Transcripts For CNBC Worldwide Exchange 20121026

Toward the gdp number in the u. S. Well have an interview with the boss of jpmorgan, jamie dimon. His views on the election and his outlook on the economy. Microsoft is unveiling its windows 8. Well have the latest plus indepth analysis at 11 45 cet from new york. At 10 20, were heading to hong kong. Big day for earnings from chinese lenders. And then at 1 ch11 50, were in chicago and Third Quarter u. S. G gdp. Apple corporate figures up 24 , but it missed analyst forecasts. Second straight miss for the company. Revenues rose 27 , slightly better than expected. Apple sold nearly 27 million iphones. The iphone 5 was released at the end of the quarter, but ipad sales were well short of forecasts. Apple First Quarter guidance which includes the Holiday Shopping season also trails analyst estimates. Lowist figure in around four years. The stock in frankfurt just off marginally around three quarters of 1 . Also amazon had his first loss since a drop in the value of it stake in Living Social and as they continue to spend heavily on expansion of new warehouses and Product Development like the kindle. Revenues were up 27 , but that fell short of forecasts. Stock was down as much as 6 in after hours. And in korea, smartphone sales powered a fourth straight recordly profit for samsung, but its their computer Chip Division that has investors worried. Lets get more from seoul. Whats going on with that pc unit, sherry . Thanks so much, ross. The results were pretty good. Very much in line its guidance. Net profit up 26 on year. Operating profit reaching an alltime high 91 from a year ago. And it was its mobile performance on the back of very strong smartphone sales that really drove up these numbers. Samsung sold 56. 3 him i dont know units in the Third Quarter with a Global Market share of 31. 3 . Its Mobile Division accounted for 70 of the total operating profit this time. But its chip business is still a drag. Chip profits tumbled 28 . Many analysts say the key question at this point is whether its momentum can continue and Stock Performance suggests that its earnings may peak this year. Thanks very much for that. Joining us for the first hour, bob parker. Credit suisse. Good to see you. What do you make of the tech sector overall . The last two week weve seen a reversal in the tech sector. I think a number of themes have come out of these announcements over the last 24 hours. The first heem is the hit of profitability of rolling out new products. Thats clearly been an issue. I think the second theme is actually the rising cost of production. And in their statement, apple said they have got to address their production costs and widening that hmargin. Samsung has been successful in increasing their market share. And that has been the theme for the last one to two years. Can they increase it even more . Frankly, i dont see why not. I think a big theme, however, in consumer i. T. Is have we reached market saturation. How many smartphones are you going to buy . A very good question. I wait to see if the company will buy them for me. Right. But there is an issue of saturation. Weve clearly seen thats why you have to have new services or new products. Were launching 4g in the uk next week and that may drive sales. You have to have new technology. Exactly. But if one looks at the last 12 months, there has been a massive increase in consumer demand for smartphones, and the apps that go into it. Ultimately one has to challenge whether the consumer at least on a 12 month view if not on a two year view has reached market saturation. I can want to ask you a question about telecoms. Were at a strange time at the moment with equity valuations. Im wondering whether that may sort of become slightly more attractive for investors if the cyclical stuff is rolling over. Well, if you believe that were in the stop start equity market for the next two to three months and the last three weeks weve seen reversals in most developed equity markets, clearly investors are moving bank out of cyclicals into defense. And the big theme on defenses are you want to focus on Cash Rich Companies will either theyll increase buy backs or increase dividends. In the case of telecoms, i think they will increase dividends. All right. Stay tuned. Well speak to an analyst who has a buy on samsung and sees a 32 up side, as well. We are also going to bring you up to speed on stocks as far as asia is concerned in a few moments time. Pretty flat day yesterday. 8 2 is where we stand, decliners outpacing advancers. As far as european stocks are concerned, down half a percent. Ibex down 1. 3, as well. As far as bond yields are concerned, well keep our eyes on spain and italy as ever. Well capped below 6 . Italian yields have risen over the course of the week. Eurodollar 1. 2929 is where we started it at the beginning of the week were pretty much back there. Sort of what we hit a few days ago. Aussie dollar, a little bit stronger yesterday, just coming back at the moment. And sterlingdollar, can it hang on to the gains. 34re plenty to focus on in the u. S. President ial election getting closer. More Business Leaders making their views known. And we caught up with jamie dimon while on a business trip to mumbai. We asked him to weigh in on the state of the u. S. Economy and the november vote. The underlying strength of the economy is actually pretty good. Corporations, middle market side companies, consumers are in better shape, housing is turning. It isnt as strong as we want. Is it possible the election changes that, it is, but i said also tell you that its possible the economy could do very well, very badly regardless. Whats important is good pl policy. We need good upon city in the United States. Simpsonbowles type deal with make all the difference and we would urge anyone who becomes president to get some of that done quickly. Who would the markets like, romney or obama . I dont really know. Markets always have a preference. People who vote for obama would say obama, people who vote no romney would say romney. But what would the markets say . Business might modestly favor mitt romney, but it doesnt necessarily mean thats better for the markets or not. At jpmorgan, are you worried about the fiscal cliff situation and which way it could return in the month of december . There are two parts. One is actually what happens at the end of december and you can feel the effects of that before the end of the december. The second one is the real fiscal cliff, does the United States of america show it has the will and capability to fix its fiscal problems. Im not worried as much for jpmorgan as i am for American Business and more than that, the american jobs and the average american. A fiscal cliff and another recession would be terrible for america. We should do everything we can to overt that. If an acceptable solution does not come about, do you feel we could have a recession next year . Yes. I think theyre pretty high if we dont do something to fix the fiscal cliff. Economists ill rely more on economists that it alone about take 3 or so out of the gdp. That is a recession. The problem is that thats kind of a static analysis. Peoples reaction could actually make it worse. And i would be a little worried about that. How does it feel now the business irn environment, is it heading toward a freeze now pending the outcome of the fiscal cliff or do you think its on the mend . I think the fiscal cliff was on the end in and getting stronger. It seems as many some people are pulling back a little bit in anticipation of a potential fiscal cliff. Hard to see data showing that, but anecdotally, ive spoken to ceos who say were make decisions to protect ourselves in the event of a fiscal cliff. Investment decisions and hiring decisions. Jamie dimon speaking exclusively to our colleagues. A lot of charter there about the fiscal cliff. Whats your own view of how it would be resolved . It is one factor which is leading to poor investor sent ch ment. And that clearly will be spended throughout november. Its over 600 billion of tax increases which unless there is a compromise will hit the u. S. Economy in early january. It will ultimate automatically in recession. So this fiscal cliff issue is exceptionally important. Provided that doesnt happen, youre quite bullet about the u. S. Economy. Our house forecast is 2. 