Transcripts For CNBC Squawk On The Street 20121218

Futures are up and the dow gained 100 yesterday. But there is room for skepticism. Europes grappling with the same question helped by some decent uk inflation data today. And a tbill auction in spain. Our road map begins with what appear to be significant progress in the debt negotiations overnight. A whose proposal looking to raise rates for those making more than 400,000 a year. But senator corker on squawk just poured a bucket of ice water on those hopes. Whitney boosts her recommendations on citi, bank of america and discover financial. Is that move by one of the more famous financial bears, a sign of a new era for banks . Walmart is once again the target of a New York Times investigation. But does the paper add anything new and can the stock outperform just as it did last time. Private equity firm server said it will sell the firearms conglomerate. Is private equity talking about guns in the country. Futures moving higher on optimism. The white House Republicans rising above partisanship, getting closer to striking a deal on the fiscal cliff. We have the latest on not just the breakdown of this offer, but by the response of some key senators this morning. Good morning. Yeah, thats right, carl. We saw the offer come in late last night and now were seeing reaction early this morning. Let me walk you through first of all of what the president laid down on the table yesterday, starting with taxes. The president is proposing now 1. 2 trillion in new revenue increases, tax increases on individual income. Thats lower than his initial offer after the election of 1. 6 and revised of 1. 4. So hes coming down on that. Now he would like to extend the bush tax cuts for people below 400,000 in annual income. Thats up from 250,000 where he was before. Now, . 22 trillion in spending reductions in the president s proposal. A fast track process for corporate and individual tax reform. And spending reform, weve also got some spending cut details here for you to take a look at. Including 800 billion in spending cuts, 290 billion of interest savings that they would save as a result of not having to make all those payments on a larger debt. 130 billion in what they call cpi spending, 200 billion in discretionary spending. All of that adds up to a fairly substantial offer. No guidance this is a final offer, though, from the white house. And already you can tell the reaction on capitol hill, Speaker Boehners office telling us that this is not a balanced plan. They dont like it yet. And then earlier today, senator bob corker was on cnbc kind of poohpoohing the whole thing. Take a listen. Were not close to a deal. And ive been trying for three weeks, ive been standing on my head doing cartwheels to try to pivot toward entitlement reform. This is not a deal here. So carl, whats going on right now on capitol hill is that Speaker Boehner is meeting with his republican conference colleagues behind closed doors. We expect that at the top of the next hour, hes going to come out and talk before cameras. Well get some reaction from his colleagues as well, what they think of this proposal and where they think this negotiation needs to go. But clearly, negotiations are ongoing, and the president and the speaker are coming closer together, whether or not that makes everybody happy or enough people happy to get a deal still remains to be seen, carl. Eamon, this is a tough one to read. Had the Biggest Movement been in that in the line in the sand with regards to how much people need to make to see their rates go up . Would you say that was the white houses biggest concession . Yeah. The white house conceding on the 250,000 is a big concession, a number that the president has taken out on the stump around the country time and time again. Now hes saying hes willing to go up to 400,000 on that. That follows a big concession from the republicans over the weekend when the speaker said he was willing to raise tax rates, not just tax revenue. So there are two kind of consecutive big concessions there, and those are framed on either side on meetings by boehner and obama. Presumably thats what they were talking about in those meetings. But yeah, both sides are making significant concessions here. How that reverberates among their caucuses is going to be interesting today, whether the democrats on the one side and republicans on the other can live with whats being created here. Yeah. Once again, well keep a close ear to what the speaker says in just about an hour from now, we think, eamon. Thanks a lot. How the cliff is impacting the markets, lets bring in michael jones. Good to see you. Good morning. Whats your guess on how the markets react to any potential fiscal cliff deal given that weve already drifted higher . Well, we believe that with real clarity on Monetary Policy for the next year, with the fed giving clear guidance, no more onagain offagain qe, youve got great support out of the ecb and the bank of japan is coming online. The only Thing Holding the market down is the potential consequences of the fiscal cliff. You get movement there, i think you take out the highs of the year and head toward 1,500 pretty quickly. Meaning, you know, by the end of within days of reesk that deal . You know, the pace of assent may be not quite that rapid. I think we see that by the first quarter, if we get a good fiscal cliff deal. I think this mornings comments really, really advance that. I really take strong exception to mr. Lindseys point that the president does not want a deal. We actually believe that the president needs a deal almost as badly as the republicans. Remember, he is a secondterm president , and secondterm president s get very concerned about their longterm legacy. We have a recession in 2013, the republicans may be blamed short term, but that will bake in the cake four more years of weak Economic Growth and that would assure president obama has one of the weakest records of growth in history. He doesnt want that in the history books. I think thats why youve seen the movement youve seen in the last 24 hours. Lets look beyond the next 13 days. Lets say we do get the rally that youre talking about. What happens afterwards . Whats the next leg thats going to carry the markets higher . Whats the next cat a rialyscat i think the important thing is we have emerged with policy purgatory. Whether the ecb would buy spanish debt or not, you know, these have been huge issues that have caused 10 and 20 drops in the market when we get disappointing news. That volatility has alienated a lot of core investors. Now we go into 2013, we know that quantitative easing is on the table for 85 billion a month forever. Or until unemployment drops to 6. 5 . We know that the ecb stands ready with unlimited support for spain and italy, when and if they sign on to oversight agreements. These are huge dramatic changes. Think about how many times weve agonized over where the money would come from for bailing out spain and italy. Now we know. When they sign on to oversight. The point is we know we know what the policy response already is by the ecb and the feds. So what is going to be the next catalyst to keep the markets to those new highs youre talking about . The next big catalyst is obviously the fiscal cliff resolution, second, you have spain sign on to oversight from the ecb. Remove any possibility of spanish default and we think that lagarde is signaling that the conditions to that oversight will be a lot about labor market reforms. Those are growth enhancing, so thats another great catalyst for the market. Last, but certainly not least, i think you could see the new Leadership Team in china come more aggressive Reform Program than people are expecting. All right. Michael, good to have you. Thank you so much. Michael jones of riverfront. Financials looking to continue their upward momentum from yesterday when both bank of america and citi hit new 52week highs. Independent Research Analyst Meredith Whitney has turned bullish on financials, too. Whitney citing several factors including her view that banks are more than adequately capitalized. And guys, the weakest position banks from the crisis are now more than adequately capitalized, thus what they earn Going Forward, whatever that is, will now be theirs to employ with far greater discretion than has been the case in the past. Thats the crux of her note. It needs to be listened to. I think we make a little bit much of Meredith Whitney, to be frank. Its been a controversial call on Municipal Bonds a couple of years ago that has not been proven correct. She might argue with that, but i think thats in the facts. You know, you hear Different Things on the financials, no doubt. I think there is less margin in the business. At the same time to her point, carl, they have been discounted perhaps to the point where there is and will be decent growth prospects. Specifically to your point about the capital, 18 billion in excess capital will be generated over the next two years at bank of america. That is 15 of the companys capitalization. Thats how much power they have. They also say there will be a soft tailwind, not expecting a boon necessarily in the housing market, but six months consecutive gain. Its been a gradual advance. Regardless of whether or not you want to give stock, or much stock to this call. This note was released in the afterhours. Bank of america closed at its 52week high at 11, and then managed to climb even higher in the afterhours. So maybe shes just simply reaffirming what people are believing now. She knows theres been a major shift in sentiment when it comes to financials, seen as the new powerhouse for the markets going into 2013. We saw that yesterday with bank of america, citi, Goldman Sachs. Goldman sachs also getting an upgrade today. Bank of america, 15, citis 47. Both with market performs. Davids right, she has ventured into the areas that maybe werent her original expertise. But this is sort of going home to some degree, right . No doubt. Were paying attention, as we should. Melissa points out the stocks moved. Theres adversity of opinion when it comes to the financials. I would also argue there are differences between the financials themselves that perhaps will actually dictate different movements in their stock prices. Morgan stanley more and more i think is becoming an Asset Management firm and may be viewed much more so as that, than a pure investment bank. Whereas Goldman Sachs may be viewed more that way. Well see. Different strategies on the part of many of these banks. You get rid of the litigation when it comes to bank of america where it seems like were getting headline after headline, month after month, to question the company to put up pure earnings numbers. You can do with a lot with that. She will be a guest on closing bell this afternoon. 3 10. Clearly well give maria and bill more clarity on her call today. The spotlight today, after the New York Times prints a second article about the companys practices in mexico in the 2000s. Extensive bribery in 19 stores. Chief International Correspondent has more on this. Thank you very much, melissa. All right. This new article, like the one that was first coming out, the reporters paint a picture of pervasive alleged bribery. They found clear patterns during the construction of those 19 Different Stores in the country, specifically multiple instances that when a payment was made, the critical permit was issued. The article, however, focuses mostly on the most controversial Walmart Store in mexico which was built in 2004, where the times said they found evidence of a zoning map that was altered specifically to allow the store to be built, where it otherwise would have been prohibited. The store was controversial because it was built near the famous pyramids that you see here. Theres some 2,000 years old. There were large protests at the time which made National Headlines in mexico. And there were allegations of bribery back then. Though no hard evidence. The New York Times reports despite the reports of fraud, walmart took no steps to investigate, and later when they did conclude there was, quote, reasonable suspicion that laws were violated, they still didnt tell authorities. Walmart has responded to the new article saying the allegations outlined in the paper today, quote, have been part of the companys Ongoing Investigation of potential violations of the u. S. Foreign corrupt practices act that we began more than a year ago. Walmart is conducting that massive internal investigation in conjunction with the department of justice and s. E. C. Thats in the wake of that Previous Article published back by the times in april which were so damning. The investigation focuses on whether or not they violated the foreign corrupt practices act. They started the investigation a year ago, remember, because the New York Times began approaching them for comment about the investigation that they were doing themselves. Why it started long before the article came out. Guys, back to you. Michelle, we had a big debate before the show whether or not the times added anything new, other than grtheir granularity. You didnt see any direct lines drawn from what was happening in mexico to any current executives at this point. This article did not even mention eduardo castro, who was head of walmartmexico at this period of time, and who is definitely one of the people in focus at this time. But i think the granularity adds a lot to the picture. Do you think the stock is going to move very much, guys, when it opens . Im not so sure. It doesnt necessarily draw a direct line to any current executives at this point. David, you know them well. Hard to draw the line. It is. And this thing is going to unfold for quite some time. I thought when they did the additional 80,000word story, they pretty much said everything, but i guess they wanted to come back to it. Great reporting on the part of the New York Times. Todays anecdotes about the store right there, very interesting. Well see. As we all know, the stock had a historic rally after that story. The alleged bribery. Walmart shares, by the way, a little bit higher. It doesnt seem like theres a huge impact by this times article. Thanks so much. Thank you. The source of many shareholders frustrations. Who are the worst ceos of 2012. Henry mcveigh, head of asset allocati allocation, where does he see the best opportunities. One more look at futures this morning. Hanging on to optimism despite allegations of fiscal cliff deal. Welcome back. Server said it will immediately begin selling investments in the company that makes the bushmaster rifle used by the shooter. All dpuns have been removed from stores near newtown. A lot of debate about the degree to which private equity has inserted itself into the debate. Some investors may be rethinking their position on investing in Companies Like freedom, and certainly you read the statement from service its straightforward. Very interesting story. If you get a change in heart on the part of the Pension Funds that make up so much of the funds for private equity, not to mention, by the way, hedge funds and other investors out there, you could see some ramifications. This certainly may be one of them right here. The company saying as a result of the sandy hook tragedy, which they call a watershed event, that has raised the National Debate on gun control at an unprecedented level, they have determined to engage in a process to a Southern Investment to Freedom Group. Largest manufacturer of guns in the country. 