Transcripts For CNBC Squawk On The Street 20130111

Infrastructure, health care costs. I can go on and on. Even the guns issue. The show is over. Thank you for being here. Its a pleasure. Thank you, david. Have a great weekend, everybody. Right now its time for squawk on the street. Good friday morning. Welcome to squawk on the street. Im carl with melissa lee, jim cramer, david faber at the new york stock exchange. Lets look at futures on a friday morning. Mild action here. We are paying attention to the mutual fund inflows. As for europe, disappointing Industrial Production numbers in spain and the uk. But the euro is at a ninemonth high this morning. We begin with the s p, a fiveyear high. A lot riding on Bank Earnings. The reports not perfect. American express joining the list of financials that are cutting jobs. Best buys troubles continue. Theyre not the only retailer under pressure this morning. Jcpenney capping a bad week. Boeing under official view as a probe is taken on the plane. A cracked inshield and oil leak. Remember a cheaper iphone . A top apple executive said forget it. The Company Continues to focus on china. Well kick off with wells fargo, kicking off q4 results. The lending business came in a little bit lower than many analysts expecting. The numbers coming out after American Express announced plans to cut 5,400 jobs and the s p closed at fresh fiveyear highs. Jim, its been said, wfc, probably the most important report of the week. What kind of grade do we give it . The whisper was they werent going to do this anyway. I dont know anyone would think they would people were certainly thinking because the stock market was 32, 35. Maybe somebody knew something. But in the end, they didnt do the net margin. The numbers will come down. People will trim numbers on wells fargo. It is still the best bank. They have too much money. The deposit growth here is unbelievable. But in this environment, people want Net Interest Margin. They want the bank to make more money or more mortgages. Some banks out there, just declined only six basis points. Thats how optimistic some on wall street will be going into this quarter. The sequential decline, its 3. 56 for the Fourth Quarter from 3. 66 in the third. As you mentioned, tenbase point decline. So that picture has been dimming a bit. Total lending has increased. Not enough to offset the incredible increase in the deposits. What did they take in over 30 billion in the quarter. 12 annualized. Even with that rescinding of the insurance beyond 250,000, still deposit flows. Yet you cant put it into productive loans or you dont want to because you worry about credit quality and we end up with contracting energy look, were at a moment where i dont think anybody whos got a mortgage, they know theyre getting a good price. The ohio regionals are going to do better. That welgs is now a sale. Look, wells could go to 33. If it had been to 32, it will go to 33. It ran to 35. 40, and the group got ahead of itself. But remember, this is a temporary problem. You have millions of people coming on air every day saying, the feds going to have to raise rates. If thats the case, wells fargo is your number one stock. Meanwhile, is American Express adding to what Morgan Stanley has done, what citi has done, and that is trimming their work force. In this case, you could probably argue by a more significant level, right . And for different reasons, yes. Thats really the pressure from the digitization of the travel business as opposed to Morgan Stanley. The digits getting smaller and smaller in terms of the Profit Margins there. I was thinking, you know, i remember thinking taking trips with my father in the 70s, you couldnt travel around the World Without American Express travel offices. Thats a world away from where we are now. Lets point out that ken chanault, december of 2011, now they had 12 separate days during the 2012 Holiday Season why they needed the authorization approvals. When you go shopping with me and i say, ive got to get that authorized because youre blowing out the budget, thats a positive sign for the american consumer. Some guy was using my card in chicago at Dunkin Donuts over and over and over. Is that true . Yeah. What were they buying . 9, 8, 9, 10. Use a couple hundred, come on. They didnt catch them. Thats interesting. Sorry. These are all really interesting. Joe made a great comment this morning is you have to understand, you have to read the release. They see the headline number, and then people start looking at it, hey wells fargo, instantly 35. 80. Guys at home, listen, these are complex metrics. This is not kellogg. The wells release was 46 pages . Yes. Jpmorgan, you know, if you wanted a page analysis, pri pricetopage, jpmorgan will take you an hour. People instantly have you have no idea what it is. What about the idea were getting back to a more normalized economy where we may see stronger growth than anticipated, and that interest margin has bottomed. You just need construction loans. If you think construction is coming back, wells will prove the numbers in the second half. Were seeing wells fargo decline, a lot of the other financials which led the s p 500 to fiveyear highs yesterday, pull back a touch. This is what weve seen in the past where one financial report, sets sort of the tone for the rest of the group. We see the group move in tandem. What do you do here . Its not a disaster. The last quarter was very disappointing. There are people who have this number, and it didnt make economic sense. I think the group could cool for a couple of days. Youll get regionals that are good. The internationals may not be good. Ill Say Something that will bother david. But if you want to know the bank to own, it has been the bank to own since the bottom, who has more interest margin thats growing . Who is taking over the world . Who is it . Look at that. Wow. You can reinvest, put it in your i. R. A. This is where the Net Interest Margins are expanding. The best bank stock to own for the next six months. And it will continue. Theyve got the numbers you want for american banks. Cfo of wells fargo is going to be on the program at 3 00 this afternoon on the closing bell. Wonder ceo. 11 kids. Great costco walmart thing. They did take over the country. Before people were like, i have to sell that stock, remember, they became something that jefferson and hamilton would have fought forever. Concentration more than 9. 9 in this country was never the case. Hes got 30 . Warren buffett has been saying, this is the best. It was up 20 last year. Also trades at a multipletobook far above thats because its a bank. Do you want that . Thats going up. You have to go worsttofirst look, this is a magnum com laud stock. I dont know what you think. I think magnums good. Not in my household, my friend. Really . Jack lumas. Now weve got simon and garfunkel and jack lewis. Reporting the domestic holiday samestore sales for the retailer down 1. 4 , above wall street forecasts. Also cutting the Free Cash Flow estimate, downgrading jcpenney from a sell to a neutral. They believe a deteriorating outlook and cash flow distress will require major changes to the Department Stores chains turnaround strategy. These seem to be cash flow stories this morning. The release for best buy this morning was curious. I felt like they were talking around the problem. Talking about accounts payable. The velocity of merchandise. And that they were going to initially stick by their estimate given on november 20th, because Gross Margins and inventory came in below line. They have to actually take it down. And he left the end of it saying, bottom line here, Free Cash Flow is actually going to be lower. A lot lower. Than you said originally. 50 million to 1. 05 billion. That was november 20th. Here we are less than two months later, theyre talking about half a billion. The sales number was not bad. So the question i have for you is, what do you buy the stock on . Is it based on the sales, or is it based on the cash flow number . We can talk about the lbo later, because their cash Growth Matters a lot more. Id go to axition at home. David straser on our air, very often, he says, basically, look, this was better than expected. Domestic holiday comps. Better than suisse estimates. We have a company that are the worst Comp Store Sales ever. I think in the end, i think strategists say theres a floor in the stock. If you pick a margin now hes looking at what the street was looking for versus what they did. Hey, you know, i just think that that is what people are going to be saying. We dont know what high velocity items are. I have no idea. Maybe its look at it this way. Someones going to touch you but you have a cold. Clearwire, im reacting to hewlettpackard. Im reacting to clear wire. Im reacting to sirius, im reacting to sprint. Why are you changing the subject . Because we were other companies i thought were dead. And they ended up getting something. Theyre not dead. They were looking dead. Here, come in the store, well lose money on everything we sell you. And put up a good Comp Store Sales number. Unless you shoot best buy right in the head right here, it is going to continue to take over. Declining cash flow number means that gets tougher in terms of an lbo. Were talking 25, even 17 would be reasonable number. But very hard to finance. Biggest gainers of the year with a 5 billion market cap, facebook, nokia, micron, hp. Its hard to dismiss. Im going over hewlettpackard numbers yesterday. And centure, s. A. P. Is killing them, but guess what, the thing is a vampire. At the 14 level, its a vampire. So now theres best buy hewlettpackard at 16. Whats going into the comp for a hundred years . Its a velvet cost. Meantime it continues to be a bumpy week for the boeing 787, hit by two more mishaps in japan and under more scrutiny from the faa. Phil lebeau joins us this morning from washington. The faa announcing in about 15 minutes a special safety review of the 787 dreamliner. Well be hearing from secretary lahood, along with boeing executives in a bit. Heres what the safety review, what it basically comes down to is this. Theyre going to be looking at the 787s electronics and specifically also looking at the lithium ion batteries. The manufacturing process also under review. An important point, though, the planes will stay in service. You talked about two incidents overnight in japan. These dreamliner incidents happened on an airway that involved a cracked windshield, another was an oil leak on a dreamliner. Neither incident resulted in any problems for the crew or the passengers. We talked with the head of Public Relations for el nappon airways. The question is whether theyll stand by the 787. Heres what they told us, were confident of the safety of the dreamliner and have no plan to conduct any actions to the remaining 787s. If you take a look at shares of boeing, weve been in risk territory. Weve been there all week long. Even though its an oil leak, they happen all the time in the aviation industry, its going to get reported because its the dreamliner. The head of the boeing will be with lahood. Is the thing to watch for now is a directive from the faa that would involve a changing of the manufacture or design . I think if there is a directive, that changes the manufacturing design, thats not going to be a huge deal. I think people who look at this will say, that makes sense. Youre reviewing how this plane was manufactured, et cetera. If theres a directive saying we think theres a more serious issue, that escalates this review and makes it much more serious than it is right now. Look forward to talking to you in a bit about what that press conference brings. Tough story. I think remember, phil did use the term headlines. I believe mcinerney, i believe this could be big. But the longer, the more people get beating down, people say i cant take the stock anymore, bouncing from 74 to 76, is the bounce less pronounced . I dont know. Tough stock to own. Given the fact that you can own united technologies, take that risk, honeywell, thats a much lower risk because theyre in everybody. Good point. When we come back on this friday, apple in the china spotlight. Well find out what Company Executives are saying about the possibility of a lowend iphone. And about dominating the chinese market. Also, the transports youve probably noticed trading at 18month highs. Airlines, railroads. Well talk about which ones may help you ride that rally. One more look at futures. Were back in a moment from the nyse. At 1 45, the aflac duck was brought in with multiple lacerations to the wing and a fractured beak. Surgery was successful, but he will be in a cast until it is fully healed, possibly several months. So, if the duck isnt able to work, how will he pay for his Living Expenses . Aflac. Like his rent and car payments . Aflac. What about gas and groceries . Aflac. Cell phone . Aflac, but i doubt hell be using his phone for quite a while cause like i said, he has a fractured beak. [ male announcer ] send the aflac duck a getwell card at getwellduck. Com. Apple responding to speculation about a lowend iphone. A chinese newspaper is told apple will not resort to a cheaper iphone. A Chinese News Agency quoting tim cook as saying, he expects china to overtake the u. S. As the companys largest smartphone market. Premarket trade, apple shares trading a little bit lower here, about 3 lower at this point. Apple cant get out of its own way. Still wants to go out yesterday i had lunch, a guy says to me apple. Help me. Apple, help me. What am i going to do, take it up . Intel, chinas market went to the number one market for intel a decade ago. This has to happen. It has to happen in order to be able to grow. I keep coming back to, samsung has the hot one. Arm holdings, theyre in apple. People are saying, look, i cant take apple anymore. Now, remember, it is at 520. And maybe inside of apple you play like qualcomm, which gets into device, not just an apple device. Qualcomm is estimated theres about 4 to 5 of content in every iphone, and that is about the same as samsung. Thats the ultimate i went out and saved money with qualcomm. Scott mcgregors got it down. Its in everything. Amen, qualcomm. Still in the smartphone space, r. I. M. Having what is like almost an echo of past headlines. That is more trouble with service in the middle east. I think asia no, middle east africa. Africa, yeah. And indonesia. Thats where theyre headquartered, isnt it . Big population there. Another downgrade today. Its really the new iteration is apparently not taking the world by storm, right . You switched. Everybody switched. I switched. You switched, right . Growing work horses here, this is the bmo. The stock, people didnt like the last quarter. Left for dead at 7. Did go to 13. Yeah. By the way, this is another best buy. In the sense that theres a floor. The term that straser did say theres no real term. I dont know if theres a real term. I think the stock turned. Best buy, the stock turned. But theres no real turn. I just want to make sure groupons up 90 since november. Tim was on in squawk, hes a great fidelity analyst. He said we got so oversold in some of these stocks that were still dealing with the bounce. I thought that was right. Some of these stocks, 2 1 2 for sprint, 90 cents for clearwire. We really did get hammered. When we come back, how do you end the week on a profitable note. Cramer will show us the way on mad dash. More squawk on the street is back in a moment. I am probably going to the gas station about once a month. Last time i was at a gas station was about. I would say. Two months ago. I very rarely put gas in my chevy volt. I go to the gas station such a small amount that i forget how to put gas in my car. [ male announcer ] and its not just these owners giving the volt high praise. Volt received the j. D. Power and associates appeal award two years in a row. And im here to tell homeowners that are 62 and older about a great way to live a better retirement. Its called a reverse mortgage. [ male announcer ] call right now to receive your free dvd and booklet with no obligation. 