as well and europe moderately in the red as asia does retreat from the big gains yesterday. we have hit dow 16,000 and s&p 1,800. but then those comments from carl icahn yesterday spoiled the party a bit. >> there could be an announcement this morning involving that $13 billion settlement between the department of justice and jpmorgan chase. if and when, we'll fill you in. >> more problems for tesla as the automaker is the subject of a formal government probe involving fires in the model s. >> the dow hit 16,000, the s&p 1,800 yesterday. both closed below those levels after carl icahn expressed concerns about current valuations, saying that stocks, in his words, could face a big drop. jim, the story for retail in the fourth quarter is going to be price competition and margin pressure? >> i think companies mentioning price competition, best buy, contrast urban outfitters last night, contrast that with home depot and dick's where they're not talking about that. i was talking with john donahoe yesterday from ebay. it's interesting to hear this idea of is it going to be a good holiday season or bad holiday season? it's overrated to say it's going to be cut throat. it's always cut throat. so i want to take a little bit of a grain of salt to what best buy is saying. this is nothing new. it's been a price war for hard goods for -- ever since circuit city used to go against best buy. i'm taking that with a grain of salt. but i am saying that home depot is showing you housing valuations are back and people are spending on their houses like they haven't for many, many years. >> the comps for depot, 8.2. that was the comp they hadn't seen since the 90s when they had much fewer stores. >> i mean, home depot does not add a lot of stores anymore, they added a store in the bakken because the oil. i don't know where all the shares are coming from or are people saying one of the things that was so great on the previous frank lake comments in the previous call, someone's whose house is no longer underwater spends three times what someone does whose house is underwater on a mortgage basis. i think this shows you there were many homes that were underwater a few quarters ago that aren't anymore. >> it's not just new homes or sales, it's simply related to the rise in the value of homes, which makes sense. you put money back into the house if there's money to have in the house. >> you don't throw good money after bad. we see these jpmorgan, they've got $4 billion for people whose houses are underwater. you do enough settlements is that just like class action money? does it ever find its way into people's whose homes are underwater? >> apparently they spent a long time trying to work on this particular part of the settlement. one will hope it will figure out to whoever it is dedicated -- >> they're talking about the end of '16 with an independent monitor. >> housing continues to be existing housing, a very positive story that's a federal reserve story. they talk a lot about taper/no taper. what i like about home depot is it says people are feeling more confident about their home, 63% of americans own a home. it's a very positive story. >> you could argue best buy is a housing play, too. you want to add a new den, a new television. why are the shares down 8%? >> this has been such a hot stock. we've been making fun of how hot it is. i was looking at a piece of research from last year. the same week -- november 20th where they were saying, look, things are going to be very competitive -- >> very tough. we were talking about a stock that was $13. >> there were pieces about how there are liquidity problems. you know what? they were creating by being negative they created a lot of -- i think they're doing the same thing now but there's a big advantage. this one is filled with, okay, amazon, we're wise to you. that's why i don't think that it's -- being wise to amazon doesn't necessarily mean your stock should be down. we've come in here day after day and people have rerecommended and recommended and recommended. i this i they'll all be back with a vengeance tomorrow recommending the stock. >> so it's down briefly? >> it's a winner for the year. >> up 260% in the last year. it's rather stunning. the ceo who initially did not get incredibly positive reviews after his first meeting clearly has done a number of important things, whether it's cost savings, whether it's competition in terms of price with amazon, whether it's training the sales force in a real way to respond to customer desires, something's gone on there. but it isn't like amazon's gone away. we may not hear showrooming as much as a concern. >> it's not the word of the year. selfie is. >> i saw you tweet that, twerking -- >> that was a runner up. selfie beat it. >> just hearing you say twerking is worth. >> but i was out in california. >> they twerk out there? >> i'm flying back. a woman says we're trying an experimental program, you don't need to take your shoes off or your wallet out. >> nobody wants to see that wallet. that is a weapon that could save -- >> like a bullet it could stop. >> on best buy, even though you think maybe people come around tomorrow, when the fourth quarter is i think two-thirds of your annual earnings per share, it's not the quarter you want margin pressure in, right? >> you look at urban out -- if you're a retailer, i don't think you want to come out and say i'm entirely confidence it's not competitive. we're not in that world anymore. when you look at the guidance for most companies, with the exception of boeing, almost everybody says the same thing that it's very tough out there. boving is actually easy out there. isn't that something? >> and getting easier. >> and as you say, conceivably will continue to be easy. >> here's one company it hasn't been easy for, jpmorgan. today may actually be the day that it becomes reality that, $13 billion settlement between the justice department and jpmorgan, expected to be announced today. stemming from financial crisis here, mortgage investments, the mortgage-backed securities. kate kelly says attorney general holder is expected to make an announcement about an hour from now on the deal itself, which we have been discussing for months, but which has been tough to get over the finish line involving conversations between jamie dimon and eric holder in which jamie dimon says we give up, just tell us what we have to do. >> there's no immunity from prosecution, though there was a line in the article which just said they're low-level people. >> and that's the criminal prosecution offer the mortgage backed securities that does continue, though it's unclear where, if anywhere, that will go. this is the biggest penalty to step back for a moment. even though we've talked about it, it's the largest penalty ever paid. >> how is the stock doing? >> okay. >> if you're focused on doing business rather than sitting down with paul weis, earnings per share go up. do less business and being in depositions is a sure fire way to hurt your business. >> you said before there's a path to getting to that premium that it once had, right? >> sewer. >> you know what, we've all wanted normalized earnings. there's been no normalized earnin earnings. you'll begin to see jpmorgan has x in earnings power. >> it's been years having those conversations about earnings power and it not coming to the fore. you have regulators all over the place. up doesn't have a volcker rule, the fdic going over this way. i mean, i don't know how you operate in this environment and ever expect it to be normal. >> and the climate's bad. elizabeth wharton hasn't even spoken. how about that? was she on that twitter -- >> she was one of. people asking questions. >> when you're out in california -- >> you love that thing, don't you? >> people in california say do they know twitter? twitter is open season. it's like colgate. how could they think not to curate that twitter conversation at jpmorgan. i remain convinced you get the justice department out of the picture, you can value certainly. as long as justice is in, it's very hard. by the way, if you mention that maybe all the charges aren't that justified, that puts you immediately in the journalism jail. you're supposed to say every charge is justified. i think jpmorgan did many wrong things -- >> well, washington mutual and bear stearns. >> but carey killinger, ever hear of his name? >> no. >> i was saying i think washington mutual is going to go bankrupt. >> they would give a mortgage to a plant. >> a ficas. >> ficases had good ficos. >> i like that. >> i just came up with it. >> the national highway traffic administration saying it's launching a formal investigation into those model ss after they were involved in three car fires in six weeks. last week ceo elon musk said there would be no recall. te take a listen. >> there's definitely not going to be a recall. there's no reason for a recall. the perception is if you read the headlines, it sounds like tesla has a greater propensity to catch fire than other cars. in reality, nothing could be further from the truth. >> it's the biggest correction it's had off off the high since its ipo. >> but that's not car fires, right? it's just sort of that stock ran out of electric juice. >> but everything has to be perfect. you can't have car fires. are they going to have to harden the battery. is the battery too low to the ground? >> it's a broken stock now or not? listen, it's still trading at an incredible multiple. >> is it a broken stock? i don't know. they get through this fine but i'm say whug have a stock like that -- that's like netflix doing that ridiculous split-up the of company. >> a lot of people have made comparisons to what netflix was doing then and tesla is doing now. >> terms of pricing the stock. >> yeah. >> you got to do everything right. >> because that was self-inflicted. to be fair and to listen to mr. musk and he's put a statement out as of yesterday as well, for car fires it's 1 in 6,300 versus 1 in 1,300. >> he came out and said their mu multiple was richer than -- >> that might be more significant on why the stock is going down. >> would i rather have an electric battery than a gasoline engine. i've often found that gasoline does ignite. >> tends to be flammable. >> upon impact. i've never really felt that the idea that a battery could really -- debris on the road, that video is like -- >> where's the pinto, right? >> but we've seen this before certainly, heavily shorted stock, which just continues to go up and then finally for some reason that we can never quite really figure out, whether it was him saying maybe it's a little overvalued or maybe it is the concern about fires, even if it's unjustified, it's over. maybe all shorts are done, maybe everybody covers, i don't know. then the thing goes down. >> how about if you hear cancellations of orders. if you don't hear cancellations of orders, the stock goes back. if there is just a as soon as, let -- a sense, let's see if the -- >> you can make an argument for a valuation here, 50 points higher, 50 points lower. >> the cult dissipates because the cult is i want one. >> but that cult is a cult of buying the car, not the stock. >> i'm saying they're the same. i like netflix, i want to own the stock of netflix. and this kind of cools it for tesla. >> when we come back, mark benoff said he made an offer to the white house regarding obama care. and how many foot longs could you buy with bitcoin? 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take a listen. >> we ofd to do it for free, we offered to run it for free for the next five years, rebuild it for free. >> is it too expensive for the president? >> i think it's hard to process what that means? >> it's a customer relations problem. >> san francisco is a long way from d.c. >> what was your take on that? >> there's a big disconnect from the valley and washington. everybody wanted a piece of that contract. you have to make sure everyone is comfortable with the product. all insurance is sold in this country. when i listen to marc benioff, i think the president knows marc benioff, the people from health and human services. they know him. they chose to go a different route. it was a business-to-business company. salesforce is a business to consumer business. benioff was saying this is totally solvable if you view the american seek eer of health insurance as a customer but the government didn't do that that's where the ideological gap occurred. >> and we have a lot of great companies in this country. a canadian company -- >> that is just bizarre. you're citing the regulatory code about awarding contracts and they ended up somehow with some canadian company? i don't know. >> the government goofed here really badly. you should have had facebook in on, this you should have had twitter, you should have had salesforce, a platform, maybe a viva. >> or maybe just one. somebody to actually get done. >> one of those. what's incredible is i don't know if they even thought about -- maybe they thought about these companies but think about benioff's offer. why would you reject his principal customer relations management company and offer to do it for free? why would you reject that? the president should sit down with marc benioff and say it's not too late, tell me what to do. as he said, he was being a little bit cryptic that san francisco is not d.c. meaning we're not political, we're just getting a job done but they're not who they want. but they can change their minds. does anyone think the republicans are not going to spend the rest of their lives talking about this botched web site? you got to get in front of it. >> we're going to talk about crm's quarter and their new partnership with hp after the opening bell. before that making money in history with your are portfolio. cramer will help you do just that, his "mad dash" is next. don't go away. 