Transcripts For CNBC Squawk Box 20131205

Interest rates unchanged at its final policy meeting of the year. Last month, though, policymakers surprised the markets with a cut in the Interest Rate to a record low of 0. 25 . Well check in with Ross Westgate in just a few minutes. The dow and the s p are now on a fourday losing streak. This morning, futures are around the flat line. Down by about 2. 5 points for the dow, down by 0. 5 for the s p and the nasdaq is up by 4 points. November samestore sales will be coming in throughout the morning. Coscos comps rose by 2 during the month. That was short of what the street had been expecting. You had lower gasoline prices and weak foreign currencies. Both of those ended up hurting results. Aeropostale is reported a much bigger than expected loss for the faurourth quarter. Also take a look at apparel retailer guess. It is cutting its full year revenue forecast. The company says it expects a bigger fall in european sales in the Holiday Shopping quarter. Joe. So you showed that we showed the tree . Yes. Its spectacular. The tree, you know, i dont what i love are the popping lights that look all over the place, but make it look look its catching light and jumping. Im glad that you say what you like. Im not going to by bah humbug. You know how when the president comes to down and you have to go into new york or something its all about you. Its all about blockades. Do you know where that rtree is . I do. It goes from first to i know. I was on 59th and 5th yesterday and you could already feel the middle of the city, which is already a hellish nightmare of congestion and beeping horns and you are a grinch. Huh . You are a grinch. Im just saying when they light that tree it becomes ten times worse. Everyone has to see it. It looks the same as last year. You have to admit, when youre there and you bring the kids in dont urge people to go and see this spec tract lar. It just means there will be more people there clogging up the streets. I have to go in there tonight. Thats the problem. How do i even get you need i. D. To get past the blockade to get near 30 rock. Grinch. Am i a greasy pa ban ana pee . You are. Its beautiful. Its a huge pain. Anyway, in corporate news, apple dominating the headlines. The wall street journal reports apple and china mobile have signed a deal to distribute the iphone on the chinese carriers network. Were talking about a pretty big potential number of people, right . Its a lot of people. Chiev china said its going to award china mobile, China Telecom licenses to award 4g to customers. Biden is over there. Funny that it was biden because you know what joe is like. But he may not be the most tactful in diplomacy, but you know what . He knows how the game works. Hes always the one over here who comes around and says, i know how this works, we have to talk to both sides. So i think biden probably is the right guy to do it. Meantime, carl icahn stepped up pressure on apple. And in a tweet, he whew. Every waking thought that icahn has about apple we have to all right. He said hes filed a shareholder proposal with apple for a much smaller stock buyback than he previously advocated. Cnbc reports that icahns plan calls for a 50 billion buyback and he had originally been looking for 150 billion. This is a little bit of a stepdown. Yeah. But tim you know, weve had conversations with tim before. We know hes a viewer. He knows my efforts to get you away from the dinosaur with your keyboard. I know what im getting for christmas. Okay. Its the only thing ive asked for for christmas. Its working. This is the only thing ive asked for for christmas. Icahn at this point is almost like a like a fly buzzing around. And i can thats that is a complete recognition with this move. There was a longterm shareholder in apple who said what he did originally with that move for 150 billion is what gives activist investors a bad name. He said it was pushing it too far. The shareholder said, look, he wants to know what the company is going to do with the cash, too. They just didnt like the way it was pushed on. It was 150. Now he said maybe you could do 50. I dont know. Its obvious that he cannot strong arm tim cook to, you know, to say how high on the way up. Right. Lets talk about another story were going to be tracking today. Treasury secretary jack lew will delivers remarks on reform and the next steps that need to be taken. According to a preview of the speech, lew is expected to argue that the Financial System is close to accomplishing it goal posed by the dangers posed by giant banks. He will be calling on overseas regulators to make their seas tougher. In july, he talked about his goals for reform. Going forward, well measure our progress in weeks and months, not in years. And much of our remaining work will be completed in the next five months. Let me repeat, by the end of this year, the core elements of the dodd frank act will be substantially in place. I think theres a shared goal between what im saying and what many of these senators are saying, which is that its unacceptable to be in a place where too big to fail has not been ended. One of the things i guess i would say is that any efforts to delay or dilute the implementation of dodd frank, if we get to the end of this year and we cannot with an honest, straight face say that we have ended too big to fail, were going to have to look at other options. Steve is going to be joining us to talk about this in the next hour, steve liesman. In other washington news, the monitor thats overseeing the mortgage settle isment says three of the biggest lenders failed to meet some of the requirements for giving relief to struggling homeowners in that 25 billion settlement that was over for closure abuses. He concludes that bank of america, jpmorgan and citigroup all failed to meet seven of the 29 requirements tested in the first half of the year. The monitor says the banks though, have taken steps to correct the errors. Back to china, Chinas Central Bank is warning that central institutions should not trade in bitcoin. The Central Bank Says while the Digital Currency does not yesterday pose a threat to chinas Financial System, it does carry risks. Bitcoin market operators say the chinese nationals are measure participants and hold a large share of the total number of bitcoins in circulation. I dont know i wouldnt read anything into that they want the yuan, but they have a vested interest i think in wanting the yuan to eventually be the currency of record after the dollar. They also own a whole lot of dollars. Did you see what green span says . No. He called the bitcoin a bubble. There it is right now. Exuberance. It doesnt make sense. You have to have some reason for why it would go to this level. When you have former central bankers last week it was down . Yeah. But still, you look at the massivition flagz since it was introduced, it doesnt make a lot of sense to him. Yep when you have the chinese weighing out on these issues, its probably a reason for caution at the very least. Why dont we check on markets. As we showed you, the futures this morning are basically flat lining, waiting to pick up direction. Maybe well get that when we get toss jobless claims. Take a look at oil prices. At this point, youll see that oil is up again. Wow, up another 39 cents. 97. 59. The tenyear note this morning is yielding 2. 828 , pick up a little more steam in the yield as we got stronger than expected adp numbers. Not only this month, but the revision for last month. That has people wondering if fridays numbers are going to be a strong one. The biggest impact well have on the tenyear note well see what happens with fridays job numbers, as well. The dollar is up against the euro at 1. 3591. Gold prices, 1,233 an ounce. Yeah. It was like painting grass, watching grass be painted yesterday, wasnt it, with stocks. There was nothing happening. Flat lining by the close yesterday. Investors look ahead to the friday jobs report is probably keeping some people out of the market. Joining us now, allen gayle, senior director of Asset Allocation at ridgeworth capital. And steve corso, director of oh, no, no, youre not him. I just play him on tv. I thought you were one day. Jack markquell doesnt look anything like you. Cut water asset management, allen, we would be disappointed if we didnt see a repeat of the last jobs number on friday. Will we be disappointed or will it measure up . Well, good morning. I think that the data weve been getting between adp and well see what the jobless numbers look like, but it does suggest that were going to be stronger than consensus number when it comes out on friday. The implications for investors is is that going to heat up the talk at the upcoming fomc meeting about tapering . So i think that that is one of the reasons why were seeing the tenyear note start to move higher in here because that nervousness is going to push this yield curve steeper in our view. So will it be 200 . I think in our view, 200 is the psychological barrier. That if we see numbers north of 200, that thats going to make the Federal Reserve feel more comfortable, that the job growth is on a more sustainable basis and that theyre going to be able to start this tapering process. All right. So will it be 200 or above . My view is there is a good chance. Obviously, with the data collecting and post Government Shutdown, i think hazarding a guess on the precise number is difficult. What do you think, cliff . 282 today on the tenyear. Yeah. I think theres a shot. Our view is taking a step back is that the economy continues on this multi year check like recovery. And, you know, the economy has been flying on two engines, consumer and business. But i think two other two engines or twoengine planes . Four engines. On half. Yeah. Because you also have the government sector and exports minus imports. So those two have been saggy. In fact, one of those has been in reverse, the government sector. Thats going to be it based on neutral and were pretty bullish based on growth. Yeah. An engine flying in reverse. That says a lot, doesnt it . Its differing ages, i think. So the gdp number, does it get revised . The expectation is well see an upward revision. Im concerned about the quality of the upward revision, that its more from inventories than anything else. But, you know, from our perspective here in the ridgeworth allocation strategies, you know, were looking at valuations. Were looking at headwinds and tailwinds for the economy and were looking at favorable entry points. And the point with the data coming out today is i think its going to confirm our view that the economy is getting stronger, that the Global Expansion is gaining traction. And so thats one of the reasons that we remain overweight in equities in our funds. Okay. I shouldnt have twitter on when im sitting here. Youre looking at the same thing i am. Im laughing at a guy who is even worse than i am in terms of no, this guy is using curse words because he lives on east 56th. He says i dont even leave my apartment when that stupid f no, i cant read, and the cops already. Dummy, you should have known that you were living there for two months out of the year before you decided to live there. Oh, my gosh, i cant believe there are people near rockefeller center. Theres a lot more because everybody has to go and see that thing. You have to do it. You go through the crowds. If you cross the potomac, you cant even get near there. Im just sort of playing the grinch. I think it is beautiful and theres iceskating and all that stuff. We know you too well. Im not really a grinch. I like it when i dont want to be pigeon holed as the do they do anything in december . The real grinch, the fed. No, i do not the grinchess. Ive got her in there as the if we look at the baton pass between the two, i think yellen will be a little bit more of a drove. And i think notwithstanding what jobs might do tomorrow, whether they taper in january or march, i dont think if you take a step back its going to be a big deal. Timing is not going to be a big deal. Its coming. And i think a lot of it is built into the market. When we were all convinced as a market in september that this was absolutely going to happen, the tenyear was trading about a 2. 80. We were around there today. A lot of it is built in already. What do you think about bitcoin . I saw you rolling your eyes a bit. I had a great discussion the other day on this. Fiat currency is not really backed by anything. I think its in a speculative phase. Who knows what anything is worth. I always go back to gordon gekko. Perception is reality. This feels very much like a speculative pop. Especially sipts theres such low pairier to entry. You could have many knockoffs. I think it has that pattern where people were getting in just to get in. Here is another one. Joe, couldnt be more right about the tree blockades. It took me 30 minutes to walk five blocks last night. I got stuck in traffic yesterday around 3 00. Long before the tree thing started. But then again, i live far away. Well, there it is. And they have a big party last night. Did you see some of that . Vans and all that. People are saying it was a that i complain the whole time i was at the macys day parade. No, i did not. It was freezing, though. My toes were anyway, allen, thank you. Cliff, thank you. Did Michigan State lose . Im not up on that, either. Apparently the tar heels beat Michigan State. Im hearing that. To not mention that is supposedly bad, too, because Michigan State was number one. Its a little early for college, isnt it . Because its march is when we really start paying close attention. Are you going to do it this year . You suck at it, but are you going to do it this year, march madness . Oh, you know what . I come in yeah, i do kind of stink. Never mine, i cant even pretend. Im going to do it, but i dont know that much about basketball. So i think if you do know a lot about basketball, i dont know that it helps. There are so many surprises. They lost over the weekend to an average team, didnt they . Who . Yeah, they lost to university of alabama birmingham. And i saw the coach was, like, mad walking around. Okay. Whatever he said to them worked. Yeah. They beat Michigan State. All right. When we come back this morning, microsoft is moving to assure International Business customers about spying. For once, news about the art world. Normal rockwells saying grace sold at auction for morp than 46 million. Sothebys says that its a new auction record for an american painting. First, as we head to a break, take a from alex wallace from the weather channel. Things are going to get messy for us. Things arent looking too bad for us. Southern plains in texas, a few light showers. We anticipate as more moisture comes in, this cold air mass, that wintry mix, icing potential, snow, even into tomorrow well be dealing with this from Oklahoma City to dallas and spreading over towards the mississippi and ohio river valleys. The noefl forecast calls for some of the higher totals to be anywhere from 5 to 8 inches. Southern parts of missouri into sections of indiana as well as illinois out there for us. It looks like indianapolis could see anywhere from 3 to 5 inches of snow. But the greater concern will be the icing. You could see more than a quarter inch of ice in the zone of purple from dallas to paducah and kentucky. That ice could cause big problems, not just for roadway travels, but it will start to weigh down on those tree limbs, branches break and Power Outages