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From minus 20 . Look, guys, you cant run a company at that level. You cant fire people fast enough. You cant take merchandise out of the store fast enough. This is very worrisome report. The preferred is what i like to watch because that had a big move over 19. Carl, i dont know. This is an obituary. Now, of course, they have a caveat, you know, maybe things can be okay, come back. We still believe jcpenney is repairable. Its kind of like the debt thats maybe greatly exaggerated, but holy cow. They say any fix will require a change in the turnaround when you go back to the discounted idea. In that case, it deserves a premium like most traditional Department Stores. Exactly. Ive got to tell you, i go to my jcpenney in midtown, and its cool. They have pretty good stuff. The store that, you know, i dont want to write them off. But this is a writeoff. Yeah. You dont see a sell too often from guys like that. Wow. Well talk about it more in a minute. The faa as you just heard, about to hold a News Conference in washington on a plan to launch a special reviewing of the boeing dreamliner in the jets latest mishaps. Should you hop aboard the stage coach . Wells fargos earnings are out. [ male announcer ] some day, your life will flash before your eyes. Make it worth watching. Introducing the 2013 lexus ls. An entirely new pursuit. Nothing. Are you stealing our Daughters School supplies and taking them to work . No, i was just looking for my stapler and my. This thing. I save money by using fedex ground and buy my own supplies. Thats a great idea. Im going to go. We got clients in today. [ male announcer ] save on ground shipping at fedex office. [ indistinct shouting ] [ male announcer ] time and sales data. Splitsecond stats. [ indistinct shouting ] its so close to the options floor. [ indistinct shouting, bell dinging ]. Youll bust your brain box. All on thinkorswim from td ameritrade. 90 seconds to the opening bell. You are watching squawk on the street live from the Financial Capital of the world. Putting a friday session together, after a heck of a week. Covered a bunch of names, guys. Axp, ba. One weve not gotten to is 3m. Basically saying the stocks boring. Theres years of metric that he uses to sprain wexplain why underperformed. I think youre selling this too soon. This is a sleep at night industrial. And if asias turning, i dont want to get off this horse. But he does. Goldman was actually very active this morning because goldman cut a bunch of the food companies. Sell on general mills. A lot of its overextended, theres risk in cereal as well as the nongreek yogurts. Its a pretty harsh downgrade. Well see what the reaction is. Come on one of our shows today, because ken, listen to me, that was a shot at what youre doing. And i believe in you. This was a very negative report. Lets get the opening bell and the s p at the top of your screen. Down here at the exchange, iraq and afghanistan veterans of america. [ bell ringing snflt [ [. Nonprofit organization, more than 200,000 members, and over the nasdaq, the tw holding corporation, specializing in cyber security. A big round of applause for these guys as they came onto the floor today. One stock weve not mentioned, jim ford, goldman adding to its conviction list, north american pickups, restructure in europe. They see price target 17. That would be 23 . Going back and forth with mullally with the ceo, its been terrific. This stock is hot. The market could cool. But the turnaround is real, the cash is real, the dividends real. This man has not done his job yet. He will finish this. When hes finished, that stock will go back to the highs of where it was a couple of years ago. Europe is going to turn. There are tailwinds, headwinds, i like ford. This is a twoweek high. As you saw in the chart. A monster run. 14 consecutive quarters of growth. Thats how big this turnaround has been for shares of ford. Its huge. Hewlettpackard has gone parabolic this week. I told you. It is up again another 2 . I told you that that stock would this is related potentially to stack selling last year. Break the 29 breakup from bernstein. They deserve to be down 44 . The cash flows no longer you love cash flow as an indicator. Of course. It may not be done in the ways you like, but remember, i threw up my hands when i saw that albertsons, that supervalue went up. Im just using that is a benchmark for parable stocks. It was an lbo that did not go particularly well. The guys who were running supervalue did not do a particularly good job. Sometimes you have to acknowledge the coverage of the super values this morning in the wall street good. Alcoa, and all the millions of little screws, the faa press Conference Regarding boeing and the 787 dreamliner is taking place in washington. A live look at the secretary of transportation, ray lahood. I dont think well listen in for now. But obvious ri if any headlines come up, well bring them to you as soon as they pop. Best buy up 8 . 8 at the open here. Stock turns, the company hasnt. I expect down 3 to 4 . The Sales Numbers were better than anticipated. No doubt about that. The prosecution rests. I guess. I still come back to the you mentioned the 105 number on the precash flow estimate back in november, five months ago they were expecting as much as 1. 25 to 1. 50. Right. Five months from that to 500, jim, thats a amazon coming after them. Last night i put gamestop in the block. Weve got the companies that are really, really challenged. I go back and say, why is wells knocked down even more. Because people knew they couldnt hit the number. Why is best buy not down. People knew they were supposed to really do poorly. This is a trading game, not an investment game. Just want to point that out. I would never buy best buy as an investment. Its too challenging. Did you see the pc Sales Numbers that came out last night . First annual decline for 2001 last year. Holiday sales down for the first time in five years. You had the video game sales down 22 . I think its going to get worse because of the violence in these games. Apples down about 4. Theres an interesting convergence. Well talk to rocco later this morning whether or not apple is hurting itself by even having its products carried in best buy. The dovetailing of those two names will be an interesting conversation. Remember when senegal was discounting itunes cards . Jobs said, i dont want that. Senegal said, fine. Best buy, in this case, neetsds apple. More than apple needs best buy. Costco doesnt need anybody. Very true. Sodastream up 2 with a buy rating. City saying its the fastest growth stories in Consumer Products out there. This is a herbalife for greenberg story. Not mentioning herbalife. I had to t that in there. Jc penney is interesting from that perspective, remember, youve got vern dado in that trade. Dan is vocal. So they give you a lot of ammo to use against each other. Maybe its just a draw. Could it be a draw . Right now theyre both making money, right . I think the stock is still below where ackman shorted it. And above where loeb bought it. I hope everybody makes money. Especially if its for char ti, right . Hello, bob. Bank stocks are opening to the down side here. I think wells fargo is the down side leader. It was down 2 just a few minutes ago. This was a good report, and it is typical for the banks to sell off immediately after. Its a little unusual. Usually jpmorgan leads with the banks. This time its wells fargo. Its typical for the banks to sell off immediately after the first day of the first Bank Earnings report. What happened to the wall of worry . We dont seem to have any worries anymore. We dont seem to have a wall either. Notes out this morning about that. Weve got the vix at historic lows. The russell 2000 at historic highs. Japans rallying like crazy. Telling the bank of japan to keep printing. Chinas been rallying recently on hopes they would do a little bit better. How much room is there for the markets to expand . Risk is really low, the returns that you can expect are lower. High yield bond funds, talking 5 yields now in some of them. The better ones, maybe 5. 5 . What kind of returns can you expect . Thats kind of a problem that i think a lot of people are having right now. We know why volatility is low. The central bankers are trying to keep everybody calm. Thats certainly an important factor here. But really, what happens to risk assets in low volatility environments. People are still trying to figure out, do you buy, sell or hold that bond fund right now. I get the question, what should i do with the High Yield Bond Fund . Growth stocks, last year they outperformed value stocks most of the time last year. Is that going to continue into 2013 . This is the second biggest question ive got. Its ard question to answer. Right now, i think you ought to hold. Im not sure if you should buy or sell, but hold. Did i see inflows into Stock Mutual Funds this week . Good heavens, ive only been standing here waiting for a whole year for this to happen. Weve had four years of outflows, Stock Mutual Funds. Weve got inflows into eps for years now. You want u. S. Stock mutual funds. We see inflows to the u. S. Stock mutual funds, nearly 4 billion. This is lipperts numbers. I dont care what theyre doing, Stock Mutual Fund inflows, folks, thats noteworthy. This is just one week. Who knows if this is the start of a trend or not, but if the u. S. Tenyear stays over 2 , if it goes over there and stays there for a little while, i think youll see a little more interest. This is one of the big things people have been waiting to watch for a long time. So far, it hasnt happened. Finally, did you see china . A great rally in the last month and a half. China reported much higher than expected inflation numbers. Did you see what happened to the shanghai index . Almost down 2 today. Worst showing since september. So its not like theres no wall of worry out there, folks. There really is. Occasionally it pops up and smacks you on the side of the head. Happy friday, everybody. Back to you. Thanks. No wall of worry when it comes to the euro. Holy cow. A year ago it was a different story. Rick santelli is in chicago. Jim, lots of extremes, once again, but not exclusively. Look at the 24hour chart at 30year. You can see the yields are up. Last week, where do we close the 30year at 310. Lets move to the tenyear. Tenyear last week was at 190. One basis point higher. Not interday, close. 191. Weve giving that a run for the money. As you open up the chart, you can see, should that happen, it will be a fresh 7 1 2month high yield for the 10. 