Transcripts For CNBC Squawk On The Street 20131217

Range, between 2. 85 and 2. 9. Europe seeing red this morning as well. Year over year core inflation fell in the eurozone to. 9. The last fed meeting of the year kicks off today. Stocks look to stay in the green and continue the rally. Boeing authorizing an additional 10 billion in share buybacks over the next two to three years. Facebook is getting into the video ad game. They plan to start selling video ads that will automatically may in users feeds. And jim cramer will talk to the coceos of whole foods this hour. The s p snapping a foursession losing streak. The feds twoday meeting gets back today. A lot of tea leaf reading, jim being looking at the calendar, looking at yellens history. Some say shes slightly more committed to the program than bernanke but well have to wait until tomorrow. A lot of people are saying wait a second, we sold down very badly last week. What happens if they stay the course . This could be a giant short squeeze. Buyers came in saying i dont like the outcome. If they do nothing, the market flies. If they do maybe lets do a little taper, the markets already down. There were two alternatives and they were both buy. Thats why i think you had a lot of Short Covering yesterday. Whats the down side of taking your gains and calling it a year today . The movies arent that good right now. I used to go watch brave heart over and over again or the fugitive. Thats because karen said get the heck out of the office, all you do is trade. A lot of people are trying to do that. So there will be a lot of lockins. If youre north of 21 , i think can you lock in. I know a lot of hedge funds right around that level and now theyre at 70 , 80 cash. And what are they doing during the day . Theyre watching what . Theres going to be 12 oscar contenders in the next couple of weeks. Well catch up on netflix, get some dvds. You can planned fixed income to a certain extent, dabble around the edges. Youre not going to make big commitments to equity. Not even as stong as the s p. Strong as the s p. I was looking at Western Digital today and i was thinking i remember when these were the shorts of a lifetime, Hewlett Packard, short of a lifetime. The shorts of a lifetime did not turn out to be great shorts, whether it be lifetime or early this year. Whether it be herbalife. Im taking my target of herbalife to whats Mega Millions . 560 million . Thats my limit for herbalife. Thats probably what his position is worth now. And thats not luck. Luck is not a lady tonight. Luck is an herbalife distributor. I like that. I got a horse right here, its name is herbalife. And the taper. At this point, doesnt everybody want to get it over . Just start it already. Yesterday somebody finally said paulson came on and said they have to taper because im tired of talking about taper. Every Market Participant is ready for that. There will always be some emerging market. It turns out that sri lanka is so not ready for taper. Mongolia is betting there is no taper and that is the leading exporter of cashmere. Its not Just Minerals anymore. It does bring us to a couple of the big div hikes. Indeed it does. Lets talk boeing. Capital returns having been the key theme in many ways for 2013. Boeing announcing its board has authorized an additional 10 billion with a buyback suspected to be made over the next two to three years. Boeing also raising its dividend by 50 . Its now 73 cents a share. The dow component trading at our near alltime highs, up nearly 80 that is not only capital returns. Thats also good Old Fashioned execution. And i remember when mcnerney, the ceo came on mad money, i said were you ever worried about the dreamliner. You know how you expect a long answer . He came back and said no. No . No. We mentioned 3m, 35 . It comes on the heels of mastercard just the other day i think it was 50 . Sort of takes you back to this time last year where it was all about the special dividend, right . Remember ahead of the fiscal cliff. Ahead of the Capital Gains race. A little m a activity, none of those things at all being motivated by taxes going up but ending the year that has been, again, the year of capital returns, largely through buybacks, shrinking outstanding shares, which has the effect of increasing earnings per share. Thats a good way to get Earnings Growth when youre not getting a lot of Revenue Growth. The new darling of this market is exxon. They brought back a billion shares. A billion shares. The stock is at a billion shares. Can you imagine every day they must give someone here an order, right . Here, buy me 200,000. Buy me 200,000. Maybe its even more. Its probably like buy me 20 billion. Billions a lot. I know that. Billion here, billion there, starts adding up. 2014, honeywell does come out with their forecast for next year, a little cautious, 535 to 555. Honey well saying the macro next year will sound a lot like this year. Dach cody, ceo of honeywell and they deliver and deliver and deliver. They do not overpromise and deliver. They underpromise and then overdeliver. Magnificent things. My Charitable Trust owns honeywell. Honeywell makes the dock pits to all planes. They also make tremendous chemicals that help you refine the socalled heavy oil that everyone built all those refineries for, the Energy Administration of the iea dramatically raised how much oil were going to produce in this country. I was surprised. They say its going to go back to the alltime high. Thats not unexpected. There were a lot of people, mark paper from eog, who has the best new fields in this country was saying he felt that he was going to peter out, that they couldnt keep raising. That presumes that the permian perhaps is as big as they say and we know that sheffield at pioneer downgraded the other day is say we go have so much oil here, were swimming in it. What happened to all the peakers from a few years ago . That was before frackers. On mad money, i had a company around the petroleum companies. Did you know theres a butane excess in this country . What can we do with that . Lighters . Some houses are heated