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[ indistinct talking ] [ male announcer ] right there in their trading platform. ♪ [ indistinct talking continues ] [ male announcer ] so the magic shell went back to being a...shell. get live squawks right in your trading platform with think or swim from td ameritrade. you're watching cnbc "squawk on the street," live from the financial capital of the world. the opening bell in about 30 seconds here on a busy tuesday. a lot of big names in the news, jpmorgan, tesla, a lot of retailers, home depot appears to have blown the doors off again this quarter, that's going to be one to watch. and interesting united ringing the bell here, jim. >> the airlines remain one of my absolute favorites. it's so funny because i hated them for years. but united airlines and continental with a lot of positive comment, theusairways people so excited with that merger. >> there's the s&p and a look at the market as it opens, down here at the big board united continental, the airline holding its analyst day today. smyczek is going to be exclusively at 3:00 p.m. eastern time. over on the nasdaq, harris interactive doing the honors. ge is out with some of its numbers from the dubai air show. 40 billion in commitments for engines and services. emirates alone, 300 ge engines, the largest commitment ever awarded ge aviation from an airline. >> ge's been moving up. it's not done. there are many cylinders works here. i was talking to marc benioff and he says jeff walks around with salesforce.com on his cell phone and he runs the company from that. i will tell you whatever he's doing, it's working right now and i think a lot of it is that ge is becoming manufacturer again with a tale of finance that may help manufacturing as opposed to a dog of finance where whatever airline order they had meant nothing. >> where capital is becoming a smaller and smaller portion of the overall revenues and profitability with the company, particularly with the announcement last week of what's going to be a fairly large offering of the consumer finance business in north america. >> people want that. >> so that will slim down capital even more. >> people want that. people -- i was talking to donahoe, pay pal. people love visa, they love to own mastercard, paypal. i think paypal is worth a great deal of money. i don't think that $64 billion captures the market of ebay. you have the market, you have the web service business, enterprise. you've got paypal, stub hub, you've got bill me later. meanwhile this company is one third the value of master card? i don't know. >> in terms of uncertainty going into retail season, best buy the biggest loser on the s&p, home depot the biggest gainer and we got lowe's tomorrow, jim. >> my charitable trust owns lowes. don't take this personally. the restructuring at lowe's is really working. if you want to enjoy, frank blake breaking down aisle by aisle what's above and what's below. they do geography what's above and what's below. if i was going to go into that business, i would just look at their call and just be in the above aisles. they are so honest. they don't seem to even care how much competitive information they give. remarkable company. always has been. built so la "built to last" is one of the great biography if is. >> tesla appears to be not a huge mover, jim. people are beginning to ask how is this any different than when the dareamliner had its problem. >> that's a very interesting analysis. you're right, carl. basically everyone panicked except for the company. musk does seem very confident. maybe they have to raise the battery a little. >> those are the numbers. if he is correct, why is there even any concern? >> because the national highway -- >> what are they doing? >> they're investigating. >> why? if the average number of fires is far less than -- >> i'm surprised. musk did sell andrew sorkin this would not happen. >> hey, look, i want one. i wouldn't be dissuaded by this. this debris i think is an interesting issue, that debris can cause a fire. but you run over debris, things happen to your car. is it too low? is the car too low to the ground? >> i have no idea. >> we enter this arm chair engineer environment. >> would you like me to give you my blueprints? >> i always want to know how you feel about the height of a car. >> it's something you and i discuss offline all the time. >> do you even have a car? i do. i own an automobile. i actually own it, too. >> he doesn't know how to drive it. >> i'm a very good driver. >> can you drive a stick? >> not that well. not that well. >> me either. >> can i drive it but i keep hearing these gears strip, which i man is bad. >> whirlpool is negative. there's been some talk, dow jones has a nice analysis of the average purchase, the average ticket size has come down from 5.6, to 5, to 4.32. >> i would like to buy whirlpool. they've made some major environmental moves. they have the small form factor, which is really important, whirlpool-maytag, finally integrating that. they did nothing for a decade. i think they tell a good story now. >> we haven't talked a lot about what icahn said yesterday. what do you think about that? >> if you think the market is high, you sell herbalife, you sell it. >> but herbalife and apple -- >> you sell your holdings. you buy puts, short futures and sell. >> yesterday people were selling facebook perhaps more than other names. >> some publication didn't like it. on the west coast you hear facebook being a primary way of being in touch with your customers and people throwing money at facebook because they feel it's the way to be able to reach the next generation. they didn't feel that way about twitter. twitter there were people on the fence. they love looking at what people are saying on twitter about their product but nobody's talking about giving twitter money yet. i know people are because they have revenues pu bu in terms of being in touch with your customer and building your brand, people favor facebook over twitter. >> the dow is up about 20. let's get to pisani on the floor. >> good morning, guys. we're up there once again right at 16,000. people are talking about overbought conditions and signs of overbought conditions and exuberance, what i've seen here is a lack of selling, below normal volume almost every day. a lot of people may have talk about things, but when it comes to actually doing anything, selling their positions, that's not happening right now. retailers. hope depot is a great number, comps up 7.4%, big ticket items improving. renovations up strong. one of the stores the other day, philadelphia, i saw all sorts of products for home maintenance, new light bulbs, fire alarms. home depot is up 30% this year. lowe's is probably up close to 40%. tjx, another great year for them. they preannounce remember. this is probably the most nimble company that's out there. every time i go into one of their stores, i'm amazed at how they change things. they have something like 10,000 different vendors and within 30 days they can completely change the inventory. one time of shoe is particularly hot, 30 days later they'll have a lot more of those shoes. that's very hard to do for other stores. this is one of their secrets. they're up about 40% this year and also raised their full-year guidance. on best buy, it hard to describe what the problem is. when you have all this information available to consumers and all theline retailers can price in realtime, if you're on amazon, you can change your price minute by minute. can you do that at best buy. it's harder for them to figure out what's going on and harder to plan. you can't do specials six months down the road anymore. they're still up great. that's an almost 40% move up for the year. even though they've got problems, can you see how strong the stock has been for the year. >> finally, intercontinental exchange just bought nyse euronex, that's the cash w equities, exchanges they bought as part of the ipo deal. tentatively summer 2014 they're going to spin off euronext. they're selling their technology business, parts of their technology business. the new ice is 17 exchanges, six clearinghouses across eight different countries. quite a really global company right now. today was that first analyst meeting. guys, back to you. >> thanks very much, bob pisani. we want to come back to situation we followed earlier this year, a heated battle between committee reit and corvex. an important ruling yesterday in this battle. corvex wanted to replace the entire board of directors, an outside company r & r owned and operated by the portnoy family was not a good way of going about doing business and they wanted that replace and they wanted the portfolio of buildings owned by this reit sold. that consent was overruled but yesterday in the ruling, it was a big win for corvex. that's why the stock is up. you have event driven shareholders here, not as many real estate shareholders at this point. the stock is up on the ruling, which basically will allow corvex to reengage on a consent solicitation in all the near terms. i won't go through all the particulars of the deadlines and dates that they need to but assume at this point that they will reengage on a consent, begin it again, let's call it in the not too distant future and by the second quarter of next year will you have conceivably a new board of directors at commonwealth, which will immediately move to replace rmr as the manager and replace it with a management team that's part of the reit. will that help beyond where we already are on the stock at 24.75? that remains very much unclear. it's been the belief of corvex and related that the properties are undermanaged. a lot of people will tell you the props are in bad geography, of lower quality so you can't expect someone to come in and buy all of these things. as one real estate investor told me is the right to a bag of blank handed to them. >> oh. >> we'll see what happens here. importantly a big vick tril for the activist in terms of being able to get a consent to remove the board. we will follow this process as it unholds. their analyst fair live influential here. they say eventually when the curtain is raised on all this, you'll end up with a shareholder who is a reit dedicated shareholder. commonwealth -- they continue to control them by structure. 22 to 24 if they are and you get high quality management in there saying right here it's more or less fairly valued. we'll see. get the cap rate down, the price goes up. it's like a yield on a bond portfolio. >> fascinating. we tend not to look through reits. we all just figure properties are ports. >> right. >> that's not the case. >> commonwealth and related, they did a highly diluted stock offering, the consent was not allowed but now they are allowed. we'll see what kind of fight rmr puts up along the way. >> people thought this was very scandalous when they did that offering. stay focused on it. kind of out in the ether. people shouldn't do that. >> let's check in with rick santelli at the cme group. >> i think it's fascinating we see flattening of the euro curve versus steepening. in the long majority yields are rising. look at a two-day chart of 5s. that's the intermediate fulcrum of the curve. now, if we look at the difference between the two and i've shown this chart a lot, let's open it up to three years because it's at two-plus year wide in terms of where it's trading at around 135. but what remains significant with this trade is if you look at the major technical areas for the 5s, it's around a yield of 138. go to the san tell santelli ex covered it. we're below it, even though we're below the 10-year. it takes some of the horse power away by the steepening trade, which is evidenced by the way it is trading. let look at r-10 since the bund. and since the last fed meeting, it's gone from a difference of 75 basis points to 100. why? our federal didn't give us information about ending taper. shouldn't there be a basis our rates are lower narrowing the spread? no. the case was building even at that point in october for an ease that eventual li played out with regard to the ewb. keep an eye on this spread. let look at the dollar yen on the month -- what country is doing more stimulus and more qe-type stimulus than the u.s.? japan, which is why the dollar is going the opposite way, which is what it normally does when taper becomes an issue, as far as nontaper. carl, back to you. >> thank you so much rick santelli in chicago. >> when we come back, the audi maker revealing its enough electric vehicle from the auto show. >> if the does does eke out a gain today, first five-day streak since march, believe it or not. squad will be right back. it's as simple as this. at bny mellon, our business is investments. managing them, moving them, making them work. we oversee 20% of the world's financial assets. and that gives us scale and insight no one else has. investment management combined with investment servicing. bringing the power of investments to people's lives. invested in the world. bny mellon. 