Transcripts For CNBC Squawk On The Street 20131211

Senate house negotiators dealing with a package that would fund the government through the fall of 2015. Costco shares are lower in the market after expectations missed. Mastercard boosting its dividend. First up, the latest aca enrollment numbers are out. Lets go to Bertha Coombs. Reporter good morning, carl. More than a quarter of Million People nationally signed up for National Health insurance plans through the exchanges in november, that according to the latest data from the obama administration, that brings the total to 365,000 for the first two months of open enrollment. As the administration was making fixes on the site, enrollment ramped up with more than 110,000 people signing up for coverage last month, more than four times the number of people able to make it through the system online in october. Number of key states operating on the federal exchange are accelerating, but not hugely. More than 18,000 in florida, up from 3,500 in october. In texas, the numbers are still low with 14,000 in october, up from 300, and pennsylvania up to 11,000, up from 2,200. But along with todays report from obamas administration, the current total nationally when you look at our thermometer is just over 450,000 people. Here when you start looking at some of the individual states, you see the stark differences from the big states on the federal exchange. Take a look at california. 107,000. In new york the total is over 69,000. And even in kentucky, over 15,500. Thats a lot better than some of the biggest states on healthcare. Gov and it really shows the difference with the web sites that have been work well, not to mention the real push from the local administration to really get people enrolled. In time this is going to be good fodder for secretary kathleen sebelius, set to testify before the energy and Commerce Committee at 10 00 a. M. Eastern. She has also called this morning tore t for the Inspector General to investigate the botched awarding of contracts to contractors. Thank you, Bertha Coombs. We do have a budget deal. House and Senate Negotiators adealing to an 85 billion deal. The pack and includes 63 billion of sequester relief, 23 billion in net deficit reduction. Heres paul ryan speaking on the deal last night. I think this agreement is a clear improvement on the status quo. This agreement makes sure we dont have a Government Shutdown scenario in january, makes sure we dont have another shut down scenario in october, it makes sure we dont lurch from crisis to crisis. Jim, one this evening being said, it probably going to add to gdp, maybe clears the deck for a december taper if the fed is so inclined. If you combine this with what bertha is reporting, youd think washington could be a source of good news. Im a little suspicious. The future is not up a lot. I wonder whether we are not going to be fooled again by washington. Theres an unemployment issue coming up. The reason i put it out like this is when i see ryan and mary together, thats terrific. But if i were senator cruz, if i were someone who just out of nowhere were someone who had come up and grabbed the mic, i dont know if id like the deal. It did take about 20 minutes for marco rubio to put out a press release saying the deal is no good. Kantor liked it, mcconnell is silent. Im not a political guy. But i do know from following politics that when you think that washington is going to be a help to the stock market before some sort of crisis, thats not been the way its been since 2009. Right. I mean, you have to frame it as progress. I realize its very small but for a dysfunctional government thats been unable to even come up with a farm bill, at least you could make an argument that, well, maybe we start to see some other progress . I think that theres reason to be optimistic. I always want to temper it because there are people who say 2014 coming, thats an election year. It does no one good in the republican party, i think, to be able to really embrace what would ultimately be the president. I also know that theres some senate seats in the south for democrats that theyve got to win. I dont know whether they feel that right now people want consensus in the country. I just am surprised to see that the futures arent up huge. It says that the people who are saying, you know what, this is small, its progress but there are many more stumbles. The Washington Post called it little more than a ceasefire yesterday. I like that. And there are arguments it leads to an immediate increase in federal spending, but some of the fees are taxes in a different kind of form. Well talk to Chris Van Hollen later and get his take on why the market maybe theyve already priced it in. We had this year of good feeling in the stock market. Maybe that was to anticipate the progress in washington. Again, i just think we would owe the viewer dont want to get the viewers disserved here. When we say, listen, washingtons over and then senator cruz comes on and says this is the worst thing thats ever happened and the next thing you know Huffington Post has 17 articles about cruz and we pronounce this deal done and senator cruz is very, very powerful and we havent heard from him yet, why should we think that paul ryan and murray have solved this . Is th has that been a good bet . Not in the past. Not in the past. Sequester, we get that off the table and its more spending. Anything is better than the four sequester dont they want lower taxes . Tea party . They havent bigger issues. Thats all im saying. Does anyone want to deal with stocks . Yeah, lets get to the stock market. Lets do that. Costco, they are lower right now, shares of costco. The Company Reported First Quarter profit below wall street estimates. The wholesale clubs revenues were up to 425 million lets just say they grew. But it showed signs growth was slowing. Analysts had been expecting higher growth as well. Costco, theyre investing in expenses, gna growth 7. 2 i believe it was. Some of the miss analysts were saying were the result of preannounce sales shortfalls but they thought theyd make up for the weakness. Maybe they didnt quite do that by getting, you know, higher gross margin and cutting more expenses. Right. Warehouse preopening expenses. Weve been seeing this more and more when we hear stores are going to be open, that often means stores are going to grow faster. I did not think costco is that bad. Weve been fooled a lot, people say negative things and then you listen to the Conference Call and you hear the growth is accelerating or maybe theyre doing better. Interesting article in the wall street journal today. Be careful when they report. And i get up pretty early. I give kelly evans a hard time about that all the time. Basically the shelf life is only a few hours before the story is moot. I think kelly was a guy. Asa i said, listen, i cant write a story until it comes out. Then i realized she was a really nice person and i felt bad. Comp prices have come up, foreign was a factor and then the membership fee, not only are they holding on to members but theyre managing to get other members to come on board, too. Theyre continuing the job senegal did. The stock fell 118 to 111. Then found out plus five versus walmart, versus target. Lets not prejudge this. Mastercard up 3 this morning after the Company Announced a 10 for 1 split and authorized a 3. 5 billion buyback. I was talking to kayla tausche, who will join us later. The number of splits this year relative to past averages, has been low. I remember talking about salesforce. C salesforce. Com. Had Alliance Data systems on the show the other day, we will never split the stock. Why so we will never split the stock. Google and priceline, retail people want to split. Best buy auto zone was what was theyve taken the share count from 65 to 34 million over the lafour years. This religion of no splitting came from Warren Buffett. If Warren Buffett tomorrow were to announce a 10for1 split, believe me i hate to get back to that era where people were point being at splits as some sort of fundamental its changed for the positive. I mean, that was a sad day. Thats true. You take a pencil, you break it in two pieces, you have two large pencils . No. Back in the 90s, the person bringing you your meals, whatever, i hear its going to split. I agree that splits are cosmetic, unlike avon, which is clearly trouble in cosmetics this morning. But there are a lot of Retail Investors who say i dont want to buy one share. I remember when leon coop aerma came to my office in 1984 and say Berkshire Hathaway is a 200 stock, you ought to tell people to buy. I said im going to sell and it tell people to buy for 200 . It went to 100,000 that was good. I know a mom and pop who bought three shares of Berkshire Hathaway who have retired nicely on it. Go to omaha once a year. Thats what its all about. Yes, it is. I dont think thats wrong. I dont want to lose sight of the fact that he has pioneered and done many things right. If your template was to do what buffett did, you would be laughing at what mastercard did. These guys are not lightweights. Theyre heavyweights and they want more people in their stocks. The north face, you buy the jacket, but not the stock, not if it 200. People think it like a mark down. Weve had some stocks that are markdowns but unfortunately they were collapses. Well talk about joy global you get a market split, as you say. Ooh, i like that. Rite aid had one of those and sprint had a market split. Those are bad split. Nokia and lucent back from the dead. Those were split repeatedly. Those were like 7for1 splits. Except you didnt get the 7. When we come back, is discovery looking to by Scripps Networks . Later well take you to an event where spotify is set to reveal their biggest changes of the year. Again, boehner talking at 10 00 a. M. On the budget. More squawk on the street from post 9 in a moment. Thanks to you im much obliged from garage to global. On the ground, in the air, even into space. We repaid every dollar america lent us. And gave america back a profit. Were here to keep our promises. To help you realize a better tomorrow. From the families of aig, happy holidays. Well see how much theyre going to be pup the answer a lot. A number of stories out this morning, late yesterday beginning with i think it was variety. Com saying that citing the source that discovery is considering a lot of conversations overall. Its not a very large premium, would want to use largely its own stock, which is a very high multiple stock versus scripps at least versus today and then would want to go about extracting those synergies i discussed. The pitch would be to the family, hey, youre going to roll into a combined company thats going to be a lot stronger and going to benefit you over the long term. There is perhaps an expectation maybe that kind of thing can happen. With the stock running up, one has to wonder whether they at all would be interested in chasing it. I saw the story break last night, stock was immediately up 10. I said to myself anyone who knows this is going to jail. So how does it start . I dont know where the leak comes from. In this case we should point out its variety. Its variety. Com. On a week wb there the ubs ma conference i spoke zaslav. Nobody is talking about structure of a deal, nobody is talking about specifics of a deal, they are just talking much more about or i should say the idea being, hey, if we can get a low premium deal, extract all those synergies, help the familiar lip out as we think rolling into this new combined company, well do it. Its rational. Dave, your interviews have been unbelievable. The interview with bewkes yesterday from time warner, hes saying incredible things about the future in cable. You asked him, is this the end cable . He was wild about it. Theyre all talking about multiplatform devices and video viewing in all different forms and the fact that hes very frustrated that video demand has not been rolled out effectively by sun cable system. I said this makes a ton of sense to do this deal after i listened to what bewkes said. The question is do you want more leverage in the consolidated cable industry. Thats another question well probably get to at some point. In the meantime time to get ahead of the curve with cramer as we count down to the opening bell. Youre is not doing too bad either. More squawk on the street from the nyse straight ahead. In todays markets, a lot can happen in a second. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. In a we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. The weather outside is frightful but the fire is so delightful and sense weve no place to go, let it snow, let it snow, let it snow its actually bright and sunny out there. A little chilly as we start our mad dash on wednesday. The cold weather has helped a lot of you. Giii on last night, cold weather fantastic for them in overcoats. Cisco. The csco keeps moving. Citi rolls out telecom coverage. Outright sell on cisco and a buy on alcatel and nokia. They were supposed to be left for dead and cisco was supposed to be the endtoend solution, all things internet solution. This is directly saying ciscos lost its way. And the fact that the other syy went up 20 on the deal two roads. Is this the first of many analysts to come that are going to give up on this thing . I think people are starting to recognize theres a problem in management. When i went out to dream force, theyre still revering cisco. But the analysts have had it with the high buybacks, theyve had it with dont worry were not losing any router business. The analysts are giving up and this is a company that was the biggest darling. It reminds me of microsoft during the swoon. We all have microsoft now, we hate it. Cisco is becoming a hated stock. Management change. Thats in the air. Thats what they want. Hes not going anywhere, chambers. Youve been talking about that. You have not been unguarded at all. No, and Herb Greenberg on street side talking about the worst executives, John Chambers name came up. This is so different from what weve had for years and years and years. So next time they report a decent quarter, youre not going to change your tune . Yeah, if they would do it but the guidance last time was so horrible. Were going to mention joy global later. I keep thinking when you cut and cut guidance youre eventually going to beat guidance. No. The opening bell is about four minutes away. Stay tuned. 