30year a little less developed on the comp. Foreign exchange, look at the dollar yen. Wow, it is unreal. I get palpitations. This is a currency move like i havent seen in a long time. Another fresh 29 1 2month high on the dollar yen. It isnt just the Dollar Benefit side. Its really the yen side thats driving it. Similar chart, except ashaved a year off. The comps are a little more aggressive on the dollar side. Lets go back to the euro, this time lets do the euro versus the dollar. We can see 7 1 2month high on that trade. Its going to be very fascinating to continue to monitor the relationship between, as ira harris said yesterday, a bit of the exporters on the auto side in europe versus whats going on with the euro yen to see what kind of impact or retaliation we see on the economic scene for the weakened currency helping the export market in japan. Jim, back to you. Thank you, rick. Lets check out the latest in energy, metals. Sharon epperson, nymex. Oil prices pulling back, jim, but thats after reaching multimonth highs. We had the brent crude contract reach a threemonth high yesterday. Wti at a fourmonth high. A lot of this had to do in terms of the gains we saw yesterday with the report that the saudis have cut their Oil Production in december significantly. Todays news is focusing on the spread between the two, which has come in significantly as right now around 17. Of course, the Energy Department this week saying they believe it will average 16 a barrel this year. That is because of the news coming out of seaway pipeline, expansion project has been completed. The partners that are overseeing this project partners have said that has pn completed. Now were talking about 400,000 Barrels Per Day of capacity now available to shippers to take crude from curbing, oklahoma, where its been bolt nettleneck the middle of the country. The Energy Department report this week shows that those supplies in curbing, oklahoma, are at record levels. We are looking at that spread coming in quite significantly. Back to you. Thank you very much, sharon epperson. We were just talking about the boring dividend yielding stocks in the con tex the of graham and the downgrade there. Phillip morris getting an upgrade. A reasonable valuation in the universe of large cap stocks. They like this one. It went out of the United States, went into the emerging growth. They want real growth, not the earnings per care growth that comes from buying back stock. Its an excellent report. What it says is, look, we do not have it in this country. You want to go overseas to be able to get gains. I like diaggio, too. Legitimate. Price target to 103 up from 98. The 2013 eps is trimmed because of the yen. Dont you find it amazing even with the packaging youre seeing with the tobacco around the world, people still smoke. Frightening. Its addictive. It keeps on going. Thats why its a defensive people still drink, people still smoke. Smoking, you go to the doctor and you cant even if you smoke, its like, i cant have you in my practice because you ruin my numbers. All right. Were keeping a watch on boeing as well. As problems came mounting for the dreamliner, the faa is looking to get to the bottom of them by ordering a comprehensive review. Highlights from the News Conference coming up. What does the future hold for tim geithner for his model for tackling the problems . This mornings early movers here on wall street. Where is flo . Anybody know where flo is . Are you flo . Yes. Is this the thing you gave my husband . Well, yeah, yes. The name your price tool. You tell us the price you want to pay, and we give you a range of options to choose from. Careful, though that kind of power can go to your head. That explains a lot. Yo, buddy i got this. Gimme one, gimme one, gimme one the power of the name your price tool. Only from progressive. Take a look at the dow map. Boeing one of the biggest losers at this hour. It is down by 1. 8 . We continue to monitor the faa conference out of washington. We will bring you the latest as soon as we have it. Bank of america, no surprise there. Wells fargo earnings dealing with softness down as well. Wells fargo is down by 1. 8 . Trying to accumulate during the break some analysis of wells fargo. Theyre saying, listen, 10 annualized loan growth, not as bad as you think, jim. Im going to say, yeah, maybe when i say, listen, the numbers are going to like, the cellside likes the numbers. The interest margin will turn. My travel associates are saying, listen, cramer, youre just talking your books. No, i like the number more than i thought. Thats important. Meantime, i do want to play a piece of sound from the faa press conference, speaking the faa administrator. Take a listen. From day one, we have worked with boeing to certify these systems and to further ensure that this innovative aircraft meets our high level of safety for the flying public. We believe this is a safe aircraft. In addition to that, the faa said they logged 200,000 hours of work during the certification of this airplane tight, flew on numerous test flights obviously. Boeing executive guys saying that the problems, jim, are not caused by outsourcing and they welcome any changes that their regulators suggest. Couldnt ask for more in terms of boeing dealing with this. This is a very complicated plane. I remember even when they first used the composites, that was a problem. Now its the ion lithium ion brat ris. I know it sounds mundane that they will fix this, but ive got to stick by that. This is one of the best manufacturers in the world. Buy on the weakness . No, united technologies, ge, precision cast parts, you can buy so Many Aerospace plays. Jets are up big. You dont need to be in boeing. Aerospace is coming back. But there are companies that are in both. Look at honeywell, they own the cockpit. Its amazing the run these guys have had. The index is just 1 1 2 points off of its record high. This is a group that has seen massive gains. In the context of boeing, boeing is just a few dollars, or had been before these problems were revealed this week, off of new highs for the year. And so the context is you take profits here on a strong gainer. I was talking to david, who is always skeptical by what i say, i would hope to say antiseptical by monday, i hope i just have a little stuffy nose. Youre running away from me like im typhoid mary. Ive had my flu shot. Ive only had one. Whooping cough is making a big comeback. Pertussis. Come here, jim. No, well pass on that attractive opportunity. What i think is really interesting is japan is rearming. Theyre ordering rake yon systems. I think germany is going to have to rearm. I dont mean world war ii. Were pulling back. I bet you we take our soldiers out of japan and germany in the next four years. It costs too much money. These countries are buyers of our hardware. We should point out this continued dispute between china and japan over the South China Sea continues to escalate. To sending fighter jets into near air space. Its certainly something to keep in mind. Gm is going to be better. And bmw will be better. Right. As a result of the Chinese Consumer not buying enough japanese government putting through a tremendous buy program of stocks there, dont you think . Isnt thats whats really happening when you debase the yen . Government you know, that was the rumor in 89, oh, the governments in buying stocks again. We used to say that about greece. But when you lower the yen at the weakest level since june of 2010. Get your walkman out. I never put it away. Hes got it under the table. You havent bought a thing since ive been on a buying spree. Im going to take you to jcpenney where you can get some slacks. I need some slacks. Straight to the dockers. They had like two for 34. The debttogdp in japan we should point out. Its been very, very difficult. My hat off to them, this strategy seems to be working. When we come back, well take you into the deep, where a giant squid is lurking. There is a submarine that has become a musthave item. Well find out how many millions of yacht owners are shelling out to have one. Thats up next. Coming up, cramer is kicking it into high gear. 6 stocks in 60 seconds will energize all of us. Get your jim jolt when squawk on the street returns. Surgery was successful, but he will be in a cast until it is fully healed, possibly several months. So, if the duck isnt able to work, how will he pay for his Living Expenses . Aflac. Like his rent and car payments . Aflac. What about gas and groceries . Aflac. Cell phone . Aflac, but i doubt hell be using his phone for quite a while cause like i said, he has a fractured beak. [ male announcer ] send the aflac duck a getwell card at getwellduck. Com. And im here to tell homeowners that are 62 and older about a great way to live a better retirement. Its called a reverse mortgage. [ male announcer ] call right now to receive your free dvd and booklet with no obligation. It answers questions like how a reverse mortgage works, how much you qualify for, the ways to receive your money, and more. Plus, when you call now, youll get this magnifier with l. E. D. Light absolutely free. When you call the experts at one reverse mortgage today, youll learn the benefits of a governmentinsured reverse mortgage. It will eliminate your monthly mortgage payments and give you taxfree cash from the equity in your home. And heres the best part you still own your home. Take control of your retirement today. Lets get six in sixty for our friday. Well start with cmi. The problem with this stock, its gotten ahead of itself. I think caterpillar is the next you hear about. Chevron, midquarter update. Theyre gist wild. This time it was better than expected. Chevron i would continue. Pg. Bill acton is in this thing at a better level. If they break it up, they dont want to do that. Citi says buy bud. They dont mean the drink, maybe they do. I continue to believe that bud is an inexpensive stock. Its working. Goldman. This is one where people are playing the flu play. They say be careful, thats a onetimeonly thing. Doctors said theyll start proveng which is the miracle drug for prostate cancer. This is the gainer. How about tonight . Weve got the super bowl on stocks. Matching the best dow stock we like, bank of america, versus the best s p 500. Cast your vote jim cramer on twitter. Baltimore and ravens . I think the broncos take it, all right . I think what people dont recognize is theres ray lewis, and peyton manning. One is on the defense and one is the quarterback we love. Great game, no matter what. It will be a great game. See you monday. Thanks, buddy. A closer look at wells fargos results as they hold their Conference Call. The numbers a sign of thing to come for Earnings Seasons when it comes to banks. Best buys holiday sales, the stock is surging today. I think its the number one gainer on the s p. Is the turnaround for real. Were back in a minute. Plus p. I have a cold, and i took nyquil, but im still stubbed up. [ male announcer ] truth is, nyquil doesnt unstuff your nose. What . [ male announcer ] it doesnt have a decongestant. No way. [ male announcer ] sorry. Alkaseltzer plus fights your worst cold symptoms plus has a fast acting decongestant to relieve your stuffy nose. [ sighs ] thanks [ male announcer ] youre welcome. Thats the cold truth [ male announcer ] alkaseltzer plus. Oh what a relief it is [ male announcer ] to learn more about the cold truth and save 1 visit alkaseltzer on facebook. Abecause what you dont know can more ababouhurt you. Ce. Th what if you didnt know that boxes by the curb. Make you a target for thieves . Or that dog bites account for a third of all home liability claims . What if you didnt know that one in seven drivers is uninsured . And that grease fires have to be smothered . The more you know, the better you can plan for whats ahead. Get smarter about your insurance. We are farmers bum pa dum, bum bum bum bum [ male announcer ] how do you make 70,000 trades a second. Reach one customer at a time . Or help doctors turn billions of bytes of shared information. Into a fifth anniversary of remission . Whatever your business challenge, dell has the technology and services to help you solve it. Lets get a road map of the next hour on squawk on the street. Shares lower right now, well talk to an analyst about the reports for wells fargo. Faa saying moments ago they believe the dreamliner is a safe aircraft, but is it safe for your portfolio. Best buy holiday sales are down. The stock is up. Way up, in fact. Could we actually be seeing some signs of strength from that retailer. We start this morning with the first of the major banks, wells fargos profits jumping to a record high beating estimates on both the top and bottom line. The stock is under pressure, down by 1. 6 . Paul miller is managing director at fdr capital markets. Paul, great to speak with you. You were in the analyst camp that believed Net Interest Margins would decline by six basis points. Are you going to take your numbers down for the full year . No, i doubt it. Because we still are very positive on the mortgage banking side. Coming down ten points is driven by the fact that they took 50 billion on deposits. The Balance Sheet grew 25 billion on the loans. So that money is not earning a lot. Those deposits are coming in, not earning a lot. Therefore, thats what drove most of that. What are you expecting for 2013 in terms of Net Interest Margins, what your forecast is and whether the company is going to give you much guidance for the year on the Conference Call . You know, theyre probably going to guide to weak Net Interest Margin at this point, given the fact that the macro back dropped. Unless we get real Economic Growth. And the tenyear starts to raise significantly, all the banks will come under pressure. What the banks need is real growth on the Balance Sheet to put the deposits to work out there, at a decent yield. Right now, theyre getting a lot of deposits, but unable to put that to work in decent yields. Whats the reason for wanting to own the stock then, paul . You know, we like wells fargo because we believe its the best of the best. On a relative basis, we like it. Saying that, you know, unless you get real Economic Growth out there, a lot of these banks out there are priced for perfection, wells is one of them. And until you get real Economic Growth, these things remain relatively flat. When you say price for perfection, it does trade to a higher multiple to book, for example, than virtually any of its peers. What other stocks would you consider as expensive perhaps as wells . You know, jpmorgan is on the same side. They have a much more volatile revenue stream. B of a, they need to show real earnings growth, i think, for these guys to get to the next level. On these bigger names right now, youre going to need real Economic Growth to get these things to break through to where they are today. In your view, paul, all of these banks are speaking specifically of bank of america really and the likes of citi, theyve already reflected in your view that these valuations, the costcutting measures that are going to be seen over the next couple of years . Yeah, i think especially with bank of america, these things are already getting the benefit of the doubt that theyll be able to do a lot of these call saves, at the same time maintain their current revenue status. Thats very difficult to do. Not saying they cant do it, but thats a difficult thing to do. If youll cut a lot of these expenses and maintain that revenue, usually your revenue goes along with the cuts in expenses. There is lowlying fruit that you can cut because of the foreclosure stuff because of the foreclosure stuff. I dont think its enough to get the people excited about the earnings