Transcripts For CNBC Squawk On The Street 20121210

It looks like were looking at a lower open for the dow. As for the action in europe, really, the action focuses on italy where theres an impending political regime change. More on that in just a moment. The road map starts at the golden arches. Mcdonalds blowing out expectations for november sales after the dismal drop in the month of october. Hoping to fuel the rise, the bacon onion cheddar sandwich. Theres one thing for certain, taxes on top earners are going up. Turmoil in italy. Berlusconi throws his hat in the ring. Retail Sales Numbers out of china, hoping the economy is in fact on an upswing. Apple, enthusiasm. Jeffreys trimming its price target to 800 from 900, as apple shares do trade lower in the premarket. Well start with mcdonalds, posting better than expected november samestore sales, global comps up 2. 4. U. S. Samestore sales up 2. 5, offered by breakfast offerings, including that cheddar bacon onion sandwich, as melissa mentioned. Jim . People are saying the u. S. Maybe is making a turn here. I find mcdonalds is levered to new products, levered to menu technology. They do invent things. My hats off to janet. They had this number last week. Reminds people, again, theyve been right down, and up. Mcdonalds is one of those things where joe asked me from squawk when we were talking, i said, i think this is a for real term. If they continue to innovate. I may this may not be your cup of tea, burger, but innovation s higher. They tried to sell it to consumers as opposed to their extra value menu, which is a little bit higher price point. That combined with these product innovations, theyre very cognizant of margins when theyre trying to push iced mixed drinks. The sandwich which ive not tried. You said cheddar baconburger. It looks like theyre going to remain modest at best. Margins are going to be a bigger piece. I think adjusted for the number of days in the month, the numbers were a little more modest. 1. 3, Something Like that. Still a beat above expectations. There had been a fear once they start posting calorie numbers, that people would blanche. And take a look and say, i cant have that. I think that this is now empirical that people dont care. I dont know where this thing comes in, but this is not something that they should put lipitor right next to these. A horrible stat. You know what, zocor at a mild dose either that, or you say, this sucks the plaque out of your heart if you eat it. A plaque sucker. To what extent can we extrapolate that things have turned at mcdonalds . Perhaps not necessarily a sign that its off to the races. I think that anything that the trend becomes great, right . The trend may be broken. I do think that to get people in the stores, they had a very broken special. This is where you went in, said, wow, its 1, and no one told me, and its a windfall. Equivalent to when i bought the j. Crew jacket last week, wow, i got 30 off. When you get people in the stores and youre not there because of the value meal, that means all these other people are going to other places. I think this is a victory for them. How far do you trust it into the 90s . Its got no Capital Gains this year, versus, say, apple. It is coming into that janny notes point on friday, it is coming up under tough comparable sales. Going forward, we could see negative numbers. Last year, december increase was an increase of 9. 8 . So when you compare, its going to be very difficult. Remember, the analysts were all negative. Thats true. Tomorrow the analysts will come out and say look, while the compares are difficult, one or two will break ranks because theyve been so negative. Doesnt matter. The question is, on the declines, were saying, you know, maybe its a wendys, a burger king gaining traction on mcdonalds ramp higher, you have to wonder who will be squeezed by the mcdonalds promotional activities. And dollar menus even, the grilled cheddar bacon onion sandwich, the mcbites. Look at them. Fish mcbites. A lot of that is corn. I dont know how much. Ill refrain from making an assumption there. We should have a road trip where we sample. The more calories the better. A big change. You can talk mr. Low systolic pressure man. Ive got the 120 over about 75. And i got really low cholesterol. But theyve changed the rules. Now youve got to keep lowering it in order to reduce the plaque. I think that plk donamcdonalds antidote to that. Basically, you dont matter, its a statement to the cardiologist. It basically says, i dont care what the charts say. Youre a loser. I cant justify going and getting that. Its a statement. Lets talk about the fiscal cliff. Also on the radar this morning, after president obama and House Speaker john boehner both were tightlipped how the negotiations went. The cofounder of the fix the debt campaign, he was asked about the chances of striking a deal to avoid the cliff. Its probably more like a 40 chance well actually get it done before the end of the year. Probably 25 chance well get it done right after the end of the year. And then theres that horrible 35 chance that well still go over the cliff and have pure chaos. But i think the chances of getting it done now are better. I think thats whats key. Be sure to tune in tomorrow for the fiscal cliff coverage live from washington. Mission critical, rise above d. C. , all day long. Becky quick, jim cramer, Maria Bartiromo holding their feet to the fire about where they stand on the fiscal cliff and how theyll do their part to rise above partisan politics and reach a deal. Now, there are some bowles comments. 40 , yeah, but the odds are much better. Theyre still 35 chance it will not happen. Its not exactly confidence building. Not necessarily confidence building. Always interesting to me how people can put percentage chances on anything like this. Seeing how difficult it is and how the story changes to a certain steextent each day. Who knows whats going to happen. Public care, confidence numbers, spending, any relationship to the fiscal cliff at five. I dont know. I just dont know. I think anecdotally, from what i have been able to observe, no. But i cant speak for that. The journal today has the lead stories of Consumer Spending starting so slow. And in part, they cite the fiscal cliff. I think if you were out there, you would get answers that would not necessarily describe it correctly. Its a shame its called fiscal cliff. And called radical tax increase. It was meant to cause a recession. The government felt in its infinite wisdom that you think its a radical tax increase . I think so, yeah. I think youll notice it in your paycheck for certain. Thats absolutely for sure. Your first check, second paycheck, then you get the chaos that bowles mentioned. And the chaos is, wow, i have much less to spend. I didnt know this was coming. Alternative minimum tax being the silent killer who really understands how much more they have to pay, check at the end of the year. Do the math. We saw it in the Consumer Sentiment numbers, and what it will be when the increases actually go through. Most of that decline in sentiment that we saw on friday was from households earning more than 75,000. A higher income in this survey, households felt it the most, even though its not here technically. One of the more interesting conversations over the weekend was bob corker saying, lets just go ahead, concede to the tax argument, which would flip the entire spotlight onto entitlements, which is what republicans have been trying to get the discussion to be about over the last couple of weeks. When you hear about entitlements, why arent they talking directly, you know, Medicare Part b koshcosts x, or medicare a, should cost this. The last thing a republican wants to do is say, look, im cutting back medicare. So, i mean, if you switch it to entitlements, suddenly everyone has to say, Social Security goes from 66 to 68. Is that what we do . Do we means test medicare . It is so much easier for grover who will be on cnbc, forget the fiscal cliff, i will come after you with both barrels. If you vote tax increase. Whats more do they want to rise above a tax increase . No. Do they want to rise above fiscal cliff . No. What they want it do is not rise above the radar screen of raising taxes. And grover is more powerful than a recession. I asked him pointblank on meet the press, college chum, look, it doesnt have to be a recession. We cut the entitlements. What are the entitlements that need cutting. And lets get Medicare Part b off there. What is your plan . No one is speaking about the specifics. Because its third rail. Its just plain third rail. Medicare is the key, no doubt about it. The rising medical costs and percentage of the budget that that will continue to take up. It is the key area, when youre looking at spending cuts. Right. And theres 4 trillion added on during the republican period. Much of it for the global war on terror. No one wants to touch do people roll back on what you spend on global war on terror . Weve got defense cuts, about theres 4 trillion, documented numbers spent to defeat our enemies, who aso is that coming. How do you cut that budget. Maybe to corporates point, if you accede to the president on tax hikes, then you shift the debate purely on, okay, weve given, lets focus on the spending side. Its dangerous. Spending side means they need to compromise thats actually worthwhile. If you raise taxes, you lose in the republican primary, and if you cut benefits, you lose everywhere, no matter republican or democrat. Everybody knows that. Dic dicey. Running for higher taxes . I mean, look, im not pro i think that Frits Van Paasschen who has a big bet on china, he laid it out. He said we need both. I was listening to cody from honeywell, its a dangerous position to want both tax increases and entitlement cuts. I hear very few politicians wanting to do that. Speaking of china, by the way, mostly upbeat data out of china. 10. 1 in november, strongest since march. Exports rose at a weaker pace. The planned resignation of italian Prime Minister mario monti weighing on the european markets this morning. He said he will step down as soon as the 2013 budget is approved. Thats because berlusconi. Its been said a couple things this morning, that italy is now the problem child in europe, more than greece, more than spain. But conversely, china, if gdp is coming back, they are in what many consider to be a sweet spot. The numbers came out saturday for china. I think italy has been remarkably good. So this was a big game changer. Italy had been a part of the good story of european recovery. Now its back. All to monti was never intended to be there for the long term. Sure. In fact, he may be leaving a month earlier than originally planned. This should not be a surprise in the larger context. While we may mention berlusconis name right now, hes not expected to win. Look, we knew that monti was successful. It may be whoever follows him is going to roll some of the gains that hes had. Socalled gains. Thats going to cause ripples here. Look, on saturday night, i said, were going to have a nice opening. Chinas good, people know that monti is not really going to hurt italy. I think if china continues the momentum, but the number the ex sports were less than expected in the month of november. Which is a concern. Then theres this perverse glass half full, that some data comes in lower, it might fuel the case for stimulus, where theres no stimulus. You have this economy in fact improving, or if not, theyll step in anyway, this new regime. The band of good we see periodically when rates are so high, they have a lot more room to maneuver than we have. Right. When we come back this morning, what do Barbra Streisand and apple have in common . People who are sellers. People who need buyers. Find out what babs is singing about and why shes such a huge fan of squawk on the street. Well take the pulse of the consumer, and the economy, with tupperware chairman rick owens. Ppi, big fed meeting. Well break it all down as we look at futures once again here. [ engine revs ] [ male announcer ] the mercedesbenz winter event is back, with the perfect vehicle thats just right for you, no matter which list youre on. [ santa ] ho, ho, ho, ho [ male announcer ] lease a 2013 ml350 for 599 a month at your local mercedesbenz dealer. At your local try running four. Ning a restaurant is hard, fortunately weve got ink. It gives us 5x the rewards on our internet, phone charges and cable, plus at Office Supply stores. Rewards we put right back into our business. This is the only thing weve ever wanted to do and ink helps us do it. Make your mark with ink from chase. Shares of apple falling. Jeffreys reducing its price to 800 from 900 a share, citing that apples rate will decelerate further next year. Third quarter, Fourth Quarter estimates the same this year. They think it will be negative marginal leverage, the stocks will likely fall. I just dont think that you know, i went and reviewed my tax situation with my professionals on friday. I im no problems appeared to me. Capital gains, anything. Estate taxes going away. Put the real estate into the kids i mean, these are the litany of the fiscal cliff discussions. They start with Capital Gains. Please take your Capital Gains. Please take them. What if people have Capital Gains . Whats the stock they own in their individual account . Not their i. R. A. . Or 401 k . Its apple. Every one of these guys are telling you that. Its the way the discussion starts. People have to understand, thats how it happens. And the buyback next year, increase your cost basis, whatever may be trading at that point. Theres no loss for investors. Theres only the possibility of gain if theyre facing a higher tax rate. Like the special dividends, making it clear theyre not interested in that. Thats right. I think unless you have a complex tax return, you may not realize that theres this Investment Advice that flows through from professionals. You dont want to upset them, because theyre better than you. They see thousands of clients. You just do it. You dont want to risk the rap. And increase taxes against investment returns as well may be motivating some out there for next year. That does also increase. Stocks can go up very quickly. But what peter is pointing out is the concern that underlies all of this, whether or not this is fueled by tax reasons, the selloff in apple. The concern here, that hes laying out, is theres going to be decelerating growth next year. Theres going to be negative leverage margins next year. These are all bad things for a stock thats been trading on the notion that it is a high growth stock. Maybe no longer. That breaks the story. Thats true. I was going over the charts this weekend, and i was amazed, a lot of tech started moving up last week. And for the longest time, apple was going up, and these were going down. Microsoft not doing all that well. Youd be surprised how many tech stocks going higher. No profits in those. Big profits in apple. Cramers been telling you all morning on this weeks stocks. The busiest day of the season for fedex. Fueled by a surge in Online Shopping this Holiday Season. What it all means for the company as it looks to