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The opening bell is within a minute or two. For those fans of round numbers, our producer points out the s p this morning almost exactly 400 points above the 52week closing low, jim. Back from december 28th of last year. Not bad. The journey. I remember i was looking at some numbers, s p, was at 880 at one point. This is a tremendous journey with different players constantly shifting. A lot of news regarding the budget on the hill. Well hear from john boehner in about half an hour. Lets look at the opening bell. Down here on the big board, auto home. Well talk to the ceo about the ipo in a few minutes. Over at the nasdaq, dhx media and the characters from yogabagaba. I remember dancing the competition for those young eyeballs, jim. Gees, you want to get them hooked. You didnt box with those care terse. Im hearing stories about you boxing. Dont do that to the kids. The kids love yogaba. The war against coal continues virtually around the world, particularly the United States. This was a disaster. Estimate 367, now goes to 350. The only thing good was the actual earnings held up. So lets give them that. The actual earnings were not disappointing, but that said the secular decline in coal, follow this lawsuit from the states in the northeast that have been burned by the midwest Coal Companies because i think coals days are doomed. We mentioned costco before the bell. Urban is the third biggest gainer on the s p. They had a negative quarter previously, urban. Urban is up, its down, its up, its down. Get a consistent view, people. If you like urban, you like anthropology and you like free people, which are doing fabulous and you like the online but youre betting on the Flagship Store turning. If the Flagship Stores turn, theyre going lower, not higher. Youve watched 3m for a few weeks now. It was the lagger in the dow last week but its taken to a buy. Its so interesting. I think 3m is one of these stories that is indicative of what i talk about, why we shouldnt just focus taper nontaper. They have new products, inve inventive products. I think 3m is going to be a big story through 2014. This report from the group called itg saw Slower Growth in the americas. What did you think of that . The guy was on tv. And stephanie link, commentator on cnbc, we were aghast at this. We said either the guy knows something and the stock is going much lower or hes making a splash. I dont want to bet against howard schultz. This is one of those companies that i think is a great senior growth stock. I just didnt think that the negatives were lets put it this way. I found it a little stretched. I thought that the negatives were stretched. I think theres a lot of good stories coming in 2014. You think tieavan. I think if starbucks is down a lot, you buy starbucks. Longterm operating margin and roi targets were reached earlier than expected. I have frank on tonight. When he announced that, i said immediately stocks go down. I said what do people want out of a company . Hope home depot is a Great Company and blake is a great operator. Youre saying im a cynical guy and i dont believe in the best run retailer in the country because i just am negative. Frank blake is good. When i once complained to him my tomato flats had blight i bought, what do you think he did . He came to your house and planted new ones. No, he sent me some seeds. No, i love frank. Kaecable isnt working, bria roberts comes over and fixes it. Hes a great merchant. I cant wait to speak to him tonight. This is another phenomenal analyst day im watching as the stuff comes out. You bet against home depot, youre making a mistake and that stock should not be down. Wanted to get to initial Public Offerings. We do that with a bit of a report here. We got one that is pricing. I see bob pisani over there in the crowd figuring that out. We got a big one tomorrow well price tonight. That is hilton, the initial Public Offering of the enormous hotel chain taken private in 07. Its been an interesting ride for hilton over the past few years the underwriters are talking about a 20 price. That is where theyre at least guiding as the book fills up, its already filled up but as they start to get closer to the pricing tonight, 20 is where the underwriters are pointing. A number of people ive spoken to as what they are expecting right now will be the price on hilton. Well on an enterprise valuation, i can get 26 compared to starbucks because of the pipeline. Theyre pricing a bit lower than marriott, 20 of the ebidta comes from hotels owned by the company, 50 of that contributed by about eight hotels, the likes of the waldorf, the hilton in the new york city and the big msas. And, yeah, if you go with an b ebidta number at 2. 1 billion, youre looking at two and a half times, including debt paydown. Its not expected. A lot of garp investors may expect it, growth at a reasonable price. This has been a manageable story. Lets go back a bit. Blackstone bought this at almost the worst time could you buy one of these properties, as the economy headed off a cliff. They bought it at one of the highest prices ever paid for this and theyre going to manage to come out of this thing with at least a double. The irr is going to be pretty darn good. One has to say its a home run when you consider what they had to go through to get here. Theyre going to own 76 of the company. Blackstone is not selling shares. They are debt holders, as well as the company itself selling primary shares. Blackstone will be locked up and they will start to exit this but it is generally you have to say a very strong investment for them. Management team very well regarded, jim. Also another key that helped them keep this thing alive was the fact that they had floating rate daebt. If they had put fixed rate debt on this thing, byebye. A lot of investors in the real estate area are just encouraged by it, in terms of loving management. Pipeline, 99 are higher margin and franchise segment. I think starwood is an excellent company. Hyatts a lagger. These guys are way ahead on the asset light. Its a remarkable company. I think its a buy. Well see where it opens. Dont expect it going to act like some of these tech ipos weve seen. But at the same time, given the ipo fever that seems to have overtaken many investors, you may get people piling in for the quick flip. 20 a share is what im hearing for where it will be priced and thats not until after the close. It will be a big day tomorrow. Lets go to bob pisani. Remember, the price talk was originally 12 to 14. Then they upped it 14 to 16. Put up the full screen. This is a very interesting company. Theyre the number one auto web site in china. More people go to them 50 of everybody who looks for cars on a web site in china go to this company. So they had a dominant position. I know it sounds a little unusual. The Advertising Money comes from over 100 auto manufacturers. There are a hundred auto manufacturers in china and they pay a subscription fee. Thats withone of the keys why people seem to like the company. Its profitable. Again, they dont sell cars. They just essentially are advertising. Operating profit 96 million, sales grew 67 up from september. Were waiting for an indication of where it might happen. Valero, they had 15 million shares at 24. That was also well above the price of 19 to 21. We have two ipos opening today both pricing above the initial price talk. I want to comment about mastercard. It want the 101 stock split or the dividend increase, which is healthy, but that 3. 5 billion stock buy back programs, these have been huge all year and are a major reason why the stock market has been holding back so well. Its the buybacks the companies do every single day thats really moving things. So 2013 mastercard paid 182 million in difficult depevidend. Thats almost 2 of the shares outstanding. In 2014 theyre going to do the sa same thing again thanks to this buyback announcement. So what does it mean for the numbers . Ba bard had a report out saying they buy 2 million next year, that will add 2 to the eps growth and this year as well. You can see these have cumulative effects and one of the reasons the company is doing so well. The five biggest Buyback Companies so far, apple, pfizer, halliburton, qualcomm, johnson johnson. We have indication on autohome up 26 to 29. Prices at 17. The indications right now, 26 to 29. Well have the ceo on later on with you guys. Back to you. Thanks very much, mr. Pisani. Lets head to the bond pits now. Rick santelli is over at the cme group in chicago. Good morning, dave. If you look at 10year, a twoday chart, a couple of things jump out at you. First of all, we are up a couple of basis points but nothing wild and were hovering right below what many consider a important pivot. You can see the dramatic response to that budget deal, whether you look at fixed income markets or equity markets. If we open the chart to one month, it kind of fascinating. You can see for one month, rates have clearly moved up. If you look at one month of the s p 500, you can see that is moved up. Even though the tenor of most of the conventional wisdom discussions revolve around the notion that Interest Rates doesnt seem to bother stocks. How many times have we talked about guns hot. If the g what would constitute that . A three handle on 10s. There lets look at foreign exchange. Thats where all the action is. Most of the people on this floor, theyre putting a few shillings in their trading stocking or trading foreign exchange. If you look at a twoday chart of the dollar yen, its coming off the big 103 handle. If you look at a twoday chart of the pound versus the dollar, the pound is losing its 164 handle. If you look at the dollar index, why is it going down . The euro versus the dollar continues to escalate. This has so many consequences. Think exports and think germany. Well continue to monitor that. Hey, gang at the New York Stock Exchange, its all yours. Thanks a lot, rick. When we come back, an Early Edition of cramers six stocks in 60 seconds. And well bring you the first trade of chinese retailing autohome when squawk on the street continues. G place. G place. I want to be a part of it. Ishares international etfs. Access to developed markets, emerging markets and single countries. Find out why nine out of ten large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus, which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. 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A 50,000pound, ingeniously wired machine that optimizes raw data to help safely discover and maximize resources in extreme conditions. Our Current Situation seems rather extreme. Why cant we maximize our. Ready. Brilliant. Lets get out of here. Warp speed. Time for six in 60 with jim. Time for groupon, nice upgrade. Put it with the twitter, linkedin was rallying yesterday and its got up side. Goldman stops access mid stream. Goldman wasnt consistency. Antimomentum hate this. Bernstein likes kellogg. Bernstein, we used to do these in hedge fund, long kellogg, short general mills. Good luck with that. Wells likes burlington yesterday. No guidance yesterday. People freaked out. I say buy giii, dont by bu burlington. Utx . I dont want to go against utx, theyve been good lately. Frank blake . Hes a great player. He knows housing. Hes kind of like fedex, nowing about the panoply of the world. Lets find out more about that. And then marathon, well, marathon is eagleford, marathon is bakken. How big is it and is it peaking . Will it lead to jobs in a bigger way than it has already . Not yet. It has but we havent seen the big factories to come in to take advantage yet of our lower prices. When we come back, its a chinese web site described by edmonds. The ceo of autohome will join us to discuss his companys wall street debut. Squawk on the street will be right back. Tdd 18003452550 trading inspires your life. Tdd 18003452550 life inspires your trading. Tdd 18003452550 where others see fads. Tdd 18003452550. You see opportunities. Tdd 18003452550 at schwab, were here to help tdd 18003452550 turn inspiration into action. Tdd 18003452550 we have intuitive platforms tdd 18003452550 to help you discover whats trending. Tdd 18003452550 and seasoned market experts to help sharpen your instincts. Tdd 18003452550 so you can take charge tdd 18003452550 of your trading. If every u. S. Home replaced one light bulb with a compact fluorescent bulb, the energy saved could light how many homes . 1 million . 2 million . 3 million . The answer is. 3 million homes. By 2030, investments in Energy Efficiency could help americans save 300 billion each year. Take the energy quiz. Energy lives here. Autohome, the online providers of views and listings in china. 