2 growth. Coming back to the issue of fiscal cliff, one looks at a range of probabilities. The central case is that there will be an agreement irrespective of who becomes president that they will defer action on dealing with the fiscal cliff until probably the middle of next year and there seems to be a lot of work being dub behind the screens by bowlessimpson and it thats what i think theyre really going for, so they have a good six to seven months to try to deal with this medium to long term fiscal problem in the United States. I would assign maybe 20 to the fiscal cliff occurring. And then youll have a significant cap pull back in equity markets. I think the central belief is at least a sick month extension. So were still just waiting for something to be solved. I think what will happen is that probably most of the recommendations made by the simpsonbowles committee will probably be agreed on. Dependent upon whether you have a republican or democrat in the white house, there will be variance on fiscal policy. So for example if romney win, i think you will see Lower Corporation tax, you wont see increased income tax for higher earners. And you will obviously see the opposite obama wins. But the overall thesis is thatter respective of who wins, there will be some tightening in the fiscal policy. And one point to make is that under obama literally every quarter the government sector fiscal policy has had a negative effect and i think the theme for next year is that there is this very easy Monetary Policy will continue. Well work out which one wins over for investors. Plenty more to come from bob. Meanwhile here are the three top stories on cnbc. Com. Is Microsoft Surface tablet better than apples ipad . Logon to find out why steve b m ballmer thinks it is. Meanwhile a new feature focusing on the worlds aging population. Read up on whether japans economy can be rescued by the older generation. And muted earnings season has given investors little reason to cheer. Find out what Business Leaders say are their biggest fears. Thats all on cnbc. Com. Still to come, chinas big four banks are lining up to post earnings. Well look at why analysts are not so upbeat about prospect this is quarter. Bob. Oh, hey alex. Just picking up some, brochures, posters copies of my acceptance speech. Great its always good to have a backup plan, in case i get hit by a meteor. Wow, your hair looks great. Didnt realize they did photoshop here. Hey, good call on those mugs. Cant let em see what youre drinking. You know, im glad were both running a nice, clean race. No need to get nasty. Heres your honk if you had an affair with taylor yard sign. Looks good. [ male announcer ] fedex office. Now save 50 on banners. Is now within your grasp with the etrade 360 investing dashboard. Etrade 360 is the worlds first investing homepage that shows you where all your investments are and what theyre doing with free streaming quotes, news, analysis and even your trade ticket. Everything exactly the way you want it, all on one page. Transform your investing with the etrade 360 investing dashboard. Still waiting for results from two of the big four lenders. Both ended lower in hong kong trade ahead of the figures. If you recall, the bank of china set a strong tone for its peers releasing better than expected earnings yesterday, but shares were still down marginally today. Meanwhile slow growth profit picture this quarter. Chinas biggest bank icbc reports next tuesday. Joining us for more is the director and head of China Bank Research at barclays. Thanks very much indeed for joining us. Lets kick off with bank of china reporting net profit ahead of estimate. How much encouragement do you take from that, what was driving those earnings . Broadly for Net Interest Income and fee income have shown strong increase year over year. The highlight is the interest margin on the quarter on quarter basis expanded by eight basis points. That was a positive surprise. And nonperforming loans . Asset quality wise it shows stable. Npo amount increased by 1 quarter on quarter, but npr ratio is actually steady. We expect the weakness will be more coming from smes and small private enterprise side. How do you view the exposure of bank of china and the other bigger commercial banks to the slowing of the chinese economy and where the risks are . Well, Going Forward, we do expect npos and asset qualities to further deteriorate. And we are more at the beginning of the cycle. So our overdue loans will gradually pick up. I think the question is to what extent it will peck up. We probably is have more of a moderated view in terms of the magnitude maybe than other people. This is bob parker. Good day to you. One question id like to ask you is your view on view on international expansion. Apart from isolated areas of overseas acquisitions, im thinking of icbc partial acquisition in south africa, but the chinese banks overseas acquisitions have been reasonably minor. Do you think that will accelerate and do you think that will be a driver in profitability Going Forward . I dont think it will drive profitability because overseas operation is going to be a very small part of chinese banks earnings. S as of now, icbc is within 5 of overall assets and profit contribution. As of now, icbc if overall assets and profit contribution. So the only exception is bank china which has about 20 exposure to overseas activities. And whether theyre going to accelerate the acquisition activities, i think certainly large banks in particular have interest in acquisition overseas and we have seen there is a report on the interested in acquiring. The question is where they want to buy, whether the developing countries developed countries. P. Just as a followup question, ive always taken the view and still do that china will have a soft landing. Ive never been in the hard landing camp. And i think theres a very high probability that if we look into 2013, growth can be minute takened probably north and the key is Consumer Sector. To what september do you think chinese bank profit and will benefit from still a fairly robust Consumer Sector . Soft or hard landing i guess depends on the definition, but if 7. 5 , i would sigh it as more of a soft landing. And Consumer Finance or if were talking about retail loans as part of chinese banks contribution, its less its about 120 or so of total portfolio. So contribution is still not that big comparing to the corporate side. But theyre growing relatively fast. So i think over time, it will probably 30 or 40 in the next tlooe three or five years and that could become more meaningful to help lower the credit risk port for the i dont as well as more diversified sources of revenue. Thank you very much instead. Have a good weekend. Some of the other stories were watching today, nine more banks have been subpoenaed by the new York Attorney general in connection to the global lie we libor investigation. Will is according to reports. Subpoenas from the new york and connecticut attorney generals reportedly received in august and september. Microsoft launching 8 today. What could be the biggest change in years. Theyre opening up 32 pop up stores just for the holidays. Its designed to run on pcs, laptops and tablets. A smartphone version will also be released next week. Windows currently runs on around a billion pcs, but most arent expected to switch to windows 8 for at least a year. And carroll has been at the head of the mining group for five years and has recently faced pressure and will step down. Carroll will stay on until a secretary says sore is named. What it does do, bob, is it now leaves just two ftse 100 ceos who are female. Correct. Is there is obviously pressure everywhere to increase diversity on boards. And i would say its defactor a good thing. Credit suisse published a Research Paper correlating share Price Performance with the number of women on boards and one can argue account statistics, but the overall theme is that diversity atboard level is good for companies. Norway has quotas. I think there are powerful arts not to have a quota system. We dont have time to go through that. But i think youve made your point. Well take a short break. Still to come, another quarter of record profits for samsung electronic, but it shares lower in trade today. Seems extraordinary when you look at the numbers why this is a company thats still only trading around 8. 9 times estimated earnings. Well look at it when we come back. It could be a tough going for the tech sector. Apples outlook for the holidays well short of forecasts. Sales of smartphones has guided samsung to another quarterly profit, but shares have denied over concerns about chip sales. And s p has september ont out t go france banks citing economic risks. And late burst by consumers has helped booth gdp, but growth may still be too sluggish to bring down unemployment. Rather a flat session for european stock thursday. Today losses. Down half a percent for the ftse and xetra dax, 1. 