deliver growth. Lets look at futures as we head to this monday morning open. Can i help you . I heard you guys can ship ground for less than the ups store. Thats right. Ive learned the only way to get a holiday deal is to camp out. You know weve been open all night. Is this a trick to get my spot . [ male announcer ] break from the holiday stress. Save on grounipping at fedex office. [ male announcer ] break from the holiday stress. I have obligations. Cute tobligations, but obligations. G. I need to rethink the core of my portfolio. What i really need is sleep. Introducing the ishares core, Building Blocks for the heart of your portfolio. Find out why 9 out of 10 large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. All right. A few minutes before the bell on a monday morning. Lets get cramers mad dash. One of the stocks, at least in retail, people have been talking about in a big way. Now, this is a company, abercrombie, where every time you get it going, people say, hey, you know what, theyre going to do a deal. When you get the kind of chew, a very positive note from bair today, going from hold to buy, now this is the hottest retailer in the country. We have a lot of negatives in retail. Its coming back. Dont forget, theres a lot of shorts in this. It takes out this level. I think youre going to see a spike up. Be careful if youre short a f. A lot of weird weather patterns in the country. Now, this is really important. A stock i like very much on the basis of corporates buying them and deckers, ugs were doing better. Piper cuts numbers. Theyre talking about markdowns. This has just been horrendous. Right here is where we started catching rumors that this is where vf would buy them. The stock has moved up very nicely. I think vf is interested because they bought timber land when it was a knockout brand. Carl, the weathers playing havoc. I was watching green bay last night and theres snow. I thought, well, if thats what we need. No snow anywhere. Chicago is wondering where it all is. Chicago is warm. Shirt sleeves. Maybe some football after the break. What a weekend it was. Well keep our eye on shares of mcdonalds as well. And later, its been party time for tupperware shareholders. The stock up sharply in the past two months. Well talk to the chairman and ceo rich goings during this hour. Find out what Barbra Streisand and apple have in common. And get ready for a new week of trading. Opening bell is next. Productivity up, costs down, time to market reduced. Those are good things. Upstairs, they will see fantasy. Not fantasy. Logistics. Ups came in, analyzed our supply chain, inventory systems. Ups . Ups. Not fantasy . Who would have thought . I did. We did, bob. We did. Got it. He loves risk. But whether hes climbing everest, scuba diving the Great Barrier reef with sharks, or jumping into the market, he goes with people he trusts, which is why he trades with a company that doesnt nickel and dime him with hidden fees. So he can worry about other things, like what the market is doing and being ready, no matter what happens, which isnt rocket science. Its just common sense, from td ameritrade. Less than a mist minute to the opening bell. Live from the Financial Capital of the world. A lot to watch this week on china, got a lot of europe. Were going to be talking some fed, of course, a twoday meeting, press conference on wednesday. Well continue to watch. Apple and mcdonalds, probably the two Companies Making the most news stateside. Disney, mcdonalds, these can offset minds for at least 30 seconds. Apple. The dow, by the way, coming off a threeday winning streak. Same story for the s p. Adding 129 points last week. The dow that is, not the s p. Theres the opening bell. At the big board this morning, ishares celebrating the recent launch of the ishares Exchange Traded funds. The nasdaq Spanish Language Media Company tell emund oh, doing the honors. Were glad to see them ring the bell over there. When you see this stuff, time warner, im always regarded them as housing plays. You buy a house, you get debt. But those are great stocks right now. Discovery with a big breakout. People love that. They do. Discovery, you think international largely. Thats so much of their growth is due to that. So much of their programming is very easily, can cross borders as opposed to other programming. Which is a bit more envisionist than the u. S. Important for all these content places. Thats been a very good one. Yes. David made a good point earlier. Covering the journal, Consumer Spending wobls. Front page. Yet the leaders this morning, abercrombie, mcdonalds, whole foods, mastercard. Something doesnt square, jim. That is incredible to point that out. Having gone there last week, whole foods, you know, you dont look at prices. You havent been there today . Youre desperate to go to whole foods. Do you know how hard it is . I had a veggie burger for lunch yesterday. Do you know how many times youve got to visit trader joes and it doesnt even have preservatives in it . You cant even keep that stuff. When you have velveeta, they tested that in the war thats bunker food. Major. Tofurkey is the only thing that lasts. Its so good, you put a lot of mustard on it, lettuce, tomato, you have no idea youre eating it. And you could eat cardboard, too, jim. I will tell you, at the cafeteria at hq, ive never seen so many vegetables. He burns more calories before 5 00 a. M. Than anybody i know. I was so proud, so proud of some of the things i ate this weekend, that are so cardboardlike, its terrific. But the roast that i got at trader joes, it tasted so much like turkey. I defy you to i think you havent had meat in a very long time. I think thats fair to say. Barnes noble up 3 this hour. They announced a price decrease, actually, for their nook simple touch ereader. Worth pointing out. Barnes noble seeing a nice pop in the session. Stock acted poorly initially, now its come back. Thats all right. The nook nooks one of those things, we talk about apple a lot. Anyone who has a nook, i pledge allegiance to the nook. People love the nook. But again, its the scale of an amazon, its amazing. We should point out, shares of ingersollrand not up dramatically, up about 1 this morning. The Company Announcing its intent to split into two. In part perhaps because of activist pressure. Nelson has had a significant stake in that company. But they will split into a residential and commercial business, as well as their environment, or industrial transportation, heating ventilation. So youve got a Security Company and what we consider to be the core of this, in many ways. Significant buyback of shares, and pay dividends. But theyre not moving it up, theyre paying it in march. A new ceo comes in, listed the pelts. Why should you buy anything with the pelts involved. This is work for mad money, after pelts provided it. After. Youre up 11 . In other words, you dont know before it. Versus the s p being up 4 . This goes back to 2005. Hes been just a terrific guy to invest with, as, by the way, everybody tells me hes a terrific guy. He is a nice guy. His activism, he sort of moved it to the performance side of things, and the operational side. It was started many ways by hines, which was a nasty fight, now hes on the board. He and johnson are buddy buddy. Johnson told me he felt pelts idea after initial resistance, that pelts said his ideas were great. Best buy, one of the big losers this morning. You point out merrill has a note telling a lot of people what they probably already know, financing difficulties. In the meantime, your core business sense has challenges, too. Im not calling this the best jillion buy. This is the biggest loser. Theres only a couple more weeks where the ceos have to come up with something. Theres a 60day cooling off period. Well see what we can bring people in terms of his efforts to try to find private equity firms to support a potential bid for the company, one which you have to imagine, even with a nice premium is coming down, down, down, given the down, down price in the stock itself. It still is, for a declining business, it does bring in free cash flow, thats coming down as well. Big question marks. Price for tvs, costco, offering very, very cheap 70inchers, as you probably know, having visited costco. Maybe you never liked them. Never. They have very good prices for tvs. Well take your word for it, jim. Mary thompson is in this morning for bob pisani. Slight gains in the doubts, 6 pints. S p and nasdaq under pressure. The drug stocks were a little higher. Semis looking fairly strong. Traders telling me, the focus for the next couple of weeks is going to be any headlines coming across for the fiscal cliff. That will drive the markets right now. That is what theyre keeping an eye on. The week ahead, we have the fed meeting this week. Theyll be watching abercrombie coming out of that. And treasuries up about seven sales in the next two weeks. And so given that a lot of people may have closed their books, theyre concerned about what demand might be like for these treasury auctions and how that may not impact not only the bond market, but stock market as well. China, that data was broadly better than expected. Thats giving a lift to commodities. Well get more on that. And the euro banks, too, being hit by news from the italian Prime Ministers mario montis resignation. That is causing some concern to the Spanish Banks as well, where the focus turns once you have the news of montis resignation. One thing we do want to note, hsbc had its rating cut from double a minus to double a. Abercrombie fitch, open humor out with a notice saying the retailer looks to the markets over the holidays. S intermec is looking to be up in 2013. Jim, back to you. Lets shift to the bonds and dollars. You know, looking at the tenyear, seeing it hovering around 160, is about as shocking as the sun coming up in the morning. But nonetheless, last week on interday trades, looked like we were going to close in the high 150s, which would have taken us back many more months. You can see the closing yield chart, going back all the way to august 1st. Now, look at boon yields. Political issues. You can have the bestlaid plans by Central Banks in the end. Ballot boxes, politics, it can get messy. Think about whats going on here. Now, if we look at the boon going back to august 1st, its a differe bit of a different pattern. It is hovering at the lowest yields. It did close below yields since august. If we switch gears a bit, move a little bit around europe, everybodys talking about monti, dragi, berlusconi, we can clearly see their yields have popped a bit. Granted, they have been much higher. Everything, of course, is relative. Where you start from is more important sometimes than where you were a while ago. And last, but not least, lets hit the Foreign Exchange side. Euro currency down a bit, a lot like the boon its come back, but its still in the 129, 130s. On a pattern formation, many technicians are potentially setting new shorts. Jim, back to you. Rick, thank you. Getting out of the longs and shorts, you feel that trade happening right now. Lets check out the latest in energies and metals. Lets start with the metals market. Thats where were seeing significant gains, particularly in copper, after that positive data out of china. Industrial production definitely better than expected. If you look at the factory order data, that was the highest output in november weve seen in about eight months time. Copper leading the gap ining th because of the chinese imports of copper. That was significant for that data. Were also looking at the Oil Import Data coming out of china, the third highest on record. Supporting oil prices. Were off of the highs for the session of crude oil but still looking at higher prices for brent and wti contract. But the biggest mover in the energy space today, definitely natural gas. Because its 60degreesplus in december today. Possibly well see an injection to storage even though, yes, it is the month of december. That is the reason why traders are selling that gas right now. Back to you. All right. Thanks very much, sharon epperson. Perhaps the largest dollar deal of the day, it is not a merger monday. Dont be mistaken, of course. We havent had many of them. But we have an announcement of a deal, maybe a strong possibility on friday, ilfc, owned by aig, on the block, is going to be sold to the chinese. In a deal in which the unit itself is being valued about 5. 28 billion. There you have a look at aigs stock price, which well get to in a moment. 81. 1 being sold for 4. 2 billion. An option to buy another 10 of the company. And finally, but roughly 10 will continue to be held by aig. An investor group, led by the chairman of new china trust that will be doing the buying here. It will require approval to the various regulators, including the review that we referred from a National Security point of view from the usa. Aig is a favorite, in part because its very cheap. It trades well below but its also theyve become kind of a liquidity provider when you have a noneconomic seller which would be the u. S. Government. The question is when that all evens out. Youll have proceeds from this not until next year. I think theres going to be another ability to sell more aia, as well, if im not mistaken. The aia lockup expires soon. Will they then be in a position to cash the company out entirely. Sandy hurt that. Higher than i would have thought. The government is free to trade. They got 15 . And i think that people who my take is, if you want to buy aig, i think that goes up. I would have hoped that the proceeds from the deal you mentioned would be able to take it and chop it up. Im worried about the sandy. Youve got to keep interest in the end. Insurance companies, got to keep capital free. I wanted to mention, we mentioned this on friday, the chinese have been aggressive, setting records in terms of merger and acquisition volume. We talked about this on friday, take a look across the borders from china, that helps the story. That 15 billion deal did get approved from the canadian government. They do own some assets in the gulf of mexico. Although that is not expected to be problematic at this point. But take a look at what happened in the stocks on friday. That, after we received word there would be a statement from the canadian Prime Minister. That freaked a lot of risk arms out. Did not have a lot of conviction here. Thinking, why is it going to come out with a statement if theyre approving the deal. You come out and Say Something if you werent. But they did come out with a statement and indicated perhaps we wont see any more of these large deals. Comp stock is up, as you might expect. You heard this deal will be approved. You got it right. The consensus is there should not be reasons to stand in the way. But there were a lot of concerns nonetheless. The consensus, not making more than 50 . Everyone was worried. You were right. Meantime, i believe we have a full screen of Barbra Streisand referenced in Time Magazine this week talking to joel stein, who said, barbra said her bodys waking up at 6 25 a. M. She told me the exact same thing as my mom who also has cnbc on all day does, apple, apple. David, shes been a viewer for a very long time. Very long time. I remember from the old squawk box days that we would correspond occasionally with barbra. Particularly joe. They were in regular contact. In the 90s. She has been an active trader of stocks for a very long time apparently. Terrific investor. Ive known her personally for great investor, some of her mad money, so to speak. She has tremendous real estate holdings. Shes been terrific about trying to save money and been a great success. I love her. Barbra, if youre watching, down 1. 