2730 is what pisani said a few moments ago. Lets welcome the ceo of autohome, james zhi qin. You were at mckenzie, you were work being out west, you heard steve jobs commencement address at stanford in 05 and that convinced you to leave and start something new . Yes. I think im just kind of guy who want to do more concrete things, can make more impact for the people around me, to the market, to society. Thats why. James, i think people dont understand. Its not like theres ford, gm, chrysler, mercedes. Theres what, a hundred brands to choose from . And you need a web site to know what youre doing. Exactly. In china there are about 80 car makes are operate. Because a lot of car makers need to join for example, we have the shanghai gm, the shanghai volkswagen and another volkswagen. I think this is a site to me, tell me if im wrong, you got the wild west out there. You got more people buying cars, right . The only thing that could slow it down is pollution controls. And also keep in mind that majority of the car buyers in china a lifetime first time car buyers. You own a car what can you say . Chinese ipos to use that broad term scare many investors, in part because we went through a time of reverse ipos where there were a lot of accounting issues and things of that nature. What can you say to assure people when it comes to your company that theres enough transparency, everybody would feel theyre getting as much information as any other company . I think really look at internal control of individual company. For example, prior to ipo, we were probably the company who already solve the internal control weakness. We do not have that. We have in place since 2011. You mentioned the china buyer of an automobile. How sophisticated are they on going online and doing due diligence. Does a china mobile deal, does bringing apple phones into the country change that level of sophistication . I think theres probably two things. First, most of the chinas auto buyers grew up with the internet. In china, thats the on market you see development of auto market and internet market. So naturally most people are going to use internet to source information. And more importantly, more and more chinese consumers are going to rely on mobile phones rather than desktops to do. I want to circle back to what david said because people got crushed. There are a lot do you think the chinese corporate, the professionals, recognize what went wrong and youre the example of what went right or youre an outlier and after that theyre not going to be so good . I think it was more important for most of the china leaders, especially the business leaders, to learn from things that probably went wrong in the past and improve. I think the whole industry is going to get better, get stronger. Proceeds from this offering yet to be priced, im looking at the big crowd behind you, what are you going to do you have a a long shareholder in telestra, are they going to be there over time . I think they will be there going forward. As a public company, we need to invest heavily for our r d. Used car business, off Market Service business, in the future everyone going to use mobile internet to access or information. Ive heard, i dont know if its true, that beijing adds 10,000 vehicles a day. Is that true . Somewhere in that neighborhood . You know what, i really dont know. Because beijing has this regulation in terms of restriction on the plate numbers. Most of the new car sales coming from even second year and third year cities. Its fascinasincinatinfascin. Well see how you open. James zhi qin, thank you for joining us. Remember how hard when you bought your first car, how Much Research you did. And later on you say, ah, i look that model. First time i bought a car, i went to that Research Center many times. John boehner, speaker of the house, talking about the budget after a break. Does it end after youve expanded your business . After your companys gone public . And the capitals been invested . Or when your companys bought another . Is it over after youve given back . You never stop achieving. Thats why, at barclays, our ambition is to always realize yours. Shes always been able its just her way. Day. But your erectile dysfunction that could be a question of blood flow. 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Ask your doctor about cialis for daily use and a 30tablet free trial. In a we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. A confident retirement. Those dreams, theres just no way were going to let them die. Like they helped millions of others. By listening. Planning. Working one on one. Thats what Ameriprise Financial does. Thats what they can do with you. Thats how ameriprise puts more within reach. Theres no denying the stairway anymore, at least when it comes to streaming. Spotify announcing this morning that it will start carrying the catalogue of british rock legends led zeplin. Well get live to a spotify event in new york to bring you those details. First up, congress has finally come together agreeing to a deal to avert another Government Shutdown. What does this bipartisan deal look like . Our eamon javers is in washington with the details. Good morning, eamon. Reporter good morning. Theyre going to replace about 63 billion in sequester cuts, eliminate those cuts, replace them with 8 5 billion in longer term cuts elsewhere in the federal budget and hope to achieve 23 million in net savings. The problem for some conservatives is it replaces shortterm cuts with longterm cuts, meaning theyre going to increase longterm spending. Paul ryan, one of the architects of the deal, said if you want to have any kind of deal in this town, you got to have one thats imperfect. Take a listen. As a conservative, i deal with the situation as it exists. I deal with the way things are, not necessarily the way things i want them to be. Now that puts paul ryan at odds with other conservatives like marco rubio on the senate side of the Capital Building who said hes not going to support this deal. Democrats are grumbling that this doesnt do things they want like extend unemployment and other thunings theres a lot of things to like for and a lot not to like for others. Thats why theyre calling this a compromise. Reporter ill take it from here. Hhs secretary khathleen sebeliu is testifying in front of the house energy and Commerce Committee. Shes testifying in front of the house energy and Commerce Committee saying they have made progress in improving the site. She can point to new enrollment numbers showing over 110,000 people picked plans on healthcare. Gov in november. Thats more than four times as many people that were able to make it through the system during the first month of open enrollment, bringing the total to 137,204 on healthcare. Gov who have chosen health plans on the site through november 30th. It will be interesting to see whether she gives any indications about what kind of numbers theyre seeing this month since those fixes have gone through. Some sources have said in the first two days we saw nearly 30,000. Additionally the secretary is calling for the Inspector Generals office to investigate the development of the site, including the awarding of those contracts and is calling for centers on medicare and medicaid director to appoint a new cms risk officer to assess Risk Management processes. Thats one of the things people have criticized in the development of this rollout. Kayla . Thanks for that, bertha. Well watch that when she takes the stand. Lets turn to the markets and the impact of that budget deal overnight. Sam wardwell joins us from Pioneer Investment management. Good morning. Good morning. The market is down today. Should we be saying as a result of the budget deal the likelihood of a near term taper from the fed increases, if only at the margin . I think so. The uncertainty was cited by the fed as one of the reasons they did not taper in september. This budget deal removes a lot of the uncertainty. The job numbers have been good, not superb but solid. The economy looks fine. I would argue the economy does not need extraordinary measures and the fed would like to get out of the business of playing hamlet. The markets watching and tense and tense and tense watching the fed. Thats really not what the fed wants to happen. They also cant let the markets fall really, can they . When do you think they will exit . Theyre very, very mindful in not getting it wrong in communicating given as th aga, as they did a couple of months ago. Agreed. What janet yellen said is the fed does not have any responsibility to manage the stock market and then she said theyre not in bubble territory. That suggests theyre prepared to taper. The only benchmark were not seeing is inflation. Does that worry you . No. We have very little inflation. If we look at commodity prices, when prices rose, supplies increase. Thats the way youre seeing the same thing in metals. The Unemployment Rate is still 7 , productivity is keeping up with wage increases, so labor costs are essentially flat. You probably wont see inflation until the economy gets closer to full employment or Global Growth picks up substantially from where we are. So where will the market goes from here . Valuations are reasonably attractive. Im a bull. At this point it seems the fed taper is more likely than not. Thats what everyone has sort of come around to in the last few days, but it goes from 85 billion a month to what . Given the data you have in front of you. I would have gone from 85 to 80 in september just to start it, if i was chairman of the fed. Just to break the tension. I dont think theyre going to go to 65. They might not go in december. They might wait until january. They might wait longer. I think the markets would be pleased if they started with a small number. Let me come back to the major point that you seem to be making here, you are a bull. How bullish are you . How far do you think the stock market will go and will it correct on the sequester . I think it very well correct in the short term. Corrections can always happen. But if we look at valuations, they could still make a 20 that gives me easily 20 , 10 up side if europe continues to recover and europe doesnt fall off a cliff. Theres always ifs in that, isnt there . Theres always ifs. At this point the u. S. Still looks good. Europe is cheap. Theres less risk, more momentum. Emerging markets are still troubled a little bit. Were leaning towards the u. S. With a secondary bias towards europe. Good to see you sam. Senior investment strategist at Pioneer Investments. Well have more on the budget deal at 11 00 a. M. With John Chambers, global sovereign ratings Standing Committee at standard and poors. The company has halted a rollout resulting in significant business disruption so avon shares weaker on that bit of news. We are still awaiting comments from speaker of the house john boehner on the budget deal and talk to congressman advice van hollen, Ranking Member of the House Budget Committee in just a moment. [ bagpipes and drums playing over ] [ music transitions to rock ] make it happen with the allnew fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Get 200 free trades when you open an account. Take a look at autohome. Despite a weak take, nearly doubling at the open. 31 is the current price. Opened at 30. 16. Bob pisani pass been watching it all morning. What do you think . People talk about what the company does. This company is buy online auto. You cant buy a car online. All you can do is look at it and decide on pricing. They have 100 autos. Its hot. You can see here opening at 30. 50. 500. Com is a company that went public a couple of weeks ago at 13. Its now trading at almost 26. Thats almost a doubling of the price overall. Bottom line here is thats a sports lottery company. Another sort of marginal business. Another one later, sunji mobile, they went public a few days ago. Theyre 12. Stock is trading near 16. Well talk about the hot ipo market in china and why its been hot. Guys, back to you. Thank you very much, bob pisani. We are again awaiting the speaker of the house john boehner to comment on the budget agreement that was reached last night between paul ryan and patty murray. 63 billion in sequestration cuts restored. No real increase in taxes, though some are taking some issue with that because there are some fees that some are calling taxes in a different form. Interestingly no longterm jobless benefits extended. Theres been some discussion about maybe those happening in the early part of next year, guys. Some pointing out theres been a pendulum swing as the labor market comes back. How many weeks do you still need to give people . 99 . Thats up for debate. That was expected to show up in the agreement that didnt show up in the agreement. I think the positive news im hearing is theres something positive in it and out of it for each side. Democrats didnt get everything they wanted, republicans didnt get everything they wanted. The debt ceiling debate gets pushed down to february. Some are calling it a christmas miracle. Lawmakers announcing they did reach that budget deal it that aims to avert another shutdown. But should anybody be popping the champagne just yet . Congressman van hollen joins us this morning. How are you . Good, how are you . Not bad. How would you characterize the agreement . Its not a perfect agreement. I do think its a very small step in the right direction because it avoid as big part of the sequester, the very deep and immediate cuts that would take place, which would be a drag on the economy, a small drag but a drag. And would undermine some of our very important investments in science and research and education. So, look, on balance i think its good. Now, with respect to Unemployment Insurance. My view is we should not leave town without dealing with that issue. Youre going to have millions of americans out in the cold if we dont address that issue. We got to take it up. Congressman, what are the chances do you think it will get through the house . Lets be very clear here. Both sides have agreed not to include the extension in the deal that theyve done. Its all very well to say isnt it awful. You could have detailed a deal going through in order to help these 1. 