in the names. If your thesis is right that we need the question is, will the economy let the stocks move higher than they already are, are you more of a macro data watcher rather than the overall economy or more interested in what the next fed move is, or both . Well, i think the next fed move reflects where the economy is. What were looking for is what does the gdp do. Is it real Economic Growth. In the sense that 2 to 3 gdp is not going to get the banks to the less level. Well need 5 , 6 gdp. They need to grow the Balance Sheets with good loans with good yields. Right now were not seeing that. All right. Paul, thanks for your time. We appreciate it. Paul miller of fdr. We should note wells fargos Timothy Sloan will be on a first on cnbc interview. The transportation secretary and the head of the faa standing by Boeings Dreamliner in a News Conference moments ago. Phil lebeau has been following the story. Phil . Guys, they just wrapped up the press conference here. Secretary ray lahood, michael huerta, what stood out in the announcing theyre doing is safety review of the 787 dreamliner, naturally youll hear mr. Converse stand by the dreamliner. Youve heard repeatedly from mr. Huerta as well as secretary lahood they believe this is a safe airplane. In fact, mr. Lahood said i would fly this plane if i were to go to the airport today. Heres a little of what they had to say of the announcement of this special review. This review will cover the Critical Systems of the aircraft, including design, manufacturing, and assembly. Through it, we will look for the root causes of recent events and do everything we can to ensure these events dont happen again. So the question now, what happens in this review, how long will it take. They did not put a time frame for how long it will take the faa, working with boeing, to complete this review of the dreamliner, and whether or not we might see some changes either in the certification of the plane or manufacturing process of the plane. One thing thats interesting, carl, when you listen to what secretary lahood had to say, im taken back to when we had the incidents with the toyota, sudden acceleration, and at that time, remember, he initially said, im not sure people should drive their toyotas, and there was a firestorm. He came out emphatically today saying, you can still fly the dreamliner, i feel the dreamliner is save. Carl, back to you. I do remember that toyota day. Not going to make that mistake again. Lets bring in the Equity Analyst at capital markets. Good to have you this morning. I understand you have a masters in aeronautical science, correct . I do. How does that inform your view of what this problem may be . If in fact there is a problem. Well, you know, a phil pointed out, i would expect that they would come out and say what they said. Weve never doubted that the airplane the airplane is safe, and ultimately boeing will get through this. Our concerns, and why we went to a hold a few days ago, is this very fact, that the faa is in scrutinizing your plane. Its akin to having a tax audit. It likely goes well, but you just dont like to have the irs snooping around on things that have already been put to bed. The boeing executive who spoke this morning, the problem he does not believe is related to outsourcing. Had that occurred to you, that that could be a problem . Or a factor in this complication . Well, it was interesting. You know, i think were in the phase of unknown unknowns, so boeing, we dont know what we dont know right now. So i know theyre saying that. But we have the faa all over the airplane, the ntsb all over the airplane. I think the risk for the i see two camps on this stock. You have the teethers, those who believe everything is a teether problem, and the tip of the icebergers saying could this be something else. I think with this investigation going on and the faa already actively on the airplane, it will be difficult to take event, especially if its a severe event, and say, this is fine, this is fine. Long term theyre going to sort it out. I agree with what jim cramer said, im in the same camp that said, why not do a derivative play on this story, if you have more risk maybe someone like spirit aero systems. At what point do you say this is the point of fear of investors are running . Thats the time to get in the stock. Weve seen that in different scenarios, that we dont know what we dont know, as you said. That is exactly the time you wanted to go in. Whats going to make that turning point for you, do you think . Well, i have to say, because theres a formal investigation, normally the way this would have worked is the ntsb would have completed its investigation, given a recommendation, the faa would have followed. The fact that the faa is actively doing an investigation, if something happens, it increases the near term risk, you know, of the faa being able to act. I do not think well have the act of grounding its highly unlikely. Boeing continues with the production rates. I think as an investor, you are exposed to these type of events for at least the next three months. Phil . Carter, this is phil lebeau. I have a question for you. You heard me asked the question during the conference whether or not the possibility exists as they are ram upg production on a very aggressive production schedule, that perhaps that is contributing to some of the problems with the dreamliner. In other words, youre asking your suppliers to run as fast as youre running, if not faster. If this as they look at this right now, are you concerned if youre an investor, that boeing is at an execution risk . That theyre not going to be able to meet the benchmarks they set out in terms of ten dreamliners a month by the end of the year . I think theyll meet the benchmark of ten per year, but it only increases the risk that we are doing this were doubling production from right now going from five to ten in a year. Boeing is under a lot of pressure. And there are also significant ramps on the legacy 737 aircraft. I will say on a different front, that if boeing gets through this with a clean slate, theyre probably better off because you have the faa saying this is the most scrutinized ever. Carter, the last time i talked to you earlier this week, you said that the contracts in terms of cancellations, theyre pretty tight. So maybe some out there might balk at getting delivery of the planes. As this faa investigation drags on, at what point do you think that maybe some of these airlines have a basis for canceling these ort eders . I think the risk is greater that they leverage this and you can solve any issue on a delivery with money and credits. So i think that risk exists. In terms of cancellation, i think we need i think were a ways away from cancellations. Have you heard anything weve heard the ceo of Qatar Airlines come out this week and defend the plane, but is there any inkling a carrier might be thinking of canceling or delaying delivery . Qatar is famous for getting aggressively publicly against boeing. It was a very unified front on that, with cutter coming in and giving support. If these issues continue and starts to affect airlines, you know, dispatcher liability, i think their tune could change very quickly. Carter, thank you very much for that. The good insight. And phil, good to have you with us as well. Thanks for the headlines out of washington today. Meantime, treasury secretary geithner saying he will stay on the job until january 25th. But then what . And could he possibly be looking to take, yes, bernankes spot in 2014 . Okay. And whats in the water under 2 million and has a Little Something to do with giant quids. That in todays milliondollar minute. What are you doing . Nothing. Are you stealing our Daughters School supplies and taking them to work . No, i was just looking for my stapler and my. This thing. I save money by using fedex ground and buy my own supplies. Thats a great idea. Im going to go. We got clients in today. [ male announcer ] save on ground shipping at fedex office. [ male announcer ] dont just reject convention. Drown it out. Introducing the allnew 2013 lexus ls f sport. An entirely new pursuit. Inside and outside of the u. S. Treasury, there is now whats come to be known as the geithner model for heading the department, navigating a crisis. How could that impact the man who is now nominated to succeed tim geithner . Steve, good morning. Thanks, carl. First of all, just to what you were talking about earlier, we understand geithners going to hang out until january 25th in the treasury, giving jack lew to confirm and i guess perfect his signature. Lets see what weve learned, what does he leave for jack lew. He got the stress test done. Actually, thats not correct there. Lets move away from that. What were talking about here is the let me go to my notes. The stimulus was done but sustained growth was not. Frank dod basel iii was not done. Aig also done. What is the geithner model . What is the geithner doctrine . I think you can say like this, overwhelming Government Force when its clear its needed. B in a crisis, spend, regulate and guarantee and do it with conviction. Lets talk about one of the things left over from the geithner years, which is going to be the issue of debt and deficit. I think you would say there was some accomplishment when it came to getting some of these deals in place. But ultimately, he probably thought that some of these things would come off and be declining faster than they have. Weve learned a lot about the financial crisis. In fact, were going to be debating the correct government response to the financial crisis for a while. Depending upon how you measure it, either gross debt or debt held by the public, coming up to historical levels. When we look at the deficit, the yearly numbers as a percentage of gdp, they have come down from a high of 10 , right now around 7 . And expect to go down to 6 . But really, guys, what we have to do is get to this place, 3 , even lower than that to get to a sustained place. So this number comes back down. That remains the big challenge for jack lew when he takes office probably later this month. Steve, i keep thinking back to geithners first weeks, actually, his first day, where he had that misstep, referring to china as a manipulator of currency. I wonder if you think lews learning curve is going to be quite as steep . Maybe not quite as steep because hes been in government for so long. What was unique about geithner is he was over at the Federal Reserve where there was no real sort of public face day. He comes in at this huge time when theres a huge need for the treasury secretary to be out there in the public. He says a few things, and then of course gave that interview to myself and brian williams, and during that interview, and i guess slightly before, the market starts to plummet as it becomes clear that the plan for fixing the Financial System was not really all that well decided. And he learned a lot from that. It took him a while to get to the place where he kind of guided the market ahead of time and when he was out in public. I think jack lew is going to be the same. What was interesting is the geithner treasury has not been especially public treasury, but the idea with jack lew, it will be even less public than that. Good point. Lew not a friend of the camera, as even the president suggested in that presser yesterday. Exactly. Thanks a lot, steve lies plan. Planes, trains and automobiles, dow transports rising, hitting the third consecutive interday high. Big names like goldman getting more bullish on the sector. Is a runup almost over . Were talking tranies a little later on. Robert frank is coming to the post for the milliondollar minute. Melissa, ive got the hottest new toy for billionaires. And why this toy made some big news this week. Thats coming up on squawk on [ male announcer ] how do you trade . 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. At legalzoom, weve created a better place to handle your legal needs. Maybe you have questions about incorporating a business youd like to start. Or questions about protecting your family with a will or living trust. And youd like to find the right attorney to help guide you along, answer any questions and offer advice. With an a rating from the Better Business bureau legalzoom helps you get personalized and affordable legal protection. In most states, a legal plan attorney is available with every personalized document to answer any questions. Get started at legalzoom. Com today. And now youre protected. In todays milliondollar minute, were taking on a deep dive in a special milliondollar expedition. Underwater vessel that takes you to the silent world of the deep ocean. The tritan 1002. You can have your own personal submarine to explore the underwater planet. Carries two people, dives to 1,000 feet. Its powered by batteries. Batteries are power ed from thee two. The acrylic hull, you dont feel enclosed, and you can see everything in the ocean. These vehicles have endurance of 8 to 10 hours. Its operated by a simple joy stick and takes a couple hours of training. Dont expect to go full speed ahead when exploring under the sea. Typically youre only traveling of a speed of half a knot to a knot. Robert frank joins us now here at post 9. Has anybody bought this thing, and can you rent it just to try it out . Yes, and yes. This has become the new musthave for yachting owners. It used to be docking off the coast and getting a sun tan, right . Now todays younger wealthy, they want some adventure. They want some exploration. These things go for 2 million to 3 million and are selling like crazy. There are already five in the water and a dozen more in the works. Not just this company, but many others. So yacht owners now, theyre fairly small, they can fit on a boat, but a lot more fun than a jet ski, for instance. Is there a safety question there at all, if you run into something . You have to take a course. And i think its a one or twoday course. But its one little joy stick. We were going over the safety features, it is pretty safe. With this one, you can go 1,000 feet underwater or the bigger one 3,000 feet. I can imagine