4 this morning, apple. Knowing her, shes probably short. Yeah. Meanwhile, tupperware is getting the seal of approval from investors. The stock near 52week highs. Coming up next, rick goings, well hear what he has to say about everything from the consumer to the Holiday Season and the economy and the fiscal cliff. As we go to break, heres a look at five of the coolest Tupperware Party themes. The lawn chair party, the tupperritaville party, the bag lady bash. Tupperrita ville party, thats up your alley. And the pms party, as in popcorn, mini tupperware and sodas. No walking dead party. Im sure thats somewhere. Just for your weekend planning. Well be right back. [ male announcer ] you are a business pro. Governor of getting it done. You know how to dance. With a deadline. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. This is awesome. [ male announcer ] yes, it is, business pro. Yes, it is. Go national. Go like a pro. Okay. Here we are for the Holiday Season in full swing. Ive known this ceo for a long time. The pulse on the Retail Consumer worldwide, joining us for the squawk is rick goings, chairman, ceo of tupperware brands. Okay, rick, im reading the New York Times this weekend. Perplexed by it. Terrible story in britain about Australian Jockeys deejays. But here we go. In the piece, New York Times, the daily mirror published a series of photographs showing that the queens cereal was brought to the table in tupperware containers. How did you get that account . She has good taste. Shes a very elegant woman and she likes quality. Ive got to go to that party. Avon falling by the wayside. Herbal life, different issues. You offer a product that you could sell in stores, but its not the way you like to do it. How much more money do you make . Youre throwing out a lot of cash. When are you going to give more of that cash to the shareholders . Were spending some time right now actually and we always like at how are we going to return this money to shareholders, do we do it with the usual touchbacks. Difference. We raised it in the last couple years in a row. So were, as we talk, were assessing that situation. I like that. I mean, you couldnt be thats a great hint. How are you able to manage your sales force, unlike all these other guys do this, so we dont worry about s. E. C. , about dumping product, dont worry about the garage filled with tupperware. With the companies you mentioned, its still youve got to manage the fundamentals of your business. The power of our business is really the power of women. Women entrepreneurs, in both the established markets and emerging markets, weve got almost 3 million of them. If you give them Innovative Products and a great selling method, they run with it. We had a discussion last week, i dont know if this pertains to you or not, nat gas, whether you liquefy it or sell it, is that a cost input for you guys, the manufacture of the actual product . Actually, when you operate at near 70 gross margins, i learned this when i was in my old days at avon, we owned tiffany at that time, we learned, my goodness, when Raw Material Prices go up, if youve got a prestige brand, it doesnt matter. Youre insulated from it. Natural gas prices, or petroleum prices, when they went way up, we saw our stocks soar. We can pass on price increases. Not many people are aware you have onethird of your business, the container business for other consumer products, like cosmetics. How is that business going . Are you seeing any sort of softening in the demands of those packages . Just trying to get another sort of read on the consumer. Actually, were not making the packaging for cosmetics, were making it for ourselves. We own six cosmetics companies. The reason we got into the cosmetics business is some of us had some experience in direct selling in cosmetics. But simply two words, latin america. Four out of the top eight markets of the world, when you asked, do i care what i look like, latin america. The market for tupperware products in latin america, 1 billion, 22 billion in cosmetics. How are you going up against the competitor . Because most people think avon as the vehicle for cosmetics. All of our latin american businesses are way up. Theyre up double digits. Were pleased with whats happening there. Okay, rick, huge in france. We know French Economy not that good. Women want to make some money during this period. France is strong for you. Weve grown, almost doubled the company in the last five years in france. Were the Biggest Company of our kind in france. Were the largest seller of cookbooks in france. We had some issues the first two quarters, during the election, as you know, most of the consumers sat on the sidelines. Were starting to see it come back to life again. So we feel very good about france. Ditto germany. Isnt that incredible. Rick, 52week high when compared to avon. Incredible. Thank you so much for joining us. Good to be here. Good to see you. All right. Stay tuned. Sfx sounds of african drum and flute look whos back. Again . Its embarrassing its embarrassing we can see you carl. We can totally see you. Come on youre better than this. All that prowling around. Yeah, youre the king of the jungle. Have you thought about going vegan carl . Hahaha you know folks who save hundreds of dollars by switching to geico sure are happy. How happy are they jimmy . Happier than antelope with nightvision goggles. Nice get happy. Get geico. Trip adviser and Deutsche Bank. Deutsche bank likes this company. People love it. Trip adviser is king. Deutsche buying a hold on apache. Apache has been such a dog. Bad for apache. An a darko . Ever since the daily, and other litigation, this is an inexpensive stock. Ilike it. Deutsche on omc. Whats interesting, theyre talking about negative momentum in advertising. You certainly dont want to see that. Keep an eye on it. Maybe its not that strong. A good lead indicator. Pwi. Finally getting recognition. When your grid blows out like in the northeast, you call quaunta. And monster seems to have bottomed here. People were worried about what monster does to your heart. Goldman says buy, buy, buy. Whats on tonight . Ive got a couple of seattle genetics, companies with breakthrough products and big announcements. Is there anything hotter than brand shale gas, dirty oil, so to speak from canada. Hes the best, and they really know about the Energy Situation in this country. Every day its a new headline. Isnt it incredible . This morning you have a full page ad in the New York Times showing this John Leonards son. Wow. I mean, real, real battleground. 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Look this isnt my first christmas. These deals all seem great at the time. But later. [ shirt ] merry christmas, everybody not so much. Ho ho ho this isnt that kind of deal. [ male announcer ] break from the holiday stress. Save on ground shipping at fedex office. The street. Our road map for the next hour, mcdonalds beating sales in november. Getting a boost from breakfast, especially the cheddar bacon onion sandwiches. Has china reached a bottom. Sparking hopes of a recovery, well tell you how to play it. Well check the Technical Levels and see if theres any reason you should get in on apples stock right now. Senator bob corker will tell us how he thinks the fiscal cliff agreement can be reached. Mcdonalds better than expected november sales. The cheddar bacon onion sandwich. Rachel joins us in the wake of those numbers. Rachel, good morning to you. Good to see you again. Thank you for having me. Does this mark a turn at least in the u. S. . Well, weve been talking about the mean re version trade for 2013. I think you should keep in mind that the company does have exceptionally difficult compares coming up in december, and again in the First Quarter. Given the very warm weather we had last year. It is some positive momentum in the right direction. But it may be premature to call it a complete turn right now. Yeah. How about the rest of the world, where it appears they are facing maybe stiffer headwinds than stateside . Well, the great news for them, specifically in china, they actually posted better than expected results. After we saw out of yum, where they posted a negative 4 , i think that will give investors a poost about their trends in that market. Rachel, whats your take on what contributed or what caused the turn that we saw in mcdonalds in the month of november . Was it the focus on the dollar menu . Cheddar bacon onion . The first thing i would say is keep in mind one month doesnt necessarily make a trend. Even excluding the trading day adjustments, they did beat in all regions. Theyll highlight the new sandwich, localizing at breakfast in the u. S. The focus on value globally, europe obviously saw as upside as well. I think the key will be what new Product Offerings they have in 2013 in same day sales, and the stock will have a catchup trade, or mean re version against its other large cap peers as they inflect positively out of the First Quarter. The talk is 98. I believe that is correct, simon, yes. Can i ask you more generally where we are in restaurants at the moment. Weve had a lot of Companies Come out, buffalo wild wings, and people are concerned whether they have business specific problems, or whether there is a slowdown in the consumer in general, particularly in your space, which has speaking about it for two weeks, its on the front page of the wall street journal . Its hard to tell whether or not the slowdown that we saw broadly in october and november was because of the election, and then sandy. And now, of course, were going to have the issues of the fiscal cliff. I would say for Something Like mcdonalds, though, it does historically trade with a staple and could benefit from consumer tradedown. I would be less concerned about it specifically for that company. But you are right, we do continue to see declining trends in cruise, and las vegas gambling, and other segments we do cover. Specifically on the restaurants, it was raised by the journal over the weekend, is there a structural change now, having gone throthe recession about the willingness of people to pay for this sort of luxury . Do you think that weve had a substantial change that could last for years . I think people have better options. They have anything from the salad bar at whole foods. They can trade up, they can trade down. They have very good options for eating at home. I think the problem is, that the pie isnt growing that much. You have about a half a point of population growth. And you have expansion in all types of food categories. That competes for peoples dollars. Youre right, people are pretty value sensitive and theyre not going to spend any more than they have to on a quality meal. And if theyre in a hurry, especially. Rachael, thank you so much for your time today. Thank you for having me. By the way, as we said, the november sales getting a boost from that cheddar bacon onion sandwich. Tweet us at squawk street and tell us what you think is the next innovation. Are viewers, they think outside the box. No more mcbites, thats already been done. In europe, Silvio Berlusconi may be on his way back to power. Monti saying he will resign. Berlusconi could run in the earlier than expected elections. Carolyn roth is in rome. And she joins us with the details. Carolyn, welcome to the program. Weve seen today, italian stocks are down, bond yields are blowing out. Yet others like jpmorgan saying actually its not as bad as it looks. Whats your view . Well, thats the tenor from the number of the analysts and economists that weve been speaking to this morning. They say, yes, because were going to be seeing early elections, too much earlier than planned, well see volatility over the next two months. Especially as theres a lot of horse trading campaigning by the different political parties. Having said that, though, if you look at the most recent polls, youll see that the democratic party, which is proausterity, proeurope, actually leads with 16 Percentage Points. They lead with 16 Percentage Points over berlusconis party, simon. So at this point, very, very unlikely that Silvio Berlusconi, the former Prime Minister, will make this grand comeback to the political seen. He only has around two months for campaigning left. Very likely at this point. But still as you rightly point out, were seeing a selldown in italian access today. Having said that, though, italian bonds are off their threeweek lows and were seeing some limits in terms of the selldown on the stock market as well. Melissa, back over to you. Thank you very much, carolyn roth in italy. Bringing the focus back to the american stock. How high will this market go in the face of the fiscal cliff. Jim is chief investment strategist, good to see you. Thank you for having me, melissa. I know generally youre a buyer of stocks at this point. Specifically when it comes to this year end situation that were in, as we face the fiscal cliff, have you been doing any sort of selling in advance of taxes potentially going higher . No. I mean, we dont manage money so much for direct individuals, that can be done from their High Net Worth group. But i think what weve been doing, if anything, melissa, is taking advantage of volatility. Were not really altering our longterm Asset Allocation positions, which i think is good, because i think its going to end and youre going to get back to fundamental drivers for 2013. But on days when theres excitement about a deal being done and the market rises, we may sell some stuff, looking to lighten up, and on days where theres panic well go off the cliff, well have a buy list to reallocate assets. Thats about all were doing with the fiscal cliff is taking advantage of the volatility. All right. In terms of your buy list, it looks like on your list, industrials, and materials, u. S. Financial, lets start with the industrials and materials here. What is the general theme thats driving you to purchase this in the face of what could be a prolonged slowdown if we dont reach an agreement and were in the socalled no mans land of perg tory for a month or so. I think the big driver on that particular play is a reemergence of the emerging world. Theres evidence that china and throughout the rest of the world is starting to recover. If that happens, it will restart the entire Global Manufacturing cycle. The u. S. Manufacturing cycle will benefit from that. Its been the missing link in this entire year. The consumers been good, but the Manufacturing Sector has been down because the emerging worlds been down. If that picks up, i think it restarts it. And the industrials and materials being the manufacturing part of the s p 500, i