by butane. If you got off the grid of manhattan, you would know you could heat things with butane, manhattan. Theres places outside manhattan . You go over the river and make a left. Governor christie is going nope. Its like the greatest stephen king book ever. Hes going to be the dickens of our era. No face . Ill agree with that. Talking about making a stand, facebook has confirmed its testing video advertising, following reports the company will roll out video commercials this week with ads to begin appearing in facebooks user feeds. Meanwhile, these are going to automatically play. As they appear on the screen. If you want to hear them, you got to click on them. But if you dont want to see them, you got to continue to scroll up. This is my Charitable Trust sold facebook a couple points ago because i felt that everything good that could happen has happened. The hits keep coming for facebook. This is a company that is very, very smart. I find when i hear these things, it also then takes up twitter. The umbrella. Those twitter did end yesterday down. Techs downgrade i thought was very compelling. Suntrust says by zillow, letter z. That has been a total bow wow of late. Wouldnt that be something if that came back. And news feeds talking bin ventory capacity concerns. Theyre going to limb et the number of sponsored stories. Analysts are arguing that might create more value in dollars, if not an actual number of actual sponsored ads. Thats a great point. Zuckerberg goes over and over about user experience, he will not compromise the user experience. I dont think he has. Though i think people have clicked on those ads think theyre a little bit newsy. A lot of that goes back to me with the story of verizon, having to this is only going to increase their problem when you think about how mobile facebook is at that point. Now youre generate ag ad immediately sm . And thats vienna. I think people have to recognize siena. One of the things that caused that quarter to look bad is their ramping up of all of these just the spin. Remember when verizon we thought they had all they needed . No, no. It doesnt stop. Speaking about tech, later this morning the president is scheduled to meet with top tech representatives. And also the impact of the nsa surveillance on Tech Companies. Yesterday the fed did rule their yeses are probably unconstitutional. Others expected to attend include netflixs reid hastings, at t Randal Stevenson and some of them have tried to apply pressure to varying degrees on the white house. Right pip think theres some kind of interesting ones. Dickerson from etsy, pink is from zinga. Are you going to play word with friends. You went through your little he didnt realize it and it was my daughter playing him and she just crushed him this is an important meeting. These people, every one of them wanted to help and i think they felt shut out when it came to the web site. It makes for a nice picture but is it nothing more than that . Do you really think all these guys if they really wanted help, wouldnt they do it quietly rather than publicly and have all of these people show up. Yeah, drew hallston, they got a young guy. Yes, i think youre absolutely right. Tim cook. If they had done this six months ago and said, guys, lets all split it up, you do this, you do that, we would be thinking holy cow, we have got the most sophisticated Health Care System in the world. This is a little bit barn door. Youre saying this is a facebook facebook. Theyve atended these meetings in the past. They wont tell you but its optics and they come in, everybody glad handles and nothing is heard. Reed hastings, they binge on spoiler alert of all the things to talk about. Alessandras family in that New York Times article oh, god i was looking for the sports section. When we come back, organic growth with a twist. Cramer sat down with the coceos of home foods this morning at their brand new store in brooklyn. And we have a news breaking story from that. Very nice. Its not just the grape truts are real good. And what we asked him to make him respond in this way. Thats an exclusive sound bite. Thats very true. I got it from him. Taking another look at futures. Open up 35. Were back in a minute. Americans take care of business. They always have. They always will. Thats why you take charge of your future. Your retirement. Ameriprise advisors can help you like theyve helped millions of others. Listening, planning, working one on one. To help you retire your way. With confidence. Thats what Ameriprise Financial does. Thats what they can do with you. Ameriprise financial. More within reach. Thats what they can do with you. Does it end after youve expanded your business . . After your companys gone public . And the capitals been invested . Or when your companys bought another . Is it over after youve given back . You never stop achieving. Thats why, at barclays, our ambition is to always realize yours. What a day it was yesterday for shares of herbalife, the h Company Announcing the completion of audits for its last three years, no change. It sent the stock rallying. The fight over herbalife has been a big one for icahn. Yesterday icahn sounded vindicated by this. Take a listen. I never really doubted that this was a viable company. I guess i was one of the few that read the report a year ago. They made so much of it. When you read the report, if you bothered to read it, i think it was nonsense then and i think all these criticisms are pretty much nonsense to begin with. We sat at the desk where the shares were halted long ago where the concerns about the auditors again. It had nothing to do with herbalifes business. It was the completely unrelated Insider Trading case. The title of d. A. Davidsons report this morning is all i want for christmas is a clean audit. Its all about potential buyback now. There had been an expectation by many you would get a clean audit. Thats why a lot of funds owned the stock. Now its all about figuring out this is a company that has no net debt. They had cash. How many terms of leverage could you put on the Balance Sheet. Lets assume