insurance and maintenance, right . Additional cost. Yeah. You own a yacht, you can probably afford the insurance and maintenance. Did you go down in the water . I didnt go under, i just was able to sit in one. But you can look all around you. Before the subs, it was only one little window. Very cool. Anybody we know own one of these . Whats cool about these subs is, a version of this sub that we just showed was used in the giant squid discovery. Discovery channel is about to launch a documentary later this month called monster squid, the giant is real. The internet exploded with these pictures this week. Many of you saw it. This sub was used to find this squid. And even more interesting, the sub and the yacht that were used to find this squid is owned by ray dalio. Ray dalio, of course, the Billionaire Hedge Fund manager, we know him well, our cnbc viewers know him well, he declined to comment. But he bought a huge yacht and sub and gave it to scientific research. All this boat does is conduct research. So a good thing done by a very wealthy guy. We dont hear those kind of stories too often. Between him, Larry Ellison and paul allen, theres something about the water. These guys cant get enough of it. Thats right. Its nice to see him saying, look, my yacht is going to be used just for things like finding a giant squid and scientific research. Its exciting. I would like to do research, wouldnt you . I would like to do research off the coasts. You might find a squid. By the way, discovery channels monster squid the giant is real premiers on january 27th at 8 00 p. M. As the Season Finale of curiosity. The wells fargo Conference Call is under way. Well bring you the latest comments right after this breakw breathe, and how that feels. Copd includes chronic bronchitis and emphysema. Spiriva helps control my copd symptoms by keeping my airways open for 24 hours. Plus, it reduces copd flareups. Spiriva is the only oncedaily inhaled copd maintenance treatment that does both. Spiriva handihaler tiotropium bromide inhalation powder does not replace fastacting inhalers for sudden symptoms. Tell your doctor if you have kidney problems, glaucoma, trouble urinating, or an enlarged prostate. These may worsen with spiriva. Discuss all medicines you take, even eye drops. Stop taking spiriva and seek immediate medical help if your breathing suddenly worsens, your throat or tongue swells, you get hives, vision changes or eye pain, or problems passing urine. Other side effects include dry mouth and constipation. Nothing can reverse copd. Spiriva helps me breathe better. blowing sound ask your doctor about spiriva. [ male announcer ] how could a luminous protein in jellyfish, impact Life Expectancy in the u. S. , real estate in hong kong, and the optics industry in germany . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 75 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. About an hour into trading. Heres some of the stories as were squawking about. About 7 31 on the west coast, 10 31 on wall street. This years flu outbreak considered one of the worst in a decade. It wasnt a good holiday for pc holiday sales. They fell for the first time in five years. As many buyers opted for tablets. Apple responding to a lowend iphone. Apple will not resort to a cheaper iphone for the sake of expanding its market share. Equity mutual funds inflow seeing the second best week on record. Art, good morning to you. Good morning. What are the inflows telling us . Some people were impressed, some people tried to dismiss them a bit. Im a little skeptical. I want to see if they continue. You do have a kind of yearend rush that money gets put in. Everybody, from the floor on out, has been waiting to see if you begin to see the asset flows. Will money come out of the bond funds and start to go into the equity funds. That could represent a clear major move here. We talked last week about the tenyear. You said if its for real, youll start to see it in mortgage apps. We did see a spike on wednesday. What does that tell you . Thats a good beginning. But i really want to see it turn into a stampede. Its when the public says, wait a minute, that boat is leaving the dock, ive got to get onboard. And people will particularly in refis, you want to see if people want to nail down the low rates. Once thats decided, then it will become kind of a current knowledge and opinion, that the rate game has changed, and that will change the flows of funds. Speaking of mortgages and lending, wells fargo bricking the bubble in terms of the financials run, making Net Interest Margin that decline that wells fargo saw. Are you concerned that the financials, the group that helped us higher in 2012, will start to come back down to reality in 2013 . You would certainly love to see the financials get in and get moving. But i think its symptomatic whats going on in the economy. The banks are awash with cash. People are rushing in. Please take my money. And they cant find a way to mobilize it and lend it to anybody. But the good side of that is, thats one reason why with an enormous Balance Sheet by the fed, we dont have any inflation. Youve got to lend it or spend it to get inflation. We could have had this conversation at the beginning of last year, probably at the beginning of the year prior to that as well. Many of the same things could have been said. Art, youre usually good at prognosticating. Is this year going to be better than the last two . I suspect not. A great little speech given by abe that helped the yuro. But they havent repaired those holes in the wall. They just put wallpaper over them. I think theyre going to come back and cause us some grief. And nobody, but nobody, talks about geopolitics anymore. I mean, it looks like the administration in syria may have to write off the north and east. Will it be a by fifurcated coun. What does it mean to japan. And there are some signs that places like iraq are starting to strain. And egypt, moneys pouring out of there like a fire hose. And food problems may arise. Theres a lot of things out there. Right now, it looks like goldilocks. Japan, and the tensions rising there as well. I think the japan thing will i think maybe worrying about the debt ceiling here has kept that suppressed. But that will break out into a potential currency war. Global, everybodys been doing it surreptitiously under the guise of lowering rates. Abe is not doing anything surreptitiously, hes going for it. Germany, their big business is exports. Theyre not going to let that happen. A lot of things coming. 1470, every time weve even approached this level, weve seen analysts come out with ultrabullish calls. Hasnt worked out. Is this going to be any different . As i wrote in my comments this morning, the bulls really need a breakout here. Theyve achieved a nominal new high, but were consolidating those gains, all of which is perfectly fine. But youve got to make a credible run toward 1500. And that, itself, may stampede money from the sidelines. Thanks so much, art cashin. Thank you. As we mentioned, wells fargo reporting fourthquarter profits rising 24 . The stock is under pressure as it saw a bigger than expected declines in margins. Kayla . Melissa, the conference still under way. The executives are still in prepared remarks right now. We do have a few interesting tea leaves to read on the record. It did take a few charges including the charge relating to the settlement this week on an ongoing foreclosure review. Tim sloan saying on this mornings call charges associated with the review which had been going on for a long time will end in the second quarter. Thats a good thing. The ceo praising new rules out from the Consumer Financial protection bureau, calling for fiscal certainty saying thats what the banks small and mid market customers need to make their investments. Stocks still down. That problem is basically because the quarter confirmed all suspicions, wells would be hit with low margins in the face of low Interest Rates and mortgage boom is starting to slow. Basically what a bank makes when it lends deposits, lost 25 basis points last quarter. They thought the drop would be smaller. In both cases, wells saw deposits jump. Thats also a good problem, but they jumped too quickly, meaning the banks couldnt reinvest them at a higher yield. On the call sloan saying it cost them eight basis points in the quarter. Also, they lost another two basis points because the bank was being too cautious about reinvesting money. On the loan side, wells saw growth of 4 . Analysts usually see that as a positive. But mortgage origination, that was rising slightly as well. But its starting to slow. The pipeline of applications is declining. 81 billion at the end of q4, compared to 97 billion in q3. Over 100 billion in the second quarter. That is leading analysts to believe the mortgage boom could last another year. Volumes, though, will be lower. Additionally, wells is building up its Balance Sheet keeping more loans on the Balance Sheet. 9 billion this quarter. Instead of selling them to the government, which, of course, has been buying a lot of mortgages. They think they could make more money by keeping them this time around. Kayla tasche, thank you. The holidays may be over. Is the showrooming . How long can the Electronics Retailer stay afloat before having to power down. Paul is the senior retail analyst who joins us now on the cnbc newsline. Colin, always great to have you with us. Best buy shares, one of the top performers on the s p 500 this morning, up by almost 12 at the same time. Drastic revision lower to cash flow estimates compared to five months ago. Whats the overall take of what they said this morning . Sales a little better than expected. I think the cash flow issue is just almost entirely a timing issue around bringing in inventory sooner to be prepared for the holiday and having to get the product in the store a little bit sooner. Cosmetically it looks bad but that really isnt an issue. I think the big news today was sales did stabilize and you saw flat sales in the u. S. Do you expect a Free Cash Flow to pick up then as the year progresses . Yeah. Because of the timing of the year end, they had to buy the inventory a little bit sooner. They had supply chain issues where they wanted to get receipts sooner to make sure it got through the store for that really important black friday and postblack friday weekend. Because they brought in inventory sooner, theyre having to pay their vendors. Especially apple, who likes to get paid a lot more quickly than the asian vendors. The tables hit this fiscal year that ended the end of january rather than hitting next fiscal year. Its really just a timing issue. It doesnt really impact the cash flow potential. Margins looked okay. I think the big news today was sales were better than expected. But if the mix continues to be towards ipads or tablets and things of that nature, arent they going to continue to face that potential problem . Theres a little bit of structural change there. The bigger factor was the timing of receipts. The smaller factor the mix toward more tablets. Ipad mini was a pretty big deal. And more phones. The iphone 5 had a pretty big holiday. Again, apple does like to get paid more quickly, so youll probably see a little bit of use of cash in working capital going forward. I think the stock is being driven by, can they get this thing stabilized. Obviously theres the issue around dick schulze and what does this mean for his bid. If youve got cash flow declining, i dont care what the reasons are to a certain extent, not to mention a lot of other reasons, that that bid is unlikely. Do you agree . I think its uncertain. I wouldnt go so far as to say unlikely. Were trying to figure out how stable the financing partners he has are. Todays news i think makes it, not because of the cash flow and timing, but because the sales are better. I think the board is probably em wo boldened to say its starting to work. Colin, at this point, best buy shares trading above your target of 12 a share. You also say that the company is okay in terms of earnings visibility. What is the reason for the market perform rate on the stock at this point . Yeah, two things. One is, while the sales did improve in the holiday period, i think the store business, remember, this is 94 of business that sells the stuff in stores, the Stores Business resonates far more during the holidays because youve got traffic, because youve got people out there shopping on black friday. Resonates far more in the two months than the rest of the year. I think it would be a mistake to flag a comp going forward. I think well continue to see sales weakness in margin pressure. Longer term, theres a lot of issues here in the business. Theres in tnot a lot of eviden yet that they are tackling these secular challenges that are very significant. Speaking of the management team, i guess before they can do anything, there needs to be a sense that theyre there to stay. I wonder if you think that the chairs, theyve rearranged them on this deck, is at least stable for now . Absolutely. Certainly the ceo is absolutely committed. New cfo has a great track record of cost reduction, which are important factors for best buy. Then youve got a new person running the commerce business. I think those are very stable. Youve obviously had a lot of turnover. I think theres probably more restructuring to come. I think youve got some good folks in Senior Leadership positions that are stable. One final question from me, before we let you go on this cash flow issue. You really believe it was simply timing . Isnt it the vendors having a lot more power with best buy that they will continue to put them on shorter time frames . What gives you the confidence that this is a onetimeonly event . Because i think there are others out there who disagree. Look, its cosmetically, it looks bad. When businesses are stressed, you would expect to see Something Like this. But that correlation is there. I think this is im very confident this was a timing issue, and a mix issue, which is going to stick around a little bit more. The vendors do want to keep best buy in business. The cash flow is still quite good. Were not anywhere close to the point that circuit city was burning cash and the clock was ticking. Not the situation here. Terms on an individual vendor basis, not changed. Thank you, colin. Brian shactman has a quick market flash for us. Corning down 4 . Interesting moves by Goldman Sachs. Right after christmas they reduced across the board. Today, two weeks later, theyve downgraded it to neutral from buy. They further reduced the price target to 14. Back to you. Brian, thanks so much for that. It is pay day, although thats usually a reason to be happy, some peoples paychecks are putting them in a very bad mood today. Well tell you why. A little bit later, why one of apples biggest problems might just be best buy. Were back after a break. Mine was earned in djibouti, africa, 2004. The battle of bataan, 1942. [ all ] fort benning, georgia, in 1999. 