think are going to be a leader next year, as that restarts. Jim, can i take you back to the fiscal cliff, and the fundamental assumption that this market is making. Weve risen on the dow for three consecutive weeks. The fundamental assumption is they will do a deal by year end, and that the markets are not going to fall out of bed. What happens if that assumption is wrong . Just talk us through what the initial reaction should be, and at what point do you say, hang on a minute, this is really close to the edge now . Yeah. I think i expect more volatility, if it goes all the way to the 12th hour. And well get more nervous, the market will, too. I think we can handle even going over the cliff, because i think theres some that believe that is likely, just on a political posturing. But i think we cant go much beyond midjanuary. I think if we do, it will get more detrimental to markets and confidence. I dont look for that as a very likely outcome, but certainly if it does and you start thinking this could drag on for months, then youre going to have a significant portion of that 600 billion tightening, and that changes the forecast for the year. I think january, mid, but not much beyond that. Does it become a buying opportunity in essence, or not . Well, i think that im with the assumption that theyre going to have some agreement. Im not so worried if it goes to midjanuary even. And on that basis, if theres extreme volatility, particularly towards december 31, on the down side, i think it is a buying opportunity. All right. Jim, well leave it there. Good to see you as always. Jim paulsen at wells. Will agreeing to higher tax rates help the republicans to get the tax cuts theyre looking for. Bob corker will join us yet. Will we go over the fiscal cliff. Plus, Apple Official lofficit weekly loss since 2010. Were going to get your Technical Analysis still ahead. You wont take my life. You wont take our future. Aids affects us all. Even babies. Chevron is working to stop mothertochild transmission. Our employees and their families are part of the fight. And were winning. At chevron nigeria, we havent had a reported case in 12 years. Aids is strong. Aids is strong. But we are stronger. And aids. Aids is going to lose. Aids is going to lose. Its easy to follow the progress youre making toward all your financial goals. A quick glance, and you can see if youre on track. When the conversation turns to knowing where you stand, turn to us. Wells fargo advisors. [ male announcer ] tis the season to discover the kid in all of us. Enjoy Free Shipping and great values on your Holiday Shopping from l. L. Bean. For over 60,000 california foster children, the holidays can be an especially difficult time. Everythings different now. Sometimes i feel all alone. Christmas used to be my favorite. I just dont expect anything. What if santa cant find me . To help, sleep train is holding a secret santa toy drive. Bring your gift to any sleep train, and help keep the spirit of the holidays alive. Not everyone can be a foster parent. But anyone can help a foster child. All of a sudden we have the leverage of the debt ceiling and we Vice President given that up. Senator bob corker on fox news over the weekend. He joins us this morning on the Cnbc Newsline to talk about his comments. Senator, good to have you. Welcome back. Thank you, sir. You sure know how to light up a room. A lot of people talking about what you said over the weekend. Are your words being characterized fairly today . No, i mean, i thought i did a great job candidly yesterday, and yall are just showing one little clip. I think all the discussion has been on revenues. The president continues to fight the ball in that area. Were not on the entitlement page. The discussions weve had on our side is to say, look, if the house actually sent over a bill that froze rates at bush rate levels with 98 of the country, all of a sudden everything shifts to entitlements. You still have the debt ceiling out there. And last time we negotiated a debt ceiling, we did a 1 increase for 1 in spending cuts. Hopefully that would be heavily oriented towards entitlements. I still think theres a great chance that something good is going to happen before year end. And i want that to happen. But it does appear to me that what the republicans have as a backstop is holding the rest of the country hostage on taxes, which is not a good place to be. So if you take that off the table, and again, i hope boehner and the president had great meetings yesterday. I hope we solve this. But the leverage it does appear is on his side. And we havent even begun to talk about entitlements yet. Yeah. What youre saying makes sense. Weve all wondered what it would take to get the conversation to be about entitlements once again. But how do you avoid being referred to as a sellout . How do you avoid the rapid growing sentiment . After six years, im here to solve problems. And what i worry about, candidly, is republicans being in a place where they do not hold out for the kind of entitlement reforms we need to have as a country. I already feel that happening. I feel that the debt ceiling being niateaway, us not getting the kinds of entitlement cuts that we need to get, which those are the things that are going to save the country. So lets just say that the house sent over something. By the way, theres a way they can do it and vote for freezing everybodys taxes by sending over a bill that freezes the top 2 , sending over a bill that freezes the 98 , send it over to the senate. Youve taken that off the table. The senate obviously is not going to take up the top 2 , but you at least take out of question taxes being raised on the 98 . All of a sudden youre back on entitlements. We still have 1. 2 trillion in sequester, which hopefully will stay in place. We will not give that away. Then we continue to negotiate on a dollarfordollar basis. That way you end up with a 4. 5 trillion deal with the proper ratios. Maybe the speaker is going to take us to a place thats better than that. I hope so. But it sure seems to me that were negotiating about something that makes it appear that all were trying to do is protect the rich. Were not at all focused on entitlement changes, which is the only thing thats going to save our country. Senator, over the weekend, Professor Robert frank wrote this was a game of chicken between the two parties. A very uneven game of chicken, with the republicans driving a chevy spark. And the president in the mack truck. What hes essentially saying if we go through the fiscal cliff, to the tax rates reset, he has a better situation to negotiate with you and arguably you may be blamed for driving through that. Do you agree the gop may simply have to say yes . I do think we are in a very awkward place, as it relates to taxes on the upper income. I just want to say that, again, boehner offered 800 billion. Thats about the amount that taxes on the upper 2 are. So now hes negotiating north of that. I mean, the best place for republicans to be, to me, is to pass the rate increases, be done with it. The numbers probably much smaller than its ultimately going to be negotiated. Then we still are focused on the right thing which is entitlement changes. Again, i hope the president s going to come to the table, candidly. Here we are. Every developed country in the world knows this is the greatest threat to our nation. Economists on both sides of the aisle know this is the greatest threat in our nation. And hopefully theyll solve this. But right now, theres no question in my mind that the president has the slight upper hand in the negotiations, and my point was, theres a way of changing that leverage very, very quickly by the house sending over a bill that freezes rates on the 98 of the population that are going to be affected. Senator, in terms of the top 2 , how much do you see the increase being . How much are we willing to give up in terms of shifting the conversation to entitlements . Does it go to 39. 6, or 37 solution . Theres all kinds. I mean, candidly, there are people on the Senate Democratic side that dont want to see rates increase at 250. They live in new york or new jersey. You might end up with 500,000. You could end up at 1 million. But the point is, as soon as the house was to send something over that dealt with that, youre in a totally different discussion. Because then the house has actually dealt with the very wealthy, if you will. They probably can do it in a way that some senate democrats, above 250, would go along with. But even if they did it at 250, what youve done is changed youve changed the leverage dramatically, and all of a sudden were back to entitlements. Again, its something that has gained a lot of discussion on our side of the aisle. My hope is senator, when you say its gained a lot of discussion, because when you describe it the way you are, it makes a lot of sense. Changing the negotiations. But how much discussion is there, and how much potential support is starting to move over to your position . I think on our side, there is a lot of support for this position. And again, were not sitting at the table. I know the wall street journal had an editorial today, theyre my friends, i read them every morning, and if thats the most critical theyre ever going to be of me, im happy. I read them daily. But i think we are watching the leverage look, on january the 3rd, let me just say, the rates go up on jand, how much leverage will republicans have to get it all the way back down, or is the president then going to be talking about dividends and Capital Gains and all kinds of other things. Since everybody has focused on the rate, and the rate only, we have thought, many of us on our side of the aisle, the best way to get that dealt with is to go ahead and deal with that now. And then lets move immediately to entitlements. By the way, if you did it this week, you still have the rest of this month to have the focus totally on entitlements. Hopefully the two leaders will come up with something that breaks. It looks like the leverage is more heavily weighted on the other side. Well, the president did say last week, senator, that if he got those rates, you could fix the rest of it in about a week. Do you believe, before we let you go, is that whats going to happen . I actually still think were going to do something constructive this year. When i say this year, i did talk to numbers of house members yesterday, talking about this very idea. And some of them are talking about doing something january 3rd. And thats fine. I just dont want us to give away the sequester. I dont want us to give away the debt ceiling. Unless weve done something extremely substantial on entitlements, which is the only thing thats going to help us get spending in the right order. So anyway, i thank you all for listening. I do think youre playing a piece of the cliff that is probably not the best piece to play. I thank you for playing the one you played right before i came on. Thanks a lot. Appreciate it. Well see you, senator. Okay, fine. Senator of tennessee. By the way, programming note, cnbc will be live all day tomorrow from washington. Senator corker will join the squawk at 8 30 a. M. Eastern time. Mixed data out of china this weekend. Strategists will tell us why shes bullish on the country for 2013. Stay tuned. Lets give thanks for an idea. A grand idea called america. The idea that if you work hard, if you have a dream, if you work with your neighbors. You can do most anything. This led to other ideas like liberty and rock n roll. To free markets, free enterprise, and free refills. It put a man on the moon and a phone in your pocket. Our countrys gone through a lot over the centuries and a half. But this idea isnt fragile. When times get tough, it rallies us as one. Every day, more people believe in the american idea and when they do, the dream comes true. Were grateful to be a part of it. Asian markets are higher overnight as china showed optimism. Industrial production hitting eightmonth highs in november. The chief china equity strategist for Goldman Sachs joins us on the phone from hong kong. Nice to have you back on cnbc. Good morning. Lets recap the date a we have. Industrial production up over 10 . Retail sales up over 14 . Electricity production of 7. 9 . Now, for most people who may not directly invest in china, does this mean that they can buy commodities, material stocks on the basis that china will rally into the end of the year, or does this just take the risk of systemic collapse from china off the table . Well, i think for sure it does further reduce the risks of hardlining from china. I dont think thats something people have been worried about over the last couple of months. This is probably the third or fourth month of improvement, after we saw gdp bottom in the third quarter. I think people have prices into some extent, so im not sure theres a lot of increment further. I would say probably for the investors, the expectations were lower, but i think with the offshore guys, i think its more within their expectations. Stock jen has a note out overnight that draws into stock contrast. The division that you have, the distance between gdp growth and equity performance so far this year. So the top performer is greece, up 24 , and we know how that economy is crashing. The bottom performer, or one of them is china. Which even today is down 5 yeartodate, even though it is growing at the rate that it is. What does that mean for 2013 . Do you get a snapback, or are the Central Banks driven a big wedge between reality and stock Market Performance . I think thats a great question. You know, i think over the past few years, indeed, chinas equities have been pretty week, especially in the asia market as you mentioned. I dont think thats necessarily because of a lot of cyclical disappointment. Certainly that hasnt helped. But in reality, i think the earnings have not been so bad until this year, it was actually the valuation that kept seeing further and further compression. I think thats coming from peoples concerns about the structural problems in china getting bigger. Therefore, whatever level gdp growth was seeing today, or Earnings Growth, people think its not sustainable going into the future. In 2013, we dont have any assurances that this is definitely going to change. But what we do know is that people are now, for the first time in quite a while, contemplating maybe there could be a turning point with a new leadership, assuming their positions in march of next year. And some of the new years coming up and maging more reformist comments recently. Let me ask you, finally, about that new leadership and the new premier. Riding around over the weekend hes a man of the people, in a mini bus thats not blacked out for once. Is there a risk for america here over the fiscal cliff . Last time when we had the debt ceiling discussion, in the wake of that, there were some very strong comments out from senior chinese officials, that china should think twice about buying american treasuries. Do you think that is a response that could be similar, although it be only verbal, if we go over the fiscal cliff . Well, i think certainly the senior chinese leadership has been watching the external demand picture very, very closely. I think theyre looking for all sorts of potential risks as well, potential opportunities to pick up assets on the cheap. I think in terms of chinas own policy itself, the most obvious thing is if indeed it falls off the fiscal cliff, or things in europe, et cetera, we think theyre likely to further loosen. However, if that doesnt happen, we think that the stage of loosening is more or less done for now. If there is further loosening policy, we think fiscal policies are likely to be the first line of defense before they resort to property policy adjustments. Helen, have a nice evening. Hell i zhu for Goldman Sachs. Apple shares falling further into bear territory. What should you make of the debt cross. Well tell you. Stay tuned. 