theyll be conservative and you have a lot of analysts working the numbers. Well, two turns of leverage. May be you could fund a buyback from a billion to 2 billion. What will you buy back . What will the results in earnings share be . Apply a multiple of 13 or 14 times for 2014, eps of that number and there you go. You know, you get to 81. And i think a lot of people at jim cramer on twitter i was being bombarded. Because i said the ad sit looking at the numbers, its not looking at the idea its a scam. Thats what blackmon said in his statement yesterday. What happened is a lot of people said wait a second, this audit is totally bogus because it didnt indict them as a pyramid scheme. The audit is not the government. Can you be well ashared the auditors were very careful and why do we presume whenny wee sao this davidson raised his price target. Clearly all these guys are expecting an event. Theyre expecting a buyback of significance. You and i i think have made the argument carl icahn great, stiritz is the investor of concern here. Theyre all expecting youre going to get taking on the debt, borrowing to get a huge capital return. The theme of the year, right . Yes. A statement by ackman it is not the role of herbalifes auditor to determine if the company is a pyramid scheme. It will be shut down by regulators. Ackman is his own worst enemy. Had he just said, look, here are the facts. But to keep saying that some organization is going some governmental entity is going to shut this down and not one has stepped forward and indicated that theyre going the ftc, the belgian regulate oorks that was one of the hopes. Then belgium signed off. Hes covered his position but theyre still short. If they were to do a dutch buyback and everyone had to call that stock in, that would be ugly. Ackerman is still motivated by spite. Stiritz is motivated by value. He thinks its a very valuable company. I dont even know if he knows who ackman is. Maybe he likes ackman. Stop trading. When we come bark get ready for cramers mad dash. And stick around for cramers interview coceos of whole foods later this hour. Opening bell in about seven minutes. D call strategies to generate income . With fidelitys options platform, weve completely integrated every step of the process, making it easier to try filters and strategies. To get a list of equity options. Evaluate them with our p l calculator. And execute faster with our more intuitive trade ticket. Im greg stevens, and i helped create fidelitys options platform. Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Shiny, happy people five minutes before the opening bell. Time for mad dash. Back to Hewlett Packard. Somethings going on in personal computers. Dell is talking about double digit Revenue Growth since theyve gone private. This jpmorgan call says hold the buy, Hewlett Packard saying everything is going right. Theres a bottoming in pcs. Printer sales doing really well. This stock kind of like best buy, remember when best buy started here, plateaued there and had another leg up. Whats going on in pcs . Theres a replacement cycle, yes. I think the new ones are so cool, they do so much and theyre thin. Hewlett packard is doing a lot of enterprise sale. That was motivated in part by servers. And mobile. Hewlett packard need as mobile strategy. Seagate sell to hold, these are hard drives. Those were written off not unlike micron because they got big into dram. David, i feel like its the late 90s again. Really . Yes. Its a throwback. Let me know when it hits 2000. I will let you know. Ring that bell for me. We got the opening bell a few minutes away. More squawk on the street right after this. [ male announcer ] the new new york is open. Open to innovation. Open to ambition. Open to bold ideas. Thats why new york has a new plan dozens of tax free zones all across the state. Move here, expand here, or start a new business here and pay no taxes for ten years. Were new york. If theres something that creates more jobs, and grows more businesses. Were open to it. Start a taxfree business at startupny. Com. Became big business overnight . Like, really big. Then expanded . Or their new product tanked . Or not . What if they embrace new technology instead . Imagine a companys future with the future of trading. Company profile. A Research Tool on thinkorswim. From td ameritrade. Youre watching cnbc squawk on the street, live from the Financial Capital of the world. Opening bell almost upon us. A couple div hikes from the giants of corporate america. Boeing last night, 3m today. Jim, as we said earlier, that has set the tone for the year. Remember 3m, that dip by the downgrade caused the beginning of this rethink. It takes it right back up, remarkable dow stocks. Certainly going to help the dow at the opening. Theres a look at the opening bell. At the big board ringing the belt, fidelity celebrating its ipo and at the nasdaq, cesars entertainment doing the honor. You mentioned the dow components. Exxon carried the load yesterday. Boeing and 3m will carry it today. When you look at boeing, this was a stock was it really hard to find boeing . I remember when there was an Ethiopian Airline fire, its been Straight Line ever since. Remarkable performer. Up more than 2 is hess. Hess has international operations. People realize theres too big a glut. I say be a little dont bet on the glut. Bet on the companies with Production Growth because in the end, theyre going to get the world price. In a is whats going to happen. By the way, the natural Oil Companies are doing well and not even going for the price. The ceo of hess, doesnt know if theres another chapter to come from hess. Well see. Just incredible they stayed in. They only got five board members. Hess was an undermanaged company and had fallen very low from even where it was while oil was a lower price. I think that hess is still a good situation. We did get news from gm yesterday, dan akerson saying hes going to invest more than a billion dollars in three states. Theres an example where is company is using money not just for capital returns. I wonder if you start looking at