15 of sales roughly to walmart, and about 3,000 employees, 237 million in sales as of the Third Quarter that ended september. Just to put it in perspective for our viewers. That leads you to wonder what happens to some of the retailers that sell the guns, like a cabelas. Cabelas results this past year seem to have been improving thanks in part to the rising gun sales. The gun manufacturers, the stocks really took off particularly after the elections. There was a notion that because obama was reelected, there would be tighter gun control regulations, and so there are a lot of people who went into the market, applied for guns, bought guns, and that really helped these stocks. But since the tragedy, the stocks have been off. You wonder whether or not investors are really questioning on many levels why they are investing in these stocks. David, you mentioned some of the Pension Funds. Calpercent calpercent cal pers is one of them. And leaders in this. And who do they sell them to. Looking at what happened to the value of some of these companies, theres discussion its a foreign buyer. In the current environment, although economics will tell you theres always a price for something, you can discount it to a certain extent as a result of the political environment. That being said, there have been no laws at this point passed in any way, shape or form in terms of no guarantee there will be one. No. A leg up on what to expect this trading day. That is next. And later, getting into holiday spirits with a company known for absolute and well talk with brian frey. Take a look at futures one more time. Hopes for a deal on the fiscal cliff. [ male announcer ] at scottrade, you wont just find us online, youll also find us in person, with dedicated support teams at over 500 branches nationwide. So when you call or visit, you can ask for a name you know. Because personal Service Starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start. Our support teams are nearby, ready to help. Its no wonder so many investors are saying. All ] im with scottrade. Can i still ship a gift in time for christmas . Yeah, sure you can. Great. Wheres your gift . Uh. Whew. [ male announcer ] break from the holiday stress. Ship Fedex Express by december 22nd for christmas delivery. We want to bring in or floor of operations with ubs, joining us at post 9. Good morning to you. Good morning. If theres a glass half empty, half full, on the cliff, the glass must be frosted glass because its hard to see how much is in there. It is. I think people picked up on what corker said, because i think folks were hoping that we were marching toward a grand compromise, an agreement that would fit many of the different components. And corkers implication is, if you reach any kind of compromise, its a bandaid, and a shortterm solution to get you into next year. That doesnt quite fit everything. I think thats why the futures got a little disappointed. Then we heard from senator conrad who seemed to indicate to carls point, its very opaque. No question about it. The market is very fresh. For example, when the president and boehner met yesterday, they were dying for some kind of detail. How do things look. Then the white house said, we have no comment on the meeting. So it became very, very frustrating. But the markets want to go higher no matter what. Futures barely took a blip when the corker comments came out about no deal being reached this week. Are we setting up maybe for a sell on the news of the event . The markets just want to go higher no matter what at this point. What happens when we finally get the deal . First of all, theyre really poised here for a potential breakout. If they can get above the 1438 to 1439 maybe level in the s p, but they also believe, melissa, that the government no matter how partisan people are, they wouldnt be stupid enough to take the country right back into a recession from which it will be very difficult to extricate it. Well see. Theyve done stupider things. Well have to watch for it. Youre right, the market is betting on this. And i think the extent of the rally will depend on how extensive the compromise is. Art, good to see you. Art cashin. What impact would a fall over the fiscal cliff have on health care in the United States . Well be tracking this mornings winners and losers in stocks. [ male announcer ] this is steve. 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. The opening bell on a tuesday morning. Have a look at the s p at the top of your screen. Over at the nasdaq, northwest biotherapeutics on immunotherapy products. Lots to watch today. I think were getting comments slowly out of Speaker Boehner, which well get to in a moment. Look, a little bit. Still some activity before the official end of all activity whatsoever as we head into the christmas holiday. So arbitron up sharply. Some people thought they were one company, but they are not. Neilsen is a company that has large private equity owners at this time as well making that about 1. 2 billion transaction. Neilsen shares, as you saw there on your screen, also higher this morning. Even though theyre paying for arbitron. The shares were not trading have not traded this well for four years. Not a cheap price. No, not a cheap price, thought to be the only acquirerer as you might expect. And a trend weve seen throughout much of this year, the price actually goes up. So the market is bracing to a certain extent their decision to make something strategic. Sometimes you just go way out tlnd a people are like, whoa, thats quite a risk. That being said, we still have not seen a lot of deals as this year ends. Our viewers already know, we talked about this so many times, it is not going to be anything close to a record year for mna. In part theyve been spending so much on buybacks. Allstate, boeing yesterday, i think lily has a small one, nike not too long ago, ge the other day. The journal gets around to doing a story about all the money that would have been invested in the normal economy this year, as you look back at 2012, its gone into buying back their own shares. It has. Shrinking the cap, so to speak, and increasing earnings per share. It is a strategy. Its been one thats been embraced by executives this year who are unwilling, because of so much uncertainty to perhaps make those investments in other areas. That being said, theres still debate about the real impact, or positive impact, melissa, of share buybacks. You know, over time, it is the best use of capital. In the short term, it shrinks the number of shares out there if they go through with the buyback. It should increase earnings, or inflate earnings. Its viewed in many different ways. If they were to invest in the business for organic growth, that would probably be viewed as the best way for capital. Many of them are compensated through rsus, which would be the stock that moves on earnings per share. And there are still some on options as well. So some say that is the best way for them to impact their own compensation. Right. Mcdonalds, of course, had good sales for the november the other day. Now word theyre asking their franchisees to stay open on christmas day. Which they had done the same on thanksgiving. Which it was one reason they did, they say, did better in november. Did you have the mcrib yet, melissa . I know you talked about it a lot. I havent had a mcrib in years. You guys think i go out and eat fast food every day. No . No. No, no, no. Particularly in light of the servers, i just saw the Freedom Group, a handgun maker, look at ruger. It is down 5. 25 . Smith wesson down. Massive run in these stocks in the past, say, month or so. Could be coming off a quick decent push. Investors may want to continue participating in these sorts of trades here. This is a group that is worth watching at this point. Especially given the server story today. Look at shares of apple as well. Another day of gains for apple. Yesterday it was interesting, because we have the citi downgrade, questions about the fundamentals of apple, price target changes today. Positive patent news coming out. Yesterday it managed to turn around in terms of the loss on the session. Today another day of gains. Samsung withdrawing its patents in europe. Theres also news about a judge refusing to place injunctions on the samsung items. Apple still in there in terms of the patents. Reporting that theyll use four square data to help fix mats, which would be a big step forward. A bit on toyota. I dont know if well hear from phil lebeau later this morning, but a fine for allegedly failing to report safety defects in a timely manner required by law. Not the first time this has happened. Its the fourth fine in the past two years. Automaker does not admit or deny guilt. But theres a look at shares a little bit higher this morning. Lets check with bob pisani on the floor with more. Good morning, bob. Hello, guys. Happy tuesday. Of course, we saw a little bit of the drop in futures when corker came out and said were not close to a deal. By and large, were still positive here today. Thats because Everybody Knows that a deal of some kind is coming. The president s offer is getting closer to the gop offer. The republicans are meeting this morning, no doubt theyll squawk and scream. Ultimately the street believes some kind of deal is coming here. The big issue is the postfiscal cliff trade. Thats what everybodys trying to figure out. Thats where theres a lot of differences of opinion. By and large its been a strong argument to buy going into the fiscal cliff and sell after that, the theory being fear of american austerity is beginning, that we are having higher taxes on the wealthy, enlistment of entitlements of some kind. A head wind for stocks in 2013. Where the arguments begin is when do you get more cautious. Some people are arguing selling immediately after a fiscal cliff deal is reached. Other people saying thats too early. Thats a mistake. Wait until later into 2013, when the tighter budgetary restraints that are going to occur, happen in 2014, not 2013. And that would be the time to consider lightening up a little bit. By and large still no agreement on this, but a lot of debate on the postfiscal cliff trade and how to handle that. Meantime, have you noticed whats going on . Weve still got a Global Market happening here. Japan close to an 8 1 2month high. Germany at a 52week high. The euro at a 7 1 2month high. Things are still moving. China, big debate on the trough here. This is the debate the last two months here. Goldman sachs upped its Fourth Quarter gdp estimates, 7. 8 now instead of 7. 6 . Look, nobodys thinking chinas going to go back to 10 or 12 . Thats over. 8, 8 1 2, somewhere around there. There is good evidence now that q4 might be the trough for china. This has been a big debate. A lot of people saying its going to be weaker in 2013. Real estate prices are improving. Electricity consumption improving a little bit. Industrial production, all of them looking better in the last couple of months. I think thats generally a positive. The one big thing i want to point out, if you watch whats going on in japan, weve got a new Prime Minister whos coming in whos putting intense pressure on the bank of japan, essentially trying to break their independence essentially. Hes told them theyve got to increase their inflation target from 1 to at least 2 , and told they have to start massive stimulus program. Massive stimulus program. He wants a weaker yen, he wants a lot more spending overall on infrastructure projects. He basically wants to inflate their way out of the problem. The bank of japan, if theyre having problems with that, hes made it clear theyre going to question their independence, and nominate directors on that board that will do what they wants them to do. You can stay independent, bank of japan, as long as you do exactly what i want you to do. George would be proud of that, i think. Guys, back to you. Bob, thank you so much. Lets get to the pits this morning. Rick santelli in chicago. Good morning, rick. Good morning, carl. Its no secret that Interest Rates have been creeping up a bit. Its also no secret that you have the fiveyear and the tenyear still at levels that are lower in yield, higher in price than they ended last year. Not true for the 30year bond. If you look at that tenyear, you can see were at the highest yield level on a closing basis since about the last part of october. Everybodys talking about the euro versus the dollar in the 7 1 2month high, bob referred to it. Lets look at another chart, lets look at a correlation between the risk on trade aspects between the stock market in the u. S. And the way the Euro Currency trades. You can clearly see here today, theyre highly correlated. However, does that really mean that the dynamics of whats going on with the euro versus the dollar has to do with the fiscal cliff . You know, that might be a stretch. Remember, it is year end. Things are getting a bit hard to correlate in terms of liquidation and profit taking. The last chart, well, this ones pretty easy to interpret. Bob just talked about it. You can debate whether the ministry of defense and bank of japan are at odds with each other. Carl, back to you. Rick, thank you so much for that. Rick santelli in chicago. I want to get to washington with some of the latest headlines regarding Speaker Boehner and what eamon is referring to as plan b. What we know is the speaker is in the basement of the Capital Building here right now, meeting with republican lawmakers to brief them on the status of the fiscal cliff negotiation, and what a gop leadership aide is now telling news news is the speaker is now prepared to offer what hes calling a plan b, or a modified plan b in which we dont do the grand big deal that the president and speaker of the negotiating on, but instead do something much smaller that would