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Were about an hour into trading here on monday. 7 34 on the west coast. 10 34 on the east coast. Priceline one of the biggest losers after hit with a downgrade from hold to buy. Barnes noble cutting the price of its nook. From 79 to 99. Holiday shopping competition intensifies. A price target from jeffries this morning continue to drag shares of apple lower, after that stock hit the critical debt cross on friday. The last time was in december of 2008. Brian marshall, and mark newton. Guys, good to see you. Mark, ill start off with you. We were discussing before the death cross and maybe lack of importance with the death cross. Walk us through why you think it may be too much hype . Its been inconclusive over the years. This has happened five times with apple since 2001. The last time in 2008 was occurring at the lows of the stock. In 2008, a lot of stocks made death crosses in the fall of that year. So its important to utilize a lot of other indicators besides just looking at the 50 and 200 moving day average. I think the stock is getting down to levels that are important. To be clear, though, september 2008 was one of those instances of the death cross. Yes. But one month afterwards the stock was down 27 . Even though the second death cross was a predictor of a market turn, you got your face ripped off in the stock in the meantime. Stocks actually go down about a week after the death cross happens, and a month after the tune of about 2 on a one week basis and almost 3. 5 . If you look at the three months following that, its actually much higher. To the tune of almost 12 , historically. Its important to use other indicators to see what things line up in that regard. Brian, i want to come out to you. Your cohort over at jeffries cutting the price target this morning. Specifically citing decelerating growth in fiscal 2014. Saying that it could see that year negative margin leverage in a multiple compression. How concerned are you about 2014 . What is beyond the Holiday Season . Well, i dont think deceleration of numbers is anything new, melissa. If you look at it, thats been the case every year for the last couple years, basically having the growth rate from the prior year. 70 yearoveryear growth, 15 yearoveryear growth. Since late december, the stock is down 25 . Obviously thats left an indelible mark on the investment psyche. We think things are pretty solid. We think december quarter is going to be good. I think stocks worth 710. It seems like a lot of bearish notes. Look at fundamentals, even those like today out of jeffries, all the really bullish notes are pinned to some sort of amorphous hope about television, or some product that hasnt been launched yet. Is your model in fact entering some revolutionary new product . No, carl, its ot. Apple has typically been introducing revolutionary products every three years. 2004, the ipod. 2007, the iphone. 2010, the ipad. 2013, people are putting their hopes on the tv. But even if it comes out, we dont think its really going to move the needle for apple. Which is going to be close to 200 billion in sales next year. We think its all about the iphone market as well as the ipad market. We think the biggest driver of the numbers year is the penetration of the International Postpaid subbase of characters. We think they still have a great opportunity going forward. A stock as liquid as this, as heavy invested as this, do you think its an hour 34 , 35 off your price target . Isnt something happening in the market that would unnerve you in setting that . Dont you say, maybe i need to rethink or rerate this . Well, you know, weve been in the low 700s, which is probably on the low side if you look at it for quite some time. I think there is an opportunity to get there, you know, simon, if you think about it, this is trading at below market multiple. We think theres upside to the 50 for earnings calendar 13. If that happens with roughly 130 of net cash per share, we think it can justify a stock in the low 700s. It wasnt that long ago we were actually there. 60, 70 days ago. We think theres a potential for this to get back. But clearly, its obviously taking it on the chin recently. Mark, last question to you. If not the death cross, then what else are you looking at in the charts . Is it actually it seems like were continuously bouncing off of those main lows at least. Right. A couple of things are important. When you look back at when the stock peaked, there were a couple of signs that were important. Volume started to dry up, and volume picked up on the down side. Even though the momentum has turned negative, you look at daily, weekly and monthly bases, longer term uptrends since 2009 are still very much in place. Thats really what im looking at. The area right near november lows, between 495 and 505, should be an excellent area to take a look at buying the stock. Er 30 bucks lower or so . Correct. Thats right. I give it about a 7 maximum down side in the next five to seven days. As you get near the november lows, it should be a very good risk reward. Im looking at really the highs from november, which are right near 600, and above that 635, which is what a lot of people have mentioned already. But bottom line is, momentum is negative. The longer term trends dont suggest selling apple here. Well leave it there. Brian marshall, mark newton, thanks so much. If youre looking to get into a luxury car, now might be the time to do it. Mercedesbenz, rolling out cars few in the industry have ever seen. Phil lebeau is in chicago. I guess essentially, phil, the europeans are taking a leap out of the americans book. They used to scoff that the American Automakers would offer. Now its par for the course. Especially in december. It used to be lexus, but mercedesbenz was looking for offers in november. This is an increase compared to october, up 42 for bmw, 26 for mercedes, lexus up 3 . Whats going on here . Lets start with bmw. Their holiday deals now include up to five months of no payments. Thats the kind of stuff you used to hear from chevy or from ford. By the way, bmw sales surged 45 last month. Mercedes leads bmw yeartodate by just under 1,900 vehicles. It last led the u. S. Luxury sales in 99. It really wants the title again. At the core of whats happening between these two german automakers, they need strong sufficient sales to offset the weakness theyre seeing in europe. Thats why their production has been ramped up here at their facilities in the u. S. Bmw announced its on pace to set global sales of more than 1. 7 million. That would be a new oneyear record. And these guys pretty much have traded in tandem, simon, with the exception of the last three months, bmw up 28 in the last year. Mercedes up 18 . All of them said the same thing, play these guys off of each other if youre in the market for a luxury car. Theyll make a deal. Youll be surprised what theyll do. Theyll sit there and say, well not go 3,400 off, they will go above that. Phil lebeau talking cars today. What would happen to the mortgage Interest Deduction in your state if in fact we go over the fiscal cliff . The exclusive numbers on that after the break. [ male announcer ] its that time of year again. Time for citi price rewind. Because your daughter really wants that pink castle thing. And you really dont want to pay more than you have to. Only citi price rewind automatically searches for the lowest price. And if it finds one, you get refunded the difference. Just use your citi card and register your purchase online. Have a super sparkly day ok. [ male announcer ] now all you need is a magic carriage. Citi price rewind. Start saving at citi. Com pricerewind. I wanted to update our viewers on shares of hewlettpackard. You may have noticed one point eclipsing up 4. 5 today. Now taking off some of those gains, but still up almost 3 . A lot of chatter continues to be centered on the idea of potentially breaking the company up. Some people would say you certainly do get a fairly big number. Lets not forget its not the hp of packard and hewlett. This argument continues to be out there. And then youll start to hear rumors about a potential activist. Lets not forget they already have an activist on the board of directors, ralph whitworth, owns a stake in the company and a director at this point. While well probably continue to hear this, i can tell you at this point that though it will again be discussed, bill george, remember a couple of weeks ago, having written a column to the effect that hp would be better off being split up. Nothing indicates to me, at least, that the board, and management are anywhere near deciding to go down that road. Many times when meg whitman has been with us, she indicated this is an important year, 2013, for hewlettpackard. And perhaps if it doesnt work, in terms of the vat strategy, t dont start to get traction, you may see a change if something breaks. But not at least at this point. Weve heard carl icons name pop up in the chatter. Hp has had no conversations at this point in any way with mr. Icon or aware he owns any single share of the company stock. That does not mean its not a possibility. We havent spoken to mr. Icahn this morning. All could a lessing around this idea could go down this breakup line. It sets up i dont know if theres a winwin situation here, but maybe theyre thinking 201 is going to be an important year for hewlettpackard. Youve got whitworth on the board already, so off of the lows from the autonomy alleged bottom, its not a bad risk reward there. There may not be value to unlock in the business. Thats true. A lot of people feel they have different fault lines, and sort of its a con glom ratiglof things that could help. Hps number eight out of 500 on the s p. Somebodys paying attention. It has significance bounce off that low. That we saw not long ago. Thanks, steven. Meantime, how does your states mortgage Interest Deduction compare with the rest of the country . Lending trees numbers for cnbc is breaking down at hq. Carl, the mortgage Interest Deduction has always been the sacred cow politically untouchable, because its so popular and designed as a housing stimulus. Now, though, it is on the fiscal cliff table. Realtors and builders alike say it will have huge con quenss for home sales and prices. But will it . Well take a look at the who, where, and how much. As we said, we have exclusive numbers from lending tree going state to state. When you take into account the home value and mortgage size and income, borrowers in nebraska and arkansas saved on at least 2,000 with this deduction. On the flip side, borrowers in washington, d. C. , hawaii and california, theyre getting the biggest tax benefit in the 3,000 to 4,000 range. New york and new jersey are also way up there, thanks to high home values and income. And im noting them because these two states need home buyers, desperately. They have some of the biggest backlogs of Distressed Properties and need buyers in there absorbing that distress. Taking away the deduction takes away one more reason to buy. 2,000 to 5,000 a year is a big savings. But we have to keep this in perspective. You only get the deduction if you itemize an only about onethird of americans do itemize. Just 27 taking the deduction. And i want to note one other thing, older americans, 54 of families ages 55 to 64 are carrying mortgage debt. Thats way up from 37 in 1989, because during the housing crash they were unable to move. So thats going to hit them hard as well. Especially for the next several years. Melissa . Some very interesting figures. Diana, thanks for that report. Back at headquarters a quick market flash. Good morning. Take a look at Marathon Petroleum trading at alltime high levels, the spinoff from marathon oil in june of 2011. Mpc is one of the companies of favorite stocks for 2013. Barrons highlighting the independent oil refiners are one of the strongest Industry Groups this past year. The stock up 2. 2 at 62. 01. Back to you. Thank you very much. Coming up well talk about the latest developments for the fiscal cliff negotiations with a former Senate Banking committee economist and the former chairman of the White House Council of economic advisers. Perhaps even more importantly Rick Santelli will be live from chicago. Hello, simon. Ill tell you what, make sure you come back in about five minutes. [ male announcer ] this is amy. Amy likes to invest in the market. She also likes to ride her bike. She knows the potential for making or losing money can pop up anytime. Thats why she trades with the leader in mobile trading. So shes always ready to take action, no matter how wily. Or weird. Or wonderfully the markets behaving. Which isnt rocket science. Its just common sense. From td ameritrade. Lets get to the group this monday morning, check in with Rick Santelli and get the santelli exchange. Good morning, carl. To me, if youre trying to work with individuals to solve the problem, trust and honesty are very big components of that relationship working. And ill tell you what, my theme of late has been that theres a lot of fibbing going on with statistics. But to the point where we take so many things for granted, we miss so many nontruths. And ill give you a nontruth. We always talk about the 1993 income tax of president clinton, and the top tax rate was 39. 6 . Threshold, 250 thud. So Flash Forward from 1993 to present, okay. Well let me tell you something, there is this little thing called inflation. I know this might be nitpicking. But 250,000 today well, started out if you want to be apples to apples would be about 165,000 then. In other words, we are not adjusting even for inflation. So, if were talking about 250,000 today being the same as then, were wrong. It would be 165,000. So the point is, is that the difference between these two is 85,000. Okay . Is a 35 miss when it comes to being honest about it. Oh, even worse lets take this. How many times, of course youve heard a million times, taxes on million favors and billionaires, even though, and i know this is adjusted, okay, but lets just keep it 250,000. Well, 250 grand isnt a million. So its off by 750k over 1 million. Okay . So, in essence, what were doing is were off on this one by 75 . Were off by 35 and 75 . So why am i doing this . Because ill tell you what, middleclass america, Pay Attention. Because if the misses on income tax are this large when theyre talking to you over simple numbers, how long, exactly, do you think its going to be before they get in your pocket . People making 50,000 to 100,000. If we really want to come up with honesty in negotiating, first of all, if youre going to tax millionaires and and billionaires on it the 250 grand threshold, okay, fine. But make sure their net wealth really is a million or higher. And any tax increases should go direct to deficit reduction. Take away the hey, everything goes into the general fund because it certainly seems like when youre fibbing about 35 and 75 truths that really all theyre after isnt fixing the economy, its your bucks. Back to you. All right. Rick, breaking it down like no one else can. Rick santelli with the santelli exchange. Tweet time now. Mcdone olds november sales getting a cheddar bacon boost. Sales figures in the u. S. Rising 2. 