2 for the ibex at the moment. Bond yields in spain and italy just nudging up a little bit. Spanish yields just under 5. 7. And currency markets, eurodollar back down to those lows. Another record quarter for samsung thanks to strong sales of it galaxy hand sets. Third quarter operating profit almost doubled from a year ago. There was weakness in the Chip Division. Investors sold off the stock questioning the firms ability to keep up the momentum. But samsung does now hold a third of the Global Smartphone share, although it still has a lot of catching up to do with apple on tablets. Joining us from seoul, analyst for korean investment and securities. Thanks very much indeed for joining us. For the earnings that samsung comes out with, why its shares arent doing any better, why is that . They have already given preearning guidance before and earnings does show what was expected, but the there is concern over Economic Development later on. Lg trades at 16 times. Average stock up 53. It seems acts undervalued on those metrics. Yes, there is some concern of the Slower Growth rate of smart phone later on, but im positive the chip business will be improved later on. Do you think if the chip sector doesnt perform, they should spin it off . What do you think of that idea . There is slower perform c demand, but smart phone tablet growth especially in mobile and memories and processor which provided to both apple and samsung mobile. Just talk about the tablet markets. Theyre still trailing apple. What will happen on the tablet side of the business next year . Not only the high he saend t and low end is going. Something is very positive because samsung show additional function. These features will both give at the high end and also the low he said side. So it will gain market share especially in the low end area. And i think samsung has a huge cash pile, 27 billion should they hand some of if back to investors or perhaps buy back some of the stock . I dont think so. This is investment time and the chip business to compete with intel. It rishs huge investment. And also new display requires investment, too. Also they would like m a in the future. P so cash at this time is more important than returning to investors. Okay. Thank you very much for joining us from korea. Interesting point. Apple has a huge amount of cash. Over 130 billion. Samsung 29. Correct. Hes saying that you need it for the investment. When does cash burn a hole in your pocket . If we look back over the last three years, there has been this steady accumulation of Corporate Cash worldwide. And at the beginning of this year, we estimated that at around 4 trillion. Now, whats happened in the last three months is that Cash Mountain is actually starting to come down and the themes are increased share buy backs, globally i think increased dividends. And certainly investor pressure on Cash Rich Companies to increase their dividends. And there is in certain economies some evidence of an increase in real investment. In the case of samsung, the argument that he was making was its less than 13 billion and thats small compared with apple and given the investment program, they probably need that cash buffer. I think wed be having a different discussion if hair cash was the same as apple. S p has cut its view on french banks. Stefane, what reasons are they citing . They cut on three french banks including the largest one, bnp paribas, on its outlook for most of the Banking Sector. Bnp long term Credit Rating has been cut by one notch to a plus from double a minus. S p has negative outlook on the large banks. The Rating Agency believes that the risks for the french Banking Sector could rise in the near term as the competition could increase on the domestic markets. Why the funding conditions would remain volatile. And globally speaking, it believes the economic environment for the Banking Sector in france will become more demanding as the french Housing Market is in the process of correcting a build up in housing prices. Although impact on banks should remain slimted. This statement comes just two weeks ahead of the Earnings Report for bnp and socgen and two week after they sold yunts that was a relief. Absolutely. Thanks for that. Greece reportedly needs 30 billion and you are rows in emergency cash and another two years to get its house in order. At the same time, the imf is warning portugal that risks have increased marketly because of resistance over its automatic tearity measures. Despite the risks, jamie dimon is more optimistic on the region. Europe is far more complicated. Youve seen the leaders there make a lot of progress. Having a banking unit is an important attempt to make sure that no country has a run on it banks. Obviously to fix the long term issue about the master agreement between the nations about how you can run deficit, et cetera. Theyre making progress on all those fronts, except their 17 nations, it wont happen all at once. So it will be a little bit of ale roller coaster as they go through all these things. What i see is that from the head of the central bank, European Central bank, they want to fix those things. They need to get it through their parliaments, but they seem to be devoted to it. So i see progress. Theres always a chance something turns south, but i hope theyll get through all that. The omt certainly mitigated a lot of tail risks. How long do we have before it comes back . The key question is when does spain make the request. We have a cat and mouse situation in the markets at the moment whereby as long as spain does not ask for a request, although weve seen a rally in spanish bond yields, i think a rally is largely done. We might get ten year moving down towards 5 , but will we get them moving down to almost lets say french levels. The answer to that is no. If spain goes to the ecb and the esm and asks for sovereign bond market assistance, which frankly i think they need to come and i wouldnt be at all surprised if they do it in november, then you could see i think with ecb action quite strong downward movement in bond yields. Its for that reason that they wont push span, bond yields up. And as long as thats the case, the government wont ask for assistance if they can keep funding them. Do they want to fund themselves or if the omt was activated, do they want to fund themselves at, say, sub 4 . All depends on the conditionality. And they dont know what it is going to be. Nobody has told us what the condition would be, but if you look at the action the Spanish Government has taken, you have to ask the question what more could they do. And i actually struggle to find what other measures could take place. And the problem with spain which were also seeing in portugal is that with the debt trap, fiscal revenues have collapsed and so you really struggle reducing your budget deficit. The imf has come back shocked as the multipliers being triple what they thought they were. And unemployment now ticked up to 25 . Correct. And obviously what is well, you have to challenge whether that is a real figure. I would say probably real spanish unemployment is probably closer to 17 , 18 because you do still have one of the issues in the spanish economy is the size of the formal economy. So are bond markets stable. You have to look at it country by country. I think the Bailout Program is working. I think the rally probably will continue in bonds. Secondly in portugal, theyre struggling at the moment with the Bailout Program. Up until about a month ago, one could make a statement that the Bailout Program is work. I think probably any further rally probably will not happen. I think the big risk for Foreign Investors in the spanish market is will we see first cause of independence for catalonia. And thats difficult to quantity five and will keep many nervous about buying. Another polled elect in november whether they go if that referendum on the back of elections. Bob, more to come from you. If you have a question, you can email us. Lets remind you whats on the agenda in asia for monday. Japanese retail sales are out at 12 50 c chlt h. Et. Also big named earnings out like honda. Plenty of corporate report cards due out including baidu. And the Rolling Stones played a surprise gig in paris last night ahead of their 50th anniversary tour. Theyre only doing one and tickets range from 1210 all the way up to 6,000 for general admission. Wow. Okay. Still making the money. Still to come, entertainment powerhouses can i s powerhouses disney and sony have teamed up, but how will it fair against netflix. We have comments from ecb policy maker, says i can assure you that omt bond buying will not have inflationary consequences. Printing presses will not be cranked up and will not automatically begin with application for a bailout fund aid and does not involve state financing. Nothing surprising there. The point people have missed is that when the original announcement of omt, he clearly said that any sovereign bond binding would be sterilized. Balance sheet could easily be 3. 