eliminate the pending tax increases for all americans, the speaker saying that he would like to have some kind of a deal, a modified scaleddown proposal now that would eliminate those for as many people as he can. The details are very sketchy on what modified plan b actually means in practice. But basically, its something he can keep in his hip pocket right now in case these negotiations with the president dont bear fruit. And presumably what were talking about here, carl, is a little bit more leverage for the speaker to now bring back down to the white house in this big deal negotiation to say, hey, look, lets get the big deal where i need it to be or ill go to plan b. Clearly the speaker now negotiating a little bit and using the vehicle of talking to his conference to do that. A little bit of movement here, and a lot of backandforth in washington, carl. Eamon, is it somehow to what the president said, lets just pass the Senate Tax Bill and worry about Everything Else later . Thats the sense were getting, that they would do something on taxes and worry about the rest later. But im assuming there will be more nuance to that once we get some of the details. We dont have the details now in what the gop leadership aides are telling nbc news. Its not clear what the plan b would be. But hes in there talking to his fellow republicans right now. We expect hell be out by the top of the hour and well have a chance to pepper him with questions. Were going to ask, and try to find out more details about what exactly hes envisioning here and whats now overtly becoming a twotrack process. All right. Hes not speaking from the house floor this time. So maybe there will be a little more information than there was last week. We can only hope. Thanks a lot. Lets get to the nymex. Sharon epperson is there with the latest. Traders are waiting for any word from washington on whether we are indeed closer to a deal on the fiscal cliff. In the meantime were not seeing Much Movement in commodities. Gold is still hovering around the 1,700 an ounce level. Basically flat in subdued trading on this day. Were also looking at rather tight ranges in the oil market. But a little bit more of a lift there as it appears there is a bit more, perhaps, of risk on trade in the euro as well. And keep your eye on whats happening to gasoline, because yes, gasoline futures are slightly higher. Were looking at the lowest levels of the year for retail unleaded gasoline. 3. 24 a gallon for the National Average at the pumps. Some states like missouri are looking at gas price increases below 3. The first time thats happened since july. Back to you. Thank you very much, sharon epperson. Financials have been on fire. Bank of america and citigroup hitting 52week highs. Well explore that next. Henry mcvey taking the asset allocation, whats next for china, how might that affect your portfolio. 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. 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Open an account today and get a free 13month eibd™ subscription when you call 18882800154 now. Optionsxpress by charles schwab. [ male announcer ] they are a glowing example of what it means to be the best. And at this special time of year, they shine even brighter. Come to the winter event and get the mercedesbenz youve always wished for, now for an exceptional price. [ santa ] ho, ho, ho, ho [ male announcer ] lease a 2013 glk350 for 399 a month at your local mercedesbenz dealer. Meredith whitney upgraded citigroup and bank of america. Jason, always good to see you. Good morning. When it comes to bank of america, bank of america as of today as carl points out is up exactly 100 . Youve got an equal weight rating on the stock with a 10 price target. Do you feel like you missed out on the story . Clearly theyve made a lot more progress on the capital front during the course of 2012 than we would have, you know, anticipated. Now youre trading at a multiple half to two multiple premium to citigroup and jpmorgan. I wouldnt necessarily be surprised to see a pullback as we turn the calendar. In terms of the longer term trends, one of the points that Meredith Whitney pointed out is that bank of america is going to generate 18 billion in excess capital over the next two years. And thats 15 of market cap. Therefore, anything that the bank earns at that point is really going to be able to be leveraged in terms of operating capital. Doesnt it have some sort of an advantage at this point, being able to have such an excess capital cushion and be able to choose how it spends its money that it earns . Thats true for the entire industry. You look at the most you know, the feds going to put out its stress test scenario a couple of weeks ago, the industry through that, theres over 100 billion in excess capital in a stressed environment. So the industry has record capital, record liquidity and growing earnings. They came into 2012 with that situation, allowed a lot of banks to increase the buyback of stock in march. Come march of next year we expect the exact same thing, more banks to raise dividends and buy back stock. Its funny to talk about that with where the industry was three, four, five years ago with capital. Right now its on much firmer ground. Is that going to be the driving theme for 2013, this idea that most banks have significant room to increase their payups . It was a catalyst in 2012. Look at the overall bank index, up more than double the s p 500. You got a boost in midmarch of this past year as a lot of the banks came out with the stress test results. Come march of next year, we think it will be positive. I cover over 20 banks, and i expect a vast majority of them to increase dividends in the first half of next year. Youve got overraitting on shares of citigroup, jason. Its had quite a run. Does it make you concerned how far the stock has come in a short amount of time to recommend investors buy that stock . Trade seven times the tangible buck value, we expect it to grow next year. We think well start to see reserve releases at citi. Growing loans particularly outside the United States. Margins held up better than peers. We look them to go back to the dividend buyback gain, after a six or sevenyear hiatus. So theyre continuing to move in the right direction. And now under new management team, with the program a couple of weeks ago, is off to a good start. You know, what about the negatives . I guess i can think the yield curves not great for them. Economic growth is obviously not the best. They still have to hold an awful lot of capital in terms of getting a return they once saw. Anything else that investors should be wary of as we head into next year and the continued litigation risk . For citi, thats a good point. Citi is not constrained to the United States. Half of citi corps revenues come in emerging markets. Which growth may be slowing. Its an advantage i think inherent in the model. Jason, im curious, yourvery familiar with how the group trades. What happens to this group which has been on a massive run . What happens to the group should a fiscal cliff deal be reached . Is it a news event for financials or will they rally . I think initially you probably get the rally. Clearly they sold off postthe election on concerns, you know, when the fiscal cliff came to the forefront. Now that talks are closer to a resolution, theyre getting a lift. I expect to see a lift. There are still structural longterm issues that probably dont get decided in this round of negotiations that could weigh on the economy longer term. Jason, well leave it there. Good to see you. Jason goldberg at barclays. Kent kelly has details on insider trading. Stick around to see who made greenbergs list of the worst ceos of 2012. As we go to break, well look at this mornings s p losers. Well, if it isnt mr. Margin. Mr. Margin . Dont be modest, bob. You found a better way to pack a bowling ball. That was ups. And who called ups . You did, bob. I just asked a question. It takes a long time to pack a bowling ball. The last guy pitched more ball packers. But you. You consulted ups. You found a better way. Thats logistics. Thats margin. Find out what else ups knows. Ill do that. Youre on a roll. Thats funny. I wasnt being funny, bob. I know. Another victory for federal prosecutors year, and a possible wrinkle for steve cohen. Details on that back at headquarters. Good morning, kate. Good morning, carl. Yesterday, two more former Hedge Fund Traders were found guilty of conspiracy and securities fraud after just two days of jury deliberations. The illegal activity took place at hedge fund two founders had connections to sac. But the prosecutorial victory could still be worrisome for them despite the fact it didnt directly affect the fund for steve cohen. They argued that they were part of a corrupt chain or circle of friends and informants at two tech companies, dell and inindividualia. A group that allegedly included john horvath who has pled guilty to charges. One witness in the trial said that horvath passed information on to steinberg. Steinberg is considered an unindicted coconspirator. But people with knowledge of the ongoing case say steinbergs cooperation, if it were won, could be a key element in building a case against steve could hen if that were to ever happen. Cohen has another case to think about, martomea, a trader who stands accused of selling two pharmaceutical stocks based on inside information, could be indicted as early as next week. Which would mark 30 days since the case against him was first unveiled. But the government has tried strenuously to gain his cooperation already, presumably in order to make a broader case against cohen who signed off of two drug companies. So carl, cohen said hes behaved appropriately, but again, this is not a good harbinger for the type of success that the federal government is having against hedge funds like sac. Kate, any word on david ganic who ran level global, where his partner was, and jason had worked at sac, and was not charged. There were emails admitted as part of the testimony, or the case against chase and the trial. Thats right, david. He remains a big figure in this. He has not been charged and its not clear what might be next for him. Obviously the events of these trials these accusations in the trial have been devastating for both level global and diamondback. Theyre not in business anymore. The Ripple Effect could be large. Kate, thanks so much for that. When we come back after a break, well get breaking news. Home Builder Sentiments out at the top of the hour. Speaker boehner set to speak about the fiscal cliff talks. Keep it right here. [ male announcer ] you are a business pro. Executor of efficiency. You can spot an amateur from a mile away. While going shoeless and metalfree in seconds. 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. Now this. Will work. [ male announcer ] just like you, business pro. Just like you. Go national. Go like a pro. With scottrader streaming quotes, any way you want. Fully customize it for your trading process from thought to trade, on every screen. And all in real time. Which makes it just like having your own trading floor, right at your fingertips. [ rodger ] at scottrade, seven dollar trades are just the start. Try our easytouse scottrader streaming quotes. Its another reason more investors are saying. [ all ] im with scottrade. Can i still ship a gift in time for christmas . Yeah, sure you can. Great. Wheres your gift . Uh. Whew. [ male announcer ] break from the holiday stress. Ship Fedex Express by december 22nd for christmas delivery. Welcome back to squawk on the street. Were awaiting House Speaker John Boehners comments on the cliff talks. When he starts to speak, well take you there live. First, though, breaking news on housing. For that, well go to diana olick in washington. Hi, diane. Home Builder Sentiments rising to 47 on the National Association of Home Builders sentiment index. This after novembers fivepoint jump was lowered by one point. 50 is the line between positive and negative. Of the indexes, three components, sales rose to 51, pushing into positive territory for the First Time Since the housing crash began. Sales expectations over the next six months dropped one point. And buyer traffic rose one point, but is still far from positive territory at 36. Hp chairman said one Thing Holding back home sales is the mortgage. Regionally home Builder Sentiment saw the biggest jump in the northeast. Sentiment rose two points in the midwest but fell two points in the south and three points in the west. Only in the midwest are the Home Builders in solid positive territory. The builders are concerned about the looming fiscal cliff. Several of the public builder ceos sent a letter to the president and Speaker Boehner last week urging them to reach a deal, even if it means an increase in taxes on the builders themselves. Back to you. Thank you, diana olick. Home builders doing nicely in todays session, up by a percent or more. Lets bring in eamon javers in d. C. Heres what we know as of right now. The speaker said to his conference behind closed doors now, his fellow republicans, that hes going to move on a send track, kind of a plan b here in case these negotiations for a big deal dont bear fruit with the president. Boehner does not like the new offer on the table. We do know that house gop leadership aides are telling me that this plan would extend the bush tax cuts for everybody who makes less than 1 million per year. So that is a much higher number than what the president proposed himself. The speaker saying hes got to move forward on a plan b, because the looming deadline is getting so close, he needs to have something he can put into place in case they get there without this big deal, melissa. Eamon javers, thank you. Markets slightly higher on signs of cliff progress. Still waiting for house Speaker Boehners comments on the cliff. When he appears at the podium, well bring his comments live. Lets bring in the managing director and senior Portfolio Manager with matrix asset advisers. Great to have you with us. Good morning. The s p has actually seen a very good year so far this year. But investors are probably going to be scarred because they only remember the volatility. As we do get up to the 15 range in terms of returns, are you concerned maybe that the rally on the cliff is already baked into stocks . Well, i think theres been some news thats been baked in. Probably that theres some resolution. I think now what really will make a difference in terms of stock returns between now and the end of the year, and of course, flopping into 2013, will be whether the deal is a large grand bargain type deal or whether its just