5 as customers chomped down on the limited time cheddar bacon onion sandwiches. So what is the next menu innovation that could propel mcd . Tweet us squawk street. Weve got some of your answers right after this. Can i help you . I heard you guys can ship ground for less than the ups store. Thats right. Ive learned the only way to get a holiday deal is to camp out. You know weve been open all night. Is this a trick to get my spot . [ male announcer ] break from the holiday stress. Save on ground shipping at fedex office. [ male announcer ] break from the holiday stress. So as you can see, geicos Customer Satisfaction is at 97 . Mmmm tasty. And cut very good. People are always asking me how we make these geico adverts. So were taking you behind the scenes. This coffee cup, for example, is computer animated. Its not real. Geicos Customer Satisfaction is quite real though. This computeranimated coffee tastes dreadful. Geico. 15 minutes could save you 15 or more on car insurance. Someone get me a latte will ya, please . We create easy to use, powerful Trading Tools for all. Look at these streaming charts theyre totally customizable and they let you visualize what might happen next. Thats genius strategies, chains, positions. We put em all on one screen could we make placing a trade any easier . Mmmm. Could we . Open an account today and get a free 13month e ibd™ subscription when you call 18882800149 now. Optionsxpress by charles schwab. [ male announcer ] tis the season to discover the kid in all of us. Enjoy Free Shipping and great values on your Holiday Shopping from l. L. Bean. Squawk on the tweet today. Mcdonalds samestore sales got a cheddar bacon boost. Whats the next menu innovation that could propel mcd . Fries cooked with the ketchup on the inside. The mcair burger that should provide adequate propulsion, hash tag junk food gives you wind. I dont think we had to read that. The mccliff burger, it will have half the beef and cost the average american twice as much. Whats coming up today . Retail check on shares talking about the two big sales to kick off beginning of december. And also were looking into the appliance cycle. Appliance update cycle is on its way so were going to see how much of that can actually help the u. S. Economy. Were the best. Way to go, us. Yes, yes. Well see you tonight. See you guys in a little while. Thank you, if youre just tuning in this morning heres what you missed earlier today. Welcome to hour three of squawk on the street. Heres whats happening so far. Theres a horrible 35 chance that well still go over the cliff and have pure chaos. But i think the chances of getting it done now are better, and i think thats whats key. Wed like to see a deal right now that includes restructuring of entitlement programs. Thats what drives federal spending. We cant solve this on the revenue side. Can we go to mcdonalds and make a statement to your cardiology which is basically, you dont matter. Its a statement to your cardiologist what is your plan . No one is speaking the specifics because its third rail. Its just plain third rail. I havent heard a thing about what theyre going to do with medicare. The power of our business is really the power of women. Women entrepreneurs, in both the established markets, and the emerging markets. Weve got almost 3 million of them, and if you give them Innovative Products, and a great selling method, they run with it. I just dont want us to give away the sequester. I dont want us to give away the debt ceiling. Unless weve done something extremely substantial on entitlements. Re c our list as the squawk on the street countdown to christmas continues. Ho, ho, ho. Good monday morning. We are live here at post nine of the new york stock exchange. Lets get a check on the markets today. Dows up about 35, 36, moderate green arrows today. S p up to 1421. Thats above that magic wind of summer watching of 1419. And the nasdaq up about 18, as well. Priceline down sharply today after a downgrade to hold from buy over at deutsche. Challenging environment for priceline even though it says the shares are still attractively values. Road map is going to go like this. Fiscal cliff faceoff coming to an end. The president and the speaker holding a meeting at the white house this weekend. We are live in washington with the latest. What it all could mean for the che. Whether or not we go over the cliff could have a major impact on the markets in 2013. Barclays coming out with its outlook. Well talk to their first strategist. Weeks away from christmas but today is the busiest day actually i think in corporate history for fedex. Millions of deliveries being processed. Well take you live to a fedex center as millions of dollars, nothing to laugh about. Well introduce you to the entrepreneur who has managed to make big money making people laugh with his company cheeseburger. Thats coming up later this hour. Well start in washington. President obama, Speaker Boehner met facetoface over the weekend to talk some fiscal cliff. Our john harwood is live at the white house with more on that. John, good morning. Good morning, carl. You know the president s been very clear since the election that republicans need to give on taxes for people at the top and not just on revenues, but also on tax rates because he says the math cant work otherwise. Weve seen some signs of cracking in the republican unity. That suggests we may be getting to the next phase of negotiations. The latest sign was possible corker, the senator from tennessee, who was on our air just a few minutes ago, as you know, saying republicans should concede ground on top tax rates and then get on to other issues. The best place for republicans to be, to me, is to pass the rate of rate increases, be done with it, the numbers aprobably much smaller than is going to ultimately be negotiated, and then we still are focused on the right thing, which is entitlement changes. And that may be what john boehner and president obama are discussing yesterday, and in the days to come. Because, Speaker Boehner needs some concessions from the president on entitlement reform in order to bring his troops along on a tax increase. We will do that, but hes got to get something, two potential areas of compromise are the ones that they agreed on tentively in the summer 2011 grand bargain talks which is raising the medicare eligibility age, and also reducing the inflation adjustments for Social Security and other government programs. But that might not be enough, carl. We might have to see some other changes to medicare before this deal gets done. All right, john, i know youll keep us apprised as to whos going into what room, because thats what its come down to. John harwood in washington. Be sure to tune in tomorrow for c innocences special fiscal cliff coverage, live from washington. Mission critical, rise above d. C. , all day long, of course, becky, jim cramer, brian sullivan, maria will be holding lawmakers feet to the fire in direct interviews about where they stand on the fiscal cliff and how theyll do their part to rise above partisan politics and reach a deal. Earlier on squawk box, erskine bowles, the cofounder of the fix the debt campaign, cochair of fiscal responsibility and reform was asked about the progress he thinks both sides were making. I think the atmospherics are getting so much better. Weve kind of gotten out of the ka kooky theater and gone to dancing the tango with those two guys. Any time you start to tango you got a chance. Joining us this morning from newton, mass, greg manke, economic adviser to the romney campaign, former chair of economic advisers under george w. Bush now an economics prof s professor at harvard and ron johnson, director at the institute for new economic thinking and a senior fellow at the roosevelt institute. Skwre, good to have you both here. Good morning. Greg, let me just get you to bounce off of what corker said today. Weve had a few senators here and there appear to give on taxes but corker laid it out pretty nicely, if you want to have a discussion about entitlements why wouldnt you get rates out of the way. Does that mark a new chapter in these talks . It might well. And the whole issue, this whole package is going to look like, republicans have already conceded to some degree on revenue. Theyll probably concede a little bit more. The question is what is the president willing to concede on the spending side . The liberal part of the democratic part of the party doesnt want to concede anything on entitlements. Thats where the real problem is. The growth of entitlements is going to put us into bankruptcy unless we do something about it. Do you believe giving him what he wants on rates forces his hand to impress us with what hes willing to do on entitlements . Well, it changes the conversation. If the republicans say were willing to give on rates, we dont know how much by the way, whether its 39. 6 or 37 or something, as long as we get something on the spending side the National Conversation can change. Stop talking about the rich. And talk about what the real issue is, the middle class. Middleclass benefits, entitlements, we dont have the taxes to pay for it. It also tells the middle class, either youve got to pay more taxes to pay for these benefits or take less benefits to live within our budget. You dont have a lot of faith that were going to avoid the cliff at all . I dont. What were going to do is either walk i wouldnt even call it a beach, were going to walk and get our feet wet. Even how cold the water is. Theres no cliff were going to drop off of. Why is it not going to feel as sudden as some think . Is it because treasury can withhold rates for awhile . Is it because congress would, after the new year, quick accelerate discussions . Why less painful than some think . First of all the sequestration and the other tax hikes are already anticipated. So theyre affecting behavior now. We start easing down the beach. When we cross the threshold negotiations will continue and people will hold out the prospect that they still may get the deal, so you wont get a discontinued allout despair. People are already quite cynical and disappointed about washington. You know allen blinder had an oped in the journal last week. He went back and pointed to march of 1980, back to carter days, where you had a shift in policy, it might not have been dramatic, but the psychological impact on consumers and their wallets certainly was. And that created real problems. Do you agree . Yes, i do. I think robs right. If we go past january 1, thats not a problem necessarily, people think this will be resolved by january 15th. But if we go past january 1 and we dont see any resolution in sight, people are thinking it might be months before we resolve a possibility. The psychological impact would be quite large. Are you a fan, rob, of say we get some sort of framework that does, i mean for a long time, we keep kicking the can, keep kicking the can, a lot of people would settle for some can kicking now, even if it pushed the harder conversation into the summertime. Is that whats going to happen . Would that be okay . I suspect it will. Im quite, i would say pessimistic about getting at the real issue. The real issue, as greg alluded to, is medical costs in entitlements in the medium term. Insurance rates, pharmaceutical monopolies, hospitalization monopolies, are the essence of the problem. All you have to do is look at every other industrial country. We pay almost double for care thats ranked 37th in the world by the world health organization. Getting at that nut is almost sufficient to handle our longterm stability. And im not confident we can get there. It certainly is, i mean having that discussion with the broad populous of this country is tougher than telling them youre going to raise taxes on the rich. Oh, absolutely. I mean, unfortunately theres no easy solution to this, the health care problem. I think trying to squeeze providers can only go so far. Ultimately its going to be patients who are going to bear the brunt of that. I dont think we have any easy answers to the Rising Health care costs. We certainly have painted ourselves into a corner. Rob, greg, thank you for your time. Good to talk to both of you. Retailer gap having its update of the day. Jackie deangelis back at hq with the flashback. Gap stocks down more than 4 today and more than 11 over the last week. This is after concerns about potential future discounting possibilities. Now harrahs Investment Bank saying not so fast, that chatter is premature. While theres no crystal ball for the holidays, they have very well controlled inventory and marketing. Right now the stock is at 30. 