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(vo) we're adding a brand new plane, with all this, every week. it's just one way we're building the new american. ♪ well commonwealth back to "squawk on the street." i'm jackie deangelis, reporting on the nymex. part of the pressure coming from the oecd, reducing global forecast but also promising volatility around pending talks with iran and its nuclear program. tomorrow we are expected to get our weekly inventory report. traders are looking for 2 million barrel builds. finally, natural gas was the bright spot in the pits this morning, though it's coming back a little bit. traders are expecting the forecast for temperatures to be a little colder than expected to boost futures. back to you. >> thank you very much. microsoft is set to begin its annual shareholder meeting in a little more than an hour or now, as steve ballmer gets ready to exit the tech giant. talked a lot about ballmer yesterday in that interview with the "journal." >> that was the topic of much conversation out west. drew halston from drop box talking openly about the idea that steve stood in the way of progress, marc benioff saying how he recognized the impediment to microsoft is himself. a lot of soul searcher out there. >> some other soul searching going on among ceos of fortune 50 companies, they looked at what happened with mr. ballmer where he expressed a bit of ambivalence about staying in this job to his lead director and they were like great, thanks. >> wow. >> and i've been hearing that those kind of ceos or any ceos, whether it's activists or just in general sort of wondering whether their board is going to turn on them are definitely seeking advice on how to prevent that from happening. >> this is a revolution. boards are supposed to be rubber stampers. >> not anymore. not as much. you still see some but there has been a change. >> abercrombie's board? >> you think he should go? he made wall of same last week, didn't he? >> yes, he did. cisco's board is interesting. they seem to be able to make their peace with mr. chambers endlessly. >> we'll see in any fireworks come out of the microsoft meeting later today. in the meantime, here's what's coming up next on stre"squawk oe street." >> coming up, are you having trouble with those dogs of the dow? well, there are certainly some tricks to the madness and jim cramer is the ultimate trainer. he'll have his six stocks in 60 seconds when "squawk on the street" returns. tdd#: 1-800-345-2550 where others see fads... tdd#: 1-800-345-2550 ...you see opportunities. tdd#: 1-800-345-2550 at schwab, we're here to help tdd#: 1-800-345-2550 turn inspiration into action. tdd#: 1-800-345-2550 we have intuitive platforms tdd#: 1-800-345-2550 to help you discover what's trending. tdd#: 1-800-345-2550 and seasoned market experts to help sharpen your instincts. tdd#: 1-800-345-2550 so you can take charge tdd#: 1-800-345-2550 of your trading. you can fill that box and pay one flat rate. i didn't know the coal thing was real. it's very real... david rivera. rivera, david. [ male announcer ] fedex one rate. simple, flat rate shipping with the reliability of fedex. ♪ ♪ let's get "six in 60" with jim. >> what happens when apple unveil as killer product against you? wow! here we go with this time piper bumps target. >> goldman cuts alterra. >> it's about time. >> merrill buying jack in the box? >> they've been closing codovas. >> i keep waiting for people to say the china no more than one child, that's great formula. >> estee lauder does a lot of customer relations management web site work. >> and morgan stanley raises target on -- >> chipotle is a major roll. they have the acceleration of comp stores. that's what people want. >> you have a busy 48 hours. what's tonight? >> we met with a lot of different people out there and we have more surprises here. workday is probably one of the most exciting companies i've ever talked to. look at this, jeremy stopleman. do you yelp? are you a yelper? and then jarden, what can i do. it's mr. franklin. new york it's mr. lillie. >> he's in our hearts. we'll see you on "mad money." >> carl, we're going to get the detail on the biggest set of fines and damages ever levied against a by if this country. >> a tale of two retailers, best buy and home depot and audi will unveil its first electric vehicle. yes, tesla shareholders, the germans are coming. ♪ hmm. ♪ mm-hmm. 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[ male announcer ] lease the 2014 ml350 for $599 a month at your local mercedes-benz dealer. for $599 a month ♪ ♪ no two people have the same financial goals. pnc works with you to understand yours and help plan for your retirement. visit a branch or call now for your personal retirement review. . welcome back to "squawk on the street" on a tuesday morning, a busy day full of retail earnings. we're going to get bernanke tonight. the dow is up about 16 points. some release from the department of justice or jpmorgan on this settlement. again, that $13 billion reported settlement with justice over allegations that the bank knowingly sold securities of low quality mortgages. a lot of numbers floating around, a lot of terms that have been reported by various outlets. we'll see what the official news is whether we actually get those terms. >> unable to break above 1,800 on the s&p. we failed the way we did yesterday. art cashin was explaining that to be key resistance as we come back down. we're expecting a settlement between jpmorgan and the justice department. >> what we're likely to get is very well telegraphed to the press. it been a long negotiation. from what you've seen in the press, and i'm thinking particularly of the inclusion of consumer aid around $4 billion, what do you make of what we're likely to hear in the next few minutes? >> well, i think you're going to see that -- look, i think the most important thing here is jpmorgan is working through its problems and this is one of its larger problems. it still has a lot of other ones it has to work itself through. it's taking an important step here. it's a record fine but a lot of the money will go to help homeowners. i think you'll see renegotiation of mortgages out there so homeowners will get relief. i know you'll be running a program about some of america's blighted cities. i think you'll see relief to cities like detroit and others that are really hurting financially, the homeowners are hurting, consumers are hurting. when you see the money flow straight through to them, that will be a great benefit to them and to the cities. >> and as a lawyer, a legal principal, are you satisfied that should be included in a settlement like this when ostensibly those harmed bit activities of jpmorgan were those who bought the bundles of mortgages that ultimately were not worth what they thought they were. in other words, the victims here arguably on this count legally you could argue are institutional investors, not actually people that are underwater with their mortgages. >> the institutional investors are getting relief. some will get relief through this package, i believe, when it's announced and a lot of them are bringing their own lawsuits. you might have seen the last few days there was another settlement announced with bank of america. it's everyone, okay. the problems flowed all wait through. the institutions were hurt, too. homeowner were hurt also. i like a package like this from a lawyer's perspective that gives financial relief to everyone in the chain that's been damaged. >> but what about pursuing the fdic for relief? >> i don't think that was a very strong case. i know they made that threat and often companies do make those types of threats as part of a negotiation. it's good it's going to be dropped. my personal opinion is it would be frivolous to bring that kind of case but they're allowed to bring it. the fdic doesn't have to spend its time wasting its time on case like that and spending a lot of resources on something like that now. >> as you know better than i, sir, the first of many, i think mine banks are currently under similar investigation and negotiation over the way they handled mortgages, b of a, wells fargo and citi amongst them. will their lawyers be able to work out what their own liability will be or at least what holder will ask them for? >> simon, i think it does. it's a very good point. it sets out a framework. eig it's a lot of work to put together an agreement like this and put a settlement like this together. it doesn't force the other banks to follow. these guys often move in herds, okay. there's sort of this crowd mentality among the big banks. you'll see others following suit the same way jpmorgan did. >> don't go too far. we want to bring in our own kate kelly. you've been reporting on this for weeks and we await the official release. how do you see it this morning and how should investors being thinking about things like the reserves and what will be left after this deal is codified? >> reporter: well, those are great questions, carl. i think jpmorgan we're going to hear from directly at some point today. we're all kind of waiting on a statement or a press release of some sort from the government, hopefully some time pretty soon with the details of the $13 billion settlement. it's $4 billion to the fhfa, $2 billion to consumer and credit unions. they now measure it at $23 billion. some analysts have raised the concern that their continuing liability from various mortgage litigation issues could exceed that amount. so i think dimon or his other top executives will be fielding some of those questions from investors as soon as the d.o.j. gives the public the details, they'll probably put that into motion and set a timetable. i expect to see some word of that certainly before 4:00. would i think they'd want to get that into the marketplace while we're still trading. >> we'll await further details including from jpmorgan. thank you very much this morning. >> another big story we're keeping an eye on, tesla. it's now turned positive. joining us now, our own phil lebeau with more details on that. >> reporter: good morning, kate. we're here at the l.a. auto so where as they get ready to open the show, a lot of talk is about what's happening with tesla. a few minutes ago, this tweet from elon musk, the ceo of tesla. he says why does a tesla fire with no injury get more media headlines than 100 gas car fires that kill hundreds of people per year? what he's referencing is the fact that the national highway traffic safety administration has opened a formal investigation into the model s battery fires. in doing so the agency said the investigation was prompted by recent incidents in washington state and tennessee that resulted in battery fires due to undercarriage strikes with roadway debris. nobody was injured, nobody was killed in either of the tesla model s fires and tesla this morning said it asked the national highway traffic safety association to launch a formal investigation. it brings up the question, will there be a rrl? this is what elon musk said at the deal book contract just last week when andrew ross sorkin asked him about the potential for a recall. >> there's definitely not going to be a recall. there's no -- >> reporter: so the model s investigation, what happens now? there is no time frame for a decision. in order, it's an open ended investigation. the nhtsa team will be working with tesla. this does not guarantee a recall. there have been investigation business nhtsa in the past that has not led to recalls. often there is a recall. we just don't know. the shares of tesla since october 1st down more than 30%, though we should point out the stock is up about 3% today. the bottom line is this -- this investigation does not guarantee that there is going to be a recall but it is moving the process much more serious forward in terms of looking into what went wrong with these two model ss that caught on fire. guys, back to you. >> an important issue, phil. we should mention the shares are now up better than 4% as investors continue to digest all of that. and later in the hour phil will talk to audi of america's president, who is unveiling its new electric vehicle today and ask him why he's so confident that will one will be a success, when others, including tesla, have run into problems. >> coming up, home depot with gains and best buy is down. we'll tell you how to play those as the holiday season approaches. n my next move, i take scottrade's free, in-branch 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 don't trade like everybody. i trade like me. i'm with scottrade. (announcer) ranked highest in investor satisfaction with self-directed services by j.d. power and associates. bny mellon combines investment management & investment giving us unique insights which help us attract the industry's brightest minds who create powerful strategies for a country's investments which are used to build new schools to build more bright minds. invested in the world. bny mellon. welcome back to "squawk on the street." brocade communication systems, shares are up 6%, profit margins rose in that particular period. brocade is an american tech company focused on data storage, worth about $3.8 billion. brocade certainly a tech stock to watch today. >> dom, thanks so much. home depot up after beating estimates in the third quarter. best buy also beating estimates but trading lower after warning of margin pressure in its first quarter. the managing director of furnishing research at raymond james covers depot, and michael covers best buy and has an underperform. guys, good morning to both of you. bud, home depot, a great quarter, comps were great. there is discuss as to what degree lowe's is on their tail. what do you think? >> they have outcomped lowe's for 17 quarters in a row. we thought the comps at lowe would catch up with ho depot but home depot is setting a blazing trail. >> unbelievable. everybody remembers that 11% comp, now 8.2. how do they get to 7? >> they get there by a couple of ways. they've got a housing help, about 250 basis points, there's their own -- there are several items in merchandising that equate for about 250 basis points and then 250 basis points from the economy itself. so they have -- they've actually laid out their plan pretty carefully on the call just ended of how they get to that 700 basis points of comp for the fourth quarter. >> i read somewhere their gross product margin up 30 basis points, the biggest in 12 quarters. is that expense control? what's going on there? is that pricing? >> they had very good expense control. obviously with the -- obviously their gross margins, also accounted for 2 cents a share for our model this year and quarter. i don't think the fourth quarter is going to be quite as good. carroll went over that or the f cfo went over that in the call. but still an extremely good performance on the gross imaginimagine -- margin line. expenses will be impacted in the fourth quarter because with the sales they've had, they're going to have 100% success sharing and variable comp. >> not the same story at best buy, michael. what is your price target at bby? >> $9. i've got it five times when i think is their next year cash flow number. cash flow is going down. the street is seeing right now it's going down this year, it's going down further next year. i think as cash flow continue it is deteriorate, people are going to realize this isn't worth anywhere near its current price. >> $60 target on netflix, are you more bearish on best buy than on netflix? >> by far. the only thing good there is they're cutting costs. and management is doing the best they can. the bad is they're losing share to amazon and to some extent to walmart and the rest to internet. they're not going to capture that share back. and the ugly is that they intend to cut prices further to try to keep that share from ef rorodin somebody else. i think the share is seeing the lig today. they've guided operating margins will contract by 65 basis points each of the four quarters so they have to comp something like plus 5 to hit analyst estimates. not going to happen. they just did a plus 0.3%. they're not comping plus 5. >> unless, michael, you believe that they're formulating a new business model that doesn't win. amazon doesn't make a lot of money but it does capture the hearts of investors. could you argue if they are competing on prices, which is essentially what they're doing and including apple and samsung zones in the store and better training their staff so they're able to give people advice, that might be a new pressure business model that can take market share from online operators. >> i don't agree. i don't think a samsung store within a store is a draw. i don't think many of us think i have a samsung phone, i better buy a samsung tv. >> no, that's not -- michael, that's not the point. if i want to buy a new smartphone or a new tablet, there may be so many on the market that i need advice and i need to see the range. i can't simply buy it online. >> agreed. that's why they've comped up 6% in mobile. i think that continues. it's just not enough to offset declines in every other category but appliances. and i don't think we're about to have a housing boom that's going to drive appliances higher next year. they have impossible comps next year. i just see traffic migrating slowly to the internet. i don't think the store within a store is going to keep people from shopping online. >> it's good to talk to you again. we'll see you guys next time. >> twitter is making a big push to snag marketers' last-minute ad dollars. gloria boorstin joins us live. >> they're looking to lure that last-day market advertising dollars. looking to convince marketing that it's particularly useful for big spender on those two key shopping days. twitter's enough study finds that 68% of twitter users plan to shop on both black friday and cyber monday, as compared to 54% of the general adult population. the study finds that twitter users spend 19% more than the average black friday shopper and 14%% more than the average cyber monday shopper. among respondents who shopped on both day, twitter users averaged $700 more than non-twitter users. according to the study, more twit are users plan for black friday a week in advance than the average shopper. 