a stop gap that gets us through. Conversely, if things fall apart at the 11th hour, that would be a material at least shortterm detriment to stocks. And a reduction in equity prices in the near term. When youre doing the mental cal ku las, jordan, in terms of how the markets will react u a stop gap, what does it mean to the markets in your view and what does it mean to the markets . I think stock cap will continue to see the kind of slow trending up. The real issue is that it wont remove some of the, kind of the headline focus that will have going into next year. Remember, theres another deadline with the debt ceiling discussion that will take place sometime in march. If thats not a part of this larger fiscal cliff conversation today. In a grand bargain, i think weve taken the possibility of an economic slowdown off the table. I think theres more certainty for business, and their willingness to invest. More certainty to individuals in terms of what they should expect in terms of their tax profile Going Forward. So i think that there could be a meaningful kickup perhaps as much as a few percent in the short term, which may be able to stick and build as we go through the year into 13. Jordan, in terms of individual stocks, you do like microsoft. That is one that you point out. Its funny, because theres such a varying opinion in whether or not technology will do okay next year. Merrill lynch, its one of the best sectors to be in. Jpmorgan said the hightech sector looks dismal in 2013. What will take to get microsoft to move beyond 32 a share . Weve first got to get to 32 per share on microsoft. But the valuation is so low, and for this Company Generating as much cash as it is, and has as high a dividend yield, we think its very attractive from the risk reward. What drives the stock beyond the recent higher valuation will be recognition that the that corporate spending on i. T. Will continue. Theres still a refresh cycle taking place. Theres still a consumer windows 8 migration that is likely to take place as we get into 2013. If theres more confidence both in consumers and businesses, that we can spend. Do you think windows 8 has been any sort of a catalyst for the stocks . It was widely anticipated that it would be. Its come and gone, and still going on, but thats not really getting any traction here. I think thats true. I think theres probably been a little disappointment in terms of at least the impact on the stock. This is something that will take some time to develop. Theres also many other new products that are taking place, being introduced at microsoft. Some already have been in the automation space, and there will be more continuing, especially on the business side where the margins are even better. We expect that windows 8 will become real, will become a driver. And it will be more reflective in the financials perhaps than some of the buzz that typically can drive more speculative Financial Technology stocks. Jordan, if we get a deal, and there is some certainty when you start to see cap x, there will still be measure of austerity, at least in the early part of next year, right . I wonder, does that steer you away from certain sectors . Maybe, i dont know, is defense an easy call . Because theres going to be cuts in spending, discretionary and nondiscretionary. I think the concern about the cliff special lir on the Defense Sector in terms of the sequestration, were all spending its been highlighted to the Defense Sector will be cut across the board. If that is removed, then while there certainly will be budget constraints. There will be clear winners and losers in different programs in the Defense Sector. We certainly think that financials will benefit. And we also think that the Technology Sector will benefit. If there is some kind of a stability and agreement on a significant deal. Jordan, thank you. Jordan posner of matrix. Were still awaiting Speaker Boehner to give us his latest comments on the continuing talks about the fiscal cliff. Well bring you the comments live, of course, after the break. Keeping a close eye on washington, d. C. Speaker boehner is set to speak in the next few minutes, we believe. We hope to get some clarity on what this plan b is that they have referred the gop leadership has referred to, when speaking to nbc news this morning. Our Steve Liesman is at headquarters. Steve, it feels like weve been around the world and back since you started breaking news on the white house offer last night. Whats your read right now . Im trying to get a feel for what the gop strategy is right here. We had senator corker, as you guys mentioned on this morning, saying he sees nothing new here. Sort of began the conversation saying he saw nothing new. Kind of agreed at the end that there had been some movement. I think there have been pretty significant steps by the president. But that doesnt mean that theyre significant enough for the gop. You know, him saying that this 250 which had been previously immutable is now essentially mutable. That was a concession. And geithner previously told me they will not do a deal without a permanent debt ceiling fix. Now theyre saying two years. Also the cpi chain thing will reduce payments to Social Security. So thats a pretty big step forward. I think maybe both sides are in negotiating positions. But also seeing this as a final offer. Its our understanding that the white house is also does not see this as a final offer. So its unclear. I think whats happening, certainly, when you ask what is plan b, i think plan b is part of the negotiations. With boehner saying, look, unless you come closer to me here, this is what were going to do. Eamon, i wonder if plan b is essentially a way for republicans, assuming we go over the cliff, to tell americans, hey, we tried. Right . It does seem to be a bit of a facesaving move if it plays out that way. I think steve is right, though, carl. I think what is going on here is that the speaker is now saying, hey, look, mr. President , we dont have to do a deal at all. We have a plan b, were ready to go over the cliff and we will hold all those less than 1 million a year harmless from the tax increases that are going to happen. You know, we think that thats a bad scenario. But we can do that. So hes putting more pressure on the white house. This is negotiating tactic to say to the president , look, i dont have to meet you just halfway here, we have Something Else in the works. His fellow republicans, he tells them, look, were not caving in to the president here. Weve got more options. Were not done with this negotiation yet. I think steve is right, this is not a final offer from the white house. But also, this is the speaker saying, we know its not your final offer. We need your final offer to be better than this one. I was just going to say, these negotiations, i used to watch guys in the diamond district negotiate over diamonds, and they would come in and say, you know, 3,000 a carat. The guy would say, for that junk . 1. And theyd start off like this. Whats weird about this negotiation is, instead of boehner coming back and you would think it would be now in boehners court to say, no, not 400,000, but 750,000. This new plan b is no negotiation at all. Kind of like getting up and walking out and saying im going to buy from the diamond dealer down the street. We should be clear that House Republican leadership aides is telling us that the speaker is not walking away from this negotiation, what hes doing here is offering up Something Else that they can do. Because remember, this is a sort of a triangular shaped negotiation. This isnt just two guys in the diamond shop. Theres at least three parties here, maybe more. And theyve got to keep House Republican rank and file members whose votes theyre going to need here happy, ultimately that theyll get some kind of a deal. Eamon, one of the things i noticed is both sides need to show the otherside that theyre as crazy as each one is. When geithner said to me, well walk away without a tax increase for the wealthy, i think he was saying, were crazy like your House Republicans there. They dont want a tax increase for the wealthy. Well walk away from a deal. I think thats sort of the way its been working here. Yeah. You might have seen a couple of fingers go up in front of the camera lens. We expect the speaker to begin talking in about two minutes. I keep thinking, you know, you talk about which one is crazier, steve. Like playing chicken. Which one is a little bit nuttier. Its a negotiation. Eamon, im curious, senator conrad brought this to us this morning, that those who feel as though they cant violate the norquist pledge in the new year can come back and cut taxes having avoided violating that pledge . Is that a viable idea in your opinion . It is a viable idea, an idea weve gotten away from a little bit. Some people were talking about that early in the fall, saying, if we go over the cliff, taxes go up automatically. That just happens on its own, we dont have to vote. Then they can come back and vote to bring the taxes down by a significant amount, but not equal to the amount they went up. Therefore, thats technically a vote to lower taxes. Eamon weve gotten away from that as people thought this deal might be actually happening here around christmas, new years time. What happens to the sequester in that situation . Does that mean the sequester would take effect . Which was, remember, the sequester is the original hammer here. They may be able to do that on the revenue side but then they have no deal on the sequester side. The presumption if they do the over the cliff scenario, the republicans will have to do something, thats always been a big question mark in terms of the sequester. Its also, by the way, a big question mark what happens to the sequester under the speakers plan b option. We dont know eamon, here is the speaker. With the dow up ten points. Our hope continues to be to reach an agreement with the president on a balanced approach that averts the fiscal cliff. What weve offered meets the definition of balance. The president is not there yet. The white house offered yesterday essentially 1. 3 trillion in new revenues for only 850 billion in net spending reductions. Thats not balanced, in my opinion. So at the same time, were going to continue to talk with the president. Were also going to move to plan b. I think, we all know that every income tax filed in america is going to pay higher rates come january 1st unless congress acts. So i believe its important that we protect as Many American taxpayers as we can. And our plan b would protect the american taxpayers who make 1 million or less, and have all of their current rates extended. I continue to have hope that we can reach a broader agreement with the white house that would reduce spending as well as have revenues on the table. I think it would be better for our country. But at this point, having a backup plan to make sure that as few american taxpayers are affected by this increase as possible. Moving down that path is the right course of action for us. Good morning. First of all id like to say, that i think all of our hearts and prayers are with the families in newtown, connecticut. As a father, i cannot even imagine the utter horror that those families are going through right now, grieving the loss of their children and their loved ones. As far as the fiscal cliff is concerned, as the speaker has said, we remain committed to trying to minimize the impact on hardworking families and Small Businesses in this country, as far as tax increases are concerned. We look to find the answer to solve the problem on the spending issue here in washington. The president is not yet there. He has not come to where he needs to be in order for us to push through a bill that really does begin to address the problem. And as the speaker said, thats why we are now discussing an alternative plan, if the president and the white house cannot come our way. Thank you. As the speaker and the leader said, weve been trying to make sure we do not go off this fiscal cliff. But at the same time, put america on a different path. One for job creation, one that also takes care of our spending. I think many times the speaker felt that maybe he was negotiating with himself. After plan after plan, where the president stayed silent. Those three weeks right after the election when the first idea was sent akcross to the presidet pr the speaker there was nothing but silence. Unfortunately today we have to go to plan b. We want to make sure we do not go off the cliff and we want to make sure we keep an economy where jobs can be created. But the thing we have to remember is where we are in this situation. We are two months into a new fiscal year. We should always look at the numbers, because they tell you the scenario of where you are. In just those two months, were 292 billion in debt. When you read the numbers, there are some positive news in it. Revenues are up by 10 . 30 billion. Thats 1 billion less than youd get if you just raised the top two rates for the first year. But the sad reality is, spending is up 16 . 87 billion. Thats where the problem lies. Thats where the president has to Start Talking about, and thats what we want to solve in the long run. America for the children of the future that we can build and one that can create jobs. The clock continues to tick, and were just days now from the end of the year. And i think that the best Christmas Gift that we could give america is an agreement. An agreement that gives certainty to our hardworking middle class families as to what their tax rates are going to be. Give certainty to our Small Business owners, so that they can hire, and that they can pursue that innovation, and that proves to the American People that we can lead and that we can get our job done. Thats the best Christmas Gift. And im confident that we can get it done. This is our moment. And this is our moment to do whats good and right for america. And now we ask the president to join us in that effort. Republicans really have gone above and beyond to work with the president , and democrats, to negotiate this deal. And neither side is going to get everything that we want, but americans can no longer afford to have our cake and eat it, too. Today our National Debt is growing faster than our entire economy. By the end of the decade, the vast majority, the federal tax revenue will be eaten up by four things, medicare, medicaid, Social Security and the interest on our debt. This means onethird of the federal budget which includes spending on education, transportation, Even National security will have to be financed mostly with borrowed money. At no time in the past four years has the president offered, or even supported a plan that would meaningfully address our longterm spending problem. Higher taxes isnt going to solve this problem and we cant afford for the American People to keep struggling. Spending cuts are not easy, but they are certainly what is required at this time. Its time for the president to meet us halfway. Americans deserve a solution. What is your definition of a balanced budget . Is it dollarfordollar spending cut . Most people would agree thats balanced. Can it be just close to that . Does it have to be exactly . We do not have a balanced plan, when the president is calling for 1. 