4, 3. 5 dritrillion. You could say the ecb Balance Sheet slrd too high. The Balance Sheet is a percentage of gdp in the eurozone already close to 5 . So the point hes making is a good one because clearly there is a concern amongst investors and politicians in europe that this increase in the ecb Balance Sheet and omt will eventually have inflationary consequences. And the point is a valid one which it wont. And i agree with that. All right. Britains first 4g Network Launches next week and new Services Also come. The network launching and has chosen film flex to power its movie services. Joining us is jeff henry. Thanks very much for coming in. What do you do thats different . What we try and do is were one of europes largest movie on demand service provider, so we white label over bronds. So the likes of ver begin media, foreign demand, we allow them to take their and they monetize them. Its our technology. They leverage it. So effectively rather than spend large amounts in term ofs a build, they represent essentially and we provide them with the movies. And its not just disney and seasony pictures. No. We have we offer movies from over six major studios, all six of them which means we can can offer in terms of recent releases, new releases from the cinema, we offer over 300 new releases. If you compare that to the likes of netflix and that window offers five. We were just talking earlier about whether people will upgrade next year, whether well reach a saturation point with high end phones and devices. Its slightly dependent on having new services who want to do that. How much of a difference do you think is 4g going to have . How long will it take to download one of your fill hims and watch it, do you think . Around six minutes. But the change for us is. It frees up to wherever you want to consume it and thats where the 4g comes in to. For some of functionality that were offering, you start watching it lets say on the train, you then go into wrork, you obviously wouldnt watch it in work. Obvious not. I might when im on air, but i wouldnt in the newsroom. Some good movies in the service at the moment. So therefore then you go home, connect ittoyour tv and therefore the seamless consumption of product is really important. Ive got a really stupid question. Every time i want to go to my local cinema, it is full. Surely the trend is im going to be watching films on my ipad, et cetera. I dont understand and perhaps urt wrong person to understand this question to, i dont understand why cinemas still exist. They exist because cinemas are probably the best Marketing Tool that the studios have. And the way that they structure their windows, we operate in a window which is straight after cinema and also some of the products why they exist, this krae either buzz for the studios. They create they have a long chain of consumption. And its because of the buzz thats caused by a big cinema release that were in the window straight after cinema. So video on demand in terms of day in data its called with dvd release, you get it on our service. And then you wait another few months and then netflix and love film take the prescription window. I thought video would kill cinema, but what it did is it sharpened your appetite to go see movies. The point im making is surely the growth is in people watchi watching not buying 23i ining f they can weight. The subject i guess is the wait. Were already only a few years into it and were talking about four to five times that consumption. If i can suggest that maybe theres another window which is perhaps youll get to see it for certain people at premium before before it goes on cinema. You know that the big new bond movie is coming out, you therefore would say there will be people very happy to pay for it. Jeff, thanks very much for joining us. The race for the white house is getting even tighter especially in the crucial swing states. The latest nbc wall street journal poll shows mitt romney has pulled even with president obama in colorado and is trailing narrowly in nevada. Both candidates have been crisscrossing the country this week with particular attention paid to ohio which has correctly picked every election winner since 1960. Spending heavy of course is a necessity if you want to become president of the United States as as the Campaign Heats up, aim mond and i monday j. Its an enormous price tag. Theyve spent more than 1. 483 billion so far and that number is still climbing. Here are the numbers. The top three pro obama super pacs dumped in 53. 7 million according to the center for responsive politics. Team obama comes in with over 779 million in spending. Romney campaign spent over 298 million. Republican National Committee piled on another 249 million. And the top three pro romney super pacs added a whopping 156. 5 million. Again according to the center for responsive politics. Total spent, more than 700 million. Now, so far team obama manages to outspend the romney camp by more than 75 million. And keep in mind this doesnt include all of the spending thats still going on for october. A key month in any election year. Thats going to all push through to election night. There will be a lot more spending still to come. But these are the numbers as were looking at that time so far. Quite a lot of spending. Bob, just a final not a final thought, but a thought on the u. S. Election. Does it matter a whole lot to investors who wins some. What matters is are we going to have political gridlock. If you have romney as president , the house stays republican. If the control of the senate moves back to the republican, then you will not have political gridlock and you will have the fiscal cliff avoided. I think the key answer is will we or wont we have the fiscal cliff and that cant be underestimated of dealing with that problem. All right. Well talk more about equities, as well. Meanwhile, Hurricane Sandy has weakened a little, but still pounding the bahamas. Its blamed for 21 deaths in the caribbean and 11 in cuba. Sandy is expected to cause Tropical Storm conditions in southeast florida today. And then track along the east coast. Forecasters say it could meet up with a storm from the west and cold front from the north that could create a super storm early next week and that might bring wind, flooding, heavy rain and snow as well as causing Power Outages and potentially major damage. And then track along the east this is todays Worldwide Exchange. Here are the headlines from around the world. It could be of it going for the tech sector. Amazon and apple both disappoint. Sales of galaxy smartphones have guided samsung to another record quarterly profit. S p sent out a warning shot for france Cutting Three of the countrys biggest banks. And a late birs of spendiurst o might have helped, but still may be too sluggish to bring down unemployment. So if youve just joined us, a very good morning to you. Will is where were indicated right now. And we are indicated for a down start at the moment for the dow. Currently 65 below fair value. Were currently around 9 for the s p 500. Ftse global 300, you can see were down near the session low. Stocks pretty flat yesterday. Down half a percent right now for the uk market. Xetra dax down 0. 4 . Ibex down off about a percent at the moment. Eurodollar is around that 1. 2930 mark. 1. 2929 is what we hit on wednesday. And were pretty much there. Dollar yen just pulling back from a four month high. Holding on to the gains we got yesterday. In asia, lets get a check in from singapore. Its a sea of red as earnings concerns weigh on the markets. Shanghai composite closed at a three week low. We saw weakness in infrastructure plays and also miners and financials. Shares in hong kong snapped a ten day winning streak. China unicom lost over 7 after earnings missed forecasts. Bank of china also ended marginally in the red despite upbeat earnings. The nikkei pulled back from a four week high. Sharp shares rallied nearly 4 following reports that the tv maker is seek capital tie ups with u. S. Tech firms. South korean shares tumbled to a seven weak low. Samsung managed another record quarter, but shares dropped on profit taking. Kia motors sors tumbled on its operating margin. And asx lower by 0. 