56% of twitter users say twitter is one of the first places they go to research products, 78% say if they saw a tweet about a sale at a nearby retailer, they'd advivisit that store on black friday. today's push to demonstrate that twitter really reaches the right shoppers is a start. we'll have to see if today's survey helps boost twitter's fourth quarter results. kelly, over to you. >> julia, thanks very much. coming up, markets are backing up the market highs and round numbers we were talking about yesterday. the question is whether there are now more loss toes come. we'll try to get you more details on that when "squawk on the street" continues. ♪ ♪ stacy's mom has got it goin' on ♪ ♪ stacy's mom has got it goin' on ♪ ♪ stacy's mom has got it goin' on ♪ [ male announcer ] the beautifully practical andractically beautiful cadillac srx. get the best offers of the season now. lease this 2014 srx for around $369 a month with premium care maintenance included. ♪ maestro of project management. baron of the build-out. 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 full-size or above, and still pay the mid-size price. 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(vo) meee-ow, business pro. meee-ow. go national. go like a pro. a lot can happen in a second. with fidelity's guaranteed one-second 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. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. welcome back. indices hovering around record high territory. is this the beginning of a correction or will the great bull market continue? joining us is kate, investment strategy. carl icahn is worried. is he right? could we have a big drop from here? >> the problem is, no one ever knows exactly what's going to happen next. predictions like that always sound great because sometimes they're correct, sometimes they're not. we think the overall trend is higher but that doesn't mean we couldn't have a big drop from here. if you look at history, we see 5% pullbacks three to five times a year and 10% corrections once a year. we haven't had one of those 10% corrections for more than two years. it doesn't mean we're due, it doesn't mean we have to have one but we shouldn't be surprised if we do have one. >> you are obviously a longer term holder or your clients would be even -- by this time next year, where do you think the equity marks will be in terms of percentages above or below where they are now? >> i think they'll be higher, between 5% and 10%. is. >> is that with huge conviction and you love this market? >> yes. >> and why? >> i think we'll see economic growth continue, probably not above the snail's growth we've been seeing but 2.5% to 3% is positive for equities. second, i think we'll see earnings growth continue. not a lot stronger but mid single digits is what we've been seeing. you don't need valuation expansion or multiple expansion for the market to be up 5% to 10% in that environment if earnings are growing about the same amount. we think that's a pretty good return for investors with almost a 2% yield and that people should be reasonably optimistic in the environment. >> as we approach the end of the year, especially as we've seen the market up 20 plus%, what is the impact of people looking to harvest gains or optimize their income for tax reasons. is that going to have an outsize effect on the market this year? >> i don't think so. typically you see people harvest gains to offset losses. there's not a lot of losses. there's not as much of that year-end tax ceiling you might have seen in the past. overall many people have still been cautious and are looking to put money to work. people are saying i'm now feeling a little more confident and can allocate a little more to equities. >> you talk about getting earnings growth as opposed to that multiple expansion. is that going to come as a result of end demand are or we in for another year of div hikes and buybacks or so forth? >> i think it will be more in demand. we're seeing the rest of the world's economic growth begin to pick up. that's good news for overall sales growth. but this is not we're suddenly going to see dramatic sales growth. it's moving from 2% to 3% to 4% or 5%. we think that's part of what drives earnings higher. >> kate, stay with us. i want to bring in brad mcmillan, chief investment officer at commonwealth financial network. good morning, thanks for joining us. >> thank you. good to be here. >> if there is a bubble, he said it's in the fed's balance sheet and it manifests itself through treasuries, corporates and loan and therefore there is a bubble in corporate profits because their interest rates are so low. when that bubble deflates, their costs will rise and corporate profits will come down. is he right? >> yes, i believe he is. if you look at david rosenberg, who has done some research, wyatt bernstein has done some research, the growth in corporate financing decline in corporate debt service payments accounts for a significant percentage of the current earnings. if you back out the effects of that, earnings are nowhere where they are right now and at some point that's going to go away. >> so what is the timing on this? if i'm sitting there at home now as an investor, i've just bought into this market, for how long am i safe from the demon that you describe? >> well, that particular demon is more like the balloon springing a slow leak rather than the balloon popping. a lot of companies have put a lot of money aside at low rates. that's not going to go away soon. the thing that concerns me more is the topping out of revenue growth and the inconsistencies that are baked into market expectations at current prices. >> okay. so in a nut shell, i asked this of kate, in percentage terms, where do you think we will be this time next year, higher or lower by what percent? >> i think probably about 5% lower, although i wouldn't rule out a runup in the interim. >> good to talk to you both, thank you for your time. brad mcmillan joining us and kate warne. >> there are only 35 shopping days left till christmas. but some retails don't look forward to black friday. we'll tell you which day they're actually watching for. plus the former president of kohl's will give us his feeling on retail. ♪ like, really big... then expanded? 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[ male announcer ] fedex one rate. simple, flat rate shipping with the reliability of fedex. ♪ ♪ about an hour into trading, some of the stories we're talking about, 7:31 on the west coast, 10:31 on wall street. shares of campbell soup down 6%, weaker demand causing the company to cut guidance. the parent of t.j. max and marshall posting better than expected numbers and new territory for a pair of health insurers, wellpoint and significacigna hitting record highs. >> we know clearly that black friday is the busiest shopping day of the year overall, but it's not necessarily true for all retailers. mary thompson is back at hq with more on that. >> reporter: good morning. november 29th will be the busiest shopping days, jewelry sales peak later, clothing sales earlier. this includes payments made with cash, checks and credit cards. jewelry is a last-minute item the two strongest days for jewelry sales forecast to be super saturday or december 2 1s and december 23rd. why? men buy most of the jewelry and they procrastinate, though this year there could be less inventory because of an unexpected pickup in sales in october. here's mastercard's sarah quinlan. >> last month we saw jewelry was the second highest sector after restaurant spending. i think it was the first time all year we've seen some discretionary spending. so people are looking at jewelry as an investment now. they can't buy the house perhaps, they can't buy the new car but they will buy a piece of jewelry to access orizeaccessor. >> one reason saturday december 14th is also one of the busiest day for clothing sales during the christmas rush. >> they are first to promote and it's really the fact that they understand that whole cycle of when do i need to actually put things on sale to actually move the merchandise. >> and despite all the promotions we'll be seeing online, in the mail or in the newspaper, electronic sales peak late, too, super saturday, december 21st, though the introduction of some new games could pull sales of those products forward. >> thank you very much. for more and retail, we're joined by jay baker, former president of the kohl's corporation, joining us from the university of pennsylvania campus where the the j. baker retail ser celebrating its tenth anniversary today. congratulations on ten years and good morning. >> we're the number one retailing center and i'm proud of that. >> now so much of buying seems to be driven by online retailers, by the emergence of an amazon.com. a lot of people are asking whether holidays like black friday are still relevant. what's your take on all of that? >> it's going to be a very interesting holiday season. one, we know it's very challenging. there's a lot of new things. amazon and google and ebay are going to do a lot more than they've ever done in the past. so that's challenging. we have one less week before christmas and of course all retailers knew this in the beginning of the year so the ones that are prepared for it i think are going to do a lot better. in addition, it's going to be very promotional. so you got to be ready for that. the customer wants great value and great bargains and i think the ones that execute that are going to do very well and other ones are probably going to have a tough time. >> it's interesting to think about what those bargains mean, though, for the bottom line. because if you look at an amazon, which has yet to be profitable -- it taking incredibility market share by essentially giving up on profit and is getting rewarded in the market. what is the thought process for a traditional retailer. how do they compete or do they simply have to join them if they can't beat them? >> well, number one, all the brick and mortar retailers are in for that business now. it is the fastest growing part of most of their businesses. so i think they're really concentrating on it. also, you know in advance it's how you buy, what kind of value you can giving what kind of expenses you can have. so you know what bottom line you got to reach and you've got to work very hard to get there. and the key is to take market share from your competition. it was the thing i did all my life. you want to win and the idea of the guy as it are going to go out there and win are going to be successful and the other ones are not. it is much tougher. we know there's one less week, we know the economy is a little tougher, we know people are spending on big ticket. you talked about jewelry a minute ago. my wife is out there buying now so that's going to help the economy. but really it's going to be tougher but the good guys are going to win. the ones that are really prepared and the ones that execute are going to do well. >> jay, we won't keep you for too long because you have to get out and pull your wife back in for a certain extent -- >> yareah, i got to get her outf the stores. >> if it's a difficult environment, what do smart minds do on inventory? >> i'm sorry, i couldn't understand the question. >> it's my accent. forgive me. what do the smart minds do about inventory? if it's going to be a difficult holiday season do, they stock less inventory? would that be what would you teach your students? >> i think certainly when you go into a tough season, you want to be very nimble and control your inventory. you want to come out going into january as clean as possible because it's the slowest part of the year, it's the part where you just have to basically give merchandise away. so you want to do it and you want to sell through the christmas season. so, yes, you want to be lean but you want to kind of have what the customer wants. and you hope that your buyers and, you know, have really sat down and figured out what are the key items, what are the key elements that are going to drive the business and you want to have, you know, as much of that as you can in your inventory. it's a tricky thing, you know, but you always hear 20% of inventory does 80% of your business. you hope that 20% is maybe 20, 30% of your inventory. >> jay, i'm not sure how much you're able to address kohl's most recent quarter but inventory up 2, planned sales up 2.4. people began to wonder if jcpenney was stealing some share. what do you think? >> i think jcpenney has had one of the worst years in the history of retailing, losing a billion dollars. yes, they're probably doing a little better now. the old team is back, they are promotional. look, i'm not involved in kohl's, i'm retired 14 years. they have very good management. they know what's happening and it's up to them to execute. as i said, they have a plan. the key is to execute. certainly i think in my opinion they're in a lot better shape than jcpenney so all they have to do is execute. >> jay, finally, in a word, in this hyper competitive environment, more stores are opening on thanksgiving. is that the right move or should the dillards of the world who refuse to open until friday to give workers and diners a break doing the right thing here? >> i think you don't have a choice. we never opened at kohl's on thanksgiving governor but all the competition is doing it. that's the world today. you got to be competitive and be out there and do what other people are doing. so i don't think retailers have much choice today. i do feel myself that it's unfortunate. it's a great day for people to be home and be with their families but the landscape is changing. it is a difficult environment. as you know, there's less shopping days so that's what's happening. >> right. well, take thanksgiving back. that movement may emerge out of all of this. we'll just have to wait and see. jay baker on the tenth anniversary of his economy center at wharton. thank you very much this morning. >> thank you so very much more having me and have a wonderful holiday. >> you, too, jay. thanks a lot. >> when we come back, one of the most luxury auto brands showing off its first bet on an electric vehicle today. the president of audi will tell us why he thinks this model will succeed while others, like tesla, are having problems. back in a minute. mine was earned orbiting the moon in 1971. afghanistan in 2009. on the u.s.s. saratoga in 1982. 