could become a problem. This is going to be the zone we watch through friday big time icing potential. Thats your national forecast. Squawk box, more of that next. Every day were working to be an Even Better Company and to keep our commitments. And weve made a big commitment to america. Bp supports nearly 250,000 jobs here. Through all of our energy operations, we invest more in the u. S. Than any other place in the world. In fact, weve invested over 55 billion here in the last five years making bp americas Largest Energy investor. Our commitment has never been stronger. Right now, its time for the executive edge. This is our daily focus on giving Business Leaders a leg up. Microsoft moves to assure International Business customers on spying. The Technology Giant says it has never turned over any data like this under the Foreign Intelligence Service act and cannot believe the authorities are entitled to the information if it is stored abroad. Theyre going to be encryptel a lot more information. Theres the story about how authorities were getting around it by tapping into the weak links. I know google and yahoo have recently moved up to encrypt that data. I read this and microsoft, i think they need to come down on the side of their xhrs versus the government, but i wonder how really serious they are. The government has put th in. But i think everything here is things you have to say to be politically correct. I dont even know if the customers over there are seriously squawking that much or whether they would actually like when cisco seemed to indicate that it had been part of their weak forecast, when an analyst actually asked on a call, was it material . No, no, its not material. If its not material, youre sort of still spinning. Until it actually becomes something you can say, yes, heres numbers, it is material. You say look, its start to go rear up and we worry that it is going to become material. The latest thing, we were looking at billions of cell phones. When you say the word billions of cell phone locations, theyre not looking at any of them individually. Unless its something that a red flag goes up theyre taking all this information. But its meta data and theyre looking for data going between people looking to do some harm. But they certainly made it look like some companies cooperated. Microsoft has to say we were shocked, shocked that there was spying going on. Although some of these Technology Companies have fought the government and said no, we dont want to cooperate. How did they do . Try fighting the government. But at the same time, they have to come down on the side of their customers. Read a lot between the lines. This is me . This is you. Fine if you want to do it and ill just respond. What . Go ahead. No, i want you to respond. Security experts say that theyve uncovered some 2 million stolen passwords to websites. Including facebook im safe there google safe there twitter, i never tweet, and yahoo . I dont have an account there. You dont do any internet anything . No, no, no. This is why. Researchers say they discovered the credentials while investigating a server in the neglecter lntds that cyber criminals used to control a Massive Network of compromised computers. This scared the heck out of me. Really . Yeah. We leave Computers Running at home. We leave them running here sometimes. I know i need to get my computer shut down. I got my credit card information stolen in the last three weeks. I have been trying to be smarter about it because they say a lot of people use stupid passwords. No, no one will figure out my 123456. I was using stupid passwords. Ive changed them all. Stupid passwords that are completely useless when it comes to trying to stop any of this stuff. And i think the lesson is we all need to be more careful about what were doing because there are criminal elements that are trying to break into these accounts all the time. You should be careful. Ive got 12 pets, two kids and a wife and they all have different birthdays. So if you think youre going to be able to put this together, start now. Some are capitalized, some are not. The turtles name, youll never figure out rudolph. Oh, shoot. Gave it away. Yeah, i did. It is a real issue. What do people do things like that . Yeah. Birthdays, but even dumber is Something Like admin or password where you dont even need to know your anniversary. My life basically began on that day. Oh, thats very sweet. Its true, too. Sglts true. Googles mystery barge in the San Francisco bay is under investigation. That probe began in the past week. Its going to be examining what permits are needed to build the barge and whether the owners of the Treasure Island pier have the proper permits. The barge has stirred a lot of speculation about its purpose since its existence was first reported back in october. The best guess people have come up with is this is going to be some sort of Cool Technology showoff place, potentially even a retail store, but they are getting curious. What is the problem . Did they not get all the permits . Well, its the San Francisco bay conservancy or something looking into it. When you get high profile, expect you will have people checking to make sure you have the proper permits. Just for the ecological perspective . I assume that. Or maybe because you dont want a big ugly looking thing out there. In the middle of the pier. You cant help but think of the dudes that were in alcatraz. Trying to get out and making his way out. Bird man. Some guy supposedly did. I dont know. They might have washed up dead. Or gotten eaten by a shark. Theres great whites around there, too. Really . Yeah. Those were the good old days when you put them out there on Something Like that, on a rock. Its a romantic side of from this side of it, yeah. When we come back, were going to talk about ad industry power play sir Martin Sorrell. He will be here on set to talk about the global spending economy. First, on this date in history, november 5th, 1996, then fed chairman Alan Greenspan delivered a speech during the dotcom bubble days. How do we know when irrational exuberance has unduly escalated asset values which then become subject to unexpected and prolonged contractions . So i c an reach ally bank 24 7, but there are no branches . 24 7. Im sorry, im just really reluctant to try new things. Really . Whats wrong with trying new things . Look mommys new vacuum cat screech you feel that in your muscles . I do. Drink water. Its a long story. Well, not having branches lets us give you great rates and service. Id like that. A new way to bank. A better way to save. Ally bank. Your money needs an ally. Just by talking to a helmet. It grabbed the patients record before we even picked him up. It found out the doctor we needed was at st. Annes. Wiggle your toes. [ driver ] and it got his okay on treatment from miles away. It even pulled strings with the stoplights. My ambulance talks with smoke alarms and pilots and stadiums. But, of course, its a good listener too. [ female announcer ] today cisco is connecting the internet of everything. So everything works like never before. There is one of us has to be the lover of the free and one of us has to be sort of the one that points out the downside to all of the congestion and traffic, right now, grinchy. We couldnt play the grinch if i didnt pretend to be that. You wear it well. I do wear it well. Good morning and welcome back to squawk box here on cnbc. Im joe kernen along with becky quick and Andrew Ross Sorkin continues off today. Making headlines this morning, disney boosting its yearly dividend by 15 . Ill bet you theyve listed their Quarterly Dividend by 50 , too. Ridesing on the news in expanded trading, i think i would like to know what its yielding instead of having that info in a vacuum. So quickly dedecembering that, it could be a 1. 5. In tech news, the Semi Conductor add mip stroigz reports worldwide conductor of chips reached 27. 1 billion and thats an increase from the same month last year. The industrys first ever month above 27 billion, but when we say chips, we dont mean cpus any more. We mean how much chips go into a smartphone . So you know chips are never going to go down in the number that we produce. There is definite lay problem. You have to be making the right kind of chips. Exactly. The memory and stuff like that. We had china and apple, china mobile. Is that the way to read this . Well, i dont know. I think its to say the internet no, no. Is he chinese . No, sadly not. I wish i did. I know it doesnt go down with the grinch image, but i think theres a big fight coming in smartphones and what were seeing with the chinese fan. I was in latin america in mexico city and one of the clients said that the highest selling smartphones, the biggest market shares are two chinese phones, the alcatel phone made by htc and the wawe iphone. Those are the two smart selling smartphone brands because theyre cheaper. The chinese fan, its interesting that theyre making that sort of penetration. So there will be a big battle. And the price point for jaomei is 400 or 500 and and theyre knockoffs, sort of. This is that dangerous western thought that all they do is steal and knockoff. Everybody has been stealing the iphone and theres been all sorts of battles with iphone. The interesting thing is the jaome iphone is assembled by foxconn. We all see this dynamic. Im the big american im the european socialist. Youre the bitter the british empire, still sort of unhappy its the multi sensor decline in the entire my niece, my grandparents would not agree with you. But they chose britain at that time, youre right. For those that havent figured it out already, sir Martin Sorrell is our guest. He is the ceo of wpp. But you live here now. You live here about a third of the time, a third in london and the rest is traveling. Enough not to pay taxes . No, no, i do pay taxes here. And the rates in new york with sales tax and everything and income taxes, state income taxes are roughly the same rate. So the tax equalization. I dont pay double. It gets offset. I dont know what that says, now were equal to its about 50 , basically is the marginal rate. You think thats fine . Well, the British Government reduced it from 50 to 45 and i thought that was wrong at the beginning of the conservative coalition because they said they were doing it to try and increase entrepreneurial activity. I think the best way to do that is a Capital Gains tax, not income tax. So i think that was misplaced. And i think at a time when people were worried about inequality and equality, which was high on the political agenda, i think it was the wrong thing to do. It brings up a lot of issues about income equality. And we know the one thing that solved income equality is growth and jobs. Growth and jobs. Not entitlements, not redistribution, its growth and jobs. And some of the efforts to do it the other way, to have the government orchestrate a shrinking of it fail. And theyre counterproductive a lot of times. I dont think he has any idea. You mean youre back to the no, im back to if youve got corporations that are already sort of not feeling that positive and you raise the minimum wage, thats not going to help them add more jobs. No. But the biggest problem, you and i both know, is whats going to happen in washington. I cant think thats the biggest problem. Oinl that they wont do the big deal that theyre supposed to do. They wont do the hiring. Theyre not going to shut it down again. I know. But theyre going to be cautious, joe. Lit will be better next year. Lets say 6 of , 6. 5 worldwide, maybe 5. 5 with inflation running about 2 ,. Lets get to something that you actually know about. That would be how is the Advertising Market . Thats what i was saying. So we are tied totally to nominal gdp. If i showed you a graph of our quarterly revenues against gdp, it is a perfect correlation since 2002. After the internet bust, because so many of the money that went into the internet went into pr and advertising, we fell more sharply. But theres a almost a 11 to 1 correlation between real and nominal gdp and our revenues. Are you a leading indicator or a lagging indicator . I think we lead on the downturn, becky. So when people get cautious, people dont spend. Its the worst of both worlds. Its a tough business. The leading indicator tells you if youre looking at what people are booking for the First Quarter yeah. When i look at our budget for next year, it was this time last year, so we were saying 3 like for like. And were showing better than 3 like for like. I think our people are probably being a little bit too optimistic would be my view. But i do think its a better at more fees next year. It will be a better at more fear going into 200 on 2. Next year, we have sochi, the winter olympics, we have the midterm congressionals. You think thats all going to add up to some good things . Its helping. We should do the senate and we should do im more focused on 2016. Because 2016 hillary will win. First female president , wonderful. What . First female president. Just thinking, feeling, doesnt necessarily mean that it will turn out great. Worse than the grinch you are. They do happen to be half the population and under a normal distribution im not saying that. They might be equally intelligent, joe. This is not a gender issue at all. Why couldnt it be a republican woman . In our business, joe, theyre better at doing our business than men. I hope you get replaced by one. I do. Good point. Very good point. Thank you sir Martin Sorrell. Thank you. Coming up, the investors guide issue for 2014, including 20 top stop picks. Squawk box will be right back. Fortune mag zoazine out w its annual investors guide. Brian okeefe is from alabama, hes the managing editor. That must have been unbelievable to watch. But its okay. We might as well try for a field goal. What the hell. What can go wrong . Yeah, exactly. And you just watched in horror. I watched in horror because i saw that guy back there to return the kid and i thought, what are the odds of a 57yard field goal going through and who is going to cover that guy when he catches it . All the big fat guys on the line trying to block the kick, right . Exactly. So they had nobody theyre all trying to prevent a block. Anyway, but we digress. Sorry. Oh, this is me. Oh, okay. Bull market continues or not . Well, i think its pretty simple. Either it does or it doesnt. I came one that myself. Yeah. Right. I dont know. Maybe thanksgiving was the peak. I think, you know, its really hard to get consensus on that. I think if you look at valuation levels, its hard to project like huge returns for the market, longterm, but i think we could see it going up a little bit more from here. I think that really were in a place wherefore regular investors, you have to sort of do all the basics, be cautious, bybe diversified, not give away your money on fees and weve had people in that said i guess it was byron, right . He said and thats the consensus. It would go up just the way you said it. Maybe it could go up more from here, but in his view is that how do you surprise people that have that consensus. Either it goes up a lot or it goes down is the way most people are in the wrong. Byron is looking for that but thats the way the market always works. It tries to confound as many people as it can. Neither would totally shock you. I guess 30 up again would shock you. That would shock me. Would 20 down shock you . That would not shock me. I dont think were on the verge of a huge collapse 2008 