8 . Ross, back to you. In the states, we have gdp out at 8 30. At 9 55, the final report on october consumer sentiment. Comcast Earnings Reporting results before the opening bell. And the fiscal cliff is still around two months away, but the combination of federal tax hikes an spending cuts may already be impacting the u. S. Economy. The Washington Post citing a report out today by the National Association of manufacturery says companies are bracing for the fallout by cutting jobs and delaying big purchases. Data shows Business Investment stalled in september. The report suggests if Congress Fails to address the cliff, 6 million jobs could be lost every the next year pushing unemployment to near 12 . Joining us for more, steve borrow from Standard Bank and bob parker still with us. Steve, good to see you. What have we priced in . I think the market has probably factored in some reduction in the amount of fiscal timing that could take place. The Congressional Budget Office says if the fiscal cliff goes ahead, its worth some 4 to 5 of gdp. Thats not a central no, i would say the market is probably priced for maybe less than half that, but thats still quite a substantial amount. If we have a fiscal tightening next year, smaller than the fiscal cliff but still some degree of tightening, thats equivalent to what happened in the uk in 2011 and id argue that amount very much helped push the uk economy back into recession. So could do the same for the u. S. You think a little less than that. Well, i think our view is that 20 probability that the fiscal cliff takes place. But if it doesnt, lets say they delay it or there is an agreement on medium term fiscal mo policy, the overall theme is fiscal policy will be progressively tightened. The only question is by how much. If you believe it will be tightened and lets say it takes out 1 of gdp next year, other things being equal, if it wasnt that fiscal tightening, you actually could have had growth moving back over 2. 5 . And i think under any scenario, growth will probably be fairly mediocre and 2 growth i define as mediocre. And the reason why i say that is 2 growth is not enough to reduce unemployment. And so then what happens to asset prices, steve . I think the stock market and bond market are priced for growth in the 2 sort of region. So im not sure there would be significant economic fallout there. As far as the dollar is concerned, i think probably also priced for that sort of scenario. So we really have to be looking at deviations significantly far away from that sort of 2 sort of level. If bobs right, that means the fed just keeps going. P. And probably beingaccelerate. At the end of the year, we supposedly end the switch operation within the treasury market and if were still looking at a Growth Scenario of 2 or less, then the fed will probably outright treasury posts next year. And i think one big theme is Monetary Policy will stay super easy and in terms of your investment strategy, you have to ask which Asset Classes suffer, which benefit from that super easy Monetary Policy. What wins out in the push pull. And still an awful lot of stimulus. You also have a question where is the growth in the Global Economy next year. I would argue china will move back towards growth. Its super cheap because its been the worst performing stock market this year and in fact the last two years. And it is very underowned by global investors. So i think if you believe that chinese growth moves back towards 8 , if you believe asian growth generally is maintained, particularly in markets like thailand, malaysia and indonesia, i think there are opportunities. Elsewhere you have to stay with Cash Rich Companies. If you by china, what sort of pace of appreciation does it have from here . Probably depends on the u. S. Election. The possibility of a romney victory, we know the sort of views that romney has about china and the things he said that he will do as far as naming the country as a currency manipulator, so you have to think perhaps of the strength in the renminbi is a little artificial as they keep the currency relatively firm. And then if we do get a romney victory, i dont think well, but if we do, youd probably expect to see some acceleration in the pace. On my scenario, obama will win more likely and the renminbi starts to weaken again. Okay. Good. Stig around. Well talk more broadly about about the dollar. Apple Fourth Quarter profits rose, but missed analyst forecasts. Second straight miss for the company. Revenues were up 27 . A little bit better than expected. And apple sold nearly 27 million iphones. The iphone 5 which was released at the end of the quarter, but ipad sales well sort of forecast. The apple stock is off marginally in frankfurt. Not very much. Just over a tenth of 1 at the moment. Amazon also reported a Third Quarter net loss. Results were hurt by a drop in the value of its stake in Living Social and as the Company Continues to spend heavily on expansion with new warehouses and Product Development like the kindle. Revenues are up 27 , but that fell short of forecasts. Amazons Fourth Quarter Sales Outlook is also shy of analyst estimates. Stock down as much as 6 after hours in frankfurt. We have an italian auction, as well. Zero coupon bond. The 2014 yield 2. 39 , lower than the 2. 53 on september the 25th. Bid to cover 1. 65. So italian yields still being contained at the moment. Still to come, microsoft unveils it new windows 8 operating system and surface tablet. Well have indepth analysis at 5 45 eastern. Bob. Oh, hey alex. Just picking up some, brochures, posters copies of my acceptance speech. Great its always good to have a backup plan, in case i get hit by a meteor. Wow, your hair looks great. Didnt realize they did photoshop here. Hey, good call on those mugs. Cant let em see what youre drinking. You know, im glad were both running a nice, clean race. No need to get nasty. Heres your honk if you had an affair with taylor yard sign. Looks good. [ male announcer ] fedex office. Now save 50 on banners. Its looking tough for the tech sector. Apples outlook falls well short of forecasts. Samsung has another record quarterly profit. And late burst of spending has likely helped boost Third Quarter u. S. Gdp. Latest poll shows mitt romney has pulled even with the president in colorado and is trailing narrowly in nevada. Both candidates have been crisscrossing the country this week with particular attention paid to ohio which has correctly picked every election winner since 1960. Dollar is weaker against the yen. Off four month highs. Eurodollar is steady at 1. 2948. Steve is still with us. Weve just had discussion that the fed is likely to keep the taps open or may even put more in towards the end of the year. But does that have much impact on the dollar . No, i dont think so. I think the way in which quantitative easing affects currencies if at all is if it adjusts real Interest Rates. Nominal Interest Rates and inflation. In theory at least quantitative easing is negative as far as those real rates are concerned because nominal rates can come down and Inflation Expectations can go up. But if you look at the u. S. , weve had obviously this is the third bout now. Rates are already very low. Inflation expectations are calm. So not really a great deal of room for real Interest Rates to fall much further and i dont think theres much room necessarily for the dollar to fall as a consequence of the easing taking place now or indeed if the fed starts some outright treasury purchases next year. What about with emerging market currencies. Every time we get more qe, they keep screaming well drive asset inflation for us and therefore pressure on our currencies and Exchange Rates. I think its a particular problem in asia because in a sense with current countries or regions that have fixed or semifixed Exchange Rates, you think of china, hong kong, singapore for instance, or other countries where they manipulate Exchange Rates to keep them very stable against the dollar, really what theyre doing is theyre importing u. S. Monetary policy. And that Monetary Policy is right for the u. S. , but its not necessarily right for these other countries. At the moment a lot of those countries are actually weakening a little bit because of exports, but i think the underlying problem really is theyre importing Monetary Policy that is way too easy, its creating potential asset price bubble particularly in property. And those have a risk of exploding. And if the fed does more easing and they import more of this loose Monetary Policy, then those risks will increase. Maybe we dont see that at the moment because their economies look soft because of the export side, but i think theres a lot to be quite concerned about whats going on there. Eurodollar were in sort of these ranges, sort of 1. 