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[ male announcer ] open an account and get a $150 amazon.com gift card. call 1-888-280-0149 now. optionsxpress by charles schwab. call 1-888-280-0149 now. bny mellon combines investment management & investment giving us unique insights which help us attract the industry's brightest minds who create powerful strategies for a country's investments which are used to build new schools to build more bright minds. invested in the world. bny mellon. welcome back to "squawk on the street." i'm jackie deangelis. we are watching the energy complex generally under pressure, though west texas intermediate taking a little bit of a turn and flirting with positive territory. a couple of factors that indicate to traders that we could be going lower in terms of oil prices, the first being the concern that the s&p is overvalued, coupled with the lower growth forecasts from the oecd this morning, those would be negative for oil prices. and also concern that crude inventories tomorrow would show another build, it would be the ninth consecutive week, more supply could drive oil prices down. and finally, the ongoing talks between iran and the international community about its weapons program. if iran was able to strike a deal and its oil were to come back on the mark market, that would drive prices down as well. if we break through the $92 mark and go negative, we could be in the high 8 0s. the colder temperatures and forecast turning prices around a little. gold prices higher on the weaker dollar but hovering around the 1275 mark of course. >> jackie deangelis, thanks. >> audi is unveiling its first electric vehicle today at the los angeles auto show. our own phil lebeau is there live, joining us with the president of audi america and with a first look at the car. over to you, phil. >> reporter: thank you very much, kelly. independent joined by scott keogh. but i have to ask you about the federal government opening a formal investigation for the battery system of the tesla model. it raises the question are you concerned about what this might do in terms of enthusiasm for electric vehicles? >> i think nhtsa needs to do what it needs to do to investigate the technology. there's always going to be a teething pain with new technology. longer term i don't see it. >> reporter: does it speak people at all when will they see the investigations, the general public in terms of interest in electric vehicle? >> overall i would say no. i think it's a big tempest in a tea pot. the consumers are buying hybrids and plug-in hybrids and they believe in this technology. long-term sustainable, it's going to be there. >> reporter: let's talk about your first electric plug-in hybrid. i think you'd rather talk about your car than somebody else's. >> i agree. >> dhont come to market until 2015 in the u.s. you believe there's going to be enough demand out there for a hybrid electric vehicle. >> we do. we're going to bring in the first quarter of 2015 and i think we've come up with the right solution. it a plug-in hybrid. it gives you the range of pure electric but doesn't have any of the range anxiety issues. has a small 4 cylinder engine, 600 mile range. we think it's the best solution. the car is packaged like an audi, drives like an audi, no com compromise. >> you haven't come up with a price. people say the price is just too rich for whose out there right now. are you worried the price is going to be a little on the high side and it's going to take time to sweeten the market? >> it comes down to do you have the brand power and the product execution. we do have the product execution. the car drives and basis like an ad audi. and do you have the brand power? when we look at our target customer group, they have disposable income, they're affluent so i'm confident. >> your sales up about 14%, outpacing luxury sales overall. how much of this is due to the fact that you're starting to turn the corner on the question of reliability, which has long been a problem for audi. >> i think it's a host of things. our brand is hot. we've been launching a ton of new products and the brand is getting recognized. to your point, can you not be a property luxury car without quality. if you look at our numbers, whether it's our warranty expenses -- >> reporter: are they coming down, warranty expenses? >> they're collapsing. most important to me, consumer reports, the single best european brand in consumer reports. that makes us very broad. >> are sales coming from previous luxury owners or are you bringing in people who in the past my have been driving a toyota, a nissan, a chevy? >> the big three is coming to audi, lexus, bmw, mercedes-benz. they know the brand is hot, and we have the products. that's what's driving our momentum. >> scott keough, on the day where they introduced the a3 e-tron. >> thank you very much, our phil lebeau in los angeles. stay tuned, we'll talk to the former president of general motors to see what that means for the car industry. >> and coming up, we'll talk to a franchisee who is accepting a currency which has rocketed in the last 24 hours. he joins us later on the show. ♪ money is the root of all the kills ♪ opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. ask me what it's like to get your best night's sleep every night. 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[announcer] tempur-pedic owners are more satisfied than owners of any traditional mattress brand. tempur-pedic. the most highly recommended bed in america. now sleep cooler with extra cooling comfort on our bestselling tempur-breeze beds. visit tempurpedic.com to learn more, and find a retailer near you. ♪ let's get over to the cme and check in with rick santelli and get the "santelli exchange." hi, rick. >> hi, carl. you know, there's a lot of reports out that the census group that's involved in phone surveys, which are part of the household survey, which determines the unemployment rate, well, some of those may have been fake. now, of course, this is the beginning, and i'm sure investigations will ensue, but it really does raise a very large question. and many questions -- some of the data points before the election -- myself, jack welch, and, by the way, jack, happy birthday. it's jack's birthday today. let's play a clip when i was losing most of my temper, but things just didn't feel right, listen to this sound bite. there was no doubt in my mind a month ago it would be under 8%. no doubt in my mind ago before five minutes it would be under 8%. take it any way you want! well, maybe i could have said that in a more calm fashion. i'm calm now. i think the time for shouting is over. but if we only knew now what we knew then really is the theme. think about what turned or determined the outcome of the election. the economy was huge. what part of the economy was everybody paying attention to? jobs, jobs, jobs! so if it turns out that these claims are true, i had a sense it didn't feel right -- jack welch definitely had a sense it didn't feel right. if we knew now what we knew then. it wasn't only about the economy. it was about health care. it wasn't polling well. it was the reassurances about the unknown, if you want to see what's in it, you have to pass it, it was that unknown that had to be addressed. if you want to keep your doctor. if you want your policy. all of the periods. if we knew now what we knew then, would the outcome have changed? i can't tell you that. and it's not only about these issues and the election, it's about the fed. think about it. it's been five years. if we knew now -- if before we embarked on giving banks $125 billion, we'd know there'd be a $16 billion settlement, or when one bank bought sloppy banks, it would come back to haunt them, or we'd still see the amount of people out of work for more than 27 weeks, where it s five years later, would it have made a difference? i think all outcomes would have changed. how many times have warren buffett, whether you wake up, you look at your positions and fall in love with them every day or get rid of them. think about the logic to that. i don't know how high it up -- and we're forgetting the biggest one -- the irs. okay? taking the voice away from the conservatives that may have been born in february of '09, maybe part known as the tea party, all of these changed outcomes. america, you really need to think about where we've been and where we're gogoing. in the media, you could do better. kelly, back to you. >> all right. rick santelli in chicago. coming up, bob lutz weighing in on tesla and what the nhtsa investigation means for the company and the shares on the rebound today. 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(vo) meee-ow, business pro. meee-ow. go national. go like a pro. good tuesday morning. we're live here at post 9 at the new york stock exchange, and we begin with a check on the markets. as the dow has reclaimed its round number level, 16,000, that is. a little bit of a rally this morning. the s&p 500, though, still off that mark of 1,800 that we hit yesterday, although it is in the green. the nasdaq adding a couple of points, but no major moves on the indexes. in terms of companies, shares of campbell's soup are slipping. the first quarter earnings came in below estimates and it cut its full-year guidance. a big move on that one. shares of best buy down. the earnings did beat expe expectati expectations, but the stock taking a hit after warning of a margin hit in the fourth quarter at the high end of prior estimates. this hour, the deal is almost done. jpmorgan and the federal government close to reaching a deal on the $13 billion settlement over bad mortgage-backed securities, and we'll look closer at what this morning for the stock in a moment. plus, the fed is looking into tesla today. the government's top auto safety watchdog opening an investigation into battery fires in tesla's model s electric cars. we'll bring you the latest on the investigation in a few moments. and another scandal brewing in washington. a blockbuster report this morning alleges that the census bureau faked employment data in the months leading up to the election in 2012. we're live on the ground in washington to find out what happens next. and would you like to buy your next cold-cut combo with bitcoins? now you can at one subway store in pennsylvania. we'll talk to the owner of that store later on this hour. first, though, jpmorgan and the justice department nearing a record $13 billion settlement. the deal would end a series of lawsuits and investigations stemming back to mortgage bonds issued before the financial crisis. kate kelly is live for us this morning outside of jpmorgan's headquarters in new york with the latest on the negotiations, and, kate, we're saying negotiations, because there's still no announcement. what's going on? >> reporter: that's right, kelly. we're waiting for further details. i'm told, actually, the two sides are trying to work out the very final language, you know, in principle, everything has been done. but the statement of facts, which jpmorgan is likely to concur to without specifically admitting wrongdoing, and then the issues over indemnification rights. in other words, abilities to go after compensation for wamu, washington mutual loans that went bad, they were holdups in the recent weeks and up to the last minute. there have been language details. we're keeping an eye out for the press release. if it's issued, we're expecting to hear from government officials, not clear who, but we'll be hearing possibly from folks in washington and california. and we may hear from eric schneiderman. jpmorgan hoping to speak to its investors about this if and when the ink is dry. i'm told they're putting together a potential investor call later today led by mary ann lake and also jamie diamond, the ceo. so lots of details to come, but we're waiting for the final exact language, and just to break it down once more, $13 billion with about 4 already pledged to hffa, 4 for consumer relief, 2 billion in the financial ability and the balance going to states attorney generals and credit unions. that's the scope of it now. >> all right, kate, we'll obviously be keeping a close eye on it. we know you are, too. we'll talk to you in a bit. our kate kelly outside jpmorgan in new york city. let's start with jpm, and look at why the announcement came out of sacramento first, and then washington. jane wells has more on that. good morning, jane. >> reporter: hey, carl. we're expecting a news conference later this morning at the federal courthouse behind me when they have it all worked out, as kate said. why here? the u.s. attorney here, and his team, have been doing the heavy lifting in this investigation. and despite whatever may happen today, their work may not be done yet. ben wagner was appointed to the u.s. attorney four years ago by president obama. this includes the