3 Million People. Actually, that would have resulted, as you know, in a government shut down, which wouldnt have helped anybody. Our view would be to continue to press ahead. The answer of the question is if the speaker of the house of the house of representatives would allow us to vote on that, we can go forward. I will have a proposal later this afternoon with my colleague, sandy levin, that would provide for an extension of Unemployment Compensation attached to another provision that deals with trying to make sure that doctors who provide Medicare Services will be fully paid. So were going to continue to work on that right now. We didnt want to have a situation where you have a Government Shutdown. Congressman, the vote on this is scheduled to happen momentarily, but if you attach that proposal to this, do you think that that puts it at risk of going through . Well, were going to press that case, but the speaker of the house has said hes not going to allow a vote on that. So i think the best move in the end is we put pressure on from the house side but the democrats in the senate will take up some u. I. Provision to try and get that done, try to send something over to the house of representatives. But again, at the end of the day, if the majority in the house of representatives refuse to provide unemployment to people, were going to have to fight it every way we can. The speaker is holding that up. Hes made that very clear. Congressman, you should be credited in your efforts over the weekend. Just specifically because i know this is what you were heavily involved in, can you explain how the 12 billion of cuts for military veterans or pensioners will be apportioned . Well, in that area, again, what the democrats had said is we should use savings from cutting agriculture subsidies to cover the gap. But the republicans refuse to use the ag bill savings for this purpose. So at the end of the day there are 6 billion from future federal employees by increasing their pension contributions for future hires and then the republicans have also the 6 billion that affects military retirees between the age of 40 and 62. I want to be very clear. We had an al teternative way to address these issues by eliminating excessive ag exce excesses and closing ridiculous loopholes. This is far from the agreement i would have written. Its the product of hard compromise. Finally, congressman, not to make light of the longterm unemployed because it is one of the true tragedies of our economy, we talk about it a lot, but is there a number on nonfarm payrolls where you think theres enough strength in the labor market or that the Participation Rate is coming back where you give up the fight on benefits . I think the issue is not just the aggregate unploemployment r. The question is how many folks do you have on longterm employment status. Thats what we got to look at. We just had very powerful testimony from folks who had lost their job through no fault of their own, are working every day sending out resumes and trying to get a job and at least in the markets they were trying to get jobs in, there werent any available. I believe that the right thing to do is to extend that Unemployment Insurance for more time while the economy continues to recover. Look, we shouldnt accept 7 unemployment as the new normal. We need to get the economy moving much faster than that. Congressman, thanks for your time. Congressman Chris Van Hollen joining us from the hill. We are waiting to hear from speaker boehner. Well take you there live when he begins to speak. Shares of costco trading down 1. 25 after earnings missed analyst estimates. Is the bulk retailer still a buy after todays numbers . Its got a rich valuation. Well have that answer in a moment. Plus call it the stairway to streaming. Led zeplin will soon be available on spotify. 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Home replaced one light bulb with a compact fluorescent bulb, the energy saved could light how many homes . 1 million . 2 million . 3 million . The answer is. 3 million homes. By 2030, investments in Energy Efficiency could help americans save 300 billion each year. Take the energy quiz. Energy lives here. Welcome back. Costco shares off their throws after First Quarter profits missed estimates. They say weak foreign currency and competition is to blame for the miss. Lets bring in ian gordon and on the phone joe feldman, assistant director of telsey. Ian, do you think this is something well see with other retailers or that can could get worse for costco . No, the discount is relative in all of retail. I think they did a pretty good job managing that. It was on the expense side i think we better need to understand whats going on there. Is it health care costs, increased labor costs . What is going on there . I think well get a little more color on that on the call. Ian, you have long said slowing u. S. Sales growth is going to be a trend across the board, comps at 5 . Do you think it could get worse or is that roughly in line with what you expected . They actually reported their sales last week so there wasnt a big surprise today. I think the u. S. Sale have been ticking down a little bit. But generally Pretty Healthy in the scheme of Discount Retail right now. Were not looking for it to get particularly worse. Like joe said i think really its what was going to be going on on the expense line. Ian, this Company Makes most of its profits from memberships, does it not . Thats where three quarters of the revenue comes from. I see that the revenue for membership fees is up 7. 4 . That looks quite bullish to me. That looks like theyre at the core of the business doing quite well or is that simply youve had the price rises on the membership and doesnt indicate that people are flocking to the storms longer term . I think theres a little bit of the benefit in there from the membership price increases, which was almost two years ago so were hitting the tail end of that curve. But as they expand into new markets and new country, and youre right a. You have a price target on 123 on this stock. Right now, 1118, 119. Some are saying it was long overvalued given its earnings and it should have been corrected for some time. Do you still stand by your 123 price target . Yeah, i understand. But the consistency adds to it. Its one this i think should be a core holding for a Retail Investor for a long term. With 4 traffic on a pretty consistent basis, these guys are executing quite well. We just have to understand the expenses a little bit better. Ian, its an expensive membership. Its not cheap. And to justify it, i know a lot of people are saying, well, i could get some of these same deals at walmart, at my normal run of the Mill Grocery Store as prices come down across the board. Do you think they need to bring the membership fees down and do you think its sustainable at this level . I dont think theyll need to do that. Theyre really targeting the business consumer and upper income consumer. So they have their niche. They do well there. There really is a lot of value in that membership fee, just on the prices. Youre buying in bulk so its a totally different occasion than going to walmart. I think thats a pretty good story for them. Were seeing some weakness in the stock today. Well continue to follow that. For now ian and joe, thanks for being with us. Thank you. Our next guest is one of tonight retailer investors in the country and last time he was on cnbc, you may recall he made a major call about the state of the consumer. Take a listen. The consumer i think retail is weak. Its the first time i think ive ever said that. Its almost like a paradigm shift, whats he talking about, how can the consumer be okay and retail weak . Well have retailers reporting and we think its going to be a lot worse than people think. Oh, boy, was he right. So what was david berman think now about the retailers as we go into the climax of the Holiday Season . Well ask him with squawk on the street returns. Clients are always learning more to make their money do more. ann to help me plan my next move, i take scottrades free, inbranch seminars. Plus, their live webinars. I use daily market commentary to improve my strategy. And my local scottrade Office Guides my learning every step of the way. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. Welcome back. Im Sharon Epperson from nymex. Oil supplies dropped by 10. 6 Million Barrels in the last week. Oil supplies down by 10. 6 Million Barrels. Gasoline supplies rose by 6. 7 Million Barrels. And distillate fuels rose by 7 Million Barrels. Analysts were looking for a decline in crude supplies only about 2. 8 Million Barrels. But we are looking at a decline that is even greater than what the American Petroleum institute reported last night. They reported a 7. 5 million barrel decline in crude supply. So this is a big decline here in crude supplies. We are still looking at oil prices right around 98 a barrel and down slightly. Were also watching whats happening with gasoline because gasoline futures have been declining as well over the last several days and we did see a much bigger than expected build here in gasoline supplies. Part of what is going on here is what were seeing perhaps in the run rate for refineries, which has been steadily ticking up quite considerably for this time of year. So well continue to watch those numbers as well as the numbers from curbishing, oklahoma. Back to you, guys. Lets go straight down to washington, d. C. And hear from the speaker of the house john ba boehner on the budget deal. I think when we get to january 1st, it will be clear that more americans will have lost their Health Insurance than will sign up under the new obama care policies. This is not what the president promised the American People. He promised them they could keep the health plans they like. Turned out not to be true. The president promised the American People they could keep the doctor they had all these years. Thats turned out not to be true as well. Its time for the president to get serious about stopping this law before it wreaks any more havoc on american families, Small Businesses and our economy. Good morning. Weve obviously got a very full agenda this week in the house, the final week of the session this year. As the speaker said, we still have a lot of concerns as to the American People about obama care. Zeke emanual was on tv this weekend saying that when the president said that you can keep your health care if you like it, what he really meant was you can do that just by paying a lot more money. Thats how you do it. Well, that is a broken promise to the American People, and i know we have secretary sebelius coming to the energy and Commerce Committee this week and id be interested to hear her answer as to why that is. The speaker of the house characteristically short. If they make further comments on the budget, we will bring them to you. In the meantime, lets get over to david. My next guest is david berman, the founder of berman capital, a hedge fund that invests solely in retail stocks. He was here in august and mentioned traditional retail was weak but not the consumer. He was right, of course. What does this mean for Holiday Shopping . Well, were joined again by mr. Berman. Thanks for coming back. Thank you for having me, david. Its a key time in front of retailers. In august you shared a thought that has resounded for quite some time within retail, making it more complicated to understand whats happening. You are now sort of expanding on that when you look at retail, particularly on the impact of lets just call it the internet generally. What are you seeing . Well, as we talked about in august and we feel it just gained momentum, weve seen what we call a new paradigm. People say what do you mean new paradigm, the internets been around for a while. But this is a new paradigm. We felt Strong Enough in august that it was actually happening because june july werent really affected. The question is where is the weakness coming from, as is the case now. Arent things good in the economy . Wages arent so bad, inflation subdude, employment is better, gas prices are better. Where are the sales . When we start looking at the numbers, we summarize every retailer every quarter and we say who the busiest retailer in the mall and we included samsung, apple and amazon. It remarkable. 49 of the total sales growth in you include those companies as retailers comes from those three companies. Its quite remarkable. Its almost equal to the rest of retail. Amazon has a lot of thirdparty sellers. Youre including that total volume. The growth rate is in the 30 percentiles. Think about the base of amazon and how big it was to begin with. So it really amazon is seeing an acceleration in sales, as we are seeing with many retailers in america, which is surprising because the base is so high already. So whats happening is its because of the three years ago or so when the oped tablet started coming on the scene. You have about 130 million tablets that people are using in a country with about 200 million everybody is using this. Theyre strong to buy at a pace that we believe a Tipping Point has arrived. So the proliferation of mobile devices and who is selling those devices, apple and samsung, but those who are using them to buy things is changing the entire face in a way you havent seen . And especially with the younger customers such as the teens because theyre the ones that adopt it the most. Ive got a teenager and youll see theyre using the internet a lot more and buying things on it now. Even clothes are starting to be bought on the internet as well. What does it mean as somebody who has invested in retail for two decades . First of all, i take fund calls on anyone who can give me advice. Theres a decline going on in retail. 