3 trillion in revenue and only putting 850 billion worth of cuts over ten years. What type of effect has the tragedy in connecticut had on this fiscal cliff talks . Is there a realization that the country doesnt want to see a long drawnout partisan battle at this time . I think both sides would agree to that. This is a difficult time for americans. Thats why, while we continue to have conversations with the white house, ive continued to have hope that we can reach an agreement. Its not a time to put americans through more stress. Speaker, what would plan b be for the other big issues that would cause a fiscal cliff . The cuts that would happen automatically, the doc fix going away, benefits going away . Would you incorporate any of that into the plan b . We would like at how we would address those i, as we put this bill together that we would expect to be on the floor later this week. But dealing with the issue of the alternative minimum tax, dealing with the death tax, could likely be part of the bill we would bring to the floor. We would not deal with the sequester. How close would you say the president s plan is being to balanced . I have made it clear to the president that i would put 1 trillion worth of revenue on the table if he were willing to put 1 trillion worth of spending reductions on the table. That, at this point, would be my version of a balanced approach, as he called for. Andrew, last one. [ inaudible ] . There are a lot of issues on the table. That issue has been on the table, off the table, back on the table. Its an issue for discussion. But i dont believe its an issue that has to be dealt with between now and the end of the year. It is an issue, i think, if congress were to do autonomous reform next year and tax reform, as we envision, if theres an agreement, that issue will certainly be open to debate in that context. Thanks. We are just listening to House Speaker john boehner fielding some comments after he spoke about the latest round of fiscal cliffs. We heard members of the Republican Leadership also speak about the need to get a deal done. Lets bring in eamon javers and Steve Liesman. Everybody was at the edge of their seats when house Speaker Boehner was asked, will we get a deal in the next 24, 48 hours. Thats the big question here. What the speaker was telegraphing there i think was pretty clear. He was saying he would consider a balanced deal, one that had 1 trillion in new revenue, as well as 1 trillion in spending cuts. And what the republicans here on capitol hill dont like about the president s plan is, they dont think it has enough spending cuts in it, even though its been advertised, i guess is the word to say, at 1. 22 trillion in spending cuts. They look at about 300 billion in that number as being not real, because it comes from reduced future payments on interest on the National Debt. They would like to see spending cuts as opposed to Interest Payment deferrals as part of the actual number here. So the speaker kind of telegraphing there, i think, where he wants this thing to end up. The question is whether well get there. Steve liesman, youve got your sources in the treasury. What are you hearing in terms of whether or not they would be willing to move closer to that position . You know, its hard to say, melissa. But i was just doing a little math right now. And it seems eamon, back me up on this or tell me im dead wrong. Im never going to back up your math on live tv. Lets say the president lets say you accept the gops number that the president is at 1. 3 on revenue, gop at 1. They each have to come up or down by 150 billion on the revenue side. And just so people understand theres a about a 95 billion difference. Lets accept the gops on that. 150 each on the revenue side. Then i have 150 on the spending side. The president would have to come up. Because, again, the sticking issue right there is the gop is not counting the president s interest savings that hes counting as part of spending cuts. You also have to factor in some of the cats and dogs in there, like what are we going to do about the debt ceiling. The president wants a permanent position on the debt ceiling. Thats part of it as well. Eamon, the president s offer last night, if im not mistaken, the last paragraph said we would do it for two years with mcconnelllike clauses in there, right . Harwoods reporting right now that according to a gop source, the sticking points are in fact the two years on the debt limit, and white house resistance on the medicare age, which harwood seems to feel are solvable. Right. One other issue thats out there. As i understand it, the 400 billion in Health Savings maybe, maybe means testing if the gop drags the democrats there. Is that part of that . Or is that separate from that as well . Thats one thing we have not seen specified from the white house, or any of the Anonymous Sources who have been giving us the details here on whats in there. They sort of say, 400 billion in Health Savings. We dont know what that is. If its means testing, i think a lot of democrats would look at that as kind of progressive. Right. Guys, thanks very much for that. Certainly the markets not too discouraged now. Up about ten when the speaker began to talk and now at 33. The fiscal cliff and what it means to health care. Well talk to the president and ceo of the cleveland clinic, toby cosgrove, in just a moment. [ male announcer ] this december, remember what starts with adding a friend. Could end with adding a close friend. The lexus december to remember sales event is on. This is the pursuit of perfection. The lexus december to remember sales event is on. 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 . Can i still ship a gift in time for christmas . Yeah, sure you can. Great. Wheres your gift . Uh. Whew. [ male announcer ] break from the holiday stress. Ship Fedex Express by december 22nd for christmas delivery. By decembut i am your rmarket data. I know what youre looking for. Im not chained to your desk anymore. Im faster and smarter now. And so much less expensive. I am your market data. And if i do say so myself, i have never looked better. Superderivatives introduces dgx. Data done differently. Moments ago we heard house Speaker Boehner talk on the fiscal cliff. How could the cuts hit the health care stre. The ceo of one of the best ranked hospitals in this country, the cleveland clinic. He joins us from cleveland this morning. Mr. Cosgrove, good morning. Good morning, carl. I dont know how anyone knows anything when you consider the new health care law, which is taking effect, and the collision between that and what might be the cliff. What is your view for what 2013 may look like . Well, we are undergoing a major change in health care right now. The care act will bring more patients to us and well be paid less for looking after them, and were having to reorganize the whole way we deliver care. The uncertainty around the fiscal cliff and potential for sequestration adds more confusion to this. This sequestration would bring about a 2 reduction in what we get paid for medicare patients, which translates into about 6 billion across the Health Care System in general. And particularly its influence on research were concerned about. That 2 adds up over time. Where does this 5. 8 billion number come from . Well, its what you look at as this goes across just one year across the health care for the entire Health Care Industry for medicare payment. But just as concerning is whaha this meeds for research. As it currently stands, it means were going to have an 8. 2 reduction in the nih budget, which will reduce Research Across the country. It looks like sequestration will have major influence on both research and clinical care, as we currently provide it. What compromise well see, actually, if we avoid the cliff, i frankly dont know. Im not sure at this point. One thing were learning this morning is that the medicare age is quickly bubbling up to be one of the key issues. What does that mean for you . That means what well see, fewer patients that are covered by medicare, as it goes from 65 to 66 to 67 or wherever it winds up. But medicare will so there will be more emphasis on private insurance, or in fact the exchanges, as they are rolled out across the country. Forgetting the fiscal cliff, the industry is obviously going through dramatic change as part of the Affordable Care act, many of the provisions will start to take effect next year. Thats true. Do you have your arms around that already, dr. Cosgrove . Do you understand exactly what youre going to be doing there and what its going to mean to your business . What we know is were going to have to be much more efficient. Were taking costs out and have been for several years. And we think that over time, were going to have consolidation of health care, which will bring hospitals together into systems which will make them more efficient. Well also see physicians that are employed by hospitals, which, again, will help the efficiency of the organization. We think there are going to be winners and losers in there, and possibly some of the hospitals that are not financially viable will go out of existence in the future. And what about this idea of hospitals getting together and actually offering insurance as well . Is that, in your opinion, something that well see more of . Youre certainly going to see more of that. And the reason for that is, it helps take the cost out of the system, because you have a collaboration between the Insurance Companies and the hospitals, or the providers, and no longer are they one checking on the other, which reduces some of the costs of delivering the care. Dr. Cosgrove, on top of the fiscal cliff, on top of the Affordable Care act, there is a shortage of physicians that will come down the pike. Why is that . And what can be done in order to lure young people back into studying medicine . What we see Going Forward is theres going to be about a 90,000position shortage across the country. As you know, weve never been producing enough physicians in this country to meet the demand. Half of those are going to be primary care physicians. Even if we open more medical schools, were still not going to be able to fill the need immediately. So were going to see more physicians assistants, more nurse clinicians looking after people in the primary care situation. So everybody can practice at the top of their licensure, and you will see a change in where health care particularly primary care is administered, and the people that youll see who are doing it, you may not see a doctor, youll see a physicians assistant instead. Significant changes are coming in health care, which is the second largest industry in the United States right now. Given our demographics, that is just miserable news. Finally, doctor, would you young woman or man comes to you saying im looking for a career in medicine, what do you tell them . One of the good things in medicine, people dont usually go into it for the purpose of making money, they go into it for helping people. If you want to make money, there are probably prochgss that youll do better. The satisfaction you get of looking after people and having a very healthy wage as a result of that is incomparable. If you can get past with dealing with the Insurance Companies, i bet you it is a rewarding job. Dr. Cosgrove, thank you very much. Thank you. Still ahead, much more on the markets. The economy and the fiscal cliff with henry mcvey. Head of global macro and asset allocation. [ male announcer ] when it comes to the financial obstacles military families face, we understand. At usaa, we know military life is different. Weve been there. Thats why every bit of Financial Advice we offer is geared specifically to current and former military members and their families. [ laughs ] dad dad [ applause ] [ male announcer ] life brings obstacles. Usaa brings advice. Call or visit us online. Were ready to help. [ engine revs ] [ male announcer ] oh what fun it is to ride. Get the mercedesbenz on your wish list at the winter event going on now through december 31st. [ santa ] ho, ho, ho [ male announcer ] lease a 2013 e350 for 579 a month at your local mercedesbenz dealer. Greenberg is out with his list of the worst ceos of 2012. Number five for us . All day long ill be doing this. Who is the worst ceo of 2012 . Somebody whos been on the worst list in prior years, but is on my list for the second year running as a nominee, Antonio Perez of eastman kodak. This year, the company filed for bankruptcy. And thats after years of promising and underdelivering. There was even his initial push after he took the job in 2005 into consumer printing. How did that go . It failed. More recently, theres been an effort to sell kodaks patents, which the Company Originally valued at 2 billion. But most recent bid from apple and google appears to be something closer to 500 million. We have no idea how that whole thing will go. But surprise here is that perez is still running the company. Back to you guys. Thank you, herb greenberg. Looking forward to four, three, two and one, for sure. What would the holidays be without a little liquor in your cabinet. 