l.a. county, and in between the epicenter of the foreclosure crisis. down the road is stockton, which had the worst foreclosure rate in the nation as the housing bubble exploded. one in ten homes reportedly went under. many of the mortgages which went bad were from washington mutual, the bank jpmorgan took over and continues to pay aheavy price for. wagner recently told the "sacramento bee" he loves the challenge of the complex financial cases, quote, big white-collar crime is the most challenging, the most interesting, and the psychology of the defendants is fascinating. it's very rewarding. by the way, growing up, his father retired from jpmorgan. we are told that is merely coincidental. guys, when the press conference happens, we will be there. back to you. >> all right, jane, rewarding in more ways than one as we wait for details on the consumer relief aspect. jane wells for us in california. thanks. we should mention, as well, the banks are higher, jpmorgan adding 1%. bank of america up 2%, financials leading the way despite, or perhaps because of, the news today. end of an era for microsoft. the annual shareholder meeting kicking off moments ago and it's sure to be memorable because it's steve ballmer and also his last meeting at ceo of the tech giant. josh lipton has more for us outside the shareholder meeting in bellview, washington. good morning, josh. >> reporter: hey, good morning, kelly. the question for microsoft shareholders in this building right behind me is who is going to replace steve ballmer, and what will be his or her strategy for the software giant? ballmer's legacy is a mixed one. degrow the company under his watch. revenue jumped from 23 billion to 78 billion. the stock has surged this year, but under his command, it's down about 25%. at today's meeting, we expect mostly routine corporate governance, directors re-elected, compensation approved. but the microsoft board continues to look for a new ceo with the goal of having a person named, they say, in the next 12 months. analysts who do cover microsoft are placing bet. the team at numira believes ford's ceo mulally will be the top pick. they believe he was advised on the reorganization and the two are close. colin gillis of bgc disagree, saying mulally doesn't have the right resume for the job. his pick, former nokia ceo stephen elop. >> if the board wants to make change, all right, they're likely going to go with an outsider candidate. and i like stephen elop, personally. that would be the choice i would make. >> reporter: now, just today, shareholders approved the deal allowing microsoft to buy that smartphone maker. finally, internal candidates mentioned, as well, such as coo kevin turner and satya nudela, and turner could be the right one if you want someone who knows the culture, and nudela knows the cloud. they will face a big challenge, as microsoft redefines its mission and purpose in the post-p.c. world. we'll be here covering the shareholder meeting, so look for more reports. back to you. >> all right, josh, thank you very much. let's bring in patrick caser, with brandywine global, the firm owns more than 4 million shares of microsoft. and tim lesko,'s principal portfolio manager, opens 338,000 shares. our own jon fortt joins us at post 9, or as we're calling him, jon forte. no one is looking for big news at the meeting. but do you see 20% upside. you still talk about the cash and dividend. what do you like here? >> well, one of the things we really like about microsoft is i think ballmer is leaving the company in good shape. i'm in the minority in thinking that. they're the leader in enterprise software. people think of it as being a consumer company. it's not. it's really enterprise, it's cloud. it's collaboration tools, things that you and i might not think of at home, so they have a leading position in the areas. it's below-market multiple in terms of valuation, so we think the stock has room to run. >> patrick, it looks like you had around 7 million shares a couple of years ago versus the 4 million you have now. why have you been trimming that position, aside from the fact it's good timing and the fact that you like the cloud? does that mean you're more open to maybe microsoft picking an internal candidate like nudela for the next ceo? >> we're always looking for the best time to sell the stock. i'm probably in the minority looking at the internal candidates. during the reign, they've grown to 78 billion. this is a company with still leading positions that's growing. an important thing for me is how do you continue to build on the leading position in cloud, leading position in enterprise? and if the board decides that's an internal candidate, we'll probably be comfortable with that. >> tim, do you take a gamble ahead of a ceo announcement, and when do you think that comes? >> yeah, i think the stock has run pretty appreciable since they announced that ballmer was stepping down. it's hard to say there's a good day to step in front of anything, whether it be earnings or an annual report. i agree with patrick. they have lead positions in many businesses, and it would be nice to see the cash he mentioned be returned to shareholders. they recently announced a $40 billion stock buyback, but that's over a five-year period. if you look at the trajectory, they built up from 25 to 75 billion in cash, while the payout to shareholders by, you know, stock buybacks and dividends has gone down by about 5 billion over the same period of time. >> so, patrick, tim, it -- >> he's leaving the company in great shape. we'd like to see a little more back to shareholders. >> it sounds like you're comfortable with the direction the company is headed. what are the potholes? what do you not want to see them do? are you afraid they'll spin off xbox or bing, or do you want to see them do that? >> no, i'd like to see them spin off the consumer products and stop spending so much money on really trying to force people to like devices that currently so far they really haven't liked. and concentrate on the back end of the cloud. if everything's moving to mobile, you still need the enterprise product to deliver the stuff, whether they be android or apple devices. >> patrick, what about you? >> yeah, you know, one of the things we see, right now they're losing a fair amount in bing. that's a challenge out there. i understand the strategic reason, they're still in bing, being integrated with some of the productivity software in the workplace. that's something that we'd like to see them continue to make progress on, lose less money. when if comes to xbox, the xbox strategic? probably not in the grand scheme of things, except microsoft wants to own the living room. i'm willing to give them more time. i want to see them willing to cut beta down the road if some of the initiatives don't take hold in the next couple of years. >> all right. the fight for the living room. thank you, patrick, tim, jon, on microsoft. >> thank you. >> thanks for having us. this probably isn't the headline elon musk wanted to see, the tesla model s under investigation by the federal government following two reports of battery fires after cars hit roadway debris. stay tuned, because coming up, we'll ask a former gm vice chairman bob lutz what it means for tesla in a moment. first, though, rick santelli watching markets and monetary policy today. >> yes, you know, ira harris, i want to know what he thought about the janet yellen hearings last week. did he learn something? he'll share that with us, along with some issues regarding china and potentially the media, and, of course, maybe the most recent news. were the job numbers cooked? do we have emeril in the kitchen? helping to cook the data. all of this and more, all at the bottom of the hour. ♪ to make your stand and take it easy ♪ [man]ask me... 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[man]lumbar button [woman]lumbar [announcer] tempur-pedic.the most highly recommended bed in america. now the fun begins! welcome back. looking across the sectors. consumer discretionary outperforming right now. if i can make it out for you, i'd tell you what it was doing. fortunately, we have dom chu. he'll tell you. >> just about flat, how about that, kelly? we have a couple of winners and losers. first up, home depot, posted better-than-expected profits and sales and boosted guidance. they cited an improving housing market. also up, tjx, behind t.j. maxx, and marshall's, and it's -- clothing retail beat wall street estimates for profits and sales. but expressed concern about profit margins during the holiday shopping season. and speaking of holiday shopping, best buy, down after beating expectations but expressing concern about holiday sales promotions eating into profits. it's the single, carl, worst-performing sector in the s&p 500 consumer discretionary index. back to you. >> worst day of the year, which blows my mind. thanks a lot, dom. dom chu back at hq. >>. >> the u.s. government opening an investigation into the safety of the tesla model s after battery fires after car accidents. phil lebeau joins us with more on that. good morning, phil. >> reporter: good morning, carl. have you seen the tweet from elon musk, about an hour ago he tweeted out the following, in regards to the safety of the model s. he said, why does a tesla fire with no injury get more media headlines than 100,000 gas car fires that kill hundreds of people per year? the reason he sent out that tweet is because the national highway traffic safety administration, due to a couple of battery fires, including this one outside of seattle, in the beginning of october, they're looking at the safety of these battery systems. now, nobody was injured in either of the two tesla model s fires. tesla, by the way, said it asked nhtsa to launch the investigation, which is interesting, because there are reports this morning that says, huh-uh, they did not ask for the investigation. at this point, it's unclear whether this investigation will lead to a recall of the model s, though when we talked with elon musk last week at the dealbook conference, here's what he had to say when that question. >> there's definitely not going to be a recall. there's no -- there's no reason for a recall, i believe. the perception is if you read the headlines, it sounds like teslas have a greater propensity to catch fire than other cars. and in reality, nothing could be further from the truth. >> reporter: perhaps it's the defiant tone of elon musk this morning saying that the model s is safe and there won't be a recall, that might be one reason why shares are up 4% today. but take a look at the stock since october 1st. down more than 30%. let's make something clear here, carl and kelly, the decision about whether or not there is a recall, it starts first off in pretty much coming down to nhtsa investigators believe there is enough of a problem that needs to be fixed and if there is a solution in place. at that point, they would then go to tesla, and they would say, we think there should be a recall. now, tesla could come back and say, we don't think there should be a recall. and then nhtsa could take tesla to court. but ultimately, this is a call made by nhtsa, and usually, 99% of the time, the automakers go along with what they decide. back to you. >> certainly sounds like tesla would do that, but we'll have to see. thank you so much, phil lebeau in l.a., doing a lot of work today. >> you bet. >> we want to get more on what this means on the sales and future of the company. on the cnbc news line, bob lutz, the vice chairman over at general motors. good to see you -- or hear you this morning. >> good to be here, thanks. >> i know you heard phil talk about the defiant tone that musk has taken. his point is, why should any of us be talking about this more than we do the average car fire? does he have a point? >> well, he does and he doesn't. when you look at the total number of model ss built to date, two is a pretty big percentage. it's a much -- it's a much bigger percentage than the 100,000-odd gasoline-powered car fires in the united states every year. and the circumstances on both of them were very similar, which was a sharp metal object going through the bottom of the car and shorting out the batteries. you know, that's -- that's cause for concern. that is something i think that nhtsa wants to look at, if see if there's any exceptional volatility to the battery chemistry that tesla uses. >> at the same time, bob, i think if i recall, one of the drivers of those vehicles, after the incident happened, said he liked his tesla, he was going to stay with t and others have said despite the incidents, perhaps this type of fire is safer than a kind of fire you might get in a combustion engine. >> well, yes and no. the fact is at general motors, when there was all of the publicity about the chevy volt fire, it occurred three weeks after -- [ audio difficulties ] -- government crash test -- both catching fire, it had a serious effect on sales, even though no chevy volt ever caught fire (unintelligible). and this is -- you know, this is two fires out of a couple thousand cars. so percentage-wise, it is cause for concern, and there is the fact that tesla uses different batteries from -- [ audio difficulties ] >> bob, we're beginning to lose your signal. you may be able to hear us, but we're having trouble hearing you. thanks for your insight. bob lutz over general motors, and it will be interesting to see. you know, the collision between hearing musk say there will be no recall, but also saying if nhtsa finds something, we'll offer the retrofit. the question is, to what degree do you bring all of that back, and what does that do to production, why we already know, it's like staying on a treadmill. >> right. especially with the model x coming up and the mass aimed vehicle. the tesla shares are up almost 5%, but a lot of speculation on whether that 180 level back in late september/early october is going to be the high. all right. would you pay for a footlong subin b-- sub in bitcoins? how does it work paying for food in bitcoins? we'll talk to the owner of the store when "squawk on the street" continues. stay with us. ♪ ♪ so you can get out of your element. so you can explore a new frontier and a different discipline. get two times the points on travel and dining at restaurants from chase sapphire preferred. so you can be inspired by great food once again. chase sapphire preferred. so you can. i got this. [thinking] is it that time? the son picks up the