companies that supply the automakers. Johnson controls. Its a company mileperhoy cha trust owns. Do you know greece was very strong. What do they have they have fewer people than we have in new york city. I remember there was a time we would always talk about greece. At the time it also seemed a little absurd. How about the dom inopen effect in europe and im not talking about kits communism, im just talking about a domino effect. Monaco. Monaco you want to watch closely, money in monaco. Some of the big winners for the week so far, johnson controls, precision cast parts, i see borg if you sell into an aircraft maker, if you sell into autos, youve done quite well. By the way, this mexican market, keep track of that. Thats where all the big auto builds are going to be. An etf doesnt really capture mexico. I think mexico is a big story tore 2014. Tesla not getting hurt by the idea that samsung is filing patents on have you been watching the ads that gasoline is the way to fuel . Its kind of the Empire Strikes back. Dont rule out gasoline. Exxon went from being a stock i really didnt care for until they showed incredible Production Growth. Im all in exxon. I like the fact that theyre bullish about themselves. Thats all im saying. They seem bullish about themselves. A lot mentioning amazon this morning, a few different headlines. Theres some reports its moving to a group called gopago, a mobile payment company. Some german employees going on strike, protesting work and pay conditions and its reported theyre ordering some camera components, the suggestion that theyre going to launch a smartphone in the first half of 2014. Really . Yeah. Wow. I thought it was the Credit Suisse note about sameday delivery. Do they have an antigoogle robot . I think that amazon is doing so many initiatives that when you speak to costco and if you dont mention amazon, youre missing the elephant in the room. Do you see the drones taking off i think its going to happen. No. You know what it is . It like martha. Or bambi versus good 64, 56 is going to take you all the way to the middle of october. A lot of love for the stock. A lot of momentum. There as a paucity of social, mobile and cloud plays and people want that asset, that sector, in their portfolio to show it year end that they had the foresight to be in this group. Something else that people have wanted seems to be airlines. I just wanted to know shares of american, the new American Airlines group of course remember 78 or 72 owned but the merger of usair and American Airlines out of bankruptcy has been a great performers. And heres barclays with an equal rate zpg the stock has run. It equates to about 17 on the old equity, the bankrupt equity of American Airlines, which you could have bought for pennies, not even that long ago. Those this evenings are not supposed to work. The fannie mae want supposed to work. Fannie and freddie is still a speculation, may be worthless. I would still by american air aggressively here. I think it going to be a fabulous story for 2014 as people people realize competition is dying down, rates can go pup you cant get a plane to start up a startup. Remember how you use to do startups all the time . Oh, sure, you go to the desert you cant do a startup. And spirit, symbol save, does not want to go up against the big guys. Hes picking routes that have been dropped by them. I just think this group has got more legs and i think that american is terrific. A lot of the housing stocks, sherwinwilliams, lannar among the laggers today. People worried about the tenyear or some violent moves. Yeah. People are still kind of bruised by toll brothers, fabulous headlines and then in the Conference Call they say things arent so hot. I still say, look, real estates a Spring Business puch dont sell a lot of homes right now. Seasonally its just not a great time. I think everyone knows when Mortgage Rates go up, you dont sell more homes, fewer. Home depot does point to the fact that as home prices go up, that is an additional spur to investing homes and buying homes. Colony talking about the number of homes being rented. Thats another spur in the history stri. Theyre one of the big ones along with tom seems to be working. They were also involved in another deal. Let get to pisani and see whats moving on the floor. Hello, guys. Happy tuesday. Most of the major sectors are to the down side. I want to talk about the dividends and buybacks. Were capping a record year. Were going off on a high note here. Boeing of course that 10 billion buyback, 50 increase in its dividend. 3m hiking the dividend 35 . The key is the number of dividend hikes this year and the dollar value of them. So put up the full screen 310 billion announced in 2013. More important is the dij end ratio. Its 35 , thats the highest since 1999. The vin oars is getting a great deal. And by the way, these industrials are paying out good dividends. 3ms dividend yield is going to be close to 2. 7 . Boeing will be close to 2. 2 . These are excellent yields for industrials. Buybacks in 2013 good but you got to look underneath the hood a little bit here. The criticism of buybacks is they announce buybacks but then on the other end, they announce theyre going to increase the amount of options they have out so theyre going to give more shares out on the other end. Thats not happening this year. The share count reduction is what a matters. How much shares are you taking out of the system . Its reduced for the overall s p 500 this year. Thats a very, very big number. About 482 billion in buyback, thats not quite a record the record year was 2007. This is the second best year on record. But still very, very respectable overall here. Heres the largest number of buybacks for 2013. Apple had a huge one in the mid of the year. Theyre the leader. Halliburton, viacom and j j also there. The Dow Jones Industrial average was up 129 points yesterday and the vix went up . You know thats very interesting. Up again here today. Important thing is theres a lot of volatility around whats going on with the Federal Reserve meeting. The vix curve is actually inverted. The price is higher, david, on the short end of the vix than it is on the months gig out. That means the markets are predicting a lot of volatility, not on with this event with the fed but perhaps even in january. David, back to you. Thank you, mr. Pisani. Did want to hit on one deal announced late yesterday. This is a Business Development corporation begun by kkr. They lend money, a lot of mezzanine finance and Senior Lending on the debt side to corporations. If you go back overtime, youll see this thing really got beat up in the recession, lets call it 07 08. Has come back since then but not to the liking of kkr, in which it will acquire and bring it back into the fold. What was the ratio,. 