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. Chip stocks have been on a tear lately. Brian sullivan has a quick market check. Everybodys moving to flash memory, and nobodys going to use the traditional hard drive anymore. Its all in the cloud. Well, dont tell that to sea gate. Seagate is off the highs of august but nearly doubled in a year. The move here, technical. Youve got 200day moving averages for seagate. It took a dip the last couple of months, but its on its way back the last couple of days. So seagate, despite all the calls for everybody never using a hard drive again as long as they live, seagate is bucking that trend. Brian, i also think thats interesting. Whats worth noting is the cloud services, they use hard drives to store the data. So those drives are in fact in demand, just not at the consumer level. Seagate up a percent. From christmas to new years, the season almost always means holiday parties, and cocktails. Can the Spirits Company keep the profits flowing. Bryan fry is ca ceo. I want to start on the whiskey trend. I did not realize how significantly sales of whiskey seem to be increasing in the u. S. Why is that the case . Absolutely. I think weve got a great situation. Whiskey following the Irish Whiskey and scott whiskey, all categories growing strongly. Very much led by irish and single malt. American whiskey is back in trend. How does that actually occur . Is that because bartenders offer it more often . Because you guys are more adegreesively offering it, or all of a sudden people wake up and their taste buds say, oh, i like whiskey . I think its all three of those things. You know, just like a rye whiskey or irish in your coffee drink. And the bartenders drink of choice. If you want to buy the bartender a shot, they generally ask for jameson. And youve got a lot of young consumers, sort of lda, up through 21 years old up through 30. Many of those people are discovering whiskey as well, enjoying whiskey. When you say american whiskey, do you mean bourbon . Bowurbon and rye are leading the charge, absolutely. In terms of being the bartenders drink of choice, is that backed up by data . Yes. We all looked at each other like, really . We do research every year asking the bartenders what the drink of choice is, the number two drink of choice after tequila was jameson. So were extremely happy about that. I can see how younger people, they lose their taste for beer, acquire a taste for spirits as they get into middle age. It also requires a little more elasticity on price, right . Yeah, but i think whats happening at the moment with regards to xhoung consumers, and im talking 21 to 34yearold, what we call the millennials, theyre drinking spirits more now. This year we got 50 new innovations coming out. When you say innovation new products. New labels . Youve got two things, new labels, for example weve got b absol absolut, and another product like malibu red which we released which is a blend of malibu rum and tequila, putting it together. In terms of looking for that new experience, that new matchup that theyre enjoying dpl are there fewer options . You dont come out with a flavor of whiskey theres flavored whiskey on the market as well. Where were seeing a lot of growth is the more premium, and Super Premium whiskeys. Jameson, for example, its popular. But we also introduced 12 months ago jameson black barrel, which is a high quality again. And the single malts, like the 18yearold, 20yearold. What do you expect coming into the Holiday Season when can comes to one of your brands in terms of the bubbly, so to speak . Its interesting. We do onethird of our business just in the last three months. But for champagne, and bubbly in particular, its the last two weeks of the year where you do nearly 20 of your business. Thats a big time for celebration, holiday parties and everything. And the everything. And the great news is leading into this period. We had a good thanksgiving. Retail was up 6 . On the premises, growing 7 leading into the holidays and early indications are this is going to be a great Holiday Season. Were pretty happy aconfident. A manufacturer was going to forego sales of a certain product because the vintage that year was not good and would rather sacrifice the revenue than put out a substandard product. Has that ever happened . Yes. You normally make those in the years where the vintage, you know, allows you to do that. So we will forego years and hope the year before was a bigger vintage so you have stock. Its just what it is. Youre dealing with a natural product and they are dealing with the weather. Thats what it is. How about china or europe . Consumption there trends . Yes, china is still going strong for us. You know, still remain very positive and europe is the situation there with the economics but in the end our business is, you know, its tough and were still seeing bright spots, particularly in Eastern Europe and still premiumizaition in europe so were positive. How do you get that moonshine to the market in. We dont do a moonshine at the moment. Does that have a brand name . No, were much more into looking at building on the strength with respect to Irish Whiskey. By the way, jameson is seen on the sides of buses s marketing going up instead of down . We put our marketing back to the level it was faster than any other company and in fact weve maintained that. So for a brand like jameson, we invest more on the bar tendtendd consumer. Were very happy where we are and the brand is growing 20 plus a year. Im not complaining. All right. Bryan, appreciate it. Optimism over the fiscal cliff. Some of the headlines notwithstanding. Dow is up some 50 points right now. Still ahead, henry mcvey as we continue to await these negotiations out of washington. Were back in two minutes. [ male announcer ] you are a business pro. Omnipotent of opportunity. You know how to mix business. With business. 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. I could get used to this. [ male announcer ] yes, you could business pro. Yes, you could. Go national. Go like a pro. We believe the more you know, the better you trade. So we have ongoing webinars and interactive learning, plus, inbranch seminars at over 500 locations, where our dedicated support teams help you know more so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. Our teams have the information you want when you need it. Its another reason more investors are saying. [ all ] im with scottrade. Can i still ship a gift in time for christmas . Yeah, sure you can. Great. Wheres your gift . Uh. Whew. [ male announcer ] break from the holiday stress. Ship Fedex Express by december 22nd for christmas delivery. Santelli exchange for you on this tuesday morning. Well head to chicago and rick at the chicago cme. Hello. Of course, everyone around every water cooler is talking about the fiscal cliff, outside of the horrible tragedy in connecticut. The sequestration that was put in place was put in place for a purpose, to create something so unruly that only sensitive people, of course, would avoid it and come to a solution. Didnt happen. Now and i was tough on senator corker this morning and part of me wants to apologize. But heres my issue. The republicans have risen above. There is little doubt in anybody minds that tacks are on the table. They are firmly on the table. Now its time to talk about spending. Okay . It isnt time to create another cliff after this cliff because we want to put a bandaid on it, of course. It just doesnt make sense. Now, i understand that the country, most citizens, including myself and everybody at cme understands that going over the cliff makes no sense. However, a bad plan that isnt going to be hooked into spending cuts you know, how many times have you heard, well, under the clinton tax code, under the clinton tax rate, under the clinton tax rates we did so well . Hmm. I have an idea. Everybody in the house and the senate, try this out for size. Lets go back to the same spending levels against gdp and taxes. Hows that . Does that sound pretty good . Because where i come from, when we raise this debt ceiling as i talked about yesterday to 22 trillion, i just cant even imagine i cant imagine theres a bandaid big enough to cover it. Although, although you just never know sometimes because sometimes when you need a 22 trillion bandaid, maybe we can find one. But is it really the way you want to go . Is our answer a bandaid this big . Is this whats its come to in this country . I leave it up to you. Carl, back to you. I want to know how you made that, rick. Is that adhesive . Does that actually work . Its going to hurt when you take it off. Rip that thing off, thats for sure. He is so creative. Very creative. With the dow up 61, a lot better than the early session would suggest, what are we going to talk about tonight . The mark can ket reaction on deal. We have mike santoli of yahoo and were talking about bank of america, certainly a battleground stock. So big show tonight. One thing weapon havent addressed, youre going to have oracle to deal with after the bell. Yes. It is a bit of a big earning week, at least a few highprofile names will begin tonight. We look for clarity on i. T. Spending, on market share, on cloud. Absolutely. Of course, well see if there are any other developments on the cliff because we were talking about the markets and the sectors that are most hit by a potential sector continue with the highs. Just a few points away from an alltime high. Well have hospital stocks. Its a market that seems to not really care where the headlines take us and they are sort of marching higher. Your reaction to the stuff out of d. C. . I think so. Listen, when you call people at this point, especially this time of year where the news flow is starting to ebb a bit, its all about what is going on. Theres a reason were so focused on it. Its what investors are also focused on. You are going to be in a market where many of those press conferences are going to be potentially news worthy. Especially as volume comes down. Well see you a little later on. Heres what you missed earlier this morning if youre just joining us. Announcer welcome to hour three of squawk on the street. Heres what is happening so far. I am opposed to rising above. I think we should go over the cliff. I think we should take our broccoli. I think we should start paying our bills and not pretend that we can use this snake oil to keep medicating the economy. Were not close to a deal and ive been trying for three weeks. Ive tried to stand on my head doing cart wheels to pivot towards entitlement reform. This is this is not a deal here. The only thing we believe holding the market down is the potential for consequences of the fiscal cliff. You get movement there and i think you take out the highs of the year and heads out towards 1500 pretty quickly. Folks, were hoping that we were marching twaurds a grand compromise, an agreement that would fit many of the different components and corkers implication is if youre reaching any compromise its a bandaid and a shortterm solution to get you into next year. We do not have a balanced plan when the president is calling for 1. 3 trillion in revenue and is only going to put 8 billion cuts. Announcer the countdown for christmas is in its final week. Are you ready . Good tuesday morning. The markets have had a bit of a wild morning. Headlines are fluttering out of washington. The dow is up 58, 59. S p up a little more and nasdaq up 25. Fng financials have been gaining. Meredith whitney ups b of a and citi to buy from hold. Goldman is positive from neutral. Lets get the resort to what they are calling plan b in the fiscal cliff negotiations. Can washington rise above in trying to get a deal done . Well go to washington for the latest. And can kkr global get a deal . And then every childs favorite shopping location, toys r us staying opened for 88 hours straight. Can the toy titan keep up with the likes of macys . The ceo will join us live. Well start with the cliff, though. House Speaker Boehner remaining hopeful that a deal can be reached but that the president has yet to offer what hes calling a balanced plan. Our aim economy monday jaf verse is live. Good morning. Reporter good morning. Briefing them on where they stand on fiscal cliff negotiations with the president and floated this idea of a twotrack process where they would go ahead with a plan b option. Take a listen to the speaker talking about what this plan b would actually be. Our plan b would protect the american taxpayers who make a Million Dollars or less and have all of their current rates extended. I continue to have hope that we can reach a broader agreement with the white house that would reduce spending as well as revenues on the table. Reporter but this is a fastmoving story, carl. And just within the past few minutes now, harry reid came out and said, not too fast on this plan b. Hes saying that he doesnt think that such a plan b option could actually pass. So he is pushing back on the republicans who are pushing back on the white house here, if you can follow that whole chain of events. Basically, the democrat want the deal. He says if we cant get the deal, were going to go to plan b. It raises the question, eamon, as to whether this is intended to pass or is more of a leverage tool in dealing with the white house itself. Reporter thats the absolute right question and my take is that this is leverage. This is negotiating. This is the speaker saying im not walking away from the table but im preparing in case these negotiations dont bear fruit here. Im preparing for Something Else that i have in my hip pocket because we dont want to raise tacks on most americans and were going to have a plan in place not to do that. That puts the pressure on the white house to come back with another set of numbers. They came forward with a proposal last night, the speaker folks telling us they dont think its a balanced plan. The speaker kind of telegraphed where he thinks this ought to go and its about a trillion dollars in new revenue in exchange for a trillion dollars in new spending cuts. My guess is thats where were going to end up, something very close to that number. Eamon, we know that youre on top of it. Well come back to you in a little while. Lets get to Brian Sullivan for a market flash here at hq. Brian . Baker hughes, the stock is actually higher despite the fact that it cut its outlook for sales and margins. Perhaps analysts were expecting worst. Remember, they warned as well, Morgan Stanley downgraded the stock this morning. However, the target for Morgan Stanley remains at 50 bucks. Bhi was at 50 bucks a share a couple of weeks ago. Baker hughes i guess the idea is that people thought they might cut but they did, just not as bad. A big problem for the drillers is despite all of the fracking optimism, they cant find workers. Its hard to get the workers and equipment where they need to be fast enough. Sometimes there are manpower sho shortages. One of the man bites dog stories. Thats for sure, brian. Thanks. Youve heard from house Speaker Boehner that we may be inching closer to a deal. But from europe to asia and beyond, how is the world shaping up for 2013 . Joining us is henry mcvay from kkr. Henry, its good to have you back. Youve been to china a lot in recent week. We keep trying to make sense of the data that comes in from china overnight. Some of the Industrial Production numbers. Remember, we have 16 businesses in china. I spent a lot of my time over there and weve got a great asian presence overall. So what are we seeing . One, exports are