check? [thinking] i'm still working. he's retired. i hope he's saving. i hope he saved enough. who matters most to you says the most about you. at massmutual we're owned by our policyowners, and they matter most to us. whether you're just starting your 401(k) or you are ready for retirement, we'll help you get there. >>. >> no cash? no credit? no problem. the subway shop in allentown, pennsylvania now accepting bitcoin, and it's believed to be the very first subway in the u.s. to do so. second in the world. joining us here at post 9 is the owner of that pioneering subway, supan shah, who has had the shop for, how long? two and a half years? >> yeah. >> and you started taking bit counsel two weeks ago? >> yes. >> walk me through the user experience if i go in your shop and pay this way. >> right. so what happens is a customer comes in and orders a sandwich, and everything is exactly the same, as any other, you know, sandwich order. and at the very end, they come up with a dollar amount, and the dollar amount is then inputted into a tablet, or with aen app. and the app converts the amount to a bitcoin value. it generates a code, or an address that the user -- the consumer gets. and then they send us instant payment, and we get confirmation instantly. it's converted back to dollars and put in our account. >> does it take any longer than a dollar transaction? >> no, it doesn't take -- i would say no longer than a credit card transaction or a dollar transaction. it takes no longer. >> how many of these have you processed, would you say, in two weeks? >> quite a few. surprisingly. we've -- the response has been more than i was expecting. >> and you're pursuing this while at the same time pursuing an mba, is that right? >> correct. i'm a student at lehigh university doing my mba there. >> is it students coming through the subway shop generally? or what kind of customers? >> so right now, a lot of enthusiasts are coming in, bitcoin enthusiasts, are coming to show a lot of support for this. so a lot of kids are coming two or three hours' drive. we're getting a lot of students from local areas that are coming that studied bitcoin and understood it and have it. and it's really cool to see all of the support from all of them. >> and just to be clear, from subway's point of view, as a chain, they're not necessarily accepting payment in bitcoin. what you're doing is churning that bitcoin into cash dollars and then ringing that into the register like you would any other -- >> right. subway does not endorse this at all. and this is -- you know, this was just my idea. you know, they've encouraged operators to have innovative ideas and grow with that. and so -- but everything is the same except it's being converted right back to dollars. >> so as someone who has obviously enough faith to accept the currency -- >> right. >> -- what do you make of what the market has done? and would you argue at this point, we're in some sort of mania at this stage? >> right. i believe that might be the case. and my hope, and i guess everyone else's hope, that as it continues to grow and the volume increases, that the volatility will decrease a little bit. and so -- and right now, it hasn't really been a problem with any of our customers, converting the values from dollars to bitcoins. so none of them has really had any issues with the exchanges we've used. >> did you invest in bitcoin? were you an early buyer? >> yes, i was. >> to what extent? >> i'm not allowed to say publicly. >> obviously, you know all of the critiques. it's a dark market transparency is limited, it's subject to manipulation. >> right. >> do you disagree with any of this? >> so for every -- bitcoin is such a versatile cool, that for every one negative thing, there's probably 100 positive aspects about it. so my subway accepting it is just one positive aspect that could show that consumer disuse this -- consumers can use this on a day-to-day basis. there are negative connotations slowly being eliminated and it's definitely growing and improving worldwide. >> and it's drawing people from, it sounds, all over the region. >> yeah. we found people from states driving two, three hours to come and pay at our store. >> i could go for a tuna sub right now, kel. i don't know about you. sun chips on the side. >> exactly. cheddar. harvest cheddar. >> sap an, thank you for coming in. >> thank you. >> sapan's subway shop taking bitcoin. this report out this morning saying the bureau faked the jobs data in the months leading up to the 2012 election. we'll get a closer look at that report and what it means in a few moments. plus, the bell's about to sound across europe. a few minutes left in their trading day. we'll get the close in a couple of minutes. [ male announcer ] what if a small company 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 company's future with the future of trading. company profile. a research tool on thinkorswim. from td ameritrade. >> announcer: the european markets are closing now. welcome back, and simon hobbs joins us with a look at europe. it's a red. >> it is. particularly in the peripheral areas. the ft is reporting that people that rely on ecb funding will be penalized in the future, and still a concern about earnings, that the markets are trading 13, 14 times earnings, and half of companies have disappointed this earnings season. so there's a lot of questions, carl icahn, the comments we got from him yesterday, also not insignificant for what you see there. i just want to show you in the meantime, and even the eocd says the recovery is lagging and uneven. i want to show you two things working in europe, the first in the airline sector, which as airlines move into the middle ground, they're finding that profitable. this is one of the biggest low-cost carriers, easyjet, increasingly attracting flexible tickets, and the stock has doubled. they reported today, and they're up there. and the same way you've seen british airways' parent aig, its stock, too, has doubled over the course of the year. but the big new, the real one i want to bring home to you today, is cash for clunkers. remember cash for clunkers here? they're on their fourth cash for clunkers program in spain, and it's really beginning to show up in the figures. there was a 34% surge in sales of automotives in spain last month, and that's actually boosted now. the whole euro area for two months running has had higher automotive registration, still have a very, very low base. we want to show you some of the brands succeeding. you may not know that spain is the second-largest car producer in europe. as a result, mainly of the siat brand, within the vw group, volkswagen, and gm is doing well, with the chevrolet. there are the five top brands in europe in terms of market share, volume rather than anything else. guys, back to you. >> spain, interesting. >> yes. who knew? >> i had no idea. >> that's why they have clash for clunkers. $1,300 to trade your car in, to try and generate jobs locally. >> yes. but it was a lemon to some extent here in the u.s. i'm not sure that's the best way to spend spain's money. but it's working for the auto industry. >> yeah, it's their money. actually, that's not strictly true. >> exactly. let's get to bob pisani to see what's moving, in another moderate range. >> housing-related stuff, thanks to home depot's great numbers overall doing terrific. looking at the housing-related stocks. home depot at a historic high. volka materials, lowe's reporting tomorrow. home depot had an outstanding report. let me give you the highlights. same-store sales up 7%. way above expectations. recovery in big-ticket spending so customer transactions were up. the average ticket was up 3%, a nice move up. the renovations business is going terrifically overall. same-store sales for lowe's and for home depot have historically tracked home prices. so that's good news, people are investing in their homes and raised their 2013 outlook. here's what you should be worried about with the stock at an historic high? what could go wrong? the housing market slowdown. this is the achilles heel for them. if the home sales decelerate, that would be significant. if the home prices reversed, that would help them. restriction on credit, that will help them. of course, higher unemployment. if that reverses, that's going to be a problem, as well. i would watch the potential for home prices to slow down as a main concern for home depot right now. elsewhere, and take a look at how well we've done with the stocks, home depot up 31% this year, but lumber liquidators, whirlpool, lowe's, sherwin williams, none of them any slouches, as well. the other great movers, tjx and the discounters. people ask me, why does tjx do so well? they have 10,000 vendors. if there's a hot shoe that's selling, or a hot brand, they can have that in 30 days and change the merchandising mix. they're incredibly nimble, and that's why they've been successful. the discounters. ross stores does this really well. to look at the moves up here in tjx, ross stores, and walmart. and we want to note intercontinental exchange, a new high for them. they announced they may be spinning off euro next, the business in europe, the stock business, sometime in the summer of 2014. that ipo. guys, back to you. >> all right, bob, that's one to watch. thank you, sir. we want to shift now to the dollar, to rates, and talk to rick santelli over in chicago. hey, rick. >> thanks, kelly. well, ira, last week we had the janet yellen hearings. what did you garner? what did you learn? what did you like? what didn't you like? >> well, you know, what i sense from her is it fit with the two fed papers that came out the week or two before that everybody got bent out of shape, or said -- i think janet yellen would like to taper, in fact, end qe, because qe 3, by all their word, and she's a model -- openly admitted relative to gold -- she'd like to end it. that would have to come with probably lower the threshold down to 5.5. now, there's reasons for it. because janet yellen was -- >> the unemployment rate. >> the unemployment rate threshold, which would give them a lot more latitude and forward guidance. but 60% of that hearing was about the regulatory process and how even janet yellen admitted that the fed hadn't done a real good job of regulating the banks, which helped the crisis become much more inflated in itself, and that elizabeth warren, sherrod brown, vitter, they all pushed her on the issue of the fed being a greater regulator. but if that happens, of the entire banking system, it will be a headwind the economy will have to -- because we're not going to see money flowing like that. that'll put more pressure -- >> what about specifically on the rate they're paying the fed, being the "they" on excess reserves? what did you hear, and what do you think? >> she said she wouldn't go negative. she might be -- >> on the rate. >> on the rate. because going negative would affect the money market funds, because, of course, the concept of breaking the buck. >> okay. let me stop you there. because that's kind of what i heard, as well. and i think paying no interest or negative interest on excess reserves makes a boatload of sense! so we're not doing that, because money market problems haven't been addressed. so this humongous strategy of historic proportions is ongoing in part, because something else is broke that we haven't fixed. this is just -- it really doesn't make sense. i can't help thinking, you know, what i referenced today when i was talking about cooking the numbers, you know, warren buffett said every morning you wake up, and you do it as a trader, you look at your positions, and if you don't love them, what are you supposed to do? >> i get out. >> you think janet yellen loves the qe position she's in? okay, so she's being a novice trader, because she's still holdin'! >> but it's a big ship she has to turn. >> i understand. it's not my problem. >> on the net interest, the excess reserves, i think the fed will like the ecg be the guinea pig for that, because they've talked about going negative. money market funds are a big source of funding now in europe. so if we go -- if they go negative, they don't really know what the impact is. again, this is all theoretical. so they're going to have an actual lab test. so i think they'll wait for for the fed -- for et ecb. >> the rates keep going down, they're getting a little bit more worried. quick, one-second thought on that. >> draghi has done a masterful job of getting away by verbally moving. he will have to create a qe program, plain and simple. there is no way to stop the inflation without it. >> you heard it from ira. listen, guys and gals, back to you. >> all right, rick, ira, thanks a lot. we'll see you later on. the blockbuster story alleging this morning the census bureau faked the jobs data leading up to the 2012 election. if the story is true, what's next? we'll ask congresswoman diane black in just a moment. 