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[ 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. Its pay day, and there might be a surprise waiting for you in your check, but not the good kind. Look, a lot of people followed the debate over the fiscal cliff and relieved to hear taxes were only going up for the rich this year. Well, they were wrong, because Neither Party wanted to defend it. The temporary payroll tax cut died in 2012. Which means everyone in the country will see a bigger tax bite out of their paycheck this year. When you get your first check at the year, look at the amount charged under fica. Youll be charged more than you were back in december. For many middle class workers it will work out to a trip to the Grocery Store or a tank of gas less every two weeks this year. For a Single Person making 60,000 per year paid biweekly, gross income in a paycheck is 2,307. 69. In december you would have had to subtract withholding taxes. Medicare in there as well. The state withholding for a person in maryland was just over 177. That gives the taxpayer net pay in one check in december of 1,596. What happens this month . Well, gross pay is the same as are the medicare and state taxes. But look at fica. Thats what goes up sharply in january. Up to 143. 08 a paycheck for this taxpayer. Thats a 46. 15 bite from the political decision to allow that payroll tax cut to expire. But heres the good news. Federal withholding from this paycheck is slightly down by about 4, to 399. 18, due to the way the federal government calculates inflation. That gives our taxpayer a net pay of 1,554, or just over 41 less than he or she made in their paycheck in december. That is the tank of gas or bag of groceries extra out of every paycheck people will be seeing this year. Wow. Or that could even be the sweater at macys. That is one of the key questions here. Eamon, in terms of the retailers, how it will be felt at the lower end. Right. This was designed to be a temporary stimulus measure. But obviously when you take away stimulus, its got a destimulative effect. People have that much less cash in their pocket and they dont spend it so its not going back out in the economy. At the end of the day, its a tax hike, the way most people feel it. Wells fargo in the red after reporting results today. Coming up, well talk to a Portfolio Manager who holds big banks, and break down what is happening in thatsector. Squawk on the street will be right back. Flash before your ey. Make it worth watching. Introducing the 2013 lexus ls. An entirely new pursuit. Olaf gets great rewards for his Small Business pizza [ garth ] olafs Small Business earns 2 cash back on every purchase, every day helium delivery. Put it on my spark card [ pop ] [ garth ] why settle for less . 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Now, yesterday hit the wires, about 24 hours ago, Consumers Financial Protection Bureau and some of their new rules on, of course, housing and how you qualify, and the entire process, debt to income ratios, the whole gap bit. One of the great executives that came out of the Mortgage Business is a gentleman named ed pinto. He just wrote a terrific paper that seemed to mirror many of my kneejerk views when i started reading some of the granular insight into some of these regs. In his paper the devil is in the details. His last sentence is a very carey one, i think under the tortured definition a borrower can have no down payment, a credit score of 580, a debt ratio over 50 as long as its approved by a governmentsanctioned underwriting system. Wow. So basically lets go through this. We talked about the Consumer Financial bureau, and what were discussing is qualified mortgage regulations. We all know but to be fair, it wasnt really caught by basically what are we doing now . Were grandfathering in some of the worst aspects of how the fha and gses still continue to fit into this mortgage process, the sausage factory, so to speak. Its grandfathered up to seven years unless they get their house in order, but how much about reforming the gses. They are the mortgage market. What he said in particular thats disturbing, at least in the old days you could see the difference between prime and subprime, but now based on the automated underwriter system, is if you dont qualify on what they dr prime, you go on this other exit on the mortgage freeway. That puts you on what used to be considered subprime. Thats what goes into the quote, so basically were just going to continue to have had you highleveraged people buying houses that may not have the ability to pay back. Think about it this way, once theyre considered a good risk, there will be claw backs and taxpayers will be on the consider what is prime, according to the rules of 43 debt to income ratio, the whole nine yards. Once you establish these as now, according to the government, these are given the kiss of approval, what if people lose their jobs, which is the k to all this once again, jobs, jobs, jobs, will we be on the hook for not only what used to be considered subprime or the whole nine yards . Listen, housing . You want to fix housing . Fix the economy with regard to jobs, and if you said to fix jobs, fix the education process. But i guess that makes a little too much sense. Melissa lee, back to you, and have a great weekend. You too, rick. I want to draw attention to the gold. Lets again great to sharon epperson. We fell to a low of 1655, down more that the 20, and evaluators are reevaluating what draghi said, and what they did, but what also what they didnt do. Thats some of the reasons why traders are saying were seeing some profit taking in the gold price. Gold did hit a oneweek high though, yesterday, so some momentum behind it before pulling back here. It really has also all week long paled in comparison to the platinum market. That seems to be where the interest is for metals. In the platinum in particular, and when you look at what the ratio is between gold and platinum, which a lot of trader look at and theres a lot of money to be made, were seeing so really the momentum seems to be more in the platinum market, though were seeing a pullback as well in the session, and gold prices against down almost 20 bucks. Back to you. Thank you, sharon. How snakes on a plane went from a movie to real life. Back after a break. [ male announcer ] this is joe woods first day of work. And his new boss told him two things cook what you love, and save your money. 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Call. And lock in your rate for 12 months. Liberty mutual insurance. Responsibility. Whats your policy . Immfy, one of my favorite headlines in the morning from the story on their earnings, outsourcing is not dead. They beat on the top and bottom line. Guidance is above estimates. Theyre adding clients, carl, and their business is growing. Back to you. All right. Thank you very much, brian. Snake on a plane, and we are not talking about a hollywood movie. Passengers on a qantas flight spotted this python clinging to the wing. Its believed to have crawled on the airport. Qantas said it did not operate the operation, but sadly it was the pythons final flight. It was found dead on arrival. I mean, that is flapping like a flag in the wind there. Tough story for animal lovers everywhere. Thats true. So tenderhearted, carl. Really. Anything to tease tonight . We have options action and money in motion. And big move in the euro, and a big move lower in the yen, so a lot to talk about. Have a great weekend. See you monday. Heres what you missed earlier on. Welcome to hour 3 of squawk on the street. Heres whats happening so far. As far as boeing, remember they have overtaken airbus in terms of sales currently, they have to gear up to deal with a new threat from bombardier up in canada, but theyll be in very good shape. If we had gone over the cliff, it would have been an f and total failure of our system. But when you analyze the bill, it was an f on spending, we actually increased spending. Its been the bank to own since the bottom, who is taking over the world . Who is it . Look at that. Im reacting to hewlettpackard, reacting to clarewater, to sirius, im reacting to sprint. Why are you changing the subjects . Because these were other companies i thought were dead and they ended up getting something. Thats when you get real Economic Growth and the tenyear starts to raise significantly. All the banks come under pressure on this Net Interest Margin. The faa is scrutinizing your plane. It likely goes well, but you just dont like having the i. R. S. Snooping around on things that are already been put to bed. Happy friday. We are live here at post 9 of the new york stock exchange. Lets get a check on the markets. The dow closes to the flatline for most of the session. Best buy is soaring after reporting some holiday sales, but did beat expectations. Sales down 1. 4 , which is better than expected. J. C. Penney, the firm noting a deteriorating earnings outlook and signs of what they call cash flow issues. The road map will go like this. Wells fargo the first major bank, but the report is not without problems. Well talk to a Portfolio Manager why he invests in the big bank, and what we can expect. Mike at burgiss says voting to raise the debt limit was one of the worst things he has ever done. Hell tell us why when he joins us live. Planes, trains and automobiles, the transports hitting new high this is week, but which part of the sector, and apple encountering big hurdles lately, but the real problem might just be best buy. Why the tech giants best move might be wells fargo kicking off Bank Earnings, the Net Interest Margin did fall nearly 4 . That is sending the stock lower. Kayla tausche has been monitoring the Conference Call. Good morning. Carl, thats right. The last time i was on with you about 30 minutes ago tim sloan talked about the big one, returning capital to shareholders. Earlier this week we had the deadlines for plans that banks were submitting to the Federal Reserve. And he said they asked the fed for a larger Capital Distribution this year. The dividend was up to 22 last year, of course now investors want to know exactly what that capital plan will look like. On that when margin, which shrank because of a higher deposit base, the deposits were growing too quickly, the ceo made some comments. He said wells fargo invested them in shortterm securities, which brought down the overall interest income. He said they wont invest then uneconomically. He says they might be taking from share for other banks, they just wont be flippant but how they invest these. He got questions about the cfpd, putting out the new rules on mortgages. He said they found the right balance, will help americans get more credit, but there are other issues to resolved. Possibly one of the most cryptic, said that the fiscal cler was a net positive to loan growth. Were assuming its because of the overall Interest Rates were lower, didnt really make any more comments about why that happened, but he said the fiscal cliff a net positive. Some of the more macro comments are getting more attention this morning, specifically that some before they start asking for more loans theyll want more clarity about the economy. Right . Weve seen Interest Rates react in a marked way to the fiscal cliff and dead ceiling issues. Once the issue got resolved on january 1st, we saw the yields and the tenyear spike by 20 basis points. How can you predict where Interest Rates will go if you dont know the next move. Even on the small and mid Market Investors are watching it very . Very closely. Yeah, interesting. Theres a lot there today. Thanks so much, kayla. So what can we expect to see from the rest of the big banks next week. We have the Research Director at aerial investments. Charlie, good morning to you. Good morning. What do you make of this argument that the banks have done as much as they can internally and now its a waiting game to whether the economy will let them rise any more . Theres something to that, but we think the Housing Market will get better and the banks will benefit from that. People are trying to figure out ways to play the recovery foreign minister market, but we think banks about benefit. We interesting rates wont stay at zero forever. So you have jpmorgan, goldman, national city, i believe. What determines whether or not you get in at this point . We really are looking for which ones are out of favor. Some of the banks have done extremely well. Last year at this time i think i was pounding the table on the investment banks, Goldman Sachs, and its up 50 from the beginning of last year. Its still a great company, but not a crazy cheap as a year ago. Morgan stanley would be only about 70 of tangible book action still a great opportunity. Frankly the alternative Asset Managers still are really cheap. People are worried about a change in the tax code, that didnt happen, so we think blackstone and kkr are very attractive. Is there a line in the sand when it comes to tangible books . You look at how wells fargo is viewed, yet tangible book is still relatively high. What is reasonable at this point . Thats a great question. Obviously ties heavily to the return on ecity. Theres a strong correlation to where something trades and where it should trade. Our view is that wells fargo at one seven times book is not that cheap, but Something Like Goldman Sachs at one point was outrageously cheep, and wells fargo frankly is a little too popular for us, everybody likes it and that tends to make us shy away. That is true. You make the point that Interest Rates will not be at zero forever and its got from 169 to 1. 