51 . That is resulting in a very significant increase in the stock price. It was about a 35 premium to the close as of yesterday. Theyre saying it will be immediately accretive to earnings, will help its Balance Sheet. One of the biggest holders of kfn was omega. I just checked. Id like to thank him for that one. Hes probably a bit happier now. He had been accumulating that great dividend. Kfn kind of stalled. Its still a home reason. Is this a good time for them to be taking that in . I dont know about that. Kkr, theyre usually fairly good buyers. Usually. Smart company. I did want to point that out as one of the other deals throughout and certainly a stock thats moving. Lets head over to the bond pits and Rick Santelli at the cme group. Good morning. Its the first day of a twoday fed meeting. Whats going to happen with regard to the taper is just so highly debated and nuanced. Are we going to know specifically, generically . Well have to wait and see tomorrow. But i can really show you what happens when a yield curve steepens because its really somewhat pronounced today. So look at intra days of 5s, 10s and 30s. The further up the curve you go, the higher above the unchanged mind the market is. In a 30year case, were up several basis points. Can you steepen in a lot of ways but the fact is were steepening today with a fiveyear note above 1. 51 yield. I think that is significant. Lets take a 10year chart. We are hovering in a zone or threshold, same words fed will use in their statement on wednesday, thats about a threemonth high yield on a closing basis. Foreign exchange, the twoday chart of the dollar index shows us the same thing weve been witnessing. Weve been spending time on the 80. Open the chart up, you see two things. Were a little we are going to close exactly this year where we closed last year. Carl and the gang, david, back to you. Well see new a bit. When we come back, getting fresh in brooklyn. Well be right back. vo you are a business pro. Seeker of the sublime. You can separate runway ridiculousness. From fashion that flies off the shelves. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. 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This chance increases if you have Heart Disease or risk factors such as high Blood Pressure or when nsaids are taken for long periods. Nsaids, like celebrex, increase the chance of serious skin or allergic reactions, or stomach and intestine problems, such as bleeding and ulcers, which can occur without warning and may cause death. Patients also taking aspirin and the elderly are at increased risk for stomach bleeding and ulcers. Dont take celebrex if you have bleeding in the stomach or intestine, or had an asthma attack, hives, other allergies to aspirin, nsaids or sulfonamides. Get help right away if you have swelling of the face or throat, or trouble breathing. Tell your doctor your medical history. And ask your doctor about celebrex. For a body in motion. Cramer sitting down exclusively with the coceos of whole foods this morning at their new store in brooklyn. We are in brand new store in bro brooklyn. Why here, why now . Brooklyn is a great city. We think this will be hugely successful. How many other stores are there. There are a number of stores, but nothing like this. Its a thing of beauty. Youve seen it, right . Its beautiful. Yes, i have. Theres talk you guys are doing untraditional things, a piece that youre opening in id ow idaho. Is there a theme here . We have a thousand stores to grow into. I think the opportunity for the country to grow is unlimited. We have 94 stores in development right now the media is making a big deal out of one or two stores, like detroit, for example, but those are outliers. But at the same time, theres talk that you are going to open a store in bryant park. Not a large area but something very different for you guys. Bryant next to tokyo, bryant park must have the highest daytime population of any city in the world and we think our store is going to be very successful there. It needs to be, the rent is very high. That location is right on the oh, its fantastic, beautiful. Where are we in terms of where this company is going . 370 stores, theres a target of 1,000. Are there that many opportunities left in the country . Probably more than a thousand. I mean, the market continues to grow. I think were thinking internally that we can do maybe 1,200 stores in the United States at this point, yeah. Just because the world is continuing to change. Thats an exclusive sound bite he just gave you because we havent said that before. Thank you very much. I got it from him. Theres a road map out there that looks to us like theres all these markets are available to us and were going to go for it. This store seems to be an homage to local. It seems like it is a Farmers Market from brooklyn in whole foods. This store is a combination of a Farmers Market, a community store. We have a hundred new suppliers in this store. A hundred. Thank you, robb and john. Well be back later with more. Analysts will have to revise their forecast because of that interview. They gave you the new target. 