37. Carl . Thank you very much, jackie deangelis. Stacks on the rise over the last month. Gary is going to tell us why stocks are set to go higher from here. First Rick Santelli, youre working on something for a little bit later on in the hour . Got to feel like hand signaling. I used to do that for a living before trading. Before cnbc. But one thing i can tell you, throughout all those years theres very few contests that the state of illinois wins. Well i guess they win in terms of underfunded liabilities, crummy credit ratings, negotiations with unions always seem to go a certain way. But there is something our next guest from chicago magazine found that chicago won hands down, and when you come back in about five to ten minutes ill tell you what it is. This accidet with my state farm pocket agent app. You can also get a quote and pay your premium with this thing. I thought state farm didnt have all those apps . Where did you hear that . The internet. And you believed it . Yeah. They cant put anything on the internet that isnt true. Where did you hear that . [ both ] the internet. Oh look. Here comes my date. I met him on the internet. Hes a french model. Uh, bonjour. [ male announcer ] state farm. More mobile than ever. Get to a better state. How theyll live tomorrow. For more than 116 years, Ameriprise Financial has worked for their clients futures. Helping millions of americans retire on their terms. When they want. Where they want. Doing what they want. Ameriprise. The strength of a leader in retirement planning. The heart of 10,000 advisors working with you onetoone. Together for your future. Gary is back, and man are you you look rested, man. You look so rested and tan, and what are you going to tell us . You know, here i cant tell i lie, i was on the beach. I intended to come back here today and talk about all the negativity i heard from people in real businesses. That actually manufacture products, actually sell product. Theres two different words out there. Theres the real economy world, people that actually are in business. And then theres the wall street economy. And i must tell you that i had this whole big plan out to give evidence and actually walk you through why i was convinced after last week that this recession call, no matter what happens with the fiscal cliff, is going to happen to 2013. But then i spoke with my greatest source in terms of the overall markets. This is the guy who gave u. S. The headsup in terms of whats happening with apple when he follows the Mutual Fund Holdings and that turned out to be the absolute best indicator on the top and when it became oversold. So this is what rich said to me, forget about what people are telling you in the real economy. When you manage money its about what the stock market is thinking. These are the pivotal five reasons why the stock market will go higher into the end of the year and early next year. Its very simple. Contra investment sentiment. You cant find anyone bullish on the stock market other than a handful of strategists. Bond fund inflows. If we were anywhere near our top of the stock market you would start to see the massive outflows out of the bond funds. Were not seeing it. Lackluster ipo market. There is a great telltale. Were seeing very few deals come to market, no hyped up deals, no coattails for the stock market on the ohio market. This is a great one. Lack of story stocks. Those who have been around, remember whether its ten years ago, 10, 15 years ago, there was nobody talking about any stocks. Any name. Any stories, any kind of things that are getting hyped up. Heres the last one, there is no retail marking debit balances out there. So how can stocks not go higher if youre a contrarian when you look at those five facts . Despite what may or may not happen in the economy. I intended to come back here and tell you continued to believe things are very negative in the real world. But remember the real world and the stock market world are not the same thing. Theres examples 6 that all around the world. Talk to you in a bit. Todays the bus crest day of the season fedex to make 19 million deliveries today, thanks to a boom in Online Shopping. Our cordny reagan is live at a fedex center in the bronx. I know its early in the morning relatively. But were only five hours in to a record day at fedex. Were going to see trucks begin to return to locations like this one after making those Early Morning deliveries. Fedex ceo fred smith expects his 300,000 plus employees to help move 19 million packages through the kneltwork today. That is a record. And its autopsy 11 over last year and it is, again, Online Shopping. The more customers click the more they get shipped. Fedex counts today as its busiest day because of the Record Number of orders in the system at any given date. That means all of those gifts that were ordered on cyber monday that get delivered today are counted. As well as the purchases that are bought today, on green monday. Those also get counted. Green monday has become a very important day for retailers, as well. Walmart, for one, says that it was its highest traffic day on its website last december. Theyre offering deals and promotions again. Hopes it gives consumers another reason to spend. Macys green monday, the third Biggest Online spending day of the season, and probably the year, when all is said and done. So, fedex is going to have even more shipments to make sure they get to those door steps in time for christmas. Carl . Courtney just stay out of their way. Be careful. Take care of yourself. Courtney reagan at the fedex facility in the bronx. 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This is the only thing weve ever wanted to do and ink helps us do it. Make your mark with ink from chase. Why they have a raise your rate cd. Tonight our guest, thomas sargent. Nobel laureate in economics, and one of the most cited economists in the world. Professor sargent, can you tell me what cd rates will be in two years . No. If he cant, no one can. Thats why ally has a raise your rate cd. Ally bank. Your money needs an ally. Lets get to Rick Santelli in chicago talking not Big Government, rick, but little government, right . Well, i guess were talking a little bit of both. Because illinois makes everybodys government look little or small by comparison. You know, on my license plate it says illinois, land of lincoln. But my guest, wes mosser, wes, what a great first name. I feel like that should be a character in a Clint Eastwood movie. What did you call illinois . Land of 10,000 governments. Is that the most in the entire country . Most in the country. I want you to tell me first of all how you know this . Well, every ten years the Census Bureau does a survey of local governments and they count up all the local governments for every state in the whole country, School Districts to basic districts, anything with taxes authority let me start you right there. Anything with taxing authority. So, there is a reason for the proliferation of illinois fifedom and that is to get inside peoples wallets. So youre talking about raising money. Whether its through Municipal Bonds like board of education, or some of these mosquito abatement, so its in essence to get that money . Yes, its overlapping local government districts that, yeah, pay for all sorts of things. Okay. Now before this involvement, what was the limitation of restriction in getting that money that caused this to develop . Oh, this was in the 1800s, and the state limited the amount of debt that municipalities could carry. So, to get around that debt limit they created, you know, all sorts of different taxing districts that overlap. Now whats the second largest in terms of fifedoms . Pennsylvania. Which has a similar township system. A lot of very, very tiny governments. Another state that is far from economic engine, locomotive with a lot of horsepower. And then beyond those two, beyond illinois and pennsylvania, what happens there, whet . Then it starts to correlate a lot more with the size of the state. Illinois and pennsylvania are really outliers in terms of the number of governments compared to the number of people we have. I find this really fascinating at this point in history, where were all discussing fiscal cliff, and what youre describing is a situation where the state of illinois allowed goarounds basically to create more debt. It sounds to me like in this instance, illinois is a model for the over trillion dollar debts weve had for several years in this country. Now, were dealing with reform issues right now. Illinois has a boatload of reform it needs to do. Doesnt this fifedom proliferation make reform really difficult . It does. And people have tried to reduce the number of governments. Kurt dillard who ran against pat brady for the gop spot in the governorship in 2010, he ran on that platform. Didnt quite happen. But it is an idea that continues to flow forward for a couple decades now. And right now were looking at our governor quinn is in a battle with unions and one of the judges weighed in saying that if you cant afford to pay people you promised raises to, youre going to have to accrue a 7 interest charge. Boy thats going to go a long way. Just think about it. Illinois taxpayers, over the years, some of your checks have been a little late. I dont think you got an extra 7 for your time. Whet, thank you for being our guest today. Thanks very much. All right, thanks so much, Rick Santelli. Bells are about to close across europe. Well bring you the close and some of the details on the impacts here in just about 3 1 2 minutes. Plus the head of u. S. Equity portfolio strategy at Barclays Barry Knapp will give us his ouk fo2013. [ male announcer ] where do you turn for legal matters . At legalzoom, weve created a better place to handle your legal needs. Maybe you have questions about incorporating a business youd like to start. Or questions about protecting your family with a will or living trust. And youd like to find the right attorney to help guide you along, answer any questions and offer advice. With an a rating from the Better Business bureau legalzoom helps you get personalized and affordable legal protection. In most states, a legal plan attorney is available with every personalized document to answer any questions. Get started at legalzoom. Com today. And now youre protected. About 40 seconds until europe closes here. A lot to watch over there. Simon hobbs, whether its the data or just the sheer Political Drama that is italy today. Absolutely. Lets mens the data. Lets mention germany. Germanys going to contract in the Fourth Quarter. The trade data was weak. The bund bank lowered its forecast. Were also watching the greek bond buyback. Theyve extended the deadline to 5 00 a. M. New york time tomorrow, because they didnt get enough people offering to sell their bonds at that deep discount. Those two stories, those two stories in the background. Lets check the close. The european markets are closing now. Well, you dont have to be einstein to work out theres a problem with italy that has moved on to spain. Look at the lock on the italian market there. Spain down also. Mario monti announcing he will resign as Prime Minister having lost the support of Silvio Berlusconis majority in parliament. So how bad is the political crisis . Well, the sort of analysis were getting out at the moment, certainly from jpmorgan, saying concerns may be overdone at this stage. You know, mario manatee may declare himself as a candidate for that earlier election. He could align himself with a later party and he could come back in some form of coalition. If not, people are saying look, the leader is also proausterity. Silvio berlusconi is not going to end up running italy. I think perhaps a bigger issue at this stage, and this is from Deutsche Bank whether the virtual intervention weve had, the ecb saying we will intervene if we have to, may now be wearing a little bit thin. There is a kneejerk reaction. The italian banks, theyre all down. Theyre clogging up the bottom of the stock 600 in europe. So the banks have fallen. Some of the industrials have also been marked lower in italy. Today for example you could see with alitalia, and Telecom Italia is also lower. You see a spike higher in italian yield. Youll see the headlines, and theyll be raging about it. Bear in mind where we actually are on this quite high yield relative to where weve been. Lets get some perspective on what has happened. What i think is more interesting is the fact that its moved over to spain. Do you remember when we had that bad auction. The spanish didnt get as much debt away last tuesday and that really spooked the markets, potentially were reaching a point at which the ecb saying that it will act further down the line may not be enough to get this huge amount of paper that comes particularly from the spanish through the markets next year. That is probably a discussion for 2013. The main point here is, how do you topped out now on peripheral debt in europe . And that really is a major question. Eurozone banks, those that are connected to contagion for once, are moving in the wrong direction, though its not a huge move overall, carl. Obviously well watch italy, and if it becomes a more bearish situation, well let everybody know about it. Yes. Getting used to waking you up in the morning and reading italian headlines. Mary thompson, a look at whos moving on the big board. Good morning to you. Not a lot moving, carl. Fairly quiet session. Given the lack of data today, Economic Data here in the u. S. , and a numb bev of big deals, of course, investors continue to focus on any headlines that will come out of washington. So far its been quiet and so has activity in the market with dow held at just about a 56point range today. What are investors focusing on . Well, in the absence of any headlines, of course, theyre awaiting tomorrows twoday meeting from the federal reserve. And also a lot of bond auctions here in the u. S. Heavy supply over the next eight days. Also bond auctions in italy and spain to see how they are received. Take a look at some of the sectors leading the markets higher. Technology, health care and industrials moving to the upside. We are seeing weakness, so in financials as well as telecoms today. I also want to point out the outperformance were seeing in hardware stocks. All of this despite the weakness we have seen in apple recently. The new york, nyse computer hardware index outperforming since the beginning of december, having its strongest fiveday run in four months, and since the beginning of the month, it is up just about 5. 8 . Who are the leaders in this group . Take a look. Were seeing strength in seagate and hewlettpackard up today, of course, because theres been some chatter about a possible breakup. But these are the stocks moving higher. Again, as i point out, despite some of the weakness we have seen in apple, this is a group that has been performing very well. Retailers mixed to slightly weaker, of course in the wake of the samestore Sales Numbers that were disappointing. Ahead of thursday, retail Sales Numbers for the month of november, take a look at some of the retailers. Jcpenney is moving higher. Abercrombie fitch, comments coming out from oppenheimer. Weakness in gap, kohls and target today. Dow holding onto a 30 point gain. Weve not had four Straight Days up since the middle of october, mary. Well see how we do this afternoon. Mary thompson on the floor. Upgrade moving one drug company. Jackie deangelis has a market flash. J j is up 0. 3 . This is not an upgrade to buy from neutral at davenport. Tries target, 80 a share added to analyst action list. After j j reported last quarter davenport analyst remained neutral pending some further improvement in operations. But hes saying that latest talks with management suggest that, in fact, hes seeing that. That the new Product Pipeline is delivering pharmaceutical and medical advances. He sees some light at the end of the tunnel. So a little bit of a boost for the stock trading above 70. Thank you very much. Another Capital Markets oped. You were gone all last week so we couldnt talk dividends. They were coming like rain water. I really missed hobbs last week. I was doing the iminternation, who does it sound like . The feds will be aging. The way he delivers that bad case for italy. The bears will be raging. In between tequila shots and dancing on tables i did Pay Attention to the advanced dividends and dividend increases last week. Youre going to see that continue for the next few weeks. It will say this, it is important to remember the Capital Allocation pyramid. I dont know if we have it. But i will remind people, dive dinds are great. 