75 of retailers this year have actually missed numbers. The stocks gone up because the markets gone up and management keeps on talking and a lot of them still think its macro. We dont see the numbers. I think for the first time in history, you have the traditional retail being weak, not representative of the consumer. The consumer is spending money on other things like cars, planes, trip, travel, housing, but importantly devices. And through amazon and through the internet of other retailers. And so the game has changed. When the fed looks at total sales, they cant look at total traditional retail like theyve looked in the past. So lets get down to some of the names in particular. Walmart still is retail in this country, isnt it . When i think retail, i think walmart. Walmart is huge. Walmart, target, costco today, we saw the numbers were weak. They are being affected, all of them, by the amazons of the world and they realize that. They are now stepping up their spending. So a lot of them like costco today have weaker than expected. Theyre all doing the right thing, nordstroms, macys, theyre spending on the internet, seeing how important that is, seeing the acceleration and theyre worried about that. Heres the problem its very hard to react to a model that has no brick and mortar stores. You dont have the expense of office space or although i look at home depot and best buy that are doing fine. Well, best buy is not fair to say. They are doing fine but because thats because of brilliant managements turn around. The company was somewhat mismanaged before. Hope depot is different. It really difficult to buy home depots stuff on the internet. Youve got to go into home depot. There is certainly a big change at the moment. Before we wrap up, you always love to track inventories because it can be a precursor. The discounts and therefore earnings misses, what are you seeing overall . In august of course we focused on apparel being weak. Has that continued . Yes. We youre 100 right. Its the same thing we said in august when we suggested they pro probably miss a lot of numbers. Inventory is okay for the whole for all of retail, right . Total sales growth, if you take out all of that, if you take out total sales up 4 , total inventory up about 4 . So that is pretty good. Hough, if you look at the apparel and Department Store subsectors, the net is 5 so those guys are really hurting, especially hurt in the teenage sectors and apparel by companies that are nonpublic in the u. S. Like forever 21, hnn and jcpenney, who is really coming back under mark goldman by cutting price. Theyre going to start taking share back you want me to put it a different way . Slur. Wall street gave a billion dollars to help jcpenney when the stock was 8 or 9 in a quick overnight secondary a few months ago. They basically gave jcpenney 1 billion more on discounting prices which they need to do to get the customer back, which in a sense messes up the profitability for everyone else but is good for the consumer. Lets go to sears. Does it just get worse . When youre a retail purist, you realize that you really have to put money into the stores and you have to invest in the customer by lowering prices. Sears has done the opposite. The paradigm shift. Sears lost 5 billion in sales over the course of many years and they are not going to get hurt by jcpenney the most, i believe. And when retail goes, it can go fast. I feel that sears sales in their stores could go faster than people anticipate on the top line and theyre spending off their top assets so i dont know where they go from here. I really dont. I always appreciate your insights. Thank you. Thank you for having me on. I really appreciate it. David berman from berman capital. Fantastic interview. What a difference four months can make. Were just one day away from what can be the second biggest ipo on the year. What should you expect out of hilton tomorrow . More on that story in a moment. In a world thats changing faster than ever, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Where does the United States get most of its energy . Is it africa . The middle east . Canada . Or the u. S. . The answer is. The u. S. Most of Americas Energy comes from right here at home. Take the energy quiz. Energy lives here. Tomorrow when hilton retrades here once again, it will represent the Biggest Hotel ipo on record. Were joint by Rachel Rothman and also john from csa. John, let me kick off with you. David faber is reporting this is going to price probably he says at around 20 a share, toward the top end of the range. It would appear, john, that demand is relatively strong. Absolutely. When you look at the lodging sector, the fundamentals are really in tact. Demand for the overall lobbying sector is really strong, supply has been under control and i think earnings visibility for these companies is getting a lot better. Im not surprised hilton is faring really well. Blackstone will hang on to its 76 stake. It will make a paper profit tomorrow. How much of that gain is due to the management that they put in under chris . Chris is a fabulous ceo obviously. Hes done a tremendous job at hilton, as has kevin jacobs. Theyre highly regarded from their days at hilton and at host as well. They have a lot of experience with hard assets. Theyll do great. For investors, how does what hilton is as a business for investors compared to starwood, how does it stack up . Its similar to starwood. Starwood has the benefit of having more luxury but hilton has larger owned portfolio. That he will really where youre going to get the true Free Cash Flow and growth to the up side. They both have plus and minuses. I didnt mean to interrupt you, rachel. Jon, when blackstone took hilton private and saddled it with debt, the top of the market, you then had this crashing within the industry. Theres a lot of banks attached to the ipo process in order to keep hilton and blackstone going in this process. I think to your point this is not going to be smooth sailing going forward. The industry fundamentals helps it a little bit given the supply demand outlook. Its very cyclical. Were facing a nice up cycle. Rates are positive going forward. The lodging industry is a very good inflation hedge as well. I think for investors, this is a solid sector to continue to own. Okay, well have plenty more on this huge ipo going through today and tomorrow. For the moment, thank you both, Rachel Rothman and jon ohn. And unveiling a free mobile app and picking up the catalogue of led zeplin, well get the full support from spotifys chief sales and marketing officers jeff levick in a few minutes. [ male announcer ] this december, experience the gift of exacting precision and some of the best offers of the year [ ding ] at the lexus december to remember sales event. This is the pursuit of perfection. To help secure retirements and protect financial futures. To help communities recover and rebuild. For Companies Going from garage to global. On the ground, in the air, even into space. We repaid every dollar america lent us. And gave america back a profit. Were here to keep our promises. To help you realize a better tomorrow. From the families of aig, happy holidays. You can fill that box and pay one flat rate. How naughty was he . Oh boy. [ male announcer ] fedex one rate. Simple, flat rate shipping with the reliability of fedex. Ask me what its like to get your best nights sleep every night. [announcer] why not talk to someone whos sleeping on the most highly recommended bed in america . Ask me about my tempurpedic. Ask me how fast i fall asleep. Ask me about staying asleep. [announcer] tempurpedic owners are more satisfied than owners of any traditional mattress brand. Tempurpedic. The most highly recommended bed in america. Now sleep cooler with extra cooling comfort on our bestselling tempurbreeze beds. Visit tempurpedic. Com to learn more, and find a retailer near you. Welcome back to squawk on the street. Santelli exchange. Im santelli. [ laughter ] all right. Lets look at the facts. Budget deal, okay . 63 billion of spending now freed up, sequesters busted, and thats over 2014 and 2015. Two years, okay . But what do you get . You get 85 billion in terms of reduction of spending over 10 years. So over 10 years, basically you end up with 22 billion. So you are giving up whats in the hand for the promise down the road. We have heard this one before. I know everybody hates kick the can, but its even more than that. Its concrete spending cuts then become amortized over 10 years and they could be changed, we get a new administration, we get a new person in the white house, you get new people in the senate, you get new people in the house. Separating the initial or jobless claims benefits was a good idea, because we try to lump everything together, and it makes it very difficult to pass. But as i think about the shutdown that ended around, what, the 16th of october, and i think, you know, what was the huge downside there . So we dipped a bit under 15,000 in the dow. Most of the data i see coming out from october, if anything, actually is stronger than expected. Just think jobs. I think the big downside was the microphone. Blah, blah, blah. The sky is falling, everything is going to end as we know it. And dont forget. Most of the worst activity that we had, whether it was in the markets or the psyche of the country was more about the debt ceiling, which, by the way, comes up in february. Even if a conservative newspaper like wall street journal, put it on the screen, had this to sigh in the entitled op ed, at least a bad budget deal, avoiding another shutdown fiasco, assuming enough republicans refuse to attempt suicide a second time. Okay. Well, whats the suicide, actually . I guess im missing that part. You know, just because its a little messy doesnt mean the word didnt get out, and what was the final deal that was passed up . By the president and the democrats, the cause of the shutdown, they didnt want to grab a delay for one year of obama care, and considering now what they knew a long time before that, it certainly seems to me that that would have been a great a great grab, a great deal to take. So who really wanted to shut down the government, and who caused the most damage . One final point. Everybody talks about the crazy group of fiscal conservatives, and on the downside, maybe its 20 , its more like 30 of the country, is there any movement in the last 100 years that you know of that started out as a majority . Do you think that number will get smaller or bigger . You ponder that. Back to you, carl. Thats the key question, rick. Thank you so much. Our Rick Santelli. Looking at shares of pandora, taking a hit after an announcement from rival spotify today. We will tell you what it is, led zeppelin and a whole lot more, when we come back. [ male announcer ] how can power consumption in china, impact wool exports from new zealand, textile production in spain, and the use of medical technology in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 70 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. Became big business overnight . Like, really big. Then expanded . Or their new product tanked . Or not . What if they embrace new technology instead . Imagine a companys future with the future of trading. Company profile. A Research Tool on thinkorswim. From td ameritrade. But it doesnt usually work that way with health care. With unitedhealthcare, i get information on quality rated doctors, Treatment Options and cost estimates, so we can make Better Health decisions. Thats health in numbers. Unitedhealthcare. If yand youre talking toevere rheuyour rheumatologistike me, about trying or adding a biologic. This is humira, adalimumab. This is humira working to help relieve my pain. This is humira helping me through the twists and turns. This is humira helping to protect my joints from further damage. Doctors have been prescribing humira for over ten years. Humira works by targeting and helping to block a specific source of inflammation that contributes to ra symptoms. For many adults, humira is proven to help relieve pain and stop further joint damage. Humira can lower your ability to fight infections, including tuberculosis. Serious, sometimes fatal events, such as infections, lymphoma, or other types of cancer, have happened. Blood, liver and nervous system problems, serious allergic reactions, and new or worsening Heart Failure have occurred. Before starting humira , your doctor should test you for tb. Ask your doctor if you live in or have been to a region where certain fungal infections are common. Tell your doctor if you have had tb, hepatitis b, are prone to infections, or have symptoms such as fever, fatigue, cough, or sores. You should not start humira if you have any kind of infection. Ask your doctor if humira can work for you. This is humira at work. Big news from the music industry. Pandora shares are lower after private rival spotify makes a significant announcement. Our jon fortt has more on that from new york. Good morning, jon. Good morning, carl. Yeah, no secret about the led zeppelin part. Weve been playing that on air in anticipation of this announcement. The other news out of spotify has a lot to do with mobile. Two parts to this. First of all, the tablet experience for spotify will now be just like the pc experience, youll have the same amount of freedom on the free version of spotify on tablet. On mobile, theres also now a free version that allows you to play any play list, but on shuffle mode. You wont be able to pick the individual song youre wanting to play at the moment, unless you upgrade to the paid version. Clearly, a gamble by spotify here that people will get addicted to the music listening experience as they listen more, want to have more control, and be willing to pay. So taking a look at how the streaming experiences stack up. Spotify seems to be 6 million paid subscribers and 20 million active users. Pandora at 3 million paid, 72. 4 million active. Itunes, we dont know how many people are paying for itunes match, their version of paid, but there are problem around 20 million plus active users, a number tim cook gave back in october. And theyve only been greeking since then. Growing since then. We have to see what this means for some of the knocks on spotify, and one of the knocks has been from new music artists, they dont pay out enough to justify the expense of making new music, carl. Yeah, sorry. All right. Jon fortt, thank you very much. Interestingly, pandora is taking a hit, but the stock has tripled this year, and if you think back to when iradio started out, people thought it would be the death of pandora. The stock continued to climb. What i was going to ask jon, a deal for the smiths or the morris led zeppelin is a big deal, garth brooks. Yeah, lets not joke, kid ourselves. Well see new 30. Looking forward to it. If are you just joining us, heres what you missed earlier on. Announcer welcome to squawk on the street. Heres whats happened so far as they start to withdraw right. Its likely to have a positive impact, because it will instill confidence in the business community, because the fed now feels confident to withdraw. Pope francis has been timed time magazines person of the year. Weve been speculating about that. I was wrong. I thought it was edward snowden. More than 250,000 people nationally signed up for Health Insurance plans through the exchanges in november. If i were senator cruz, if i were some of these people who out of nowhere just come up and grab the mike, i dont know if i like this deal. I have learned to say that its not over till its over, washington. [ bell sounds ] so where will the markets go from here . Valuations are still reasonably attractive if the Economic News continues to be good. Im a bull. Take a look at autohome, the ipo were watching out of china. Despite a weak tape, nearly doubling at the open. On balance, i think its good. Now, with respect to Unemployment Insurance, my view is we should not leave town without dealing with that issue. Youre going to have millions of americans out in the cold if we dont address that issue. Announcer the squawk on the street countdown to christmas is in full swing. Ho ho ho ooh, Merry Christmas good morning. Were live at post 9 at the New York Stock Exchange with a check on the markets. Even with the budget deal on the hill, the stock market has priced it in or is leery about final passage, currently down 51 points. Were off the lows. But s p was down 10. Thats the biggest decline for the s p since november 7th. Shares of groupon on the move after getting an upgrade to outperform from wells fargo. They cite commerce as an opportunity for growth. And mastercard continuing the rally. The Company Announcing the 10for1 stock split, wells 83 div hike. And theyve authorized a 3. 