1,000, huh . Analysts will say i have to go out with that note, have to credit squawk on the street. You will, please. That was exclusive to us. They did that because they love cnbc and they love us. Thats a major new bump. A lot of people felt wait a second, theres cannibalization. Theyve answered the cannibalization. Once a store opened and that had to do with the johnnys foodmaster in boston. Theyre over that. Come out tonight and credit our shows. There are samestore sales coming in, there were worries about walmart and target. They welcome the competition. They say it helps everybodys business. This is the next iteration of this is not just a store, it a presentation. I did ask them, by the way, because i have a place what happens near the summer . At one point the river was green. It was not because of st. Patricks day. It was not because at one point the river smelled. They said theyre even cleaning the river. This is a Super Fund Site considered to be the most polluted body in the nation. It is a city of more than 2 million people. Just happens to be on the other side of the river. Interesting how coceos have a reputation for not working out but this appears to be doing okay. These guy are ying and yang, they finish each others sentence, theyve really got some excitement going. Im going to go to the store again later this week. I thought the presentation was magnificent. The fact they have all the smaller suppliers in brooklyn. This is happening in the country, its a reversal of the food chain. Remember the delmonte fruit cocktail with the syrup . Now were reversing. Whole foods is packed with small, organic and natural. Its not a fad and very close by. In other words, within the region as well. Exactly. This is all about local guys, guy makes pickle, guy makes desserts, local butcher, fresh fish. Its just one aisle after another is eye opening. Its so exciting. And more tonight on mad . Were breaking form. Well get six in 60 with jim in just a moment. Lets get six in 60 with jim. Eli lilly . I didnt think lilly had a great pipeline. Theyre saying its terrific. Whole foods. Different view of General Mills. Yes, Morgan Stanley says theyre challenged. People think General Mills doesnt have natural and organic and its hurting them. Wells on resources. The fact that the stock isnt up worries me. Once again, the credit defaults in this country are so low. The finish line today . This is a gutsy call. Sell to buy. Not even in the hold. They report this week, macys told me, terry lundgren, finish line owns their concessions in macy. Doing fabulously. Id buy the stock. And then citi on yahoo . Sum of the parts. More whole foods tonight . People have to understand the last quarter wasnt that great. They guided down their samestore numbers. If you think like that, youre going to be the guy who sold whole foods at 7 in 2008 when it traded at only two times cash flow. Dont make that mistake. This is a longterm story and these guys are indeed visionaries and i dont credit many people with being visionaries. Well see you tonight, jim. Well get home Builder Sentiment after a short break. The American Dream is of a better future, a confident retirement. Those dreams, theres just no way were going to let them die. Like they helped millions of others. By listening. Planning. Working one on one. Thats what Ameriprise Financial does. Thats what they can do with you. Thats how ameriprise puts more within reach. Just by talking to a helmet. It grabbed the patients record before we even picked him up. It found out the doctor we needed was at st. Annes. Wiggle your toes. [ driver ] and it got his okay on treatment from miles away. It even pulled strings with the stoplights. My ambulance talks with smoke alarms and pilots and stadiums. But, of course, its a good listener too. [ female announcer ] today cisco is connecting the internet of everything. So everything works like never before. Open to innovation. Open to ambition. Open to bold ideas. Thats why new york has a new plan dozens of tax free zones all across the state. Move here, expand here, or start a new business here and pay no taxes for ten years. Were new york. If theres something that creates more jobs, and grows more businesses. Were open to it. Start a taxfree business at startupny. Com. Well commonwealcome back to the street. Home Builder Sentiment took a healthy fourpoint jump in december after falling in august. The street was looking for one point so that was a big beat. Now at 58, 50 is the line between positive and negative. Builders are citing pentup demand from the Government Shutdown in october driving the traffic now. Of the three index components, current sales jumped 6 points to 64, future sales expectations rose two points to 62 and buyer traffic rose three points to 44. The last one, the only component still in the negative. Sentiment games were not widespread. Sentiment fell one point in each of the three remaining geographical regions. The northeast still in the negative at 38. One reminder that noted analyst ivy zellman lowered her forecast for new home sales and Housing Starts among Rising Interest Rates and higher prices. Back to you. Thank you very much, diana olick. Everyone wants to know where the market is going in 2014. Steve liesman has polled his panel of experts for the fed survey and he joins us back at hq to tell us what they told him. Reporter this group has not been particularly good at predicting the market this year. Theyve been better on the fed. Their take on stocks, i dont know. Theyre predicting 1773 for year end, 1814 for the s p by june of next year and 1857 in our first take on december of next year. If those numbers seem weird, take a look at where we are right now. 1781. So they dont they see the market falling between now and year end. Very little increase. Just a 4 increase next year. Come out, take the wide view here. Now just to remind you what this poll is here, this 1547 is what this group predicted for year end. So follow it up now, they have chased this market higher and higher and higher. They have been bearish on stocks all along, they pretty much remain bearish on stocks. Heres the bond, the 10year outlook here. Again, theyve been a little bit better here, although again they have been a little bit more dovish on where rates would be. 288 is a prediction for year end, 2. 18 for june, and 3. 