29, 1. 31. Will we stay there . I think so at least before the election in the u. S. If obama wins, the dollar probably wont move very far. If romney wins, probably an initial up side move in eurodollar. I still feel longer term eurodollar will come down. We still have a target of 1. 15 over the next six months or so. So im laooking for weakness. If spain asks for Financial Assistance and then we get an even bigger cap on spanish yields, wouldnt that be positive for eurodollar . I think my concern is that in order in a sense to diffuse the tensions in the bond market, we really just policymakers just transfer the volatility to the currency markets. And you see that for instance in the way in which policymakers are outlawing naked cds positions for instance. Because before people might have speculated against the eurozone by buying the cds of countries like spain or italy or others. Now they cant do that. They have to have an underlying position. And therefore theyre still bearish about the eurozone. What do they sell . The euro is still there and can be sold without any restriction. And i fear thats where things will go because the eurozone economy to me is still very weak and the eurozone crisis is nowhere near over. Steve, good to see you. Have a good weekend. Dont forget we have three top stories trending on cnbc. Com. Microsofts new surface tablet really better than the ipad . Logon to find out why microsoft ce chlt on thinks it is. And also a new feature focusing on the worlds aging population. Read up on whether japans economy can be rescued by the older generation. Plus a muted earnings season has given investors little reason to cheer. Go to cnbc. Com to find out what Business Leaders say are their biggest fears from here. Also still to come on air, Standard Poors has cut its view on french banks. Well have the latest. European stocks are weaker and that seems to be leading u. S. Futures lower, as well. Right now implied down. European stocks pretty flat yesterday. Today were down a third, percent lower for the ibex. Half a percent lower for the ftse and xetra dax. Cac 40 similar amounts. Nine more banks have been reportedly subpoenaed by the new York Attorney general in connection to the libor investigation including credit suisse, bank of america and socgen. The subpoenas were reportedly received in august and september. At the same time standard and poors has cut it view on french banks, as well. Who has been cut and what are the reasons cited . The economic environment will be more demanding of the french Housing Market stefan, for some reason your mike which youre wearing isnt working, so its one of our problems. Technology. Yes. Have we got stefane . All right. Start again. So which french banks and why . S p believes that the french Banking Sector will face more difficult economic environment because were close to a correction on the french Housing Market. Thats the view from s p and the Rating Agency also believes that the risk for the french banks will rise in the near term because the competition is going to increase in their domestic markets. Conditions will remain volatility. As a result, it has decided to cut long term rating for bnbbnp. S p now has a negative outlook for the large banks. This announcement comes just two weeks ahead of the beginning of the earnings season. Socgen will kick off the earnings season. Stefane, thank you very much. Good to see you this week in london. Hell be back in paris next week. Despite the ongoing risks in europe, jamie dimon is sounding an optimistic note on the region. Heres what he told cnbc in an exclusive interview while on a trip to india. Europe is far who are complicated because youve seen the leaders there make a lot of progress. This omt which says theyll make sovereign debt good as long as countries meet conditions, thats an important statement. Having a Banking Union is an important statement to make sure that no country has a run on it banks. Obviously to fix the long term issue about the master agreement between the nations about how you can run deficits, et cetera. And theyre making progress on all those fronts, except there are 17 nations. It wont happen all at once. So it will be a little bit of a roller coaster. But what i see is that from the head of the central bank, European Central bank, head of the governments, they want to fix those things. They know what needs to be done. They need to get it through their parliaments and they seem to be getted to it. So i see progress. Is there always a chance something turns south, yes. But i think theyll hopefully get their way through all that. And also his views on the election and the fiscal cliff. More of that later. And also the latest on the results from apple and the preview of the windows 8 operating system. What does it mean for the tech shares from here. Were into the last half hour of Worldwide Exchange. If youve just joined us, here are the headlines. It could be tough going for the tech sector both apple and amazons earnings have disappointed. Apples outlook for the holidays well short of forecasts. And sales of galaxy smartphones have guided samsung to another quarterly profit, but shares have dropped on worries over chip sales and momentum from here. Plus a late burst of spending by consumers has likely helped boost Third Quarter u. S. Gdp, but growth may still be too sluggish to have any impact on unemployment. As we start thinking about the u. S. Open a little bit later, stocks indicated to have a negative start right now. The s p 500 is currently some just under ten points below fair value. The nasdaq at the moment is some 18 points below fair value. And as far as the dow is concerned at the moment, were some 67, 68 points below fair value. European stocks 2 1 2 hours in to trading today have been in negative territory. Were not quite at the session low. Weve had half percent losses today for the ftse. Third for the xetra dax. Ibex here as well down around 0. 8 . Pretty flat certainly for the german and french and uk markets yesterday, as well. So what are investors to do . As we wait for the gdp number, heres some thoughts from the experts who have already been on cnbc today. Sterling isnt necessarily a currency you want to buy when youre risk positive typically because its like the u. S. Essentially zero ranked currency. The bank rates 0. 5, but sectionally rates are rock bottom. So its tended to act more as a safe haven. We see obama reelected, we think theres a 30 chance that the fiscal cliff actually hits the end of the year. That is risk off for Global Markets, but not necessarily good for u. S. Treasuries. The real safe haven in the Government Bond markets in that case is bunds. Over a longer time frame, we believe equities as a whole are the right place to be. Apple Fourth Quarter profits rose, but did miss forecasts. Second straight miss for the country. Revenues rose 27 . And apple did sell nearly 27 million iphones. The iphone 5 of course was released at the end of the quarter. But it was ipad sales were the disappointment. They were short of forecasts and apple First Quarter guidance which includes the Holiday Shopping season also trails analyst estimates. Apple says it expects Gross Margins of 36 and thats about the lowest figure in four years. The stock in frankfurt only down marginally, though, as you can see. Down just over a tenth of 1 . Ron grover of the Los Angeles Bureau chief at reuters joins us. Ron, thanks for joining us. Lets kick off with e padipads. How disappointing is that . Quite disappointing. They thought it was hair big hot product. They sold 14 million. Thats not a small amount. The street was expects 15, 16. Thats a big problem. Is there any sense that people were thinking ipad mini is coming out, we might not buy an ipad or not . Is there any impact from the mini . Youre exactly correct. There is plenty of impact. Consumers were expecting the smaller one, slightly more inexpensive than the previous one may have held back. Apple certainly hopes that they will change course and buy it. The mini goes on sale november 2nd. Pretty soon theyll know i guess. And of course we know with the ipad mini, one of the issues was