditions. And would thus warrant trimming the pace of purchases in the coming months. In the coming months, the uz that mean as early as december . Does that mean you think tapering starts in march . And what happens to the tenyear as a result . So no one knows for sure when its going to start. Thats a very discreet decision thats done on judgments, very difficult to predict, especially when you have a committee thats all over the place. But if you tell me over the next 12 months are they going to taper . Absolutely theyre going to taper. Are they going to do it in a gradual fashion . Absolutely. Are they going to try importantly for markets to strengthen Forward Guidance . Yes. That has trade implications. Weve been saying for a while, bill gross has been tweeting it. Look at the curve trade. The front end of yield curves is protected. And you can make money going long the front end, short the long end. The other trades that take into account the fact they are lucky to taper but they will not taper in isolation, they will do other things. The interesting thing is trying to figure out again what happens to the tenyear. Right now its at 2. 8 . Obviously its moved up from where we were earlier in the year. If we were to taper as early as december, what happens to the tenyear then . Does it go to 3 and beyond . Yeah, we think its in a broad range of about 2. 60 to 3. 10 in the shortterm. Thats where mostly its going to be. There are some uncertainties, technical uncertainties, including if they taper and also something you mentioned earlier, theres also the signals out of china, i think joe mentioned it earlier. So, you know, this is an uncertain time and thats why we keep on telling people, focus on whats less uncertain and have option to react. Always nice talking to you. Thank you, becky. Coming up, were going to talk Retail Stocks with jim cramer. He comes on to talk about his show but, you know, we have things to ask him about, you know, right for our show. Target, abercrombie, dollar tree all trading. Dont miss squawk box tomorrow, our guest host tom fanning ceo of southern company. Doing whatever they can to provide it. And hes got a lot to say about regulation and everything else. So watch tomorrow. You really love, what would you do . [ woman ] id be a writer. [ man ] id be a baker. [ woman ] i wanna be a pie maker. [ man ] i wanna be a pilot. [ woman ] id be an architect. What if i told you someone could pay you and what if that person were you . When you think about it, isnt that what retirement should be, paying ourselves to do what we love . The ocean gets warmer. Paying ourselves to do what we love . 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, lets get to the New York Stock Exchange where jim cramer joins us now. The perfect person to make sense of these crazy retail numbers weve seen this morning. Jim, we start with target. Target. Im listening to your discussion about taper. Its always kind of funny because its so different from the boots on the ground view. I mean, here, targets Third Quarter Financial Results continued strong execution, but not true. Well, not in my opinion. But then it then it says where Consumer Spending remains constrained. Then you go to dollar tree. Very cautious consumer. Target very good operator. Im surprised they cant do better in this environment. They keep talking about how bad off the consumer is. Why is that a good time to raise rates . I know all of the idiosyncrasies. I agree with you on the health of the consumer. How much of it is because of what walmart told us that they are going to be aggressive with discounts in the quarter and margins thin everywhere. Williams and sonoma reported a fine quarter. You put costco in a higher brackett in terms of target audience. Costco has the bmws in the parking lot. You have home depot operating well and lowes poorly. Walmart not operating well. Do i want to buy target . Maybe three days from now people want to buy target. Is it competitive environment . Some guys not able to. So it is case by case. There are more cases that are bad which makes me feel like maybe the enterprise is strong. The consumer which is about twothirds of the economy is not strong. The idea that we are parsing words and a release of walmart or target or dollar tree i would rather for those guys. Things are very tough out there. What do you make of abercrombie . It is time for jeffreys to go. Are you calling for his head officially . His contract is up this year. There is no reason for that man to continue to be there. Im sure he is a nice guy. Is that the guy with the plane . The guy that said the things about youth and thoughts. Im not on his page. Cool people, in a world of facebook and twitter you dont go there. That is like jamie dimon doing the twitter thing. The 69yearold fellow, time for youth. We can be cool after high school. We can eventually be cool. We are still working on it. There is hope. You want cool . You have to go to there sears release. Launched adam levine and nicki minaj in 500 k mart stores. Launch them . Launch what . Set him up . Launching and launching what . Like a product line . Or are we launching them . Adam is sexy now. Getting his conference call. Watch nicki minaj. Did somebody tell nicki minaj she was launched . Launch lady gaga. What happens to her . You go to sears or k mart for years they have been empty. You cant find a body on the floor to help you out with anything. Back to the shopping your way. Like at burger king. They are going to slice and dice it. Every item is going to be an ipo in the end of this thing. I was listening to mario talking about the different auto. Sears has a couple. They can do the sears base, auto base and then new sears tire and then die hard. He can split it up and maybe when he is finished maybe there will be something. They are launching nicki minaj. I looked up launch in the urban dictionary. It is used to describe just a quick acceleration in a car from a complete stop. Pop the clutch and go. Thats all i got. Urban dictionary immediately. Jims launching nicki minaj. Maroon 5. We will see you in just a couple minutes. Always holding back and never willing to really tell us what he thinks. When we come back our guest host has been the cfo of Td Ameritrade. Well have him. Lets get back to our guest host for the last word. Stock is up nicely about 70 or so just based on improving environments since 2008, obviously. Any of it because of the fed . Would you attribute any of it . Actually, we have lost about 70 of our revenue from where the fed has taken Interest Rates from 2008 until today. It is hard to make. You had nothing in the bond market to sell then. No. We had about 100 billion in assets in the accounts. And the interest was 1. 41 . You are like a saver. Thats the hard part. 2014 is off to a good start. Trading activity is up. Delta between 1. 20 and 1. 40 range is predicated on trading. Did you open the new do you have facilities anywhere . You dont have retail outlets, per se . We have a little over 100 branches. You have 120 in five years . The ones we have will probably relocate some geographically and get them biggerer. I dont think we will need that many. You dont expand that way. You have plenty in capacity if people decide to call you. A lot more trading and certainly a scalable business. We are ready for it to come back full force in terms of we have plenty of tvs ready to be tuned. Thank you. Thanks for having me. It was very interesting. That does it for us today. Make sure you join us tomorrow. Right now it is time for squawk on the street. Welcome to squawk on the street. First breaking news on the treasury and gm. Thanks, carl. Treasury anticipates exiting the controversial General Motors investment. It will do so by the end of 2013. Its launching its plan to sell the remaining 31. 1 million gm shares. It has recouped about 39 billion from the 49 billion it invested. That would be at todays share price if it sold the shares for 1. 1