kind of moment. I think the economy is mulging along and repairingist. Stocks have been way ahead of what the economy has done. But the economy seems spring loaded. How long can we power along like this . We have a powerhouse. You have this shale revolution. Couldnt something really good happen if corporations felt more comfortable and started investing and hiring and Everything Else . I think that thats if youre going to make the bullish case, you want to see a lot of pent up demand coming out. That could happen. But the market might already reflect it . But the market maybe has already anticipated that a lot. Its hard to get consensus. When youre talking to a group of 20 experts, are there some areas that say these are undervalued areas . This is where a group of them think you can see some big gains . We went out and talked to a bunch of managers with different approaches, different methodologies, different areas to focus. Its interesting to then pull in their best ideas. These are all people with long track records, good track records. You do see some big themes. We saw a lot of picks from Financial Services broadly defined. I think thats a play on the economy more generally, kind of working its way back and people getting a little more confident. Energy services continues to be a theme. Maybe some of the big tech, the big cap tech names. Large Cap Technology is an interesting area. I mean, everyone is so infatuated with technology stocks, but actually the big cap sector is kind of relatively unloved on a valuation basis relative to the rest of the market. And theres some evidence that, you know, Technology Spending by companies has been really not so good for the last five or six years and it could be on the way back up. And if thats true, large cap stocks could benefit. I have one more thing. I guess we have to go. But so what you basically said, just make sure that you mind your ps and qs. Keep your fees low, keep your diversification do all the things you know to do because you cant control. All the basic tackling and maybe minding opportunity on the margins. And make sure you have a guy watching in the end zone in case he does catch it. Absolutely. Very good. Thank you. When we come back, the mustang rides again. Phil lebeau brings us the carmakers new design. Squawk box will be right back. Thats when i talked with my doctor. He gave me some blood tests. Showed it was low t. Thats it. It was a number. [ male announcer ] today, men with low t have androgel 1. 62 testosterone gel. The 1 prescribed topical testosterone replacement therapy increases testosterone when used daily. Women and children should avoid contact with application sites. Discontinue androgel and call your doctor if you see unexpected signs of early puberty in a child, or signs in a woman, which may include changes in body hair or a large increase in acne, possibly due to accidental exposure. Men with Breast Cancer or who have or might have prostate cancer, and women who are or may become pregnant or are breastfeeding, should not use androgel. 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Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. Ford is unveiling a brand new design to commemorate the occasion. Phil lebeau joins us from new york. And we cant wait to see this. I wish i could show it to you right now, becky. Come on. We do have a picture of what you will see here in the next couple of hours when we reveal it and talk with ford ceo alan mullaly, and this is the iteration of the ford mustang. Approximately 9. 2 million mustang models have been sold, the height year being 1965 when they sold well over 500,000 that one year. Mustang sales are strongest in the mid60s, tapered off in the mid to late 90s and really in the last few years while they have been out there its really become more of a niche vehicle. In fact, 71,159 mustangs have been sold in 2013. They believe theyre going to get much higher sales when the new model goes on sale next year. And as you take a look at this storm here, the reason were showing you this. This is fords stock going back to october of 2006. Why do we go back to then . Because thats when he took over as ceo of ford. You can see the stock has had a nice move since then. Were going to be talking with mr. Mulally coming up on squawk on the street. As you can imagine, a lot of questions swirling around his future at ford. He officially says hes pleased to be here and plans to p be here for the foreseeable future. Well talk about that later on this morning. Guys, back to you. Truly an iconic brand. Camaro, corvette, mustang. That was the one car i wanted. Never got it. I had one mustang and its a little embarrassing because it was during the oil crisis. In 1979, and i had a phil, i had a formula 400, a white one which was a pontiac fire bird and i told my dad oil will never theyre never going to find any more oil. I need to get rid of this because the writings on the wall. I sold it and bought a four cylinder orange hatchback. And next thing, gas was a buck a gallon. And i was driving around. Thats right. Thats also when joe, those were back in the days when you thought they wouldnt sell coors east of the rocky mountains. Thats right. We go way back, phil. There was a time. That was my mustang, a four cylinder. It had a standard transmission. I dont think it went over 60 miles an hour. I had the worst, you know, i did not get the cool one. They are maybe the most iconic american car. I think people have written that. Absolutely, and i dont think theres any argument about that. Lets be honest, over the last 50 years, generally speaking, most years the mustang has been great. But there have been some forgettable years in there. There were some years there, where you looked at the mustang, what are they doing with this . Theyre going back to the retro design. This is very good looking new model coming down. Got a deal on it because it was orange too. I couldnt understand why i got a deal on it. Anyway, thanks, phil, well see you later. Coming up, this mornings top stories including Interest Rate decisions from the boe and the ecb. Plap plap v. Is it safe to register at healthcare. Gov. Why the administration has been hush hush on what still needs to be done. Intelligence Committee Chairman mike rogers joins us to explain. Breaking news from europe. Decision on Interest Rates could move the markets. Well bring you that decision and the market reaction. And tis the season. Former toys r us ceo turned Retail Consultant gives the latest assessment of the Holiday Shopping season and the state of the consumer. Squawk box begins right now. Good morning, everybody. Welcome back to squawk box here on cnbc. Im becky quick along with joe kernan, andrews off this week. Leaving Interest Rates unchanged. That is as we had been expecting. Again, the bank of england leaving rates unchanged. Right now, why dont we take a look at where the futures stand. This morning after four days of declines, youve seen that the futures have barely budged. Obviously the markets going to be looking to see what happens with not only the jobless claims but also the big jobs picture tomorrow. Thats been one thing thats been a big focus. Yesterday, you did see an adp report that was stronger than expected. But people are still waiting to see what the official governmentally is on friday. In our headlines this morning, the European Central bank is expected to leave Interest Rates unchanged, as well. Were going to find out in about 45 minutes with the latest policy decision. Last month, it did surprise the markets, though, cut rates to a record low of. 25 , 25 basis points. The bank will be out with the latest economic projections, as well. And today well also be getting a reading on november sales from the retailers. Costcos already out, reporting Comparable Store sales came out with a gain of 2 for november. We should point out that most of the major chains no longer report numbers oen a monthly basis but costcos one that does. Part of what hurt it are lower gasoline sales. Were going to be talking to former toys r us ceo Gerald Storch. Also, apples long awaited iphone deal has been signed. China mobile is the Worlds Largest mobile operator and one of the few major carriers not a offer apples iphone to the customers. Neither company would comment on that report. Joe . Steve is here with a report, treasury secretary jack lew is going to deliver remarks on financial reform. In the next steps were going to take at 8 30 eastern. Steve liesman joins us with a preview. What is displeasing you this morning . Nothing, but youve got you want to know what else, my buttons are not buttoned. I know. Im seeing how long its a report and i want to be precise about what im saying. Treasury secretary will deliver remarks on financial reform this morning. And declare that the pieces are in place to end, get this, too big to fail. Now, in july, lew spoke at cnbcs delivering alpha conference and set himself a year end deadline. I think theres a shared goal between what im saying and what many of these senators are saying. Which is its unacceptable to be in a place where too big to fail hasnt ended. Any efforts to delay or dilute the implementation of dodd frank. If we get to the end of the year and have not ended too big to fail, were going to have to look at other options. Heres what lews saying. Today, quote, based on the totality of reforms were putting in place, i believe well meet that test. In other words, weve got the pieces in place to end too big to fail. Lews remarks come days before they finalize the controversial volcker rule. Lew will also call on regulators to make their own rules tougher and match those in the u. S. Among the Unfinished Business for 2014, lew says is reducing risk for money market, shortterm debt and derivative markets. Its important to remember, lews comments in the summer as Democratic Senators join with republicans to call for tougher regulations than the treasury was proposing or adopted in dodd frank. Lose appeal to give to the end of the year was an effort to hold off efforts by senator warren and mccain to bring back the act. It remains to be seen if that satisfies those senators. You can never know with certainty until you get to that point. So we havent ended too big to fail . You cant possibly know. And were waiting for the actual remarks to come out. But i think hes declaring victory maybe a little early, but i think the political side of this is the most important part of it. That warren is still out there, i mean, ben knows this. We didnt introduce ben yet, right . People know who i am. People know who you are. I dont know how much mccain is still on this thing. But the question is whether or not the volcker rule when it comes out next week, does it stave off the efforts for tougher i think the bank will see this and think, weve ended too big to fail, we dont need to break up the banks. I would think from a banker perspective, the declaration of victory is probably a good thing from their perspective. You know, if youre not listening that closely. I think youre saying lose if youre not really listening that closely. I kept thinking you were saying lose imagine. Like you were booing. Not saying boo. Steve, thank you. And you youre adding words. Im adding words. You say you were dancing around. It was like a good grateful dead jam there. Artfully done. Very nicely done. Steve, thank you. My pleasure. Well see you again in a little bit. A little bit. Today marks the 17th anniversary of the irrational exuberance speech. Dow closing down for the fourth straight day. We have the Senior Vice President and chief investment strategist at charles schwaub. Its great to see you. Nice to be here. Thanks for having me. We have been trying to figure out. At this point, there are so many people who are concerned about how far the market has come. Are you getting worried here . Youre getting some indications the market may be overbought, technically. What floors me is how much the bubble chatter has taken over. And i think it is a function of the muscle memory of the two most extreme bubbles weve ever had being within our recent memory. And i think this tendency on the part of investors in the last couple of years to be looking for the next shoe to drop, whats the next crisis around the corner . You kind of fill in the blank. It was debt ceiling, Government Shutdown and now oddly it seems to be bubble, we want to be on guard to make sure we dont miss the next bubble. When you look at the things that typically have marked bubbles and anticipate what is to come after a bubble burst, i dont think its the appropriate label to describe where we are. Because of valuations . Valuation on a forward p e or trailing p e basis, were sub the norm. At the bubble peak in 2000, we had double the valuations. Nasdaq 100, were at 19 times on a trailing earnings basis. We were at 185 times on a trailing earnings basis. So i dont see whether its the enthusiasm investors, mutual fund flows, where institutions or positions, net log exposure. Theres no cohort that is hog wild in this market. Even though the measures of sentiment suggest things are a little bit stretched, i dont see any of the conditions. That doesnt mean we cant have a pullback. I think, actually, it would be healthy in order to bring sentiment in. But to suggest its a bubble ready to burst is a stretch. Yeah. Isnt it the fact that we came from a low base. We came from the depths of the financial crisis and crash. People have to say weve run up consistent. 2. 