5 billion buyback. The bipartisan deal will avert a shutdown, but how much more do we need for the aaa rating . And spotify says thats the way. The Music Streaming Company inked a deal with led zeppelin. The company will allow free music streaming to more devices. Well speak exclusively to an executive at spotify, and how much money can they make from this . And the milliondollar home series is back, and that means the realtor to the superrich, dolly lenz is with us this hour. I participated in that, carl. It was an interesting time on main street. Twitter, meanwhile, has been on a tear, doubling its ipo price. But is there more room to run we have a twitter bull and bear debate this hour. You wont want to miss that. Meanwhile, hhs secretary kathleen sebelius, finalist for times person of the year, testifying in front of a us who panel on the future of obama care. Bertha coombs has been monitoring the panel. Bertha . This is her third appearance before the Commerce Committee, and no huge fireworks so far. Maybe because secretary sebelius was able to testify that theres been progress on healthcare. Gov since she last appeared with those fixes that have gone into place. She said now theres calling for the Inspector General to conduct a probe of the management and the awarding of the contracts for the site. Sebelius is also calling on Marilyn Tavenner to appoint a new cms risk officer and talked about what the new risk czars task will be. I will instruct this officer to look at i. T. And Contracting Management practices starting with healthcare. Gov, and the risk factors that impeded a successful launch. Ill ask for an initial report in the first 60 days with recommendations on how to mitigate risks as we move forward. Now, sebelius admitted the flawed launch of healthcare. Gov may have also expressed enrollment in some of the states, because a lot of people kept seeing the negative headlines. Asked knowing what she knows now, would she have delayed the launch . Heres what she said. Knowing what you know today, do you wish, in fact, you have delayed the launch between october 1st . Well, i certainly wish we could have saved millions of people a very frustrating experience and had a smoother technology launch. On balance, i am not sure what the right answer is. The laws benefits went into effect january 1st. People needed some time to sort out options. We clearly put a dent in that time, but there are going to be millions of americans with new health coverage. That is one of the things that she did keep touting, that people will be getting their health coverage. Asked whether she has asked those federal contractors who have clearly botched the job to refund some of their funds, she would only say that at this point, some 667 million had been outlaid for the building of the site. Theyve only paid, so far, 319 million of that. They may very well be keeping back more as the investigations roll out. She says she will wait to hear from the Inspector General about how much, prapts, she should ask for back. Guys . All right, thank you very much, Bertha Coombs at our headquarters. The budget deal has arrived and well avoid another Government Shutdown. But what else needs to be done in order for the u. S. To get the triplea rating back . Joining us with his take is john chamber, head of sovereign ratings with standard poors. Welcome back. Thank you. This has been a breakthrough. Do you see he it that way . I wouldnt call it a break it through. The deal needs to get approved. The amounts involved are pretty small. I think the good news is that, a, there appears to be a deal. Just like we had a deal over the fiscal cliff. And the other news is that the cuts that have been identified, we have matching revenues that are further down the road to pay for those. So its a paidfor amendment to the budget control act. These are things that when we move the outlook to stable in june, theyre consistent with that. So we would see the upward and downward pressure on the rating as balanced at the aaplus level. One absence from the agreement, john, is there is no agreement on the debt ceiling. Of course, were going to hit that again in february, and treasury has said that it could possibly last until the middle of march with the money it has on hand. Walk us through what will happen come february in your estimation. Well, it could be contentious again, as its been contentious so many times in the past. Most notably, back in october and again in august 2011. Since 1960, weve raised the debt ceiling about 100 times. So its something that weve constantly bumped up against. Our expectation is that you could have noise around it, but it wont be as bad as what we saw in october. But thisst clearly a problem in our budgetary process in that you separate the spending and the revenue decision, passing a budget, from funding it with proving the debt. Would aaplus be at risk in february in your opinion . We dont think it would be at risk, because our assumption will be that even though therell be noise around it if not sooner, at the 11th hour, the debt ceiling will be raised. Lets talk about getting aaa back. Other countries have done it over time. We had you on around the time of the shutdown. We talked about that. Right. The report is intercept was called the debt ceiling debate, at least, is unlikely to change the aaplus u. S. Sovereign rating. What would it take . The countries that have done it had a very large fiscal adjustment and external adjustment over a period of time. And the average time it took was about nine years. A good example would be a good example would be sweden, finland. Denmark. Canada. Canada had a very severe budgetary problem in the 1990s. And through a number of reforms on the energy sector, husbandal the pension sector, they were able to turn it around and now a aaa credit. Gdp next year is going to be in heavy, heavy focus. You believe that the additional sequester spending cuts will detract from gdp. Others, though, joe of deutsche bank, comes to mind, think it is will help gdp. Yeah, we think with this with this deal, if its approved, that it will remove the fiscal drag, and we see that well probably be revising upward our projection in 2014 from 2. 6 . So this might give you a small pop, but its a small pop. Its not something thats going to be big. We had you on in the early part of the year. And at the time, i think it was when you went back to stable. Yeah. Part of the reasoning was the promise, maybe early indications of bipartisanship or compromise on the hill. Right. Do you think you were early in your call, and is this bringing the call to fruition . Certainly, were a bit worried about that call in october. But i think that we were vindicated with the way it ended up at the end. What we see, some small sign of bipartisanship, and, of course, that will need to deepen amidst the credit standing of the United States, is to improve. Got a lot of work ahead. They do end thank you for coming by. Thanks for having me. Joining us from s p today. As we told you before the top of the hour, spotify got a whole lot of love from led zeppelin. Well talk to an executive at spotify, wholl give us the deta details. First, Rick Santelli talking to David Stockman. Hi, carl. Yeah, Everybody Needs a guy. If you have a plumbing problem, you call your plumbing guy. A car problem . You call your car guy. I have budget questions, so im calling my budget guy. David, are you going to be here . Yes, David Stockman is going to be here, and hell help us decipher the budget deal. Not too cold for you, is it . All at the bottom of the hour. Ask me what its like to get your best nights sleep every night. [announcer] why not talk to someone whos sleeping on the most highly recommended bed in america . Ask me about my tempurpedic. Ask me how fast i fall asleep. Ask me about staying asleep. [announcer] tempurpedic owners are more satisfied than owners of any traditional mattress brand. Tempurpedic. The most highly recommended bed in america. Now sleep cooler with extra cooling comfort on our bestselling tempurbreeze beds. Visit tempurpedic. Com to learn more, and find a retailer near you. The dow is down 50, off the lows. Look at the health care sector. Not doing anybody any good. Dominic chu has more on that. Health care stocks are taking a hit this morning, led by lab corp. Which tumbled after the 2014 Earnings Guidance missed streets expectations. And also a lot of the big names in the sector also putting pressure on the overall sector. Now, Health Care Stocks are taking a hit, of course, because of whats been happening in the overall sector with the runup that theyve had for some of the stocks, so keep in mind, health care sector, at least for right now, kayla, the biggest loser on the day. Back over to you. Certainly a lot of sectors in the red. Only one in the green, dom. So well be watching the markets in general. Meanwhile, watching a private company who is not denying the stairway, the stairway to heaven. Spotify has an event in new york, the streaming website is announcing that led zeppelin will be available for streaming. Jon fortt join us with jeff Levick International growth officer for spotify. John and jeff, over to you. Thanks, kayla. Jeff, thanks for being with us. Lets dive right in. Adding a group like this, you added pink floyd recently, the eagles, the chili peppers. Whats the impact on your signups, on your listens, free or paid, when you do Something Like this . Obviously, having one of the most important bands in the history of music when your platform only brings more attention to the platform, is great for users. And its a great announcement for us to share with our existing users and new ones alike. Now, the moves that youve made on mobile today, moving tablet to the pc model, allowing the play list, shuffle for free. Yeah. On phones, strikes me as a gamble, because youre paying more for content. Im sure, you know, led zeppelin doesnt come free, and at the same time, youre giving away more free. What makes you confident maybe in the trends of conversion from free to paid will work out. Its a monumental day for music and spotify. Today, we announced were having a free version of spotify on all platforms, and that is a mobilefree version as well as a tabletfree version. Obviously, you know, music isnt cheap and we do pay we license our music and the way we subsidize that is through advertising revenue, on the free platform, and then on the subscription product, as well, which is a paid platform. Are you confident you can maintain i think its something close to 30 of your listener base ends up converting to paid, is that going to hold up as you expand the capabilities and free . Thats obviously the plan. Again, what we love about the Premium Model is it actually has Revenue Sources on both sides both the free and the paid. So what were really focused on innovating the best Music Service and expanding the platform globally, and now we announced were in 55 countries globally, as well. Every time a new player or a new feature comes out in streaming, pandora stock seems to get hit. Its down about 3 today, the last time i checked. Yeah. Fell me about itunes radio. Since that launched a couple of months ago, have you seen any impact, positive or negative in. It hasnt changed our business, because were not a radio product or platform. Radio is a medium thats existed for a long time. What we do in music is the first major innovation in the space in the last decade. So, you know, we love radio and we have radio functions within our product, but allowing consumers to listen to their music, their play lists for free on mobile to us is a huge innovation and major change for the music industry. A question from carl. For all of the zeppelin fans out there, any color on how the deal came together . Did they come to you . Did you have to bring them kicking and screaming . How did that work out . No, we were always thanks for the question. Were always working with artists and artists managements, and it does take time for bands and acts to understand, you know, where were going, and spotify is a new platform, and streaming is the new medium. With the growth of streaming and new audiences and new consumers using this as the first platform of choice, obviously, you know, zeppelin wants to make sure the music is enjoyed by their fans around the world, and thats what were trying to do for them. Jeff, the major criticism of spotify that ive seen is that its great for big artists with huge back catalogs like a zeppelin, eagles, et cetera, but for new artists breaking in, it doesnt bring in enough revenue to justify the expense of putting out really great music. How do you answer that . Yeah, you know, obviously, as we grow, the revenue grows for the artists, and for new acts, what weve seen is a huge platform of distribution for them. And allowing acts from around the world to find new global audiences. The rise of lord, a small act, 16yearold out of england, been written about and tie it back, her fan base grew out of spotify, and our platform allowed her to travel across the world and now become the numberone act around the world. Yeah. Jeff, this is kayla back at the New York Stock Exchange. You have 20 million users and a 4 billion valuation as of last month. At what point do you think that strategies like the ones announced today will begin to pay off in terms of profit for the company . Yeah, i mean, weve made a conscious choice, which is to take, you know right now, our focus is on growth and investing in that growth around the world. We feel comfortable about the model. You know, getting more users on the platform, streaming more music and being in more countries, thats really what will help us continue our growth, and continue to support the business model. Its interesting, you said or, rather, daniel said on all platforms, but mentioned ios and android. Is that what its come to on mobile, that nobody matters except ios and android . From our own user data, we see thats where the majority of the streams are coming from. Well continue to innovate in the space. But to be on both those platforms for a Product Announcement and a law enforcement, which is live today in both stores, is really the place to be for us. Salt in the wound for blackberry and windows phone, guys. Back to you. All right, jon, thank you so much. Our jon fortt joining us there from new york. We do have a d. C. Budget deal today, and former omb director, David Stockman, a sharp critic, will weigh in. What can 1 million get you on main street usa . The milliondollar home series continues when we come back. Theres a saying around here, you stand behind what you say. Around here you dont make excuses. You make commitments. And when you cant live up to them, you own up, and make it right. Some people think the kind of accountability that thrives on so many streets in this country has gone missing in the places where its needed most. But i know youll still find it when you know where to look. Anncr vo introducing the schwab accountability guarantee. If youre not happy with one of our participating Investment Advisory services, well refund your program fee from the previous quarter. While, its no guarantee against loss and other fees and expenses may still apply, we stand by our word. [ male announcer ] this december, experience the gift of true artistry and some of the best offers of the year at the lexus december to remember sales event. This is the pursuit of perfection. [ male announcer ] 1. 