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[ male announcer ] fedex one rate. simple, flat rate shipping with the reliability of fedex. coming up on "halftime report," home depot is leading the dow today after reporting strong earnings. but is it really the best way to play the housing sector? and with markets at all-time highs, can you still find value? jpmorgan's kate moore thinks so, and she's here to show you exactly where. and will we see this rally continue over the year's last 27 trading days, or are stocks in for a pullback? it's ahead on "the half." kelly, we'll see you in about 20 minutes. >> all right. great, scott. thank you very much, sir. we're looking forward to it. in the meantime, following a report this morning that some of the census bureau's investigations were faked when they were looking into the housing data -- employment data, i should say, back in 2012. this had to do with the household survey, one of two parts of the jobs report put together each month. let's get a view on this from capitol hill now. representative diane black joins us from tennessee. congressman black, first of all, thank you very much for joining us, and good morning. >> good morning. it's great to be with you. >> and we want to talk to you about the budget process that you're involved with, about obama care. but first, the reports, again, that are coming out about the bureau of labor statistics, perhaps an employee who was filling in data for households, he didn't actually reach when he was supposed to, in the critical months of 2012. what do you make of all of this? >> i think it's just one more disappointment to the american people that they can't trust this administration. whether it's the president saying that you can keep your insurance, keep your doctors, period, or whether it's something that we don't know about benghazi or the irs scandal. these are all just one compiling on top of the other to show that there's a lack of trust in what the administration tells the people. it's very disappointing. >> it does, though, congresswoman, appear to be the case that this was an isolated incident, that the employee was, frankly, just trying to keep up with his workload, that it didn't affect the outcome one way or another, and we've had plenty of months of jobs data since then that would indicate to us that there was a particular problem, that was moving the needle one way or another during the period in question, is there not? >> well, i think even when you go back and look at the same time period where in the ways and means committee, and we have an oversight committee hearing, where we asked the administration about the numbers that didn't coincide about what came out to begin with, and they would come back and readjust the numbers, so there's a lot of confusion out there about what the real numbers meant, even back in during the time of the hearings. >> the reporter who wrote this story has written stories like this in the past. i mean, essentially questioning the integrity of the jobs data. what makes you think this particular story is true? and if you believe this is true, what makes you think it's systemic to the collection of data overall? >> i think what it does is it sets a question as to what you can and cannot believe. and that's the disturbing point, is that we make decisions and policy decisions here in our jobs, based upon what we get from the administration. and all of the various divisions, and when you get information that's conflicting, and you get one number-one time, and you come back with another number another time, it make it is difficult. it is our job to use the data to make the policy decisions. so this is concerning to me. >> congressman, in the meantime, there are important deadlines looming with regard to the budget talks, that you're a key part of. can you give us a sense of whether there will be either a move towards a kind of grand agreement to reduce the deficit over the next decade, or whether there are just small measures that you and your colleagues on the other side of the aisle are starting to meet and come to terms with, maybe to move the ball forward with some small agreements here? >> well, the budget committee has been meeting, the conference committee. and we've been hearing testim y testimony. last week, we heard testimony from dr. elma door, and it was instructive what he said, even if we can make a small step in the right direction, controlling the debt and deficit spending, it's a good thing for the countcount count count country. we want to manage the expectations and we want to make sure we're together in regular order, as has been set up by our constitution. you know, we haven't had a senate budget since i've been here, to deal with, so it's good we're back in regular order and meeting in conference committee. we are hopeful that at the end of the day, we're going to get consensus that will be able to move the ball forward on balancing our budgets and controlling our debt and deficits. >> will there be a rolling back of the sequester, or should we expect some version of it to still be implemented next year and beyond? >> well, you all know -- and this has been talked about a great deal in the media -- none of us really like the way the sequester was done, where it is across-the-board cuts. and so, there are agreements that that really was not the best way to do it, and that we would really like to replace the sequester numbers with something that is more reasonable, where we actually use a laser-cut rather than a hatchet-cut. so that is part of the discussion, is that we would find a way to replace some of the areas, particularly, in our opinion, the defense cuts have been devastating to the national security. we know that the democrats are concerned about the cuts that have been made in some of the social programs. and so, there is an agreement there that we'd like to do a better job with replacing that sequester with some more reasonable provisions. but at the same time, we want to be very cautious that we're looking at long-term spending, and that we're doing something to get a down payment on that debt and deficit spending. >> finally, congresswoman, on obama care, i'm sure you saw the poll numbers today. 57% now oppose obama care, 46% strongly. the story that mckenzie apparently told the white house back in march they needed to have more testing, more revision ahead of any launch. is it your opinion that the potential for repeal of the aca is greater now than it has been since it was passed? >> i think what you will continue to see is that this bill is a train wreck, and it just continues to crumble as time goes on. we have been saying all along that the people would wake up when it really started to be implemented, and that it affected them. now we see people losing their insurance, losing their doctors, not being able to get insurance. the higher premium payments. and i think as time goes on, when the american people voice to this administration and to congress about this train wreck for them on a very personal basis, this is a personal issue. that we will see more of a crumbling of this bill. this bill really does need to be repealed totally. we do have other alternatives out there. >> right. >> there frankly could have been initiated, rather than have the government try to co-op one-sixth of our economy. those folks that did not have insurance and didn't have ability to get it, i believe we could have fixed this a whole lot easier than what has happened here. >> congresswoman, thanks to you for your time today. >> you're welcome. thank you for having me. >> congresswoman diane black of tennessee. we want to get back to the census story for a emmo. our own steve liesman is joining us now with more details from headquarters. and, steve, you know, firstly, we should make it clear to people, the incident in question has to do with, i believe, with the household survey, one of two surveys involved in producing this monthly report. >> reporter: right. very quickly, i want to tell you, we have a statement from the inspector general of the department of commerce, saying we are aware of the media reports. and evaluating what actions may be warranted. the data show a huge spike in the number of employed in the household survey, and a decline in the unemployed in the months leading up to -- you can see there -- that's november, the end there, november 2012 election, as kelly said, the household one of two surveys conducted monthly. the survey, in which data gathers from the census bureau, they contact 60,000 homes nationwide on behalf of the bls. that's used to calculate the unemployment rate. the separate payroll survey used to measure job growth, that data comes from employers themselves right to the bls. so it remains unclear from the "post" story now were the numbers faked for political gains? were they faked at all? we don't know. the unemployment rate, why has it declined and stayed down? why have payroll jobs been strong if the unemployment rate was pushed down artificially and faked to increase employment, is it possible the employee, or the survey takers, filled it out either which way, either unemployed or employed? several people contacted by cnbc said it would take a large number of people involved in faking data to move the unemployment rate either way. each government worker who gathers the survey data contributes only a small amount to each report. i also contacted bob groves, the former director of census. he was in that job from 2009 to 2012. he said he had never heard of the case, even though the "post" said mr. buchman was caught doing this in 2010. that's julius buchman, mentioned in the "post" story, and talked to phil roans, told me he had not heard of this case. but, kelly, any allegation that raises question on such important data for markets, the fed, and public policy, are obviously very serious for investors, government, and really the american people, kelly. >> and, steve, absolutely, just, again, this particular case seems to be a case of the employee trying to fill out as much of the survey data required to meet, for example, the 90% threshold when they're trying to contact households each month. he was trying to fulfill the job directive as opposed to a political directive, right? >> two things there. one is that the sense that he was only trying to fill his job. another is a suggestion in the "post" story that it was for political gain. and that's what's unclear right here. and, also, the allegation in the "new york post" again that it was not just one person, but there was more than one person involved in this. >> steve liesman with the details on that report this morning. steve, thank you. >> thanks, kelly. detroit was the biggest municipal bankruptcy in u.s. history, and it left a lot of people thinking who might be next. on paper, chicago's pension liabilities are bigger than detroit's, and pretty much every other city in the country. the question is, is chicago on its way to being the next detroit? the answer when we come back. op. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. a confident retirement. those dreams, there's just no way we're going to let them die. ♪ like they helped millions of others. by listening. planning. working one on one. that's what ameriprise financial does. that's what they can do with you. that's how ameriprise puts more within reach. ♪ welcome back. detroit went bankrupt for a lot of reasons, including its massive pension liability. on paper, chicago's pension liability is much larmer than detroit's, and pretty much every other city in the country. so does that mean chicago is on its way toward following detroit? scott cohn joining us live from chicago. scott, are they sort of giving you an evil eye there? >> reporter: well, you know, it's my hometown, so they can't be too nasty to me. it is not a pretty story, kelly. as you said, no city -- not even bankrupt detroit -- has as serious a pension issue as chicago, and you could argue that detroit has a plan to get out of it, although it is bitterly contested in bankruptcy court. so let's look at the numbers by comparison. detroit's pension plans are about $3.5 billion short of what they need, according to the emergency manager, kevyn orr. chicago, nearly $27 billion, according to mayor rahm emanuel. chicago is a much bigger city, so let's look at it in a different way. chicago's pension gap is nearly seven times the city's annual revenues, according to moody's. in other words, it would take seven years, if they devoted everything in the pensions, to pay it off. los angeles, houston, three times that, and detroit just 1 1/2. so the situation here is, team. but it is not unique. what's going on nationwide is the municipal debt situation is in the neighborhood of $800 billion to as much as $4 trillion, and paying down the debt means it doesn't go to police, fire, schools, infrastructure, so the cities keep short-changing the pension plans, and experts say that just makes matters worse. >> pretty much everyone who has a pension problem skip payments, and that comes home to roost, because if the markets are good, in actuality, you're fully funded. when the market's are down, you haven't funded, it catches up to you. >> reporter: that is exactly what's happening now. and it's particularly an issue, because the ratings agencies are really starting to pay close attention. as you know, just last week, chicago got knocked down three notches by fitch's. downgraded earlier this year by moody's. we have more on cnbc.com/cities, and can you see the public pension situation where you live. and later today on "power lunch," we'll look at the battle between emanuel and the unions and we'll talk about where we'll be tomorrow. it turns out in municipal finance, everything may not always be what it seems. guys? >> we'll try to get to the billy goat, at least, before you get to the airport. we'll see you tomorrow later on. scott cohn in chicago. straight ahead, a big surprise from samsung and its smartwatch. we'll find out why the galaxy gear is shocking the street. tdd# 1-800-345-2550 searching for trade ideas that spark your curiosity tdd# 1-800-345-2550 can take you in many directions. tdd# 1-800-345-2550 you read this. watch that. tdd# 1-800-345-2550 you look for what's next. tdd# 1-800-345-2550 at schwab, we can help turn inspiration into action tdd# 1-800-345-2550 boost your trading iq with the help of tdd# 1-800-345-2550 our live online workshops tdd# 1-800-345-2550 like identifying market trends. tdd# 1-800-345-2550 now, earn 300 commission-free online trades. call 1-888-628-2419 or go to schwab.com/trading to learn how. tdd# 1-800-345-2550 sharpen your instincts with market insight from schwab tdd# 1-800-345-2550 experts like liz ann sonders and randy frederick. tdd# 1-800-345-2550 get support and talk through your ideas with our tdd# 1-800-345-2550 trading specialists. tdd# 1-800-345-2550 all with no trade minimum. and only $8.95 a trade. tdd# 1-800-345-2550 open an account and earn 300 commission-free online trades. call 1-888-628-2419 to learn more. so you can take charge of your trading. ♪ [ male announcer ] 1.21 gigawatts. today, that's 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. ♪ the microsoft meeting going on, bill gates, jon fortt, making comments about the search for ceo, saying he's happy with that. we'll see what happens with the stock. we'll see if any announcement is forthcoming. thanks again. let's get back to headquarter, and scott wapner on a busy day and "halftime." >> thanks so much. how to protect your portfolio from a damaging drop. home run. what does depot's blowout say about housing and the other names you should buy? we begin with the markets, the stocks hitting the big monday milestones, and pulling back a bit. with six weeks to go until the end of the year, are we headed for another run, or a reversal? it is "halftime." let's play the action. how about it, pete? a run or reversal between now and the end of the year? >> i've been saying a run, and i continue to pound the table. even with the pullback