5 trillion in gdp growth, 170 increase in corporate earnings. I think leaving fed liquidity aside, theres been plenty of traditional fundamental supports for the market having done what its done. And were looking at a valuation level thats not excessive. I think bubble is just not an apt term to use to describe this. Part of the question becomes how washington behaves from here. Right. When we look at the deal potential in january and february, probably not looking at a big deal, probably also not another shutdown. Probably not. And sounds like chairman ryan and patty murray will come up with something on the sequester to at least take some of the bite out of that in 2014. So its not a guarantee that happens. But the likelihood is there that you have less fiscal drag in 2014 coming out of washington. I think theres almost no chance youll get a shutdown in january and that deadline for funding the government. Theres no appetite on the republican side to make that happen. Debt ceilings a little harder because democrats will have to come up with some agreement to cut some more spending, do something to allow republicans to take that vote to raise the debt limit. And maybe im too sanguine on this, but i think the threat for washington in 2014 is significantly lower than in 2013 particularly because of the shutdown and how that hurt republicans. And its an Election Year in 2014, republicans want to talk about obama care, they want to talk about other issues. They think they can beat up on obama and the democrats and dont want to get bogged down by shutdowns and debt limit fights. Theres no reason to think stocks are too high because washingtons going to kill everything. And maybe it was set so low because it was on the floor. You cant go much lower than they are. They can clear the bar for expectations which is no shut down. And maybe get the Approval Ratings in the 10 range, double digits at some point. One of the things weve been watching is what the feds going to do next. How much do you think the fed has been responsible for this. And if the tapering begins, is that really something that takes the steam out of the market . Not if its just based on valuations like youve been talking. I have not been of the view that feddriven liquidity is the sole support under the market. We touched on it a few minutes ago, there are many traditional fundamental supports, not least being simple gdp growth. And the base from which we came classic epic market bottom type of stuff. I think tapering at this point would be a good thing. The analogy ive been using for the pulp fiction fans out there that qe1 was like travolta taking the needle to uma thurm n thurmons chest. But now i feel that the patient wants to leave the hospital and theyre stuck on the tubes. Its the rip the bandaid off. I think the big difference between what were seeing now and what we saw back in may is that i think what the fed reacted to and not tapering in september was not so much what happened on the long end but expectations for the short end. Now youre looking at a late 2015, maybe into early 2016. They seem to have done a better job through their words of anchoring the short end, which i think allows a tapering. Which ultimately i think is good for i think one of the big uncertainties is how do we exit this thing. Given this is never before tried, you shouldnt have blinders on to the possibility theres going to be mistakes in volatility. But ultimately, i view this as a good thing that were starting to move on a path toward more normal monetary policy. I was trying to figure out, we had a long discussion yesterday where the bubble, the next one would be. And i was thinking, everybody thinks its the feds balance sheet. And i think that would be true. The dislocation the fed has orchestrated by holding something at a rigged level for so long. But then when i think about where it would be anyway. Because the economys been so slow, im not sure theyre that far off from where rates would be anyway. And that would mean the fed had rates to set levels coming out of world war ii, a different process. Where would we be without the fed . Probably at 2. 9. It would be much higher. March, maybe, it doesnt seem september would make a whole lot of sense. Inflation is below the target. Weve got to go. All right. Up next these guys will be here, be with us. Questions remain about the security of healthcare. Gov. Congress wants to know what further repairs are necessary. But havent gotten many answers from the administration. Were going to speak to mike rogers about that next. And later, fresh sales data and retail analysis from former toys r us ceo Gerald Storch. Were aig. And were here. To help secure retirements and protect financial futures. To help communities recover and rebuild. For Companies Going from garage to global. On the ground, in the air, even into space. We repaid every dollar america lent us. And gave america back a profit. Were here to keep our promises. To help you realize a better tomorrow. From the families of aig, happy holidays. Welcome back, everybody. Retailer Dollar General rising in the premarket trading today. Reported Third Quarter profit of 72 cents a share. That is 2 cents better than the street had been expecting. Dollar general also raising the lower end of the fullyear forecast and adding 1 billion in the stock repurchase program. Tech experts are calling into question the security of the healthcare. Gov website. Mike rogers is the chairman of the house intelligence committee. And hes not exactly pleased with the kind of response hes been getting from the Obama Administration about security. And depending on where you look, congressman, you know, people on the right to some extent say there was never even any thought to getting security in there. And people on the left say, you know, when i had a kid, should i have gotten rid of my kid when i saw a few glitches . No, you fix the glitches. Its a wide spectrum. What wept into the planning for security . Well, unfortunately, not much. This isnt about wanting the site to fail itself. Youre pushing people. People have lost their health care. They need to be able to access this site in order to get on and get a policy by january. So thats our concern. And what youve done is youve opened them up to a level of risk using this website ive never seen. Standard site of this size would be about 500,000 lines of code, roughly, maybe a little less. The code in healthcare. Gov is about 5 million lines of code. And it has never been thoroughly tested. And so we know of a very low level access problem and meaning that somebody could use the site today as we know it to get information off of your own personal computer. And its a really lowlevel effort. This is something that should never happen in a site like this. And we know that vulnerability exists today. So my argument is, listen, if youre going to ask people, youre going to cancellations are going out, youre going to need a site that functions. This one doesnt even function, number one, and we know its never been end to end stress tested in the way the industry would accept to put anything online. And thats my concern. Jarm rogers, i wonder given these concerns, and ive ready some of the stuff youve written and said about the security of this site. And if peoples data is this vulnerable, wouldnt it be the correct thing to do to just take this site down and completely revamp it in terms of security . Would you call on the administration to say were going to take a timeout, take this thing offline and make sure people are safe . Absolutely. Dont have the administration look at it itself. Bring in independent groups that do this for a living and fix the vulnerabilities on that. Heres the problem with that. If this were an amazon site or pro flowers, whatever that is, they would stress test these for 60, 90, 120 days. Well, we know none of that happened. Theyre putting new lines of code in to try to repair the problems and never testing the system overall. The eco system of the security of the site has touches a lot of different places. And so you have to really when you put new code in, it may impact in a way we dont understand or they didnt understand when they put the code in. In other places. None of thats been tested in a thorough way. What i would do, shut it down, get it functioning and then bring in these independent security folks so they can get it so youre not putting at risk millions and millions of americans private and personal information. And by the way, theres nothing if youre very sophisticated nation state hacker, you know, you can follow this thing upstream. They keep saying, well, theres a hub that doesnt store information. If you can get to the hub, get behind the fire wall, you can increase your likelihood that you can get into the irs or Homeland Security or others. The state of changes that touch this we think are vulnerable in a way thats breathtakingly bad. My call to them is, listen, shut it down, get it working functionally, and then stress test it from end to end so that you get some sense this thing is secure. But theres so much its so partisan at this point that anyone on the other side that hears you say shut it down thinks youve got an ulterior motive to since there still is an question in this country, one party does want this to go away. The party that wants it to stay thinks what do i need to do to make this work . And they cant delay it. They cant shut it down. They need they need all the young people to sign up. Did you see the latest polls . Like 26 of young people planning on signing up. Theyre losing the millennials on this whole deal. Theyre panicked the thing could collapse under its own weight if they dont get young people to sign up for it. And that was the whole problem with the way this thing was put in place in the first place. But we i dont know if weve ever had something that let me tell you this one thing. I hear what youre saying. Let me tell you this. Heres the problem, the practical part of the problem. I think when people see the product, theyre not going to like this thing. I believe that passionately. Higher rates, lose your doctor, all thats happening. But you know what, youve canceled peoples insurance. Right. I had somebody who had a her daughter had a cancer surgery in january. They canceled her policy and then canceled the surgery. She has to try to use this website to go out and find something that helps her get her daughter back into surgery. Now, thats a huge problem. So the problem is, the site is not functioning very well. So if youre going to take care of somebody like that and i think its wrong it all happened in the first place, but if thats the only mechanism, you better make sure that its safe. Neither sector would sue these guys in a heartbeat. Neither side cares about that person either, i dont think. Come on now. All the president did was gave this sort of this fix that, okay, never mind. The individual states can decide whether they cancel these policies. He feels he sort of punted on that and its not going to be his fault if the Insurance Commissioners dont let people keep their policies. But on the other side, republicans really dont want all these people to be covered in the first place with this plan either. That is just so wrong. I cant believe you would say that. This is a woman who is worried about her daughter getting who is going to help her, congressman . Were engaging now. But heres the problem. The law is the law. This notion that, well, you just dont care. Then you wont say then the obama you would say the Obama Administration doesnt care about this woman, right . I am telling you that the law they passed and promoted is not working for average people. Its causing huge disruption and harm and anguish for these people. We ought to fix that. And one of the ways you can do it is not just say we dont care, damn the torpedos, full speed ahead. Thats kind of what were seeing happen, though. Well, absolutely. Im with you on that, both sides, sort of, theres so much partisan backdrop to the whole thing. I dont know if anyones thinking about the actual individuals that are being affected by this. I disagree. We argued from the youre going to impact individuals. They said, listen, were going to help 15 of the population and ruin it for 85. We said that upfront. Said this is going to be and the democrats would say, you want the law to go by the wayside and not cover the you dont care about the 41 million that dont have insurance in the first place. That is so wrong. Absolutely. How are you going to fix it he has not been one of the partisan i did see your questioning of sebelius and it was all focused on the Security Issues around the health care site. Yeah. Absolutely. It is a huge problem. How do you do this without completely shutting things down . Well, i dont know how you would do it without think of iphone, right. What they never say on october 1st, were going to roll out our new iphone product. They say its going to be in the fall. Why do they do that . Because theyre stress testing that thing all the way up to the last second before they put it out to find any vulnerabilities in that system. Any problem in the applications, all of that. But you cant undo the cancellations. You cant undo the cancellations sent out to this point. And the Insurance Companies have the security of the site. I understand that. But the very basic thing here s is, dont expose peoples personal private information in a way that i have never seen before. Especially 2013. Remember, this isnt new. As i said, they have almost 5 million lines of code which tells you somebody didnt know what they were doing. The average enterprise ready site when they went out would have somewhere around 500,000 lines of code. Now youve got all that added vulnerability thats never been tested. And so my argument here is if you dont like obama care or you love it, it doesnt matter, you want the site to be safe because youre exposing these people to a vulnerability thats going to cost them economic damage. Do you want to fix obama care and youre in favor of the loss because it will cover the 41 million that are not insured now, congressman . You hope it succeeds and we cover those 41 million . I have better ways to cover the 41 million that doesnt take it away from everyone else. I think thats part of the problem. How would you do it . And when would you do it . And how could you get a bill passed that would cover those 41 million . Good news is, we have a whole bunch of host bills that we have promoted. Including, by the way, in the debate. And remember, the only bipartisan argument on this bill was when 40 or so democrats joined republicans in opposition. That was the only bipartisan effort on this bill. And thats why youre seeing, i think, all the problems because there wasnt another voice at the table. We argue that you should force Insurance Companies to compete across state lines. I know. And preexisting conditions, it could have been done. It could have been done. Im with you on that. But its just that the other side has a lot of ammo when when you say, wow, you dont care about these people, the other side can always come back and say, well, you guys dont want the law in the first place. And its sickening to watch both sides bicker back and forth. And the people that are losing coverage are just footballs. Well, i mean. Listen, it happened in my personal family, my father lost his medicare advantage, i have a brother thats disabled. All his rates are going up. His doctor says, hey, i dont know if i can see you anymore. These are real life problems. I know. I dont know how anyone would look at this and say thats a partisan issue. This is affecting democrats too. Its being used by both sides will use the ammo from by really not even seriously describing the other sides position. Like every democrat says, republicans dont want to cover the 41 million. Well and the republicans a, thats not true. We have plans for it. And again, heres the problem. You can argue the politics of it, i get that. But right today, somebodys losing their health care. Thats not a republican or democrat thing, thats reality. And these people are getting ready to go to the holidays. This woman breaks my heart, shes going to have to worry about trying to figure out how does she get a new Health Care Plan by the way she probably cant afford and get her daughters rescheduled Cancer Treatment in january. Thats a compassion issue. And we ought to say, listen, if thats the consequences of that, maybe you should slow down. Maybe its not exactly crafted in the right way. Maybe we should rewind this thing before isnt it too late congressman, no matter how you feel about this bill isnt it too late to undo it . The damage has been done. You need to find a way to fix these people and get them back in the system quickly. I agree. But heres the problem. We know that theyve affected probably 5 to 8 of the market already, those are the folks the ones getting the medical pink slips now. Heres the next problem. And the president s pretty clever about this. He postponed the small businessman dates until after the election. And already the bigger businessman dates until after the election. The estimates now are some 80 Million People. So you see this 5 of the market and how much turmoil its caused. Guess what, thats coming. We know that. Thats fact. Not a republican fact or a democrat fact. Thats a fact that 80 Million People roughly will get those medical pink slips because