21 gigawatts. Today, thats easy. Ge is revolutionizing power. Supercharging turbines with advanced hardware and innovative software. Using data predictively to help power entire cities. So the turbines of today. Will power us all. Into the future. Maestro of project management. Baron of the buildout. You need a permit. To be this awesome. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. aaron purrrfect. vo meeeow, business pro. Meeeow. Go national. Go like a pro. Cnbcs popular Million Dollar home competition is back, and all day today were following headtohead matchups of what 1 million can buy you on main street in locations around the country. Alabamas cozy cottage lost to delawares mammoth manor, so now the mammoth manor takes on the antique colonial. Touring the homes are diana olick and jackie deangelis. Reporter this greek revival mansion is a history buffs dream, built around 1850, it houlss houses nearly two centuries of stories. Facing main street in addition to the manor house, you also get five outbuildings. The fourbedroom antique colonial is full of history and charm. It sits on five acres of property and has a facility that can board up to 16 horses. Its the perfect country retreat with access to urban life. Of the 7,000 square feet in this home, i wont lie, the kitchen is your renovation. But with ample space and imagination, its a chance to blend the old with the new. Using this original bread oven as the centerpiece. Inside, this wideopen floor plan has almost 5,000 square feet of living space, which includes a Gourmet Kitchen with Granite Countertops and Cathedral Ceilings with exposed wood beams. Upstairs are potential bedrooms, perfect for a very large family or a b b, and this is where your story starts. Up in the attic, they used to hide slaves traveling north on the underground railroad. This colonial home has four bedrooms and two bathrooms. Upstairs, every room in the house has a cozy fireplace for those cold nights. But here in the secondfloor den, this is where the fun happens. The real selling point is this grand main level with its nearly 13foot ceilings and original stensles that match the stained glass. This house is a horse lovers cream. It can fit up to 16 horses and it boasts both indoor and outdoor arenas. And while it feels like were in the country, were just two miles down the road from the country club and a lot of shopping. All of this for 950,000. So now, we know, jackie can shoot pool and ride a horse. Now we know that squawk box mammoth manner is in delaware, trying to guess the location of the antique colonial. The horses make thee think kentucky. You have a bit of insight, because you also worked on one of those. I did. I did. And i was on a flight leaving a city that jackie was coming to, we ran into each other in the airport. So i dont think im actually allowed to guess on this one. I will say, a hint, somewhere cold. Shes wearing a jacket. Talking about the cozy fireplaces. That is true. Lets bring in Real Estate Broker to the super rich, dolly lenz, back at headquarters to tell us if i was right and which house is the better bang for your buck. What do you think, doll . No, unfortunately, not correct. But it is a cold area, it is in new hampshire. It is a fabulous house. But the problem with it is the fact that its a horse farm make it is a very particular buyer. So were looking for that needle in the haystack buyer who has 16 horses, or perhaps an antique car collection, or some other use for all of that space. You know, its not really a house for a person to live in alone. So thats the issue with that house. Its a great location. Its an hour outside of boston by train or by car. So it really is a fabulous house in a great setting. But i dont know, what do you think . Having seen both . Well, dolly, it does seem like it is a particular buyer for a the house in new hampshire, but do you think they could do Something Else with that space, tear it down, build another house on the land . What would you suggest . They can. Once you start with that, you kind of eliminate the house value and it becomes land value alone. And then, the price plummets for what its worth. So for that reason, given that were really cnbc and this is about money, i would probably go with and actually, definitely go with the mammoth mansion. It has a lot of uses. Bed and breakfast. All kinds of uses. The three bears could hide up in the attic, and nobody would know. We could be making oatmeal all day. The house is just fabulous. Yeah. And i think, really resonates to people who are value buyers, which most viewers are, as per all of the feedback, value buyers. Weve had this discussion again and again, dolly, you like homes that give you some options, right . They tend to be in more rural settings. You can you have some choices depending on how you want to use it. No, exactly. And choices are always good. Look, i have a friend whose husband is a doctor, shes a cook, shes also a nurse, and she said to me, i would buy a house like that to start a bed and breakfast after i retire. For her, she can bring her family there. She could do bed and breakfast, her husbands a doctor, perfect. All right. Well, the milliondollar mammoth manor wins round two. Tweet using milliondollarhome, and catch dolly in fast money halftime. And later, shell crown the big house at the end of the show. A big surprise. Next time, come down to post 9. Thank you. Dolly lenz joining us. Bells are about to sound across europe. One minute until the close. Simon is here after the break. Dont go away. [ male announcer ] if we could see energy. What would we see . The billions of gallons of fuel that get us to work. Wed see all the electricity flowing through the devices that connect us and teach us. Wed see that almost 100 of medical plastics are made from oil and natural gas. And an industry that supports almost 10 million american jobs. Life takes energy. And no one applies more technology to produce American Energy and refine it more efficiently than exxonmobil. Because using energy responsibly has never been more important. Energy lives here. 11 31, european markets closed just moments ago. We want to bring in simon hobbs to look at what was moving in europe. Yeah, a negative bias as you can see. Again in europe today, its for some of the major markets, its a bigger decline than youve actually had in this country. Bear in mind the technical situation in europe on the markets there is actually quite weak at the moment, after the recent losses. You see the dow has kind of been hugging the flat line for the last month, or above the flat line for the last month, but european stocks are deteriorating and moving down below their 50day moving averages. One standout stock today is eads, which will rename as airbus, a new dividend policy, 30 , 40 will be the ratio, after they aprnnounced in the earlier in the week axing 6,000 jobs. And look at that, up almost 80 so far. Banks are a focus, as well. The t royal bank of scotland, still a majority owned by u. K. Government, is losing its cfo. And i want to mention finally whats happening on the political scene. We have a summit at the end of next week in europe. After a mammoth session of finance ministers meeting last night, they have got some sort of compromise deal on the table for a bailout for the banks, but it will take ten years to phase in. Each nation will have a veto. Germany doesnt want to bail out everybody. That may cause problems down the line. Meeting on wednesday, and full summit thursday and friday. Fmoc next week. And the dow is now down 85. Hey, bob. People have been asking me, why is the market weak . And it started in the preopen. The futures right around 9 00, all of a sudden, drooped and drifted look at that. Thats 9 00 a. M. , before the market opened. Issues in europe. All of a sudden, a spike in the euro at exactly this time. This is usually related, somebody selling something, and you can see the euro spiking up. Were a couple ticks away from the highest close since november 2011. Look at that. 1. 38 almost. So i think that there was some relationship here with what was going on in europe. Elsewhere, slow weakness in the small caps again. Russell 2000, were almost 4 off of their historic highs, only a few weeks ago, and that is leading it. When small caps lead the market to the downside, people have various issues with that. Let me talk about the chinese ipos, a wild morning this morning with autohome pricing. 12 to 14 was the initial price target. It prices at 17, and then opens up at 30. 16. This is an online auto site. You cant even buy the auto. You can just compare them. But there has been massive interest in it, because theres massive growth. So take a look at why the chinese ipos are hot. Weve had a few in the last few weeks. Massive growth here. 67 increase in sales, just in that one. Transparency issues were an issue a year ago, all across the board on chinese stocks, but the company is out of the penalty box. The count rips out of the penalty box. They havent changed anything, people dont seem worried about it anymore. And doing well on several deals before has spurred other deals. So if you look at whats going on here, 500. Com, they went public a month ago, 13, now trading at 25, 26. We had sunji mobile, at management, went public, 12, now trading at 16. And a hot week for ipos. We have 10 chinese ipos in the pipeline, because the ones in the last month have done so well. Weve had six this year, and ten in the pipeline for that. By the way, carl, big week here at the nyse, and 4 billion in ipo on a holiday week. Big names, of course, like hilton, coming as well. Back to you. Bob, no doubt, a lot of pentup demand from companies and investors looking to put money to work on the china ipos. Hilton pricing overnight. Investors want to put money to work in the asset class, so no surprise youll be very busy. I am. Thank you so much. Okay. All right. We have the market at lows of the session. 82 points down on the dow. The s p dipping below 1,800. We want to go to Rick Santelli in chicago with reaction to the budget deal. Rick, what do you have . Well, kayla, i think its amazing, first of all, we had mr. Stockman slated for today. How appropriate. All right. If ever i had a guy, youre my budget guy, tell me your impressions after combing through some of the numbers of what has been put forth by both parties jet to be voted on. First, lets be clear. Its a joke and betrayal. Its the final surrender of the House Republican leadership to beltway politics and to kicking the can and ignoring this budget monster thats hurtling down the road. Theyre busting the caps, and its totally unnecessary. Its going to add 70 billion to spending this year and next year, and then theyre going to pretend to save it in 22 and 23, way, way down the road. Theyve not only kicked the can down the road, but kicked it into lowearth orbit. You know, its unjustified. Lets look at what theyve done. Defense with the sequester is 600 billion of outlays. We can easily live with that. Prior to the, you know, bush wars and invasions, we had 400 billion in defense spending in todays real dollars. 