9. Have we is that trend truly reversible . Will we being going higher . Its hard to predict the tenyear rate, but absolutely long term, but frankly the shortterm rate is very important to these fusions. Somebody like a Morgan Stanley or us custody banks. Something like Morgan Stanley can charge their customers for the money market accounts. Right now theyre frankly having to forgo the fees. These banks will make a lot more money. Finally American Express is another Cautionary Tales weve already seen what Morgan Stanley has done. Thats a normal attrition where youre taking maybe not your best performers. So thats a normal rate. Theyll continue doing that. We think the draconian costcutting head count reductions are behind us. You have a few names in your portfolio. One favorite . If i had to pick one name, it would be Morgan Stanley. People still do hate it. Its at 06 of book. People fought for 70 years to become a partner in Morgan Stanley so you would have the right to buy it at book, now you and i can buy it as a big discount and we think thats temporary. Thank you. Always good to talk to you. A quick programming note. Timothy sloan will be on closing bell today, 3 10 p. M. Eastern time. As you might have heard, facebook seeing a monumental climb, up more than 60 . Inching back toward is Investor Sentiment toward social media stock as a whole shifting. But first Rick Santelli is working on something for later on. I am. In about ten mys i love doing hand signals. Weep have representative Michael Burgess from texas opt why am i so excited . Well, for a couple reasons. First he was one of the 18 house Texas Republicans that voted against that stopgap fiscal cliff deal on january 1st. Were going to tell you why, and were going to discuss where were going with the negotiations on the debt ceiling. Truly youll not want to miss this. Be back in ten. [ male announcer ] youre not the type of person who sets goals and only hopes to achieve them. So youll be happy to know that when it comes to your investment goals, Northern Trust uses awardwinning expertise to lead you through an interactive investment process. Adding precision to your portfolio construction by directly matching your assets and your risk preferences against your unique life goals. We call it goals driven investing. Your life has a sense of purpose. Shouldnt your investments . Expertise matters. Find it at Northern Trust. [ male announcer ] how do you turn an entrepreneurs dream. Into a scooter that talks to the cloud . Or turn 30million artifacts. Into a hightech masterpiece . Whatever your business challenge, dell has the technology and services to help you solve it. Welcome back. Getting a nice pop after suntrust increased its price target. The target now 50, up almost 4 . Got breaking news off washington. House Speaker Boehner has delivered the president to deliver the state of the union on february 12th, saying the nation faces immense challenges and looking forward to hearing the president s solution. February 12th for the state of the union. In the meantime the problems for the boeing 787 problems keep coming. The faa says it will stand by the aircraft. Phil lebeau has more. Interesting press conference. I think a lot of people were expecting perhaps more details about the review. There was the element from hearing from the secretary of transportation saying he stands by this plane. The Safety Inspection will be conducted by the faa, but boeing will be assisting in the review. The fog cuss the electronics and the lithium ion batteries. I believe this plane is safe and i would have absolutely no reservation of boarding one of these planes and taking a flight. These planes are safe. That is not the only time we heard from them that the plane is safe. The review will take a look at the manufacturing process of the dreamliner, something that the faa has been working with boeing on over the last several years. Boeing denies the rampup in production, as they go up to ten per month is causing the latest slew of problems with the dreamliner. The process does not stop with just certification, as every Airline Program weve continued to Work Together on a daily basis to ask all the right questions and address all the right issues. Despite the fact that the dreamliner remains in service and weve had heard from several executives with Different Airlines saying, listen, we have the dreamliner, we stand by it. Todays news no doubt took a hit for boeing shareholders, down the last week, carl, almost 3 , another 2 back. They started getting back some of it, but its down 2 again today, carl. You had the right question earlier on, and that is what it does to the scale of production, no matter what the outcome, but its something to watch. Thanks so much. You bet. A quick look at how the sectors are shaping up. Materials dragging the market, social media has been getting a boost recently as well. Facebook share is gaining positive momentum. Julia boorstin has more. Social media stocks do seem to be undergoing a sentiment shift ahead of the press conference on tuesday. Facebook shares are up another percentage point or so. That follows a 12 gain over the past five trading days. Now, a number of analysts have issued positive reports looking ahead for the Quarterly Earnings report. The consensus seems to be that the efforts to make money on the growing mobile news will start to pay off. Meanwhile, linked in shares are, the announcement its passed the milestone of 200 million mebsz. Even zynga is in the green on news its gathered many gaming patents. Wall street certainly likes the efforts to move in that direction, though we have to remember that zynga stock is still done about 70 over the past 12 months. Carl, we have to remember that a lot hinges on what happens with facebooks earnings, which will be reported after the bell on january 30th. Theres a lot of positive momentum, so well have to see if they can live up to the expectations. Hoping a rising tide will lift all votes. Theres a lot of news to come. Well see what happening on tuesday as well. Julia boorstin in los angeles. Up next why one member of congress is voting to raise the debt ceiling is one of the worst things hes ever done in his life. Michael burgess joins us right after this break. [ male announcer ] dont just reject convention. Drown it out. Introducing the allnew 2013 lexus ls f sport. An entirely new pursuit. Introducing the allnew 2013 lexus ls f sport. And you see the woman you fell in love with. Shes everything to you. But your erectile dysfunction that could be a question of blood flow. Cialis tadalafil for daily use helps you be Ready Anytime the moments right. You can be more confident in your ability to be ready. And the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. Tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. Do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. Do not drink alcohol in excess with cialis. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, seek immediate medical help for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use and a 30tablet free trial. Rick is here with a special guest on that very topic. Rick . I am. Id like to welcome republican congressman from the great state of texas, congressman Michael Burgess, also a medical doctor. Welcome to the show, congressman. Good morning, rick. Thanks for having me on. Absolutely. Now, you are a selfidentified fiscal conservative. You were one 18 congressmen from texas, and i believe under the old congress i think you have 32, i think thats moved up based on redistricting. Why didnt you vote for it . On the if is cal cliff . Yes, on the the bill we just passed . Yes, the bandaid bill. Well, first off it was a made for tv drama, we shouldnt have been there in the first place, but you know, my big stumbling block was in that bill, there was a turning off of the sequester. The sequester are the automatic across the board cuts passed in august of 2011 in order to pass the last debt ceiling bill. And apparently people thought it was okay to turn that off going into this year, but unfortunately its turned off for two months and were right back about in the soup with another debt ceiling deal. How are we ever going to get out of this conundrum if we dont at some point start paying the money we promised to pay. You just said something. How are we going to get out of this conundrum. According to an oped by mr. Stephen moore, the president doesnt believe theres a problem. Do you believe that the material in that oped is correct . Do you think in your opinion that the government believes the president specifically doesnt believe we have a spending problem . The president does need to wake up and assess his surroundings. We are fixing to have the inauguration in a week or so. The debt will stand at a little other 16 trillion. By the time the next permit is inaugurated, the National Debt will be 22 trillion. Who cannot say theres a serious problem with being awash in red ink, and it threatens the fabric of our republic. I dont disagree. Yesterday the nominee to replace Timothy Geithner is jack lew. Keep in mind hes problem the professor and frankenstein that created the monster known as the current budget, even for bush when i look at mr. Lew and the comments made by Stephen Moore regarding the president , this is a duo that i dont think will make the job of tackling spending any easier. Am i missing something, congressman . No, if i read woodwards book correctly, wasnt it jack leb who was the architects of the sequester when that was proposed as a way get off the cliff last august . So, you know, again at some point were going to have to start paying keeping the promising we have made to pay down some of this. You know, after the budget control act in august of 2011, we set our appropriations limit up to the maximum. I said, why do that . We all know were going to have a disaster somewhere along the line that will require more money. Sure enough, we had a once in a lifetime storm that hit the new york and new jersey, its going to cost a lot of money to repair that. We should have saved some of the last years budget in order to pay for last years disaster. But, again that kind of thinking just doesnt seem to get anywhere. Now, we only have about half a minute left. Quickly, even though my person opinion is theres a huge difference between moral obligation and debt obligations, maybe the debt ceiling issue directly isnt the best avenue. The twomonth delay on the sequester, do you think thats the best qualifier in your group of arrows to try. The best arrow in the quiver is the appropriation process. Unfortunately for the process, its the debt ceiling will happen first, followed by the continuing resolution lapse. So both are opportunities to try to curtail. They are coming in the wrong order. If a way to reverse that, i might be in favor of doing that to get them into the proper sequence. Thank you. One final thought. In six months, when i have you on again and maybe a couple times interim, do you believe the discussion will be how many spending cuts the republicans in the house were able to be a catalyst toward with some great achievement that approaching a grand spending bill. Could we have that conversation in six months . Well, i would love it if we could, but lets be honest. We had a status quo election. The president wants to continue to spend money, so we continue to be the restraining order on the administrations spending habits. Its going to be tough sledding, no way around it. Well, remember, a lot of people are calling you lunatics. I call you a patriot. Thanks for being a guest on the show, congressman. Thank you. Carl, back to you. Planes and trains are outperforming the market over the last few months, but do you really want your money in those stocks . Weu can talk about the transcripts, and the bell is about to wring in europe. Dont go away. You know my heart burns for you. Im up next, but now im singing the heartburn blues. Hold on, prilosec isnt for fast relief. Cue up alkaseltzer. It stops heartburn fast. Oh what a relit is cue up alkaseltzer. It stops heartburn fast. Ive always kept my eye on her. But with so much health care noise, i didnt always watch out for myself. With unitedhealthcare, i get personalized information and rewards for addressing my health risks. But shes still going to give me a heart attack. Thats health in numbers. Unitedhealthcare. About that europe puts to pet a pretty eventful week. Mcmerck as the markets close. Once again its going to be an allitalian version. Because we had a watershed event this moment in illy. The Italian Government borrowed money, 3. 25 billion euros, and the quleeld 1. 