their businesses cant afford to continue to provide care anymore. Theyre going to push them to the exchange. Thats a huge problem. We know whats coming to say we shouldnt do anything about that i think is wrong. We can do something about it. We should sit down and i think they should say, listen, dont worry about your legacy, well get through that. If the worst thing that happens is we get the about 30 Million People covered with Health Insurance when this is over, america wins. Good idea. But now what were doing now is just saying, well, we dont care what damage its doing because we believe in it and because youre a republican and you dont like it that by gosh were going to let these people suffer. I think that is the most asinine thing ive ever heard in my life. These are real people with real problems and we made their lives worse, not better. If i could ask one quick question, if im a consumer going on to the website now, trying to sign up for insurance and i have to give all this personal information, what is my vulnerability . Whats going to happen based on what you say are incredible weaknesses . What are the risks to me as an individual signing up for insurance on this site . I would argue its fairly significant only because we know what the capabilities are. Everything from nation states. So other nations who have their intelligence and military services trying to penetrate sites like this, very sophisticated organized criminal organizations, tent to be eastern bloc oriented, nation state capability when going in and breaking into these systems to steal information. And as i was saying earlier, theres even a very lowlevel problem with this site that no one would tolerate. You can create a url, go out and send this out to an individual who should be getting on healthcare. Gov. It looks exactly like healthcare. Gov. You click on it, youre talking to somebody that isnt even healthcare. Gov. Thats a very thats a problem that should not exist today. It is it shows to me that just sheer incompetence on understanding the sheer level of security vulnerabilities when you launch a site and expose personal information. So everything from that little one i talked about to very sophisticated hackers who understand how to penetrate the system and swim up stream to get the mother load of information. All of that is vulnerable. Thats why its shocking we wouldnt all agree. I dont care what party you are that we ought to, hey, lets slow down, take it down, get it functioning because if it doesnt function, its not secure. Once you get it functioning, have these independent groups stress test this thing, find the vulnerabilities, fix it, get it back up online. What part of michigan do you represent . I represent the center part of the state and we built beautiful cadillacs, buicks there and you should buy some. A couple. Youre not near Michigan State . Not michigan. I do represent Michigan State who is going to put the hurt on ohio state this saturday. Well, i dont know after last night. Maybe football. Thanks, see you later. Still to come this morning, we have a new warning from the man who hacked the governments healthcare. Gov website. More about this in a moment. Up next, though, what brick and mortar operations can learn from internet retailers. Former toys r us ceo Gerald Storch on the Holiday Shopping season. [ male announcer ] this store knows how to handle a saturday crowd. [ male announcer ] the parking lot helps by letting us know whos coming. The carts keep everyone on the right track. The power tools introduce themselves. All the bits and bulbs keep themselves stocked. And the doors even handle the checkout so we can work on that thing thats stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. So everyone goes home happy. Every day were working to be an Even Better Company and to keep our commitments. And weve made a big commitment to america. Bp supports nearly 250,000 jobs here. Through all of our energy operations, we invest more in the u. S. Than any other place in the world. In fact, weve invested over 55 billion here in the last five years making bp americas Largest Energy investor. Our commitment has never been stronger. Welcome back to squawk box, everyone. In our headlines this morning, it is a busy day for economic numbers. Even as investors look ahead to tomorrow mornings november jobs report, were going to get initial jobless claims as well as a revision to Third Quarter gdp figures. Later this morning, the government will be out with october factory orders, as well. The bank of new england has left the rate unchanged. It is also expected to leave rates unchanged and be issuing the latest economic forecast. Southwest airlines and Virgin America will reportedly buy takeoff and landing spots at new Yorks Laguardia airport which is currently owned by u. S. Airways and american airlines, thats according to reiters. They have to sell as part of the Settlement Agreement over the planned merger. Well, the black friday numbers are in with mixed results. But cyber monday seems to have hit the ball out of the park. Joining us now is former ceo toys r us, currently the ceo of storch advisers. This seems like the first year to me where you dont have a good online strategy, youre in trouble. Is that true . I think we hit a tipping point. The internet guys are sticking it to bricks and mortar. Theres declining traffic. Generally speaking, thats true throughout the year, plenty of retailers have declining customer visits to the bricks and mortar stores. Meanwhile, online is up 20 . It was up 20 on cyber monday, up about 15 , 20 , on thanksgiving day, which is the big black friday day these days, and a lot of that gain coming from amazon, of course. About half of it, 55 of it say is coming from the online arms of the bricks and mortar retail. You can still play, but youve got to play the online world. I think of myself i shop online a lot, but shop from all these places, macys. Com, nordstroms. Ive been trying to figure out the winners and losers and the biggest question has to do with the mall operators. Malls have been doing pretty well. People wrote off shopping malls a long time ago, but theyre coming back strongly. Doing well. Most of the highend malls are doing just fine. Do you have to be one of those highend malls to be where people want to hang out for entertainment . Okay. So if we look at the winners and losers so far, whats jumped out at you . Well, obviously amazon is a huge winner, another big winner is apple. Because apple is the product everyone uses as a benchmark. So youve seen apple stock take a huge jump with the black friday and cyber monday results. And you also see a huge amount of shopping is taking place on mobile devices which doesnt just mean your smartphone, iphone, it also means your ipad. All these gains online are mobile. In fact, i was doing math the other day. A majority of the gain on cyber monday was to the 80 growth. 80 up in mobile shopping, principally on ipads. Weve seen the figures before that ipads and iphones take the majority of this stuff. People who own these use them longer. What is it about the demographic or the product . Some of its demographic, some of its functionality. Ipad is a much larger installed base. Android sales have passed apple sales, the installed base is heavily apple. Thank you so much for coming in today. My pleasure. Well see you again through the holiday season. When we come back, a look at making college affordable. Were going to speak to the ceo of university now. A lowcast accredited university that was named one of the most disruptive in education. Squawk will be right back. [ male announcer ] they are a glowing example of what it means to be the best. And at this special time of year, they shine even brighter. Come to the winter event and get the mercedesbenz youve always wished for, now for an exceptional price. [ santa ] ho, ho, ho, ho [ male announcer ] lease the 2014 e350 for 579 a month at your local mercedesbenz dealer. A confident retirement. Those dreams, theres just no way were going to let them die. Like they helped millions of others. By listening. Planning. Working one on one. Thats what Ameriprise Financial does. Thats what they can do with you. Thats how ameriprise puts more within reach. Looks like yesterdays trading sort of. Nothing happening. But you never know. And coming up, our Higher Learning series continues today with two men disrupting the world of online education. The ceo of university now and the president of ed x joins us after the break. I love having a free checked bag with my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. Stick with innovation. Stick with power. Stick with technology. Get the new flexcare platinum from Philips Sonicare and save now. Philips sonicare. All this week, its squawk boxs Higher Learning project where were putting the system to the test bringing together some of the brightest minds leading the charge to disrupt, innovate and reimagine the way we learn. Our next guests are trying to make education more accessible to everyone in two different ways. The founder of university now. Thats a network of accredited universities with the goal of meeting new demand and addressing high cost. And the president of ed x, thats a learning destination that offers free online courses from one of the worlds greatest universities. Also a professor of Computer Science at m. I. T. Gentlemen, welcome to both of you. We were talking off camera about how there is a massive need right now to train people to be qualified to take the jobs that are available. The gap in skills. How big of a problem is that . And i would guess thats a big part of the reason that you do what you do, both of you. Today theres about 3 1 2 million jobs we cant fill because theres a lack of skilled workers to fill them. Lets take california, for example. There are in a lot of them are going into nursing, education. The mean age of a nurse in california, 58. Thats crazy. Its actually insane. What it means is the system hasnt responded to demand. When i talk to large employers, what they typically tell me is we get tons of applications for front line jobs. We dont have enough folks that we can go out into the marketplace and recruit into management. And thats the goal that university now is trying to find and take those people directly for those jobs . Correct. Were addressing were going right after that problem. Were going to clear lines if we can and also provide jobs that provide people with training that employers need. Let mel tell you quickly, the ecb has left rates unchanged. The online classes you can take. We have been talking about that a little bit this week. What is it that youre filling . Is it a need for continuing education for people once theyre in jobs or do you train people to be ready for jobs they wouldnt be ready for otherwise . Educations very fundamental. Education is a basic human right. It should be available to everybody like the air we breathe. We offer free courses from some of the best universities in the world like m. I. T. , harvard, berkeley. And our approach is that learners can come from anywhere. Take these courses, great courses, and you can use them for whatever you want. Many learners come to fill the skills gap. We talked earlier about great Jobs Available in Computer Science or nursing and other areas. But the skills are here. We need to find a way to match the skills. Breaking the skills gap is one area. In other cases, continuing learners are in existing jobs that want better jobs or promotions. We have High School Students that dont have great a. P. Classes in the high school and want to fill those gaps would schools recognize this if youre taking somebody who is in high school . Recognition comes in different ways. We heard from a lot of students that have gotten better jobs as a result of posting a certificate on linkedin, for example. Many schools and colleges have given campus credit for some of the courses these students have taken. And we announced a partnership with College Board and davidson college. Where any High School Student anywhere in the world can take these take these modules and augment what they learn in high schools and teachers can use these modules in high school, as well. Even though it sounds you two are coming from similar places. Gene, youre not a huge fan of those online courses, are you . Were an accredited university. What happens here, you come in, every class starts with an assessme assessment. We figure out what you know and dont know and guide you through a class in a personalized way. Our view is, were indifferent about where you learn it, what matters is you get the skill and we can demonstrate to ourselves as an institution and your employers eventually that youve learned that skill. This is great for the Younger Generation now looking to understand how to develop these skills. I have the pleasure of giving the winter commencement address at my alma mater. Thats in january. What message should i send or would you send to recent College Graduates or graduate students that have not had the benefit of this renewed focus . That might have now a degree in something that isnt applicable to where the jobs are. So what does somebody who has already come through that traditional fouryear, unbelievably Expensive College process and now theyre having trouble finding two things. One, congratulations, youre a winner, one of the few people that graduated. Most of the people that Start College dont finish in the u. S. Number two, you will do this for the rest of your life. This investment is an ongoing investment. Try to find models like ed x like ours where you can make the investment in an affordable fashion and keep up. The job youre going to have in ten years probably doesnt exist today. That would be Continuous Education where i might be using maybe 20 , 25 of what i learned as an undergraduate. And most of the other things have been picked up along the way. Heres a great resource. You can take these online courses and you can learn about things you havent learned before. Do you get pushback . Youre an m. I. T. Professor, do you get pushback that what youre doing is going to mean the end of the university as we know it . There are certainly a lot of debaters. And as professors, we like to debate. Debate, you have people on both sides and well continue the conversation. But the key here is Online Technology is not going to replace university. I like to think of this technology as lifting all boats, including universities. As an example, within m. I. T. Itself, one in 200 graduates is using edx. The blended model has been going on for 20 or 30 years, but its becoming more and more popular to improve the quality of campus education using online content. Thank you both for coming in. Thank you. Appreciate it. Up next, we have a new warning from the man who hacked the healthcare. Gov website. Well talk about that and why you should care. And later kobe bryant is out with his new nike shoe. Its a high top, a really high top, can had shoe catch lebron not only on the court but in sales . Well have that later. [ male announcer ] heres a question for you if every u. S. Home replaced one light bulb with a compact fluorescent bulb, the energy saved could light how many homes . 1 million . 2 million . 