50 more, and they cant live with it. Do we have any new industrial state enemies in the world . No. Are there greater threats in the world . No. Weve been fired as the worlds policeman . Yes. Why cant they allow the defense sequester happen . They should. The house side. If we let the sequester happen and not bust it, as they did, 580 billion of domestic discretionary spending. Bill clinton left with 400 billion in todays dollars. He wasnt starving headstart or the National Health institution and all of the rest. Theres plenty of room, but theyre unwilling to make the tough choices. I understand democrats doing that. The only hope of getting our fiscal situation under control is if the House Republicans stand up and theyve totally capitulated, and i think it is going to friger trigger an enormous negative reaction from the Tea Party Republicans who ought to go after every incumbent republican who votes for this abomination. Now, when we talk about kicking the timeline, david. Were not talking about kicking it just maybe till the midterms. Why dont you tell the audience, in your opinion, exactly what this timeline really is . Well, yeah, thats the thing. When you take a twoyear vacation on the fiscal budget, and thats what theyre doing, locking it in through october 1, 2015, the end of fiscal 215, a few weeks later is the iowa straw poll. Both parties going hammer tong in the election. Theres not a chance anything will be done about the fiscal equation, which is festering, until 217. And if you get around to addressing it, you cant have an impact till 218 or 219. Now, who thinks we can wait that long . We have 17 trillion of debt now just by the momentum built in. It will be 25 trillion after the next president ial election. With Interest Rates normalized, there will be an explosion of debt service payments, and what do we have . We have paul ryan, the alleged great conservative warrior, throwing in the towel and say g saying, were going to do nothing for the next two years except break the caps. Now, all of these offsets arent real. And even the ones that are, like, you know, pension contribution reductions, should be put into deficit cutting, not into additional spending. We have to wrap here. I am so glad you are able to come to chicago and visit with us today. Ill leave the audience with one comment. Young people who are all for obama care until they saw what was in it. I think young People Better understand what they are paying for and what debts will be on their shoulders now so we dont have to wait till 2018 to address it. David stockman, youre the man. Hey, gang, back to you, kayla, carl, its all yours. Thanks a lot, rick. Turner field, the home of the atlanta braves, is 17 years old, which is actually pretty young by stadium standards, so why is the city tearing it down and building a new one in the suburbs . More on that when squawk on the street comes back. In todays markets, a lot can happen in a second. 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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. Coming up on the halftime, shaun white is the man to beat in sochi, and well join us live on the big challenges ahead. If youre looking for risks, listen up. Well talk to an investor who says you should buy this years worst trade. Plus, time to get in on the great performance chase. Why sticking with whats worked so far could have a bigger payoff in the years end. Its straight ahead on the half. Well see you in about 15 minutes. Scott, sounds good, thanks a lot. Theres a big fight brewing over the deal to move the braves from their current home, turner field, to a new stadium north of their current home. The new home in cobb county. Debbie, good to have you with us. Good morning. It is a pleasure to be here. How are you guys doing . Not bad. Fascinating story. Walk us through how this all came about, how you learned about it, and what your initial response was. Well, initially, we found out that it had been in secret negotiations since july. It was introduced at a press conference. It took everyone by surprise. The deal was smacked of cronyism. It was a deal that was cut behind closed doors in secret. The vote was rushed. No public hearings. And it was the same process that the same commissioners and elected republicans accused and criticized the democrats for with the Affordable Care act, the way that was passed. It took everyone by surprise. Their financing Public Financing of it is they did it deliberately to not have to have right. A referendum, and its bad. Tea party act go ahead. Debbie, the price tag on this new stadium in cobb county, over 600 million, no doubt that will make a lot of Business Owners question whether cobb county, the suburbs of atlanta, can actually afford that. But the argument by by atlantas mayor was that otherwise, if it stayed in the city, just south of downtown, that it would still need hundreds of millions of dollars in renovations, in development around the area, and that cobb county could better afford that than the city of atlanta. What do you say to that argument . What i say to that argument is that the braves have a right to move wherever they wish to move, as long as its paid for with private funds. They have 400 million that they have pledged to develop the area around the stadium. Why are they not using that 400 million to build the stadium and give the taxpayers a break . It is the government picking winners and losers. Theyre using public funds, the taxpayer will get the shaft in this, and the political cronies who are well connected stand to make millions of dollars off of this deal. They deliberately arranged and did creative financing, which there are groups that will be challenging this, and will be filing a lawsuit to challenge the legality of this. It was done the wrong way. Debbie, if the if the cobb county commissioner released documents about how they reached this decision, where exactly every single dollar would go, would that make you happy . Is that what you ultimately want to see, or do you want the braves to stay in downtown atlanta . We dont care where the braves stay. Again, it was the process. And the public money thats being used. They have not been forthcoming. They did not hold public hearings. They rushed the vote. Everything that republicans accused democrats for, theyre doing the same thing. Theyre hypocritical for doing this. It is wrong. The whole process was wrong. They need to put it to a public referendum and let the taxpayers decide if they want to use tax dollars for the stadium. This process needs to be done in the correct way and understood. And the braves need to pay for their own stadium. The complaints well at thely graphed here, debbie. Well watch it. We reached out to the commission chairman, whos in favor of the stadium deal, and he turned down our invitation and declined to comment. Interesting story. Speaking of baseball, the most valuable team in the majors, the yankees, will look a lot different. Robinson cano represented by jayz, bolting for the mariners in seattle, that 240 million deal over 10 years, but the yankees gaining three big offensive weapons carlos beltran, Jacoby Ellsbury and brian mccann, and we spoke exclusively with march yiano ri, and he spoke of the loss. Theyre old men, but theyre good. Theyre good. Theyre all capable of doing great jobs. I mean, mccann, ellsbury, and obviously beltran. So, i mean, yeah, i keep saying that its great, great offense, but we need pitching. That was mariano rivera. Were watching the market and shares of twitter just cents away from an alltime high, leading many analysts to raise their targets, and an s p analyst slapped a sell rating. Is it time to take the money and run . Hell be here to give his case when we debate that stock. Stay tuned. [ male announcer ] for every late night, every weekend worked, every idea sold. You deserve a cadillac, the Fastest Growing fullline luxury brand in the United States. Including the all new 2014 cadillac cts, motor trends 2014 car of the year. Now during our seasons best event, get the best offers of the season on our Award Winning products, like the 2014 ats and srx. Where does the United States get most of its energy . Is it africa . The middle east . Canada . Or the u. S. . The answer is. The u. S. Most of Americas Energy comes from right here at home. Take the energy quiz. Energy lives here. Welcome back. Twitter is on the rise for the Third Straight day, up better than 2. 5 . Some are calling for it to keep going higher. The question is, has this bird learned how to fly . Lets turn to ken who has an overweight rating on twitter, and scott kessler, from s p capital iq, a sell rating. Gentlemen, thank you for being with us. Ken, i want to start with you. Last week when twitter rolled out its tailored audiences, you raised the target to 52 buck as share, yesterday hit 52, today at 53. 37. Where does it go from here . You know what . It clearly reached our target price faster than we were expecting, but i still look at twitter as being undermonetized asset from an advertiser perspective, and i think when you look at the reported ad engagement growth in the Third Quarter of over 600 , the issue for twitter is really, like, where does pricing go, and pricing has been coming down pretty significantly. But things that they announced last week around tailored audiences, the new ad engagements and rollouts, theyre leading us to believe the pricing on the ads will inflekt, and youll be left with strong ad engagement growth, so i feel good about the story. As some of the ad revenue has gained momentum, scott, you think that it might be overheated at this point, even with the announcement last week, do you still believe that . Absolutely, kayla. I mean, look, the reality here is that this is an announcement from more than a week ago, and people are still trying to figure out why twitter is appreciating. We think a lot of that has to do with, pure and simple, momentum, as a lot of investors are looking at the performance in 2013 and trying to gain ground and exceed benchmarks. When we think about twitter, the reality is were not disputing that theres a lot of potential here. Its just largely reflected in the stock to a large extent, and we think looking at twitter, its trading at more than three times the price to sell multiple of facebook, and we think thats unsustainable. What do you think would deflate the stock at this point, scott . We have a few lockup deadlines for the ipo approach, and the first earnings coming not too far in the distant future. What do you think pops the bubble . Kayla, the way we think about it, right now as twitter shares seem to be appreciating, so, too, does the margin for safety kind of dwindle. And so, we think the risk increases as the stock goes up, and we think, for example, when they report results, there is more room for disappointment as the expectations increase. Wed also point out that, you know, it seems like a lot of data points that the company has highlighted as indicative of opportunities can be flipped to suggest that there are issues. So you look at 10 or less of the internet population is on twitter. Well, theres a reason for that. I dont think people understand twitter or how to use it as well as some other social networks and the monetization gap internationally is only going to close after substantial investment. Ken, well give you a quick final word. Our expectations are expectations too high here . When you look at the street estimates, i think they still have a ways up to go, and i think a lot of investors who are looking at this stock and are excited about that, see it. The average target price, i think is about 25 below where twitter currently trades. I think theres still a chance for street estimates to come up, and probably looking at 15, 16, to come up dramatically. All right. Thanks so much to ken and scott for being with us today. Thank you. 53. 25, the print on twtr right now. Well, arts and crafts, sports activities, botchy ball, stressreduction programs, it sounds pretty relaxing. Its not a resort or a retirement home. Its what Bernie Madoff is doing in prison. Well hear from Bernie Madoff in his own words five years after being arrested for the multibilli multibilliondollar ponzi scheme in just a moment. So i c an reach ally bank 24 7, but there are no branches . 24 7. Im sorry, im just really reluctant to try new things. Really . Whats wrong with trying new things . Look mommys new vacuum cat screech you feel that in your muscles . I do. Drink water. Its a long story. Well, not having branches lets us give you great rates and service. Id like that. A new way to bank. A better way to save. Ally bank. Your money needs an ally. Losing thrusters. I need more power. Give me more power [ mainframe ] located. Ge deepsea fuel technology. A 50,000pound, ingeniously wired machine that optimizes raw data to help safely discover and maximize resources in extreme conditions. Our Current Situation seems rather extreme. Why cant we maximize our. Ready. Brilliant. Lets get out of here. Warp speed. They always have. They always will. Thats why you take charge of your future. Your retirement. Ameriprise advisors can help you like theyve helped millions of others. Listening, planning, working one on one. To help you retire your way. With confidence. Thats what Ameriprise Financial does. Thats what they can do with you. Ameriprise financial. More within reach. Hmm. Mmhmm. [ engine revs ] [ male announcer ] oh what fun it is to ride. Get the mercedesbenz on your wish list at the winter event going on now but hurry, the offers end december 31st. [ santa ] ho, ho, ho [ male announcer ] lease the 2014 ml350 for 599 a month at your local mercedesbenz dealer. Five years ago today Bernie Madoff became the most notorious con artist in the world. Our scott cohn got a look at madoffs life behind bars and is back at headquarters with more. Good morning, scott. Good morning, carl. Ive been to more than a few prisons, and i can tell you life for Bernie Madoff could be a whole lot worse than it is at the mediumsecurity unit in butner, north carolina. Its where i spent two hours with him back in january. We sat together at the corner of a large table at the wardens conference room. The conversation off the record, at his insistence. But he looked good. He was very much at ease, different from all of the infamous Court Appearances back in 2009. Seemed more normal, his hair shorter, different glasses, hes put back on some weight. While i cant reveal the conversation at this point, this on the record e mail gives you a sense. As remorseful as i am for the pain and suffering ive caused, i take comfort that my assistance will accomplish what i originally claimed, with all of my assistant, my recovers will recover the original principal, which they tell me is bunk. I think he would like to sort of turn his image around by suggesting he had something to do with it, and as far as irving and i know, and everyone on our team, hes done nothing to assist us in these efforts. This fifth anniversary, madoff has gone silent. We havent heard from him since october. But hes got some time. Incredible story, scott. Thanks for that. Back to hq and checking in with wapner and the halftime. All right, guys, thanks so much. Heres what were following today. Chairman of the board. U. S. Olympian shaun white on what it will take to win gold again in sochi as he faces his biggest challenge yet. Gold rules. The man who says the precious metal is still in a bull market. Hell tell you why and where it goes from here. But we do begin with the great performance, chase, and why your best bet may be to stick with whats working, whether its the airlines, the autos, and they continue to lead the markets