slowing and dramatic to europe. Thats a structural fen phenomena. The second major market is real estate and my assumption is that they dont want real estate to go up too much and they cant have it go down too much because it will hurt the bank. So were in a holding pattern. They are looking to liberalize the overall economy. Youve seen the stock market rally. Thats based on the assumption that growth is stabilizing and, more importantly, i think the new administration is going to try to do liberalize and the message is, dont expect us to lower rates to try to reduce growth. Thats what they did in the past that created bubbles and issues. I think what they are going to try to quietly do is stabilize the economy by focusing on liberalize zags of reforms and its horn when tao talked about gdp per capita, not just gdp. If they come up with that, its a big shift. China is a wild beast. We have to watch it. We spent a lot of time trying to make sure we do the right things for our clients but there are times of stabilization with a slight uptick. So its never going to be 10 but we can get used to 7 1 2. I think it will be 7 1 2 with increasing gdp per capita. I think china is a story in transition and its going to be a more volatile market and thats a very sensitive market that i would want to avoid. Can kkr we try to overlay that to the microinvestments and thats an area where weve been staying away from. Can you give me one example of that . Probably in most of the privates should keep it that way but its not an area. Our mantra has been to focus on consumption and weve been focused on export stories as well as what we think its really compelling. Well go to europe in a second. When the changeover happened, people said these guys are not reformers, right . They are not ushering a new group of guys. I think im not in that camp. I think they are going to have a methodical view. If youre in charge of china, youre actually not evaluated until youre a ten. Scorecard. So i wouldnt expect some fireworks. But i want to be very clear. I dont think Investors Holding their breath for Monetary Policy which is what they did after 2008 and 2009, i think they are going to be disappointed. Euro is at a high. Does that change anything regarding fundamentals . When japan went into inflation, the currency went up. I think what europe is telling you is even though theres a risk of breakage, its telling you deflation. Their banks are much more levered than ours. So to me there are other ways to be involved in europe besides the currency. We still remain very cautious on the Financial Services system but i dont think the currency is going to implode given what is reflecting to me is a deflationary income. We are moving up in the capital structure of year and trying to help small and mediumsized businesses when the big bank are shrinking. Thats happening slowly but what it allows is a firm like kkr to go in with its clients and help out small and medium size businesses grow. Weve done that across real estate and other types of industries. Thats working well. One last question there. Is the sweetest of the sweet a german manufacturer, a seimans or germany, the mark can kets has had a big run this year. There are other parts of europe where were poking around and we think its interesting as well. Good to see you. Come back again. Appreciate it. Up next, how the debate about gun control is already changing after last weeks shootings. Well talk with Richard Blumenthal fortunately connectic from connecticut right after this. When the conversation turns to knowing where you stand, turn to us. Wells fargo advisors. Private equity firm cerberus is going to sell its stake in the firearms maker. Good morning, mary. Good morning. They are reconsidering its relationship with cerberus. The reason being, the country largest gun manufacturer and the maker of the Assault Rifle used in fridays newtown massacre, the ar15 bushmaster. Cerberus said they are shocked and deeply saddened by the shootings in newtown adding that its not the private equity firms job to take positions on the now revived talks on gun control. Instead, they are deciding on another course of action. To sell Freedom Group and return money to investors, fulfilling its obligations to clients without being withdrawn to the National Debate with the former charter and public responsibility to do so. Known for past investments and troubled Companies Like chrysler, they have strong ties to washington, d. C. John snow is its chairman and dan quayle is chair of the Global Investments charm. They tried to take the Company Public in 2010 and withdrew the application in 2011. Carl, back to you. Mary, a lot of discussion about the investors who, once you are in, you are in. Some of these firms may want to lock in the support longer term. Thats true, carl. Thanks a lot, Mary Thompson back at hq. When we come back, the latest on Knight Capital search for a buyout. And telecom and Consumer Staples are the laggard with the dow up 86. Back in a minute. Were all having such a great year in the gulf, weve decided to put aside our rivalry. cause all our states are great. And now is when the gulf gets even better. The beaches and waters couldnt be more beautiful. Take a boat ride or just lay in the sun. Enjoy the wildlife and natural beauty. And dont forget our amazing seafood. So come to the gulf, youll have a great time. Especially in alabama. You mean mississippi. Thats florida. Say louisiana or theres no dessert. Brought to you by bp and all of us who call the gulf home. Tdd 18003452550 tdd 18003452550 and the streetsmart edge Trading Platform from charles schwab. Tdd 18003452550 gives me tools that help me find opportunities more easily. Tdd 18003452550 i can even access it from the cloud and trade on any computer. 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Remember you were in front of those aquatic the whales, the dolphins behind you. Yes those werent whales or dolphins. In the meantime, its coming on the back of a nice 90point gain on the dow. Thank you. Knight capital groups Board Meeting in hopes of a buyout offer. Kate kelly has more at headquarters. Kate . It is turning more aggressive as they battle for the upper hand. Final discussions begin on sunday and getgo will pay 3. 60 for as much of the outstanding shares of knight. They would keep knight public. Virtue has proposed to pay about 3. 20 per share and would privatize the company. If the rank and file and in share terms would have the more attractive offer and as the board gathers to talk further. Kate, bob pisani is joining us here at the desk for a quick conversation on this. It raises questions about the timeline here. I think the problem is, the reason this had is taking so long is its hard to figure out what getcos finances are and they dont make it public. The board is taking a lot of time to get information about what the fi nnances are so they can figure out they are offering half of that in cash. Thats 1. 80. We need to get to some comparable 3. 20. That means they need to fill in another 1. 40. They need to have a Company Valued at a very minimum and the stock is trading at 3. 30. Kate, there seems to be some indication, at least, that the numbers are looking fairly good, at least forgetco right now. It is complex and the complication that there are two complications. One is is they are going to issue new stock as well as new warrants and a range of stock prices depending on how long you hold the warrants. Its certainly north of a billion bucks. The other xfactor is they have a consortium of financing partners, including reportedly cerberus but we havent been able to confirm that. Theres a lot of rumor mongering back and forth, one side talking about the virtue financing issue and the other side saying that theres dislike of getco and loyalty to joyce. Final point, nobody else has emerged here. Ive been waiting for citudel to emerge. They havent. Maybe some people dont like the idea of another competing internalizer coming in. Its been very difficult to get a deal passed the publicly traded board with this controversy with knight with the issues around dodd frank. Thats an interesting wrinkle. Blackstone apparently talked to them early. It appears to be a twohorse race. Well, nice job moving the stock and a good bit of insight from both of you. Thanks, guys. When we come back, well talk to a newly appointed of the house member committee, Marsha Blackburn. It seems that everyone has an opinion on that. Were back in a minute. Ard, i love em even more. I earn 1 cash back everywhere, every time. 2 on groceries. 3 on gas. Automatically. No hoops to jump through. Thats 1 back on. [ toy robot sounds ] 2 on pumpkin pie. And apple. 3 back on 4 trips to the airport. Its as easy as. [ man ] 1. [ woman ] 2. [ woman ] 3. [ male announcer ] the bankamericard cash rewards card. Apply online or at a bank of america near you. The dow is slightly off of the high but not by much, bob. Boehner comes and complicates the fiscal cliff. It doesnt matter what boehner says anymore. Were going to get a deal whether he wants it or not. Thats what the stock market believes. We have a deal, we dont have a deal, it doesnt matter. We have a deal. You get the point . Theres a little bit were in a seasonal period here for what is going on here. So even with no deal, we see a deal. It doesnt matter here. But remember something, the seasonality factor, lets get in pay mode. This is when we make good money. December, january, those who actively trade the stocks here, most profitable period, you add to the winners. All right. So theres a little froth here. Theres a lot of talk about what you do after the fiscal cliff that really matters. Look at the dow industrial. Even as carl said, congressman boehner, the speaker of the house, complicating things, they dont care. Its that time of year where im starting to look at the full year. Heres the fiscal cliff in the last few months. Were up 14 for the s p. Thats above an average for here, for sure. We have sectors at new highs right now. Industrials are doing really well. Financials are at 52week highs. Banks are a big leader. Industrials at a twoyear high. Consumer discretion canary, and you can buy the xly. That is an historic high. Home builders and up 300 , get t. The eank home builder was up 100 and bank of america is the alltime leader for the year here, up 100 for the low price. It hasnt had as much impact on the Dow Jones Industrial average. Its a priceweighted index. Nonetheless, citigroup helping here. Jpmorgan and Regional Bank lagging the big money bank have had a good year. And just remember, some sense of a little bit of i dont want to say silliness. But we see a deal when theres no deal . I think it was cashin yesterday who said they are beginning to hear hear the jingle and dangle. And otherwise prohibitive. At least this morning, michelle, its not moving the stock much. And the construction of stores and shares of the company are up roughly 11 . And stock fell for roughly a week and one lawyer find it most and think it is a stretch. 150 million and to give you some additional corruption finds, is 1. 5 billion slush funds with highranking executives, and amnesty to any employees, 130 people came forward. Thus far, theres no evidence that alleged bribery was occurring on such a vast level at walmart and violations of the antibribery law and this is not done yet. When we asked mike duke, the ceo of walmart, when we might see the investigation, carl, he said he just didnt know. Thats amazing. Whether or not you agree with what the times are saying, michelle, they have put forward a heculean effort. The reporting is impressive. The granularity of the detail, every t has been crossed and every i dotted. Its impressive reading. It really is. Michelle, thanks so much. I want to get you a statement by the White House Press secretary jay carney in reference to the plan b that house oh republicans put together a few moments ago. Carney says, in short, the president is willing to work with republicans to reach a bipartisan solution. Is he not willing to accept a deal that doesnt ask enough of the very wealthiest in taxes and instead shifts the burden to the middle class of seniors. The speakers plan b approach dint meet this test because it cannot pass the senate and therefore will not protect middle class families. The president is hopeful that both sides can work out the differences. Clearly the white house not impressed with plan b. Straight ahead, Marsha Blackburn joins us live to talk about the fiscal cliff. Dont go away. [ male announcer ] you are a business pro. Executor of efficiency. You can spot an amateur from a mile away. While going shoeless and metalfree in seconds. 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. Now this. Will work. [ male announcer ] just like you, business pro. Just like you. Go national. Go like a pro. Can i still ship a gift in time for christmas . Yeah, sure you can. Great. Wheres your gift . Uh. Whew. [ male announcer ] break from the holiday stress. Ship Fedex Express by december 22nd for christmas delivery. By december 22nd. 