the price of it. Are we getting more indications here with these numbers that costs are becoming a bigger problem . Well, yeah. For the first time, they are starting to talk about costs becoming a pretty good sized problem. A falling profit margin, cost margin as understand. The problem is they seem to be rushing a lot of their products out quickly for the christmas season. Theyre facing a lot of competition from a lot of new people. Samsung, google, amazon and others. And i think theyre starting to feel the pressure. So the stock is down 10 in the last month. Its mad a pretty good year. So how do you think were looking at the moment as we stand at this point just ahead of the Holiday Season and all these new products . Well, we dont predict stocks. I cant tell you any numbers. But i can tell you the market is a lot more nervous about apple than it has been in years. And after being up about 50 , i dont think youll see the stock skyrocketing or maybe enagreeing a whole heck of a lot through the rest of the year. So where do we go next year . Theyre still the worlds Biggest Company and they still have a huge amount of cash in the bank. Samsung has 29 billion. Apple well over 100 billion. So they can in a sense outinvest them. And they will and they have in the past. I think the real problem with apple is the expectations gail. The street has learned to expect so much from this company and now they have been disappointed. I dont know into the next quarter or next year if the street exactly knows what its going to expect of this company. Its a new guy running the place. Tim cook, not steve jobs. And i think everyone is trying to get their feet under themselves as to where the company will go and what kind of company it will become. And whats the view on tim cook now, as well . Well, hes certainly a nicer man than steve jobs was. At least thats according to everybody who has known the two men. Steve was material, could be abusive, but he was a wonderful marketer and he had a great sense for what the consumer wanted. I dont know that the street thinks that of tim cook at least not yet. He has to prove to them. All right. Ron, thanks very much indeed for joining us. Thank you. Sandy has weakened a little, but still pounding bahamas. The storm is blamed for 21 deaths in the caribbean and 11 in cuba. Sandy expected to cause prtropil storm conditions in southeast florida and then track along the east coast. Alex wallace from the the Weather Channel joins us for an update. Alex, whats the expected path of this and the intensity . Ross, its going to be doing a bit of a snake over the coming days. Right now intensity has as you mentioned dropped just a little bit. The latest advisory putting it at 80 miles an hour. Last advisory was 85. Movement still remaining at 13 Miles Per Hour now. But its moving more to the northwest at about 13 Miles Per Hour. Right how it is moving its way through the bahamas. The center of the circulation is right about in there p. So most of the nastiest of the weather is north of the center of circulation, but you can see just how large this thing is. Already seeing some of the outer fringes showing up here into the eastern portions of the carolinas. And all the way down into puerto rico finding heavy rain moving on through that area right now. So a large expanse with this system, so large areas will be impacted. P where is it going to be heading . Going to be doing a bit of a snake. Right now its moving to the north and west, but then it will turn more to the northeast a little further out from the coast. But there will still be some outer impacts here for us along the carolina coast. And then late in the weekend into early next week, it turns back towards the east coast. So thats why were thinking well be talking about some big problems here anywhere from the eastern carolinas all the way up into new england. Need to be on alert for sandy. Enback into the interior portions of the northeast, aware of the situation because as it moves inland, wind will be a big problem as well as rain and were actually thinking wind will be the biggest problem. Could be widespread wind damage for parts of the northeast. That could lead to big time Power Outages and even inland and along the coast, well be watching for flooding. Again, the northeast dealing with this sunday into tuesday. P but right now, its the southeast coast having to deal with it. Back to you. Thanks. A lot of people will be keeping their eyes on that. Well take a short break. Still to come, meek cricrosoft out windows 8. Will consumers and businesses leap to makt switch. Ag bank has come out with its profits. Slightly better again. Seem to be managing expectations very well. Microsoft 8 is launching today. Designed to run on a variety of devices including it new surface tablet. A smartphone version of windows 8 will be released next week. Windows currently runs on around a billion pcs, but most owner arent expected to switch to windows 8 for at least a year. Joining us, michael silva, research director. Thanks very much for joining us. Steve ballmer was on squawk yesterday telling us everything wonderful everything would be with the new tablet and windows 8. How many of a game changer is it for them . Well, it really needs to be because theyre really trying to get back into the consumer market, face apples ipad and more importantly get back into the phone market where theyre not doing all that well. Theyre trying to make it more touch screen, make usable across a whole range of devices. Steve ballmer was talking about this. Will it will businesses be able to transfer and make the tablet much more business friendly with windows 8 . Well, there are lots of businesses that really hope to reduce the number of ipads, give them a single device that can do everything. P but most users will continue to use traditional laptops and desk tops and theres really not that much reason to move one of those devices there. So organizations will look at that time really only for years that theyd both notebook and desktop p and tab let in one and for most of the user, theyll wait for the next release. Lets bring in natalie morris, as well. You have a surface tablet with you, right . Well, i did, yes. I dont have it if my hand. I left it in the other room. So what do you make of that, have you had a chance to play with it with the new operating system . Its a fun device. The way theyve done this time which is different than the way theyve done it in the past is taking windows as a holistic experience, whereas before we saw windows vista, windows 7 and thin windows mobile, windows phone, and it was very disjointed experiences. They thought how can we unify digital like. So windows 8 feels a lot like it does on the tablet and like it will on the phone. And so that is what we have to defend microsoft for. Theyve taken a chance here. People who are used to their start button and used to using their mouse for everything, several commands at the touch of a mouse, this will be disruptive for them. So there will be a learning curve. But theyve had to modernize the system and i think theyve done a great job at that. Michael, you said 90 of enterprises will not buy until 2014. So what is it that why wait so long . Really what we said was that 90 of organizations would stipulate windows 8 for broad deployment. So theyll look at it for certain users that really need it, but for most of their users, theyll probably actually wait for windows 9. And how long will that be before that comes out . We think microsoft will ship windows 9 relatively quickly. Were expecting it within two years after windows 8, which is short for microsoft. Usually theres about three years between releases. So natalie, thats kind of an interesting fact if that happens. With all these new features that youve talked about, the pc market is still really important, as well. So how are consumers away from the business, the households, going to jump on to this windows 8 . Right. Well, theyve made it a lot easier for consumers to go ahead and implement this. As he was just saying, its hard for an enterprise to roll out a new operating system to all of their users. It takes the i. T. Department a put many layers of security on to what already comes with this. But the user can just upgrade, its much cheaper than it ever was before. And so i think that just the householded at home will look at this and say its give it a try. They have a new app store that we can play with. Your kids might really like it. It will update your pc to make it a lot more of a Family Friendly experience. So i think people will