3 million . The answer is. 3 million homes. By 2030, investments in Energy Efficiency could help americans save 300 billion each year. Take the energy quiz. Energy lives here. You can fill that box and pay one flat rate. I didnt know the coal thing was real. Its very real. David rivera. Rivera, david. [ male announcer ] fedex one rate. Simple, flat rate shipping with the reliability of fedex. Impact wool exports from new zealand, textile production in spain, and the use of medical technology in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 70 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. [ male announcer ] this december, experience the gift of true artistry and some of the best offers of the year at the lexus december to remember sales event. This is th of perfectio. A new cyber warfare warning from the white hat hackers who alerted congress to security flaws in the healthcare. Gov website. Joining us now is david kennedy, ceo of trusted sec. And we just had a congressman on that was warning about this. So its a real problem. I mean, its not that hard to do. Youre pretty good, right . But its not that hard to do, right . Thats right. When we looked at the site. These were things were not able to hack the site, but we can look at the website as a whole and see what type of exposures they have. Not hard things to do, very simplistic types of hacks. Were not allowed to bet on football games, so no one actually does that. You didnt hack it. Were not allowed to. And give me authorization, id be happy to test it for free. But what you can do as a security assessor is you can see how the websites piece together. Thats what we testified in front of congress. We saw how the rollout went in terms of working. What did that are you shocked that we could spend so much money and not address security . Thats why i started getting interested in the security aspect of it. Normally what happens in a rollout of a website is the production piece. The piece that keeps it up and running is the number one most important piece of it. All of the effort goes into that part and then securitys bubbled around that. It means there was no security around it either. And thats why a lot of security researchers and myself started looking at the website, looking at the flaws and there was a significant amount out there. Its pretty shocking. David, what about the ripple effects between what they might do to the front end to improve the optics of this thing . Could it make the back end even less secure than it is right now . If you look at the report that was released, what happens is youre rushing out, slapping new hardware in. The front end we see every day up and running and, unfortunately, when you do that and dont do testing around it, you introduce new exposure. Its definitely possible and there hasnt been fixes yet. Theres more good possibility that more exposures were introduced to the website itself. David, its ben white at politico. Can you talk about what they did on security . It seems to me essentially they said we dont care that much about this being secure for both the user and the government if its got all these pathways and other elements of the government. Should they shut it down and revamp the security . Whats the solution . It doesnt appear security was a thought as they built the site. Thats unfortunate because it takes a lot of Sensitive Information. First name, last name, address. Theyre adding the payment card portion to it where you enter your credit cards. Theres a lot of Sensitive Information on there. And there wasnt basic levels of security put on it. So in order to fix these things, its very difficult to fix a website thats already up and running. And the reason being is when you build lets take a House Foundation. If your House Foundation is flawed, you have to gut the whole house out and redo the whole thing again. Thats similar to what happens if you dont build security into the product. You have the foundation thats not good. And in order to fix it, you have to dig down deep and refix everything and thats difficult to do. Remarkable. David kennedy, thanks. Appreciate it. Appreciate it. See you later. When we come back, kobe bryants new kicks. Jane wells brings us that story. Plus, can you trust tomorrows jobs report . We did a little digging on what went into the numbers. That story and much more from our guest host, squawk box will be right back. Every day were working to be an Even Better Company and to keep our commitments. And weve made a big commitment to america. Bp supports nearly 250,000 jobs here. Through all of our energy operations, we invest more in the u. S. Than any other place in the world. In fact, weve invested over 55 billion here in the last five years making bp americas Largest Energy investor. Our commitment has never been stronger. 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. It is arguably one of the most famous market comments of all time. How do we know when irrational exuberance has unduly escalated asset values . 17 years to the day after Alan Greenspans speech, what do investors make of 2013s soaring stock market . Breaking economic news. Weekly jobless claims and revision to Third Quarter gdp, comments from mario draghi, and a speech by u. S. Treasury secretary jack lew all just about 30 minutes away. Plus, big business on and off the court. Kobe bryant sits down to talk basketball, his new mega deal, the inspiration behind his latest sneaker and why hes determined to be a laker. Welcome back to squawk box here on cnbc, first in business worldwide. Im joe kernan along with becky quick and Andrew Ross Sorkin. Our guest host Liz Ann Saunders and ben white from politico. I have it on my ipad now. Excellent. You can get it on our iphone, mobile, everywhere. I used to go to www. Politico. Com. You dont need to do that. No. Its free. It may not be free forever, joe. We may ask you to pay a little bit for our content. And you can get more content with politico pro which will dive deep into Financial Services. Advertise at the top of the show. I come on these shows for a reason. Also joining us for the rest of the show, steven roach at Yale University and former chairman of Morgan Stanley asian. Everythings about biden and china. Hes there. Initially i thought that was kind of funny because if you want one guy who is really politic and sensitive and moves around stealthily and doesnt really you wouldnt think it would be biden. But he knows he claims he knows him. I kind of like him now. Hes the only one in the administration willing to talk to the other side about doing something. This administration lacks a point man in china. Weve got him now. Hes the closest thing hes got, but hes spread pretty thin in his hes going to be tested in dealing with the Security Issues that are threatening to boil over. Like our man joe over there. All right. Weekly jobless claims are expected to just rise slightly to 318,000. Meantime, well see a revision to gdp. And its seen showing the economy grew at a pace of 3. 2 . Is that what your work is showing . My one of my predictions, we have 1. 75 , just under 2 . This year or some year . This year. At some point. That would be up from the initial reading of 2. 8 . It wasnt that long ago. We forget. 12 we had one. Okay. U. S. Equity futures ahead of those reports are kind of flat. Well take a quick look. Up four points on the dow. Also, in Global Economic news, the bank of england keeping rates unchanged at. 5 . The ecb is also holding its key rates steady at. 25 . The European Central Bank President mario draghi will hold his last News Conference of the year at 8 30 a. M. Eastern. Among our top corporate stories this morning is apple, the wall street journal reports that the tech giant and china mobile man, im glad youre here today. Have signed a deal to distribute the iphone on the chinese carriers vast network. A deals been rumored for some time. And today, china said its going to award china mobile, china unicom, China Telecom, all licenses to provide the 4g network to customers. Do you know how many customers china mobile has . I said it seems like a big market. Like 800 million . Youre right. You nailed it again. Thats why i make the big bucks here. Exactly. I said that earlier. Seems like a market opportunity. It is very, very large. Then we heard they like knockoffs. Made by htc. But almost as good as i dont you know, i dont certainly dont utilize everything the iphone does. You can get everything you want in china. But apple is a brand that Chinese People its expensive, though. Chinese people in certain areas of china are its well within their means to afford luxury brands. You talk im sure you have them on the show. All the luxury goods, producers in the world, their biggest market, not knockoffs is china. Why should apple be different . I meant things that are almost iphones. And if you dont really need to pay double, you could get a smartphone that does everything. Yeah. They love the brand. Theres something about that legitimate apple brand, apple store in beijing is very, very crowded, just like new york city. All right. Weve got more china stories. We didnt just load these up for you, stephen. A lot of things in this theme. Warning Financial Institutions should not trade the bitcoin. While the Digital Currency does not yet pose a threat to chinas Financial System, it does carry risks. Bitcoin market operators say chinese nationals are major participators. Bitcoin dropping on the news. But this has been a volatile currency, i have a hard time calling it a currency. Its a very volatile currency. And within the last hour or so, France Joining this conversation. The bank of france warning of the risks related to the bitcoins. Im going to throw this out to the table. This is something that people are still trying to figure out what to make of it. Alan greenspan thinks its a bubble and theres no way to value this. And he said theres no Intrinsic Value to it. There doesnt seem to be any Intrinsic Value to it. It seems to me a fad, flash in the pan. What do you think about bitcoin . Real quickly that the thing that gives its interesting to economists, the ability to pay taxes in that currency. If you cant i mean, why does a dollar have value . Because you can pay your taxes in it all over the country and then it becomes a means of commerce throughout the country. I dont know bitcoin you can pay your taxes in it. You got me. I cant remember greenspan ever calling anything a bubble, so this is a big deal. He said it, but he called it a bubble and rode it all the way up. Went from irrational to rational. Right. Nobody is ever is anybody we remember the names of the people that call bubbles because, you know, theres like one person that does it. Guy just got a nobel prize for it who works in yale. How far up above are we than we were in september just before the fed surprise . Were up. On the stock market . Yeah. Or yields. The yields on the tenyear has been the closest thing to watch. Were back up to where we were in september. Why is it now a bubble . Was it a bubble then . Im i think its something where the market is when youre in cash. Right. Right . Probably. If youre the person on the sideline its a bubble. Lizann had an interesting look at valuations. I think thats what was that number . A hundred over 180 at the worst point. Those companies, they didnt even have revenues. They didnt have revenues. You can find arguably bubble companies. But 9 out of the 10 sectors in the s p 500 right now on a trailing earnings basis are sub their 25year average. The only sector with a trailing p e above the 25year average is the utility sector. One thing that definitely doesnt happen is the bubble bursts when everyones talking about a bubble. And isnt it a factor to some degree, people think the stock market must be a bubble because the rest of the regular economy doesnt seem to be doing that great. People dont see a lot of wage increases, they dont feel their personal position is better. So stocks are running up so much, it must be a bubble because the underlying economy is not particularly strong. Thats a great point. You have a disconnect between the weakest recovery on record and a very strong stock market. So one of those two things are wrong. Do you really have a disconnect between the level of stocks and profits . Even though the economy may be a 2 economy. Its been stunning how Profitable Companies have been and remain stunning. And also their margins. Because the shift of income has gone from labor and capital. Theres big social implications. Huge implications. I agree with that. And we can have that discussion separately. Hes not trying to just wanted to make sure you were in the conversation, joe. Counter productive to what hes trying to address. What would address it is growth. Thats good stuff. People dont want another they want a job. Minimum wage increase. A job that pays a certain, you know, decent living wage. Trying to get that arent spending, theyre not going to hire as many people as before you raised it. If you raise the minimum wage, you get more money in 30 Million Peoples pockets, theyre going to spend money and why do you think a company does when it sees overall what it has to pay out on that side of the income statement and sees that go up. Theyre going to be less ready to hire new people. My question on this is theres a lot of data out there on the impact of the minimum wage on employers. And none of it suggests youre going to lose a lot of jobs if you raise it to somewhere close to the level of inflation. If you catch efforts by the government to narrow income disparities are i think by definition either counterproductive or not going to work. And the way you do it is through growth. You unleash the growth and people get jobs, get down 4. 