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 . Coming up on halftime, if d. C. Reaches a deal, is oracle the stock to own . And a bold call on the price of crude in 2013. Carl, well see you in 20 minutes or so. Scott, see you then. In the meantime, i want to bring in Marsha Blackburn to talk about the fiscal cliff and what a day weve had already. Congresswoman, thanks for being with us. Good morning. Good to be with you. Thank you. Lets back up a little bit this morning to what youre calling from sen see bob corker said on our air. That was in response to the white house offer overnight, still no likelihood of a deal. Why so negative . Well, i think you have to look at the fact that for about 19 months we in the house have been sending things to the senate and to the white house. I mean, its been over 1300 days since the senate did a budget. Every person in america sees their tax rates stay where they are right now. Weve passed bills to deal with sequestration. Weve passed it to deal with reconciliation. All of that is in the senate. I guess harry reid and the president are dug in. They want this fiscal cliff to happen. We keep working at it trying to prevent it. The white house moveses from 250 in terms of people whose taxes will go up to 400 and the speaker is at 1 million. Theres been speculation that maybe the two could meet at 500. Why is that not happening . You know, go ask the white house. I think thats a good question to ask them why there is not movement. And many of us feel like youve got to have some spending cuts. Look at the 16 trillion debt that we have. You have to get the fiscal house in order if you do not do something about entitlement reform, about the spending that is out of control. Youre still going to see a downgrade when it comes to the rating agencies and when you have even many of the democrats now beginning to say you have to take a look at the spending and you have to take a look at entitlements. I think the white house would be wellserved to look at some of the things that we in the house have passed. The senate could go to conference on any of these bills they wanted to go to conference on. They are not doing it. I think that they are fine with people having their taxes go up. We in the house are not fine with those taxes going up. We want to make tax reductions permanent and the spending needs to come under control. Talk to me about the reasoning behind this plan b that the speaker rolled out a short time ago. White house senator read saying that there are not the votes to pass it. Weve seen some Republican Congress people say im not voting for it. I didnt come here to vote for anyones taxes to go up. Is this actually intended to get past the house floor . Well, a couple of things. Number one, i commend the speaker for continuing to work on a plan b and for returning to regular order in the house, which is what we ought to be doing. We need to take it it to the senate. We need toll send it to the president. He can sign it or veto it. But we are separate branches of government. Were going to take our action. Now, lets see what ends up in plan b. As were talking about this, lets see what is going to come out of the ways and means committee, out of budget committee, and see where we are going to end up with this before we decide to aye or nay it. Our goal is to make sure that nobodys taxes go up and that we get the spending and the entitlements under control. Because if youre going to get the fiscal house in order, and if youre looking at 1 1 2, 2 growth, its not going to get you where you need to be. No. At least not any time soon. Finally, its been reported that at least the main sticking points at this hour and this could change soon continues to be the medicare age, number one, and number two, whether its one or twoyear vacation from the debt limit. Does that sound accurate to you . You know, youre hearing lots of Different Things. There are different options that are there for medicare, for making certain that the promises are kept to seniors and near seniors and that there are options for younger workers. I think that youre going to see that debate take place over the next three months of next year, quite frankly. I also think that when it comes to the debt ceiling, that is the jurisdiction of the house. We are the ones that need to be taking the actions. The president needs to be coming to us. We can allow or disallow and, quite frankly, i think a lot of people are at the point where theyve watched this administration with the 1 trillion plus deficits every year. If we keep this up, by the time we get to 2020, were going to be in the shape greece is in with 152 of our gdp being locked into debt. We cannot sustain this. You have to begin to make some systematic across the board and detailed reductions in this spending discretionary and on the entitlement and you have to deal with the trust funds and treat them as trust funds, not as passthroughs to the general fund. Congresswoman, thank you very much. I know its a busy day. It is. Thank you. Congresswoman blackburn. Steve liesman is working on this since late last night. At the very least, steve, its high theater, wouldnt you agree . High theater and complex math, carl. What we want to do is concentrate on what i market really cares about. How far apart are the sides . Unfortunately, it is so complicated we can only do one piece at a time. So were only in this presentation going to talk about revenue, not spending. And i have to say, these are the best available numbers . Are they the actual numbers . We have only run them by each side and they have said that they are not far off or as close as you are going to get. The first thing we want to look at is tax increases. With the new proposal from boehner and obama, it looks like there are 140 billion apart by the democrats measure. However, use the gop measure and they are saying that the democrats are not counting 95 billion that comes from a change on the spending side. That has to go with going to the changed cpi. Youre going to want to watch that 95 billion figure because when they Start Talking about revenue, that number is going to come into play here. Lets move on to deductions. It looks like best available data that they are probably closest right here, with the 28 cap on deductions from the Obama Administration and the numbers that we think are coming out of the gop, about a 40 billion difference where in this one case the gop is ahead of the democrats. Moving on, the estate tax. We know the Obama Administration wants to go back to the 2009 level. That raises 100 billion, as far as we know. The gop does not want to do that. Okay. Youve been through the math. Now lets total it up. What are the differences here . On one measure this is pretty much the democrats measure. Its a 200 billion difference. Again, only on revenue. Add back that 95 billion that the gop says and its a 300 billion difference. Carl, all i can tell su that were working the phones hard on the spending side and we have the administration trying to get a bit more about how they would do it. This right now, one more look, 200 apart by the dems measure and 295 on the gop measure when it comes to revenue. That should help people begin to price how close they are in coming to a deal. Steve, two things come to me. One is the perfect being the enemy of the good and the what . The comments this morning about the light at the end of the tunnel. It doesnt look like a large difference. It doesnt but the question becomes the 95 billion which i can be happy to explain to you. It has to do with moving the cpi effect on tax rates. If that becomes a sticking point, it looks like deductions are okay here. But this is where the rubber might meet the road, is tax increases and the estate tax and then its all going to figure in with spending and i, frankly, carl, have not figured out how to bring it to you in at least a coherent way. Ill figure it out. Luckily we still have the big brain working on steve. Well see you later. Some countries are pushing for the internet to be controlled by the u. N. Well figure out what to do to keep that from happening after a short break. Its a new day. If youre a man with low testosterone, you should know that axiron is here. The only underarm treatment for low t. Thats right, the one you apply to the underarm. Axiron is not for use in women or anyone younger than 18. Axiron can transfer to others through direct contact. Women, especially those who are or who may become pregnant, and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. Report these signs and symptoms to your doctor if they occur. Tell your doctor about all medical conditions and medications. Do not use if you have prostate or breast cancer. Serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet, or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. Common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. See your doctor, and for a 30day free trial, go to axiron. Com. The u. S. Was one of 55 nations to refuse to sign the treaty last friday fearing that it would open the door to online censorship. Rick santelli has a lot more on that. Tell us about it, rick. Absolutely, carl. Ive been watching this story for months now. Thanks for the likes of google as the u. N. Tries to take over, moderate, become the referee for one of the greatest job creators, one of the most creative endeavors, and thats the internet. So two weeks prior to last friday, 149 countries you all got together at the world teleconference and we do have ambassador terry cramer. Welcome. Thank you. Maybe you can tell us exactly what most americans should be aware of when we name countries like north korea, china, russia, the arab lock that are trying to control the internet and i find it fascinating that among the biggest trading partners, tell us what is going on. Rick, its supposed to be on telecommunications, not on the internet. And what became clear very early on is proposals that you mentioned from russia, china, a variety of arab states to interject the internet into the discussion. As you know, there are two big concerns with that. Number one is freedom. We do not want to create even the smallest of doors opening that would run the risk that there would be content censorship. The second thing is, it provides a huge wealth of opportunities and it does well candidly when its being left alone. When innovation can happen, infrastructure side, content side, et cetera. So we made a very strong statement at the end of the conference a that we were not going to sign this treaty. We had, as you know, 55 nations said either they were going to not sign or think about it more, which obviously is a sign of more concern. And this is part avalon ger, broader discussion that needs to happen about whats going to allow the internet to succeed. I think that many of president Barack Obamas programs i disagree with but i do believe that he appointed you and i am fully behind his approach regarding this issue because it seems clear that the Current Administration thinks like you and i do and that they should leave the internet alone. Is the cat already out of the bag . Is the camels nose already in the tent . 55 nations might have already walked out on this but the union is still going to be active. So what can listeners and viewers do to send a message to stand firm on this issue, sir . Yep. So youve got exactly the right message. The positive outcome of this treaty is weve gotten very explicit about the importance of Internet Freedom from a commercial standpoint, from a free speech standpoint. Weve been very clear. There are a lot of other nations with us on that. This is going to be a discussion that will have to continue. This treaty does not go into effect until 2015. All of the nations that do not sign like us are not bound by this treaty. We go back to 1988. The ones that do sign this do not have an enforcement mechanism. So the bigger issue here is that we have to keep advancing this dialogue about the risks to the internet. We need to keep advancing the importance of broadband deployment and through that process im confident that people will see the benefit of the internet and economies and citizens will see the benefit. Were going to have to leave it there. We are a bit short on time. I thank you for what you are trying to do. And americans out there, stay on this issue. The internet is a great, free place to do commerce, to interact. Lets not have that all taken away from us. Carl, back to you. Interact watching rick santelli, thank you very much. At one point we all wanted to grow up. We just wanted to be toys r us kids. Courtney reagan is in times square. Thats right, carl. I do get to be a kid here in times square at toys r us. This store has been opened for 24 hours a day for the last 16 days. What santa has been shopping for, thats coming up on squawk on the street. Tdd 18003452550 lets talk about lowcost investing. Tdd 18003452550 at schwab, were committed to offering you tdd 18003452550 lowcost Investment Options tdd 18003452550 like our Exchange Traded funds, or etfs tdd 18003452550 which now have the lowest tdd 18003452550 operating expenses tdd 18003452550 in their respective tdd 18003452550 lipper categories. 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You can obtain tdd 18003452550 a prospectus by visiting tdd 18003452550 www. Schwab. Com schwabetfs. Tdd 18003452550 please read the prospectus tdd 18003452550 carefully beforeesting. Tdd 18003452550 toys r us is on almost every parents list. But can the toy store come out on top this year . Courtney reagan is at the store in times square. Reporter this location has been opened 24 hours a day. How is the Holiday Season gone so far . Were almost done. Final stretch. Well, were very excited about this weekend. Every report says its going to be one of the biggest weekends in history for the retail industry, especially saturday. They are calling it super saturday, you know. I heard they call it fathers day because a lot of the dads need to pick up the stream that they have lost out on over the season. Were not taking chances. Were opened every day this week from 6 00 a. M. Until 1 00 a. M. And starting on friday, were opened 24 hours a day from 6 00 p. M. Friday to 10 00 p. M. On Christmas Eve monday. Reporter now, earlier in the season you had a little bit of trouble, at least for the Third Quarter, with some of the promotions and a lot of the folks putting items on layaway. Now i assume theyve had to pick them up and pay for them. The layaway was due to be picked up on sunday. We gave amnesty midday on went. Most of it has been picked up. Well really pleased with our pickup on lay away. A lot of people came back from laying away from september and october. They showed up over the last week to pick up. How is the response been with the holiday programs that youve offered this season . Sure. Toys r us has more toys than anyone, toys that you cant find anywhere else. This year we added a price match guarantee. So if by some miracle, despite all of our fantastic deals and great pricing, you should find it less expensive somewhere else, well match it. Reporter youre in 35 countries. Whats the consumer like in europe, japan . China . Well, everyone read the same book. They know that christmas is a week away on tuesday. Reporter softness in japan . We dont know yet . The world is the same all over the world. Thing were strong on black friday, then in the industry as a hole we saw a lull. Theres been a lot of reports about that and its expected to pick up this last weekend heading into christmas. Reporter what about the hot toys that are still left . Well, we have a lot of toys that are left because we are toys r us. The tabio is 149. 99. Angry birds, et cetera, so they dont have to bother your ipad in order to do it. Thats very hot. Lego is very hot. This year they are both very, very hot. Angry birds is hot. Anything angry birds but particularly angry birds construction is selling well. And we would be remiss if we didnt sell ferbie. A lot of inventory left to sell here. Were running out of time. Your hourses are extended. Youre going to make it easy for the consumers. Pretty much. Come on down to toys r us. A lot of hot toys in stock but cant promise you that all the way. Its