50 of return in stocks over the long term is dividends and distributions reinvested. If you remember that pyramid here, do we not think cash, m a, buybacks are good but typically the multiples come down. Dividends, great way to use your cash. 50 of the return longterm. But remember, remember, and before the dividends, if you want a contrary opinion, if you want it, i recommend this f. T. Article that came out today, u. S. Companies, mixed blessings. Its a great piece to read in the f. T. If you want to know about how a lot of these companies are borrowing money and making a big bet by borrowing money to pay these dividends. Remember this, organic growth, always the best way over any longterm period. So yes, the dividends are great. Yes it has to do with whats happening in d. C. For the most part. But remember, organic growth, multiple expansion the best way to make money in stocks longterm. Dont let that be forgotten in the differ dends euphoria. Yes, well said. Theres been a lot of that, gary. You got it. Barclays releasing its outlook for 2013. Barry knapp is the head of u. S. Equity portfolio strategy with barcla barclays. Good morning, carl. 1525 doesnt sound so bad. Largely on the back of capex coming back next year. Walk us through it. Sure. Yeah, thats, we think thats a relatively optimistic forecast at 10 total return. We do think that the market will struggle at the first part of the year. We need to work through all this Public Policy uncertainty. To focus on the timing of the deal, we think misses a larger point as to whether we actually get a good deal or not. Our definition of a good deal is one that isnt too reliant on tax revenues, and actually does start down the process of getting our mandatory spending under control so we dont siphon off all our savings over the long run away from capex towards funding the public sector. But what we think is going to happen, Earnings Growth decelerated massively from 2012 from 15 a year ago to slight negative numbers now. We think that will bottom out somewhere around the first and second quarter, and reaccelerate through the back half of 13 driven by stagizing global growth, and a pickup in capex. Now capex is clearly the weakest part of the economy. We thought it would be weak during an election year. Theres a whole body of academic evidence that Public Policy certainly does impair it. But we were stunned as early as the First Quarter of this year to see the tech sector, ibm, talking about flat Revenue Growth in the u. S. , and there we think theres a level of capex that has just been foregone because of this Public Policy uncertainty that, even in a semistable environment, it should rebound a bit. And that could be a big driver for Profit Growth in 14. You point out that your sector positioning, you say its cautious, but you are upping technology to overweight. Underweighting domestic cyclical. If capex is a phenomenon next year why would you not be more highly leveraged to that . Well, we think that first of all, the numbers, and the valuations, look fully played out. We think they still have Housing Market euphoria. And, have looked at things like Consumer Confidence going up, at least until friday, as a result of house prices stabilizing. For us, thats the reason why the savings rate dropped from 5. 5 in the first half of 11 to 3. 75 in the second half of 11. Were now at 3. 4 on the savings rate, Income Growth is really slow. Yet if you look at earnings estimates, where Consumer Discretionary sector for retailers, media, were looking for 13 to 15 gains next year and we just think thats entirely implausible in an environment where labor Income Growth is weak, the savings rate is low, and the Housing Market, while helping confidence, the consumer just doesnt have the firepower to increase the level of consume shun so that part of the market looks like its really overpriced and the estimates are too high whereas the Capital Spending parts look like the numbers have come down almost enough, particularly in tech, they have come down enough where we can get a healthy rebound. Interest being. Among the advantages you think the economy has next year, obviously a huge tail wind. You mentioned favorable demographics, but vastly improved manufacturing competitiveness. Is there something specific that you mean . Sure. Theres been a number of studies about how over the 20 years or so of wage disinflation weve had in this country, along with Wage Inflation in china, the fact that we have flexible labor markets, our Manufacturing Sector particularly in some of these righttowork states, all end productivity and transportation costs adjusted its virtually a push to manufacture at least not high labor intensity products in the u. S. Versus china. Right. So consumer electronics, plastics, fabricated metals the president s in michigan today with extension from daimler. No, thats right. Ironically michigan might vote to become a righttowork state which could help their manufacturing competitiveness, as well. But thatroceeen going on for 20 years. Now, look, we think we probably need to cut the Corporate Tax rate and have a territoriality agreement so we stop trying to tax profits of u. S. Domiciled countries twice. But if we can do those things we think manufacturing will start coming back. Its not going to really happen in a major way in 13. But you know, 14, 15, these benefits will start to accrue to the economy and if it looks like theres a real strong case for a pickup in Earnings Growth, in 14, then the market will start to price that in the backup of 13. We spend so much time talking about whats going to happen in washington over the next 20 days. Its nice to actually have a conversation about what will happen in the next twelve months. Brarry, thank you so much. I had to force myself to do it. Barry knapp at barclays in new york. Thanks, man. Wheres the love for the twinkie . Today is the last day for investors to make a run at hostess. Hundreds of buyers are reportedly interested. 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Carl, looking forward to that, as well. That is not fair, scott. We should have had that guest. Well see you in a few minutes. Today marks a key deadline in the hostess bankruptcy saga. It is the official drop dead day for buyers to get a seat at the table. Kayla tausche is back with more. Its an interesting story. With hostess having a going out of business sale, potential buyers are circling what they call a once in a lifetime opportunity, those iconic brands available relatively on the cheap. Today is the deadline for those companies which range from snack food giants to supermarkets to private Equity Companies to submit initial bids or just expressions of interest in the various hostess brands. In all they have about 2. 3 billion in sales. Advisers are hoping to fetch half that in proceeds for the brands. Conventional wisdom would tell you that the twinkie is the biggest sale. The highest priority for hostess is selling wonder bread, since consumers bread choices are more prone to quick changes in taste and preference. Wonder bread also has about 500 million in revenues which is actually nearly five times what twinkies sell in a year. Im told some 160 parties have expressed interest so far, but only a few dozen are actually expected to bid. Food Companies Like flours foods have taken a look, vendors like kroger and walmart, also could be interested. Metropolis andco which owns pabst blue ribbon is still doing early due diligence. But im told a Company Previously thought to be interested in buy being the whole company, we should have a sense, carl, later this week as far as what the future of some of those hosess brands will be. How competitive do you see this business getting . I think it will be really competitive. You know bankers and people involved in some of these auctions like to play up the level of interest. But in this case, you cant imagine life without the twinkie. Everyone knows whats going on right now. You imagine that a lot of these companies have been eyeing twinkie for awhile. Now you get it on the cheap. I think a lot of people will be interested in that. Just the marketing you got for free in the wake of the bankruptcy alone. Right. Has made it more than an icon than it already was. Although the pabst blue ribbon hostess combo does sound a little bit strange. It sounds a little funny. Interesting, carl, there are some average joes out there, a guy don sheridan from wellesley, massachusetts, who wrote a letter in cursive on looseleaf notebook paper saying he should be allowed to bid. Everyone wants a piece of this. Its probably going to go to one of the big corporate giants. Thanks so much, Kayla Tausche back at hq. You know those cat photos with funny captions that seem to be all over the web . What if we told you those photos are helping to create a multimillion dollar media empire . If youre skeptical, dont be. The founder and ceo of cheez burger is going to tell us just how hes done it in just a moment. Tweet time this morning. I dont know if you saw mcdonalds november sales this morning. Pretty good. Getting a boost from the cheddar bacon onion sandwich. Were asking you whats the next menu innovation that could help propel mcd to success . Next would be the iburger with lte. Mcho hos, mctwinkies. A happy meal with rise above pins. Were doing some lull work right now after the break. Well tell you more about it. Dont go away. Oh. There you go. Wooohooo. Hahaahahaha im gonna stand up to her no youre not. I know. You know ronny folks who save hundreds of dollars switching to geico sure are happy. How happy are they jimmy . Happier than a witch in a broom factory. Get happy. Get geico. Fifteen minutes could save you fifteen percent or more. 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Common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. See your doctor, and for a 30day free trial, go to axiron. Com. I have obligations. Cute tobligations, but obligations. G. I need to rethink the core of my portfolio. What i really need is sleep. Introducing the ishares core, Building Blocks for the heart of your portfolio. Find out why 9 out of 10 large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. This startup is the cats meow quite literally. Cheez burger is a network of over 60 websites best known for its usersubmitted images of cats with quickie captions. And its no laughing matter. The company has raised 32 million in Investor Capital to go along with their 2 million page views each day. And now, theyre venturing into television with a new show on bravo. Sounds like a purrfect combination to us. Ben hill is the founder and ceo of Media Company cheez burger network. His company is featured on the show lull work on bravo which is owned by nbc universal. And he joins us from ceo this morning. Ben, good morning. Great to have you with us. I feel like were almost family in a way because you are now on bravo. By the way, congratulations. Thank you. Whats it like . How has having a Television Show changed the business . You know, people who are not spending all their time on the internet can recognize me. Thats about it. You were a medil grad, which for those of us in journalism and media, theyre all over the place. Was it your intent to go into a different line of work. How did you get into this . I think i stumbled on it by accident. When 1999, when i graduated the dotcoms were all the rage and i decided i actually wanted to go to internet, where i spent most of my time, instead of writing for newspapers. Now basically theres an empire. 60 humor sites. 100 employees. I saw that in october you were ranked third among the most visited humor sites tracked by comscore. Are there aspirational levels for you . What do you connote sucks is if what youre dealing with right now is not success . I want to do something that allows me to write a book that could be a bestseller. I want to lead a very interesting life. I dont want to just have a business for the sake of having a business. I really want to have a great life story to tell. Speaking of which, right now youre dealing with both an advertising model, which im sure theres a lot to wrote about, versus a licensing deal model. Which of the give us your breakdown on where they both stand. Weve been hearing lately that maybe advertising in the new year is going to take a step back. How does it feel . How does the market feel . You know, right now the market is really interesting, because the mobile advertising has to really take off for Companies Like us to continue 20 grow in the future. The question out there as for mobile advertising has as high of a value as it is on the desk top internet today. Right now mobile advertising alone is the vast majority of revenues. Licensing is a small fraction. And in the meantime youve got some other businesses, as well, in which you would consult with a consumer brand, for instance. Can you walk us through how that works . Maybe a couple players . Yeah, so for us its really about getting them to understand this generation of people who see internet culture and the remixing of content as a gateway to understanding and marketing to an audience. For example we have worked with Companies Like toyota who have advertisers with us, kraft, big name brands really trying to understand what do we do with the millennials . People who are shunning away from traditional sources of media and traditional sources of advertising . And what are their general misconceptions . When you first had your meeting with them, how much do you have to educate them . What are they doing wrong up until the moment that they meet you . You know, we tell them, dont be afraid of the users. Dont be afraid of letting users take control of your brand, and making them into something that they can enjoy and love. Dont be afraid of having a little laugh, having a little fun. Because what they try to do is put brand from the topdown perspective. Heres the message we want to send you and we want to control users. But these kids, the millennials are not responding to that. Theyre going, i can spend my time looking at funnier ads somewhere else or i can spend my time dealing with brands who seem to understand who i am. We want to help brands understand that if you want to embrace the customer you have to trust them, too. And part of that involves hearing from them when theyre a little critical of you. Youve got to develop a thick skin when it comes to that. Finally, you know, ben, were hearing a little bit more often that Venture Capital is tougher to raise than it might have been say six months ago, a year ago. Is that rue . And if so, what are you doing about it . Venture capital is the next thing about Venture Capital is that it has a very serious lag compared to the market. When the market crashed in 2008, all the funds being invested between then and now have been coming from funds that had raised prior to the crash. So the money pipeline has actually been pretty steady for awhile. Where were seeing a little bit of a slowdown is in the series b and c areas where the capital after the c state is a little bit harder to come by because they require big capital and requires market exits, ipos and acquisitions of considerable size for those returns to make sense. Yeah. Ben i hope to have you back. Fascinating model. And of course, welcome to 9 the family. Well see you on tv. Thank you. Ben huh with the cheez burger network. Quick check of the market