5 . Minimum wage, joe . I mean, in a perfect world. Do you think there should be wage price controls . It is a wage control. I dont. I dont. It was a spectrum, right . There was a spectrum. And it strikes me that the minimum wage is not so much economically determined as socially determined. I have made the point, steve. How much is too little. Can i be like joe biden . I made the point, argued from both sides. Dont touch my air space. Someone said the Consumer Sector has gone up more than any other sector. Those shareholders have been richly rewarded from the Consumer Sector, maybe some of it shouldve thats the point. Income has been skewed away from labor toward capital. You can argue on you can argue on the way to mediate against that. But theres no denying the fact that the share of National Income going to the owners of capital is an alltime high, share going to labor is an alltime low. One of the problems of that, doesnt address the biggest problem weve been talking about, too, which is higher education. Access to that, affordability of that, finding and making sure people are trained for these higher paying jobs. Its that gab. But its also, becky, globalization, all that and above. We used to be arguing about the idea of minimum wage at mcdonalds. Nobody was arguing that because it was mostly teenagers having those jobs. Now people are trying to raise families because they cant qualify for these other jobs out there. You dont fix the basic underlying problem. You need to train people. This is a conversation we need to be having both on this set and in america to figure this stuff out. Fortunately, we are going to be able to continue this conversation when we come back 4 growth and 4 unemployment, we wouldnt be having this conversation. Youre right about that. On that 4 growth, again, you would have more of it going to capital. Whats the right . It sort of selfcorrects. You certainly arent going to get government governments going to make it worse when they get involved. There are some unintended consequences almost always. When we come back, well talk about whether or not you can trust tomorrows government jobs report. A cnbc investigation right after this. Plus, kevin landis and his Industry Outlook for 2014. Squawk box will be right back. Were aig. And were here. To help secure retirements and protect financial futures. To help communities recover and rebuild. For Companies Going from garage to global. On the ground, in the air, even into space. We repaid every dollar america lent us. And gave america back a profit. Were here to keep our promises. To help you realize a better tomorrow. From the families of aig, happy holidays. Welcome back, everybody. This morning, we have a cnbc investigation into the real story behind the jobs report and whether or not you can believe those numbers. Eamon, why dont we start things off with you. We know there are several investigations into exactly how the census conducts surveys on behalf of the department of labor into the ultimate research that becomes the jobs report which were all expecting tomorrow. Theres been a news report out there that suggests one person involved in the census data gathering process falsified that data allegedly. So what we wanted to do was get some information on exactly how census gathers this department of labor data that goes into the jobs report and what the redundancies are that are built in to prevent refalsifications. Look at how census goes about building this jobs number in terms of doing the research. Theyve got field reps out there interviewing about 70,000 addresses every single month. Those field reps are literally knocking on doors in most cases. They also conduct some of these interviews by phone. And those reps handle 20 to 40 addresses a month. Now, take a look at how they protect the integrity of that information. They have supervisors in place who randomly recheck about 2,000 addresses a month to make sure that, in fact, the interviewers showed up at that address to conduct the interview. They also have supervisors who randomly reinterview about 400 households a month just to make sure that the data that the interviewer collected was, in fact, correct. And thats what the family at that house says. Then about 150 times a month, im told, the supervisors feel theres something suspicious enough about what those field reps have turned in that they actually pull that interviewers entire list and conduct reinterviews. If there is fraud in this process, its probably inside that 150 times a month number. Thats where supervisors have decided, you know what, theres something a little bit fishy about what this person has turned in in terms of the data. Were going to go back and recheck it. What we havent been able to get from sources familiar with this is what the falsification rate actually is. How many times do they find that an employee sort of slacked off, didnt turn in the work, faked the work. Some fake data, that sort of thing. We dont know. What we do know is they have a process built into the place where they actually go back and check the data on a random basis to try to prevent it as best as they can. But a lot of human beings in this process, steve, and thats why theres some concern here about how rigorous a process this is and whether any of that false data can get into the system, steve. First, the idea that one interviewer only does 20 to 40. It means its very difficult for a single interviewer to falsify the data. And it requires a conspiracy of many people to do it for political reasons. And what were hearing from the people were talking to is that the political thing is less and less likely as much as the issue of what eamon and i discovered thats falsification rate. Which we dont know what that is. Its essentially whats called a nonsampling error. The sampling error is we didnt actually gauge the Hispanic Community correctly. But its the nonsampling error which is the falsification rate. Three questions remain unanswered that were waiting to hear from the investigation. One is, what is this actual falsification rate . Theres a tolerance inside the data. Two, the specific allegation in this case is a supervisor colewdicolewd i colluding with the interviewer. The supervisor is in charge of checking the integrity of what the interviewer does. We dont know what happens. Finally, i think the guys dont quite get it. This is a very important number for the markets and the society as a whole. Theres no disclosure about these incidents. From the New York Post, the New York Post said that the process itself was part of the problem because they were demanding a 90 completion rate. And they so when you couldnt get ahold of people when they werent home and werent there because the process demanded that 90 completion, thats why the supervisor and some of the people were making up numbers because they couldnt come up with this is good enough for government work. You saw the numbers, 2,700 people doing 70,000 interviews. No matter where you sit, that speaks volumes. Agreed, joe. The question is, do you have an alternative for how to do it . All of these things, if you hear a private company, they have a sampling error, plus or minus 3 . Is adp more reliable . Do you think its more reliable because its based on actual numbers for payrolls and things that have been billed . Yeah, adp is a slightly different thing in the sense theyre getting information. By the way, so is the payroll number. The payroll number is data given from establishments. Isnt that this is the household survey. Yeah, survey, right. When you guys flash nonfarm payrolls, this has nothing to do with that number. Everything to do with the unemployment rate. Correct, steven. Just to cut through this quickly, theres no allegation. There was an indication in the New York Post that somehow these were being massaged by politicians, particularly the Obama White House to give you a better number heading to the election. I havent seen anything to suggest eamon, what are you hearing about the political side of this . Yeah, i think it would be very difficult to have a political conspiracy the number of interviewers to affect the number if theyre just interviewing 20 to 40 houses a month would be ha lot of people involved in that. You like big government. Thats a huge and there were all these people on twitter saying, oh my god but theres nothing here to suggest. The only point jack was making its not this goldplated number that comes in and you joe, its a survey. Its a survey. I know its a survey. If its a survey, any kind of survey will have a margin for error. A municipal employee if if you didnt have to do something important, think if all you had to do that is in there. Have you ever seen how many guys go interview and its like the guy from the i figure out 70,000 like four guys might actually go out and interview go distribute 1,000 of these fliers, joe. Still in the garbage, right . Still to come this one isnt that important. Still to come weekly claims and a revision of gdp. First, though, from apple to social media, the tech trends im not going to finish this. I love having a free checked bag with my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. Clients are always learning more to make their money do more. ann to help me plan my next move, i take scottrades free, inbranch seminars. Plus, their live webinars. I use daily market commentary to improve my strategy. And my local scottrade Office Guides my learning every step of the way. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. We are continuing our whats working series today with some Investment Trends in the tech sector. Joining us now is kevin landis. Cio and Portfolio Manager of firsthand capital management. Thanks for being here. Thanks for having me. I know youve been all over the social media stocks, this has been a huge year for that. What happens in 2014 . Well, i guess its its a fools errand to try to create the next facebook or create the next twitter. You have to do something different. So were not looking for any big fireworks in social media next year. Were trying to move on to the next thing. Which is what . You know, it might be wearables. The fitbit and those. If you think about it, theres over 1 billion cell phones sold every year and theres going to be a tie rate to that. And if people would pay 3, 4, 5 for a Lance Armstrong band that doesnt do anything youre not totally bought in in on this idea of wearables being the next thing . When i think about how much money people spend with jenny craig or Weight Watchers and how it changes peoples lifestyle when they get something that counts their steps and then i think about having a nice cool app that ties into your smartphone and bluetooth built into them, yeah, actually, i think that could be something. I notice youre not wearing one right now. Stephen is. Ive got it on my app. Yeah. And i have fit bit talk to lose it. Yep. And so, you know, i dont do anything, i let my apps tell me where to go in life. You look like youve lost weight too. Yeah. I went a little overboard in obsessing between fitbit and lose it. But it works. You dont tweet all your fitbit stats. No, i refuse to do that. I dont want to know. The insight there is people care very, very deeply for their own personal data. They really want to track it and manage it. And the second insight is, you know, you really dont care about my data. As much as you seem like a wonderful guy. Im trying to get back under 100. I follow you. 2,000, i blocked you. I keep it under someone has to die before i go over 100. So who do you invest in . If you think wearables may be the trend, where are you putting your money . Well, theres two really promising startups in San Francisco, jawbone and fitbit. And we have an investment in jawbone, but i think theyll do well. But nike has their fuel band out there. Seems more geared toward triathletes. I think there are more people going to Weight Watchers than triathlons. What does jawbone do . Well, jawbone originally was sort of the bluetooth ear piece and had lots of different products but they have the up fitness band that andrew wears. And that one is really, really catching fire. And they announced a new version that has the blue tooth syncing up. And the sleep monitoring. Yeah. And the other thing you dont see in those, the Semiconductor Industry has gotten better at making sensitive sensors. Its only a matter of time until theyll be able to monitor things like your pulse, your blood pressure, some day maybe even your blood sugar. Imagine what that would do. Something that would measure how many calories. The caloric intake. Too many from what i can tell. Thats what youve got to do. You need it. Every room i think i think you get it realtime. If youre monitoring your blood sugar, i think what will happen is when youre eating too many calories. If you had that deficit of caloric intake. We have a camera. Stop. Wow. Theyre solving your first world problems, there you go. Another issue youve been looking at is educational disruption. Weve been talking about that, where do you think the winners are . That was on camera. Is that my age or iq . Im terrified of buying the ulta vista of this. The entrenched all the reasons that this part of the economy has failed to adapt are mostly still in place. I think itll take a while to unwind and fix itself. We havent put our bets down on that trend but its going to be big, it has to be. What has to happen before youll put money on the table for this . You know, a lot of people say theres not a lot of money in that because theyre college students. Come on, thats b. S. , budweiser makes a lot of money. We find someone who is making money. I think you look good. I do. A revision to the Third Quarter gdp. Rick santelli standing by in chicago. Take it away. All right. Our second look at Third Quarter gdp is off the charts out of expectation range. 3. 6, 3. 6. Hey, anybody have a camera . Lets snap a picture of that. I have a feeling its going to be a while before we see another one of those. Its good and most likely continued inventory adjusting that pushes it higher. Initial jobless claims for the most recent week. Well, we see that claims moved under 300,000. 298,000, thats a drop of 23,000. So the data, it really would auger for an equity market that should go up, but i dont see it going up. An Interest Rate market that is going up rate wise not price wise. That makes sense. Kneejerk reaction, dollar index moves higher. These are all very predictable and logical moves. A big move in the dollar index right now. Moving it real close to some resistance territory. Lets go through some of the internals on gdp, shall we . Consumption . Pretty much as expected, arguably 1 10 light at one point for the price index now has a two handle 2. 0. But most are going to dismiss that. The personal Consumption Expenditure core over core, 1. 5, thats actually. 1 hotter. If you wanted to look at continuing claims, one month kind of out of sync with initial claims, that moved a bit lower from 2. 765 to 2. 745 million. Not sure we gained much from that. But looks as though were giving it a run for 2. 90. Can you imagine tomorrow if we have a two handle on jobs, a three handle on tens. Back to you. Thats the key point in everything. If we have a two handle on jobs, youre likely going to see a three handle on the tenyear note. Take a look again at what ricks been talking about. The yield on the tenyear steadily climbing as people digest these numbers. We just hit 2. 8 yesterday. The stock market has been the inverse of that. And youve been watching stocks decline even though rick pointed out, these numbers should be good news for the stock market. Good news is going to be good news for the stock market that is not necessarily playing out in how were watching these things. Steve, you want to talk about the numbers . Yeah, i was talking with stephen roach. Its so nice to have him next to me. You want to be a junior economics reporter, you can be senior. Ill be your apprentice. Lets move on and tell people about your data here. The big part of it is inventory adjustment. Rick alluded to that. Bottom line, with went from an 86 billion inventory build to 116 billion. And as steve pointed out, about half of the revision upward comes from revision. Up 1. 4 compared to 1. 5. Lets see, structures up 13. 8, thats better, equipment compared to minus 3. 7. A little bit better on the Business Investment side. Exports were down a bit, Government Spending up a little bit more than originally reported. Mostly because of state and local spending. So i think whats going to happen here, steven. Tell me if im wrong here is what you got extra from the expectation in the Third Quarter may come off in the fourth quarter. So you were looking at a 3. 2, 3. 3 going in with a 1. 2, 1. 4 in the fourth quarter. Im wondering if guys are going to be in the 1 range to even it all out. Its like that seinfeld episode. No matter how you get there, it ends up being a 2 economy. The point is that the underlying final demand growth taking out the inventory volatility is still pretty weak, steve. Its around 2 . 2 . A little bit lower than that. And the biggest piece, 70 of the economy, the consumer is very weak. And so its hard to get as enthusiastic as, god bless him, rick was. Rick is enthusiastic about everything. The market and he thinks the next quarters 1 . That seems that believes it a little bit. Thats going to go back down to 2. 