85 , the first time it is below 2 since march of 2010. Were going to roll through some charts for italy over a period of time. The yield is down six months take a look over the back, gosh, late in 2011. Boy, have things changed because of mario draghi. Lets show you also the euro i also wanted to show you the italian tenyear yield versus the u. S. Lets go to the charge where they are yield versus year old. U. S. Rates have been rising while italian rates are falling. Its been whats been so long a very steady pass, and while the ecb is doing that lets just move on to the euro, so we can show you the big move it has made, particularly today. So this is day two of the draghi effect. Art just said they really only walepapered over the effect, but you have to admit their actual budget, if you could get rid of italys interest payments, the actual budget is pretty close to being balanced, which is big statement, as opposed to ours, as opposed to greeces still, so in some ways they are closer. But youre right, carl. Back to you. Interesting. Good stuff. Get a check on energy here. Sharon . That has seriously pressured brent crude prices. Were also looking at weakness in the metals, gold, silver, copper platinum, palladium, all lower on the session, but actually the biggest drag were seeing here right now seems to be in gasoline futures, down more than 2 action and we do have a big increase in gas inventories over the past several weeks action actually since october. This is about 4 above what we normally see for this time of year in terms of gasoline inventories. And a lot of folks will be interested in the impact this crop report that comes out at noon has perhaps on gasoline prices. What happens to corn, what happens to ethanol will impact gasoline futures, impact gasoline prices at the pump. Well be watching it very carefully. Thank you for that. Lets bring in bob pisani. The word of the day appears to be flow. Yes, were finally starting to see it. Weve waiting for it. Those of you who listen to these records. Weve seen weekly outflows for four years, and inflows into bond funds, waiting for this to start to reverse. Well, at least last week was interesting. This one includes the first day, theres a lot of competing services. Any a decade, but exchangetraded funds are continuing to get monday. But its nice to see Stock Mutual Funds get some inflows here. Are we reversing finally the outflowing that weve been seeing. Its too early to tell, most of these are often i think its encouraging. I do want to know that eps reports in inflows continuing. China, the inflay numbers was quite noticeable today. This is the main etf, the fxi. You see this big move up, this is just in a month. All throughout going into the month of january, all of these funds here, thats a big to the down side. Speaking of asian funds, this is a good way to play japanese stocks. Thats also on the up side, as you can see here today, so obviously of course announcing a Stimulus Program here, but you can play these, this is a good way, wisdom tree removes the effects essentially of currency in this particular etf, vxj, you may want to look into that. I note the effect this china news is having on our market, even on a day when the dollar is down, material storings are notably weak. This is that china effect. Aluminum companies right across the board are down, steel stocks are down like allegheny, the big mining stocks are down. Iron ore stocks are moving down. Finally carl, the big question is what do you want to do, the cliff negotiations or the debt ceiling negotiations are a month, month and a half off, what do you do with a company like caterpillar . It goes from 86 to 95 essentially at the start of the year. What could el do right now . The relative strength has been strong recently. Do you buy, sell or hold . These are the questions that the managers i thought have to deal with all the time. By and large, hold seems to be there, but theres a lot of people wondering what should i do now . Theyre going to report january 28th. Right now i think its a hold. Clarity on pricing will be key for Companies Like cat. Thanks, bob. Have a great weekend. You too. Transports have been on a tear, the dow transports average hitting a new intraday high, the highest since july 2011. Looking at two industries today, airlines and the rails. Of course the rails have remained relatively flat. Guys, good morning to you. Happy friday. Good morning. Thanks for having us. Helene, i love your report. The title is going all in and hoping for the best. There are a few things that are apparently working in the sectors favor, right . Yes, exactly. One of the things to think about with respect to the group right now, we call it the three cs cutting capacity, charging for everything, and industry consolidation. Those are the things that are really working for the stocks. Even though theyre up in 2012, they were up 35 over 2011. 2011, they were down 31 . So if you look on the xal at a year on twoyear basis, the stocks are back to where they were in 2010, and we think the fundamentals are much improved. So some unit revenue growth. Consult ailing incredibly appears to be working here and there. Ive seen predictions for crude this year at 70, which is the most important dynamic . I think the key element for us is that we continue to have a stable to absolutely even rise in environment, because that really keeps the lid on capacity growth. We dont look volatility in the fuel markets. We really like predictability. In an environment with even 70 oil will be fine, because the airlines would be hugely profitable at those levels. We think the stocks can double and tripping even if these current levels. Donald action switching to rails obviously were getting data in the form of volumes, but how long do we have to issue catch ats that come along with ma sandy did in the northeast. It depends. Quite frankly, with what youre looking at. In the north and east there are caveats related to sandy, because there was the interruption of flow and rebuilding efforts, but in the you have a different stories. Its all about fracking, natural gas, the increase in Oil Production and chemical production. The stuff that makes stuff, as we like to call it. Why do you think freight has we look at transports overall. Why is that . And i wonder if a fedex, for instance, when it comes to general freight came out with guidance better than were getting, if that would change the picture . It would certainly. Were seeing a worldwide slowdown, but again it depends entirely on where youre looking. If you look at the union pacific, that stock has dramatically outperformed the rest of its peers, because it is moving, you know, look at the balkan in particular, hot spots in the industry. The balkan 18 months ago was producing 10 Million Barrels a monday in cruelty. Now were more than double that. As a result weve got weve more than doubled the number. Were seeing 22,000. Were seeing natural gas success, 330 per mcf, thats cheap feedstock. We are permitting and building chemical plants in the United States for the first time in 40 years. So when you look at a rail like u. P. , who has great access to all of those chemical plants, its benefiting both in bringing product in, the petroleum carloads and bringing finished product out that benefits them to the point that, you know, since we first started recommending that stock, its more than tripled. That is a good tip. Finally helene, your favorite pick, youve got one . This. Yes, we line dealt a and united. Which by the way the earnings are coming up quickly. Thank you both for your time. Is apples presence if best buy stores tarnishing the tech giants image. While best buy could be dragging apple down with it. Plus the man who says he knows when the next ipad is coming out. After a short break. Aig . We said we were going to turn it around, and we did. Woman were helping joplin, missouri, come back from a devastating tornado. Man and now were helping the east coast recover from hurricane sandy. Were a leading Global Insurance company, based right here in america. Weve repaid every dollar america lent us. Everything, plus a profit of more than 22 billion. For the american people. Thank you, america. Helping people recover and rebuild thats what we do. Now lets bring on tomorrow. A bold prediction coming from market maven jeremy siegel. Should the sell the rally ahead of tuesdays big event . Wells fargo beats, but is it a buy . Two traders will face off. Carl, see you at the top of the hour. Rocking the tie bar today. I like that. Despite best buy reporting some flat holiday sales today. Should they stick with the retailers action or is it time for apple to drop best buy. Rocco, welcome back. Thanks. Also the mayor, according to foursquare of cnbc los angeles. I know, i think we have to start paying you now. Congratulations on that distinction. Yeah. Rocco, in a relevant black hole . Is that fair . I would categorizes them as such. You know, look at the numbers. I read an article before i went on that said the ceo accomplished his first goal. Free cash flow was plummeting, Christmas Day amazon. Com had so much more traffic to their website than any other retailers. Walmart was second at about 8 million visits. Best buy came in third or fourth. I would say so. People adopt go to best buy to buy things anymore. They go there to browse. If youre apple, why do you want to be a part of that mess . You made the point that a lot of companies have tried to divorce themselves from what they see as losers, a zynga, why do you think hes doing things so differently than jobs was before he died . Well, i think you need some context here. Number one theres two apples were talking about. The apple inside the next year. Thats the apple that can do pretty much everything it wants and win. It could do a cheap iphone, gnome date china and india, crush nokia and r. I. M. I dont think it should, because then theres apple 2. What will they be in 12 to 18 to 24 months. Can they answer the question of, can we keep that steve jobs magic . When i look at the best buy situation, i say are they running a charity . Are they trying to prop best buy up . Or should they be saying, sledge good for our long term image . Look at walmart, target, all of these reseller relationships and say do we have to be a wholly exclusive brand, where you buy at our stores, our website and maybe well do something with a bose or tiffany or something at christmastime. But rocco, where the pressure is on more than ever to keep unit sales high, if you dumped walmart and target and best buy, where would you make that up . First of all, we dont know what there is for make up. Nobody tells us. If anybody gives you a number, theyre guessing. Nobody knows how much units get sold at the resellers. You dont see that in apples reports. The retailers dont talk about how many they sold. If you told me a number, i wouldnt believe it. First of all, we dont know what the loss would be, you this the jeff bezos and steve jobs theory of sure, short term we wont worry. Were word about the longterm image and branding. Listen if you said an ipad, youll go to the apple website if theres not an apple story nearby. You wont say ill sets for the best buy brand or a nexus 7 or kindle because theyre not selling apple stuff anymore. Provocative as ever, mayor pendola, good to see you. Thanks, carl. When we come back, it is the pawnshop for the rich and famous, Beverly Hills loan is raking in the dough. Well find out the secret to their success, after the break. Bifrl hills loan is a different kind of pawnshop. Customers are now using it as a revolving line of Business Credit instead of just personal credit. Our jane wells is live in los angeles with more. Good morning, jane. Reporter hey, carl. There are actually three Largecap Companies in the pawn sector. Theyve all been outperforming. Cash america, easy corp, and first cash financial. Theyre Beverly Loan Company in Beverly Hills, total loan amounts are up 10 in the year. The collateral is getting more expensive and unusual. What is that . An 11 carat pink diamond. Could you i dont in 1996. Iconic. As i walk through the valley of the shadow of death they bought the a. M. A. Awards. He also bought the original energizer bunny. He says High Net Worth customers increasingly need quick cash, they dont want their credit check. Sit back and listen to two good examples. I actually recently had a gentleman in here who was really a bit wary, a bit nervous to be in here. He had to meet bonus demands, end of year, hes paying out bon uses to his staff. He needed a quick infusion of cash. He had some outstanding receivables. He came here, received a collateral loan, and was able to pay out his bon uses, but he was a bit tentative. I recently had someone who had holiday popup shops, and that they sold like christmas ornaments, things of that nature, and they needed money quickly to fill the shelves, because they were selling out, apparently christmas was a bit stronger than they anticipated. Well, in order to meet those inventory demands, they couldnt go to a bank. They came to me, brought their watch collection, bought cash on the spot, bought the ornaments, and has since come back. How l. A. Is that guy . Theyre actually expanding to new york. He says 9 out of 10 customers radio el deem the goods, pay off the loans, fourmonth loans, 4 a month. On street signs meet a regular customer. I i like the story. Jane wells in lapse. We have the man who says he knows when the next ipad will be released. It might be sooner than you think. Thats coming up next. [ male announcer ] some day, your life will flash before your eyes. Make it worth watching. Introducing the 2013 lexus ls. An entirely new pursuit. Abecause what you dont know can abouhurt you. Ce. What if you didnt know that boxes by the curb. Make you a target for thieves . Or that dog bites account for a third of all home liability claims . What if you didnt know that one in seven drivers is uninsured . And that grease fires have to be smothered . 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S. , its also in china. So obviously apple released their fourth generation ipad in october, and then the new ipad mini in october, but i think were going to see another refresh come through sometime in mid march. So ipad 5 i think will be a thinner its going to be a lighter model, and possibly theyre going to tweak the display technology. One thing we have heard at ces this week, sharp gave a great presentation on that you are igzo technology, which i think ultimately apple will move towards, much higher pixel count screen display. Interesting. Trying to guess when new products come online has proven to be a disappointing exercise for some, brian. How much confidence do you have in this march call . Im pretty confident theyll come out in march. Ipad mini is something we talked about october 2011, we saw it come out in 2012, so im confident well see something in march. One thing we have to remember, i think the product refreshes at appearing will get shorter and shorter. Youve had a price target of 1111 for a while. Weve been giving you some ribbing. Youve not moved off of it even as some rivals have brought down even the more optimistic targets. What will it take to get you off