give it a try. But its a distractor. It will take a learning curve. Michael, how would you compare to other operating systems like chrome . Well, totally different. Maco s and chrome, theyre not touch, theyre not looking to be tablets. Google and apple both have different operating systems to be tablets versus pflt cs. So this is really ambitious. The problem is that theyre two very different experiences. We really dont expect this to be an issue in terms of businesses skipping win did hes 8 for microsoft. Businesses are still paying microsoft in large numbers. Theyre paying an able fee. Whether they use the new os or not. But for consumers, the real issue here is confusion. Theres windows 8, windows rt, you go in a store, you see two devices that look almost identical, how do you know which one to buy. And it will be really difficult for microsoft and the retailers to explain that to the typical consumer. Okay. Michael, have a good weekend whenever that starts for you. An natalie, thank you, as well. Just a reminder of the headlines today so far. Its looking tough for the tech sector. Apples outlook falls short of forecasts. But samsung has another record quarterly profit. And late burst of spending by consumers is likely to have helped boost consumer Third Quarter u. S. Gdp today. I look at her, and i just want to give her everything. Yeah, you you know, everything can cost upwards of. [ whistles ] i did not want to think about that. Relax, relax, relax. Look at me, look at me. Three words, dad etrade financial consultants. So i can just go talk to em . Just walk right in and talk to em. Dude, those guys are pros. Theyll hook you up with a solid plan. Theyll wa wa wait a minute. Bobby . Bobby what are you doing, man . Im speed dating [ male announcer ] get investing advice for your family at etrade. Oh, hey alex. Just picking up some, brochures, posters copies of my acceptance speech. Great its always good to have a backup plan, in case i get hit by a meteor. Wow, your hair looks great. Didnt realize they did photoshop here. Hey, good call on those mugs. Cant let em see what youre drinking. You know, im glad were both running a nice, clean race. No need to get nasty. Heres your honk if you had an affair with taylor yard sign. Looks good. [ male announcer ] fedex office. Now save 50 on banners. Fairly flat session yesterday. Right now down half percent for ftse, third lower for cac 40, ibex down around threequarters. U. S. Futures also indicated lower. Dow currently some 64 points below fair value. Currently 13 points below fair value for the nasdaq. And the s p 500 at the moment is sorry, about 100. And s p 500 at the moment currently ive got it right, sorry. Currently 9 1 2 points below fair value. The end of a long week. I should trust myself first time around. Well get the final report on october consumer sentiment. Analysts looking for 83. 1, up nearly five points from september. Comcast, parent of cnbc, merck, goodyear tire, all report before the opening bell. But first well get the preliminary estimate on Third Quarter gdp. Out at 8 30 eastern. Forecasts calling for growth of 8. 1 . And fiscal cliff is still two months away, but the combination of tax hikes and spending cuts may already be impacting the u. S. Washington post citing a report by the National Association of manufacturers which says companies are bracing for the fallout by cutting jobs and delaying big purchases. It suggested if Congress Fails to address the qulif, 6 million jobs could be lost over the next year. And jamie dimon, the jpmorgan ceo has been speaking exclusively about this. This is what he had to say about the impact on the economy. Two parts. One is what actually happens end of december and then obviously you can feel the effects of that before the end of december. And second one is the real fiscal cliff. Does the United States of america show that it has the bill and the capability to fix it fiscal problems. Which i think can easily be done as you saw from things like the simpsonbowles report. So im not worried as much for jpmorgan as i am for American Business and more than that is correct the american jobs and the average american. The fiscal cliff and another recession would be terrible for america. Probably no arguing with that. Jack, good morning to you. Lets just look ahead first of all to this gdp number. How is that going to play in . Well, everybodys looking for a number. 1. 8, 1. 9. It will be what i call a glimpse of the obvious. We are looking at an economy that is slow. We dont see much going on. Worse yet, and you were going through what washington was reporting about the fiscal cliff and what the fallout can be. The other part of it is not only job losses, but the hiring that would normally take place is being suspended, also. So those that would normally be hiring in this condition are holding back. This is not a good situation. I think that the entire thing is turning into a perfect storm as it were and i think we need to get beyond it. Although i suppose most investors believe there will be some kind of deal cobbled together. I think they will kick it down the road. You can feel it already. I think what everybody is doing is waiting for the election. Regardless of how gdp comes out today, most of the selling incidentally that weve seen for example over the course of the last couple of days has been portfolio protection type of selling. And what i mean by that is selling thats coming incorrectly from option market makers. So all of that is really more protective measures being taken place, with all the indecision going in to the next couple weeks here. And in terms of the levels at the moment, what are you looking at . Whats the key targets for you . Well, i think theyre coming back down to 1390 or so in the s p. Probably a healthy move. I wouldnt want to see a sustained trade under that, but remember all youre really seeing is the market pulling back from what has been a very illiquid bull run. So to see the market pull back and get being ready and maybe evening out before the election is more digestible i think than anything else. I think its really a question of what happens after november 6. If weve got romney in as president here, you could see an expansion in multiples that could take us up with a real hard run the last couple of months. And if we get a reelection of president obama, we could see a mau market just muddling along the way it has been. Romney victory, jack, i know youre a supporter, but whats the theory . Ill explain that. Its not the question of earnings. The earnings are earnings. We see the numbers be contracted, two of the biggest consumer stocks reporting worse than expect earning. What you are going to see, an expansion of the multiple. Right now we have a suppressed multiple. 13, 14 on the market. That is an indictment on policy or lack of policy thats coming out of washington. Thats the difference between say a Reagan Administration or even a clinton administration. Doesnt have to be a republican where youve got multiples up around 20 or 25 to earnings. If we had a 20 multiple on the market with 100, 105 dollar earnings, wed be at 2,000. Thats really how we have to think. Its an expansion of the multiple, the psychology of the marketplace. Jack, have a great weekend whenever it starts for you. Remember of course that gdp number coming out at 8 30 eastern. Finally before we go for you rock and roll fans, Rolling Stones played a surprise gig in paris last night ahead of their 50th anniversary tour. Theyre only doing one stop in north america, so if you want to get involved, newark, new jersey, stub hub has tickets on sale that range from 310 all the way up to 6,000. And thats this week. Kelly will be back next week. Clocks change here in europe, so only one hour of Worldwide Exchange next week. It will start from 5 00 eastern. Squawk box is under way next. Apple posts a rare earnings miss while amazon report as quarterly loss for the first time in nearly a decade. Beijing blasts a New York Times story about the family of chinas Prime Minister wen getting rich while hes been in power. And Hurricane Sandy remains on track to slam the east coast. Its friday, october 26th, 2012. And squawk box begins right now. Good morning. Welcome to squawk box. Im becky quick along with joe kernen and andrew ross sorkin. And it is another big day. The nation will be getting the first read on Third Quarter gdp at 8 30 a. M. Eastern. Were also going to be talking growth, fiscal cliff, the fed and more with larry summers. Thats at 6 30 a. M. Well talk about rising above the fiscal cliff with