7 if youre right this is a oneshot deal. I do get excited about numbers because they dont come special delivery from any single individual inside the bureaucracy, at least not directly. Ill tell you what, im very, very optimistic about the u. S. Economy. Maybe more than ive been in many years. What im not optimistic about is how little we Pay Attention to. Because big stories get boring to talk about them every day. But whether its health care, whether its dodd frank, the volcker rule, portfolio hedging. Some of the people that wrote this bill, you know, some of these hearings that mr. Levin had. He didnt even understand the vernacular of the market much less regulating it. All of those things are keeping us moving forward. I live in a little town, guys. They constantly talk about. Why dont you talk more about, how can i plan for the future when i have no idea what the futures going to cost me . These are big deals and to see these kind of numbers makes me so optimistic that maybe well get some of these knuckle heads out of d. C. And well really clear the zone for some stellar growth in the futures. I will say theres a lot of people writing in that say the irs was all desperate guys acting on their own too. Theres one guy that reports all the how did they do it at the irs . I guess its just maybe i dont know. I think it was a little by skewed. You dont think it was a little bit skewed . I dont want to get into this. I want to talk about the gdp number here. Hes fired up. Because hes calling me fat. Hes throwing his weight around. The inventory bill and the numbers in this thing. People exaggerate how bad the inventory build is and the beat on gdp wouldnt be so bad, some of this would get bled off and its not the real negative draw of the gdp. Depends on sales. Depends on sales. If theres too much stuff on the shelf, depends on how much consumers take off the shelves. Inventories dont keep building at the same rate. Thats the point. We had a huge build in the Third Quarter. Theres still you have too much hair. When we come back, the final News Conference of the year. Plus, jane wells sits down with kobe bryant. [ tires screech ] chewleys finds itself in a sticky situation today after recalling its new gum. [ male announcer ] stick it to the market before you get stuck. Get the most extensive charting wherever you are with the mobile trader app from td ameritrade. Wherever you are with the mobile trader app is caused by people looking fore traffic parking. Y 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. Squawk sports news this morning. Jayne wells sitting down with kobe bryant. Really . In person . Really. In person. Like we were this close. And we broke some news last night, joe, on twitter. Laker fans were hoping kobe would be back on the court after eight months this friday. He told me, nope, not yet, the achilles tendon is fine but you get the 18year nagging injuries kicking in. When he does return, hell wear this new 225 boot, i mean shoe. They let me borrow this for 12 hours. And the reaction on twitter is extreme. People either love it or hate it. High top. High, high top. Yep. Kobe bryants return to the high tops says he was inspired by the boxing shoes Manny Pacquiao wears. He says the shoe was on the drawing board long before he hurt his ankle. But this is flexible top and a big gamble. Because for the first time nike is using the new woven tops in a basketball shoe. Its risky what youre doing here. Yeah, that was a big part of the challenge because its a great shoe but youre also moving. Youve got to change directions, jump and youre big. And im big. Youve got to factor in the weight and so forth, the stability issue. So that was a big challenge for us. But i felt like our team did a good job. He was at practice today, wore the shoe and players huddled around him and were like, what is that . He wanted something ultrahigh but played like a low. Weve had the idea to take fly net beyond running into other sport categories. Hes an amazing athlete and his demands in terms of performance are as high as any athlete. And really any sport. Honestly, i just love doing this. Like i love the process from the beginning all the way to the end. So sitting in there and going over the materials and inspiration from the shoe all the way up to the advertising concept. So from the beginning until the end, im absolutely involved and i just enjoy it. Are you really involved . Are you really involved . We can have the conversation about everything from soup to nuts even to the ad campaign. Its a work in progress right now. Mark parker says kobe is one of the most handson, detailoriented athletes, much like tiger woods is. But can kobe catch lebron whose shoes sale dwarf the competition estimated at 300 million over the last year. Well, nike is rereleasing all previous shoes. Speaking of lebron and maybe carmelo, we talk about kobes new 48. 5 Million Contract and whether that makes it impossible for the lakers to build a winning team around him. Guys . Did you ask him that . Yes, i asked him that. I asked him that. I asked him also if hed like to see lebron and melo. Did you ask him if hed like a winning team around him. Yes, i would. Heres the question you have to ask. Are the lakers spending this much money because they say its important more important to have kobe bryant because he sells tickets and merchandise. Or is it more important to bring in another team that can build a championship . Its a rare situation when you have Something Like that. Its been done, you know. Where youve got someone because its team versus individual. Its hard by the way, what do you think of this . I think its kind of cool looking. I was thinking about nike and phil knight still around. Hes still a fairly young guy and its the largest Apparel Company on the planet and how unbelievable it is as a company and marketer. Well, you should have seen the money they spent. It was at the mocha downtown and they created this whole art gallery look. They pulled out all the stops. And then they sign people early, they stick with them. Right. The greatest athletes are all nike athletes. And they make each one feel like its all about him or her. And they have the best logo in the world. They do. I mean the swoosh. If you have a sex scandal, they stick with you. They do. I know. Maybe i if wore those, joe, i might lose a few pounds. What do you think . Will politico stick with you . I personally think those shoes are incredibly unattractive. Ugly. I knew you were thinking that. Yes, theyre getting a lot of they look like wrestling shoes and lizards on your feet. Its light because of the technology. Yes, it is. And he says its also important because i have these in Running Shoes and theyre very snug, but theyre very flexible. And if youre lateral on a court, that could be a problem, so they have look, im not an expert, but theres reenforcement here so there is some support. And the important thing for him on a high top, usually constricting, this is supposed to be flexible. But itll go almost up to your calf. Its a ski boot. Looks like a ski boot. Is that the only design . The only way it comes . You cant get a different color or any kind of alternative . Well find out in february. This is the prototype which im allowed to hold. Ive been babysitting it like a gold bar overnight. Is that kobes size . I i dont know. Its like a 12, isnt it . Or a 13 . Let me see here. I think thats worth more than a gold bar. Oh, my god, you have skis for feet. Look at her. They got nothing on you. What size are you . Im a 7 1 2, i know you know what, i once saw shaqs shoe. Shaqs shoe goes out to yeah, yeah that would look even worse then if that was to scale, that would look worse. Youd hate it even more. Its hard to imagine it could look worse. Thank you. Youre welcome. When we come back, were going to get highlights from draghis final News Conference of the year. After that stronger than expected revision to Third Quarter gdp and lower than expected jobless claims, you see its up at 2. 864 . Squawk box will be right back. Just by talking to a helmet. It grabbed the patients record before we even picked him up. It found out the doctor we needed was at st. Annes. Wiggle your toes. [ driver ] and it got his okay on treatment from miles away. It even pulled strings with the stoplights. My ambulance talks with smoke alarms and pilots and stadiums. But, of course, its a good listener too. [ female announcer ] today cisco is connecting the internet of everything. So everything works like never before. [ female announcer ] today cisco is connecting the internet of everything. [ bagpipes and drums playing over ] [ music transitions to rock ] make it happen with the allnew fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Get 200 free trades when you open an account. Welcome back, everybody. Weve been listening to ecb president mario draghi speaking in frankfurt. He says that the central bank will remain accommodative as long as needed. Take a look at how currencies are doing on this. Dollar still up against the euro at 1. 3566. When we come back, we have three great guest hosts. Jim cramers going to be joining the conversation too. Were going to talk apple, retail and much more. Lets get down to the New York Stock Exchange where jim cramer joins us now. I was just thinking about nike. This made me think of nike. Is that not like an incredible you look, its so nice and just the way they do everything. Its Pretty Amazing to become the biggest Apparel Company, right . And its a fabulous stock. Theres a big china kicker. This is absolutely what i think is the most exciting growth stock in the dow jones. I love that piece. Imagine if these things take off like lebron. Under armour is doing extremely well, too. G3, they do a lot of nfl stuff. It is still very, very strong. I think the stock is going higher. Wait a minute. That stock it split again, i guess, and its back to 80 . Yeah. The stock has been a real horse. Its up gigantically for the year. People dont push it that much because there isnt a big cohort that follows that kind of apparel. Dont forget vanity, but vfcorp. , thats north face. Its cold around the country. This cohort is fantastic. 70 billion market cap now. Jim, my wife just got a job at vfcorp. And shes really excited about it. You think theyre doing well . Eric wiseman is one of these quiet, fabulous executives that just hit europe in a way that is so amazing. I think hes going to take over asia, too. Their product line is great. Congratulation toes your wife. She works on the nautica line. Shes really excited about it. I get discounts on north face now. Youre so lucky. Eric just tells me about it. I have to get one. I dont know where to go. I guess we dont have enough time. But i have people writing in that people hire someone at the minimum wage. The minute they find someone they want to keep that is not going to go somewhere else, they immediately go up the minimum wage. Thats the way they test employees, the ones that dont work and end up leaving, anyway. In a weak economy, if you were to increase the cost of doing business in a weak jobs market, it just is counterproductive to the jobs. Its such a you know, i see how knee jerk it makes sense to do it. Theyll spend more money. The economy will be better. But i just dont know. I wish god would come down and say its either good or bad to raise the minimum wage. Youre as close as we have. Raise it or not . I would say chipotle and starbuck res the two most highly valued restauranteurs. They pay above because they have complex menus. Its case by case. But when the government starts getting involved, i dont know. What is the fair way, jim . What is it . Give it to me. Fair wages is what people work at, right . Thats what i always think. Thats the problem. Thanks, jim. Thank you. When we come back, better than expected economic numbers this morning. Were going to ask if this foreshadows a strong jobs report for tomorrow. Squawk box will be right back. Through all of our energy operations, we invest more in the u. S. Than any other place in the world. In fact, weve invested over 55 billion here in the last five years making bp americas Largest Energy investor. Our commitment has never been stronger. They always have. They always will. Thats why you take charge of your future. Your retirement. Ameriprise advisors can help you like theyve helped millions of others. Listening, planning, working one on one. To help you retire your way. With confidence. Thats what Ameriprise Financial does. Thats what they can do with you. Ameriprise financial. More within reach. Yep. Got all the cozies. [ grandma ] with new fedex one rate, i could fill a box and ship it for one flat rate. So i knit until it was full. Youd be crazy not to. Is that nana . [ male announcer ] fedex one rate. Simple, flat rate shipping with the reliability of fedex. Our guest host this morning, based on the numbers that we got today that were stronger than expected, does that tell us anything at all about tomorrows jobs number . And what should we be looking for . I dont know if it specifically tells us anything. Obviously, its come up certainly after adp. Im not so sure it will move the needle unless its an extraordinarily strong number. To the extent the fed is focused on it, youve got inflation declining and below their target. So if theyre looking for an excuse, even in the face of a stronger jobs number to wait until there is a chairmans transition, they may be able to point to inflation being below their target. So i still think the better bet is early 2014. All through the commercial break, we continued this conversation about whether or not they should raise the minimum wage, whether there should be a minimum wage, and obviously this will be something thats front and center. Steven, your thoughts on this. Well, i hate to say it, i agree with joe. I dont think the or the government, you hate to say it . No. The government has no idea what the right wage is for any segment of society. What we do know is the National Income is being skewed more towards capital than labor and thats a social issue we need to address. My view is if youre going to have a minimum wage, why dont you let it keep up with inflation . Why would you let it keep to we shouldnt have it is what youre saying . No. But if youre going to raise the argument that we shouldnt what is the number, then . Nine bucks or Something Like how do you know . Because it keeps up with the times how do you know it wasnt . You can see the mail coming in. Hey, big shot, why dont you try living on minimum wage. You want people to get more jobs and have more income. But if youre concerned that the National Income is skewing way too much to capital and not enough to labor, why wouldnt you skew it towards theyre now trying to test kiosks where you do a lot of ordering yourself. And you wonder if it leads to you know what good intentions pave a path to, right . To people getting a living wage so they can afford stuff and it would be nice if it were true to be virtuous. You nationwide to check what happens and you dont get any job lows based on increasing the minimum wage. Make sure you join us tomorrow. Right now its time for squawk on the street. Little china grove to get us started. More specifically, apple and china mobile. Good thursday morning. Welcome to squawk on the street. Im Carl Quintanilla along with jim cramer and david faber. Well get to that apple news in a minute. But the broader economy making some headlines here. Gdp revised up to