44. Thats a december end rise. This groups expects a taper in january and february is the average. Take a look at some of the comments we have here. Barry naps of barclays saying the belly of the Treasury Curve is vulnerable to rate hikes getting pulled forward. And john connors said tapering is coming and i expect qe to be reduced by 40 . And stewart hoffman, the u. S. Economy is ending 2013 on a solid note and that will continue through 2014 in harmony with Global Economic improvement. This is from the july survey compared to the current survey. The start of the taper was seen in november 2013. Where is it now . Its now in march. How about when qe will stop all together . That was in july. That was july. Now its at the end of the year. Quite the upshot of the wall of this here, of this particular graphic is how much easing theres been. You can see that, by the way, when you look at rates. The 2015 fed fund rate has come down. Thank you very much. Steve liesman at hq. Lets keep the conversation going. Guys, good morning to both of you. Good morning. Charlie, i assume you saw that poll that 1781 number looking out to next year. Does that give you comfort or pause . Yeah, i think its actually giving as you little bit of pause. It does seem to be a real consensus pick that stocks are going to be up next year, that Rising Interest Rates are not that big a deal. Its fine how these people werent naturally as bullish a year ago when stocks werent nearly as cheap. How about you, joe . I started thinking gross would be in the mid 2s. I thought the 10s would get to 3, which they did. My colleagues and i have been extraordinarily bullish on equities as simon knows. Next year well be at 2,100 stocks. There will be some indigestion if stocks go higher. Given buybacks and dividends, youll have a good year for stocks. Youre in the camp you think taper will begin this month tomorrow. And it will end by september, october. Thats not what steve is saying. Where do you fall now . Start tomorrow, thats what we thought as a few months ago when we had good Employment Data and theyll be slow in ending the program. The mark has gotten so many times looking for tapering to end. I think well see that yearend tapering move closer to mid year. Joe, the cost of living didnt move in november. The cpi for the year is up 1. 7 core cpi, overall Consumer Prices 1. 2 . Thats low inflation. Its the last piece of the puzzle. Some say because you dont have those Inflationary Forces as the fed would like them at 2 , they cant tape from here or the taper will be real slow. It will be real slow, i agree. Is that why stocks stay high then . That is part of it. Again, tapering is not tightening. I dont like this historical analysis. Tightening isnt tapering. Theyre totally different. Its confidence the economy is doing better which gives stocks a lift. Inflation is low but inflation is lagging. Charlie mentions indigestion. Investors would opt to avoid that. Whats wrong with locking in gains today and waiting until the new year to do anything else . Because thats market timing. Studies show nobody is any good in making shortterm predictions in which way the market will go. When people try to time, they always seem to sell at the bottom and buy at the top. Selling in december is actually the worst month to sell in. Your play book for 14 in a year or two, charlie . Four big tail winds energy, auto in europe with one big rising tail wind. Its going to be a real tug of war. Theres an awful lot of wind this winter, ill tell you that. Thanks, guys. Appreciate it very much. Some of the top tech executives are headed to the white house this morning for a meeting with president obama, including dick cook, costolo and eamon javers has a look at what theyre discussing. Were expecting the ceos at 10 45 this morning. The white house is billing this event as a dualpronged meeting to discuss both white house. Gov, the troubled web site for health care and also the nsa spying issues and some of those disclosures from leaker edward snowden. One of the keey questions will e will the ceos be able to present some kind of united front to the Obama Administration and to the president himself who will be in this meeting. Thats an open question. These companies are not necessarily monolithic in their outlook on how they want to handle the spying issue. Will the president get a specific ask of any kind from these companies. A number of them do want the United States government to free them up to actually release more information about how often theyre turning over data on their customers to u. S. Government and u. S. Intelligence agencies. Thats at big question going in. Were going to wait for the ceos as they arrive and well see if they have anything to say on the way in or the way out. That arrival is going to be fun to watch, eamon. Im being told that david has news on the othernd of the desk there. Just news for those who watch the chess pieces in the wireless world. Interesting. It may amount to very little but worth noting that dish and sprint, of course if you recall dish is the company that competed to try to buy sprint or at least did for a bit, ultimately driving up the price for sprints eventual victor that are trialing a wireless broadband product in corpus christi, texas. Dish is out there with a lot of spectrum. This would be using Sprint Spectrum and equipment from dish to create fixed wireless broadband. Usually would use that in sparsely populated areas, a way to get broadin band to these homes. The largest question is will there be cooperation between these companies down the road that might involve an agreement using a lot of that spectrum acquired at dish. Worth a mention at the very least, this new cooperation between two rivals into the long ago. But it seems like dish is really trying to weigh some of its alternatives here. It tried to merge with tmobile. There was some speculation it would make a move from light squared. This is just something to note because these had been rivals. Dish made a bid for sprint and for clear wire. Charlie, who controls the company, has a lot of options, including merging with directv, owning spectrum and getting a commercial agreement with sprint or the like or its nem number four, continue too do what youre doing. It will be interesting to watch developments there in 2014. Certainly will. And a statement that multivitamins dont save lives and dont do anything at all. Well look at that when squawk on the street comes back. [ male announcer ] how could a luminous protein in jellyfish, impact Life Expectancy in the u. S. , real estate in hong kong, and the optics industry in germany . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 70 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. With investment information, risks, fees and expenses sleep traiends sunday interestfree for 3 event its your last chance to get 3 years interestfree financing on beautyrest black, stearns foster, serta icomfort, even tempurpedic. Plus, get free delivery and sleep trains 100day low price guarantee. But hurry, sleep trains interestfree for 3 event ends sunday superior service, best selection, lowest price, guaranteed sleep train your ticket to a better nights sleep welcome back to cnbc. Im Michelle Carusocabrera where we have breaking news out of moscow. The ap, reuters and dow jones reporting that putin has announced that they have a deal now with ukraine that include as number of things, normalization of trade relationships, an agreement to purchase gas and probably most important at this very moment that will impact the market is russia is supposedly agreed to buy 15 billion worth of Ukrainian Government bonds. They got 7 billion rolling over next year. Their bonds were plummeting. There were fears of a default. Were they going to turn to the west or to the east . If this is to be believed, we think they have now turned to the east and asked for help from the russians officially. Heres the ukrainian currency. Were showing you a twoweek here. Its been rising lately. If we showed you a longer period one, youd have seen it plummeti plummeting. It appears the ukrainian leadership out of moscow have chosen to align themselves with russia. Back to you. Thank you very much, michelle. Here at home a new review on vitamins. A review that says stop wasting money on Vitamin Supplements. Reporter a handful of researchers reviewed all of the studies on vitamins and published an editorial saying that, quote, the case is closed, supplementing the diet of well nourished adults with most mineral and Vitamin Supplements has no clear beb fit and mig and may even be harmful. I spoke with peter miller who said remember what our mothers always told us, eat a wellbalanced diet, trying to correct a bad diet with supplements wont work. Analysts say one of the drivers has been the aging baby boomer population that takes vitamins to offset health care costs. Gnc holdings, Nuskin Enterprises have a footing in the industry. They dont seem to be too concerned about it impacting demand or sales of vitamins. Whether or not the street sees this as a concern, of course a lot of consumers do tague vitamins and incorporate vitamins into their daily health routine. A lot of vitamins are not very concentrated, are not very good vitamins. Some of the big brand names if you research it, and i have, are actually quite poor in what they deliver. They say you dont need it if youre already eating well. Of course, this will be something that consumers watch very closely. I believe from this editorial, 53 of u. S. Adults take a dietary supplement, a high number. And 28 billion spent every year. And if its something that doesnt work, theres a lot of money people could save. And tonights Mega Millions jackpot at a staggering 586 million. What does it feel like to win that jackpot . Well talk to one lucky winner after this break. [ male announcer ] if we could see energy. What would we see . The billions of gallons of fuel that get us to work. Wed see all the electricity flowing through the devices that connect us and teach us. Wed see that almost 100 of medical plastics are made from oil and natural gas. And an industry that supports almost 10 million american jobs. Life takes energy. And no one applies more technology to produce American Energy and refine it more efficiently than exxonmobil. Because using energy responsibly has never been more important. Energy lives here. Energy lives here. [ bagpipes and drums playing over ] [ music transitions to rock ] make it happen with the allnew fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Get 200 free trades when you open an account. Welcome back to squawk on the street. Im scott wapner at the breaking news desk. Following that herbalife story now, getting their reaudited financials back yesterday was certainly a big deal. Other than in its filing, we hadnt heard from herbalife itself on how it feels about this whole thing. We spoke with carl icahn yesterday. Its my understanding from speaking to people close to the company today that they feel relieved about getting their financials back, that the company is now intent on getting back to business as usual, that the audit just simply took a lot of time away from, you know, the regular running every day of the business. And that management believes that the business is not about bill ackman at this point, its about doing everything right, continuing to hit their numbers, which they have done. Their earnings continue to be strong, the stock has continued to rise and on the news yesterday the stock just rocketed higher. Heres the stock north of 75 a share. David, im glad youre on the desk this morning. Everybody sort of wondering whats next. Weve all been talking about the prospect of a big buyback, lbo, spirits and drucker and miller and beyond. If you look at thecompanys Balance Sheet and consider theyve been essentially frozen for many, many, many months, unable to do anything because they didnt have the financials back, that their debt matures in couple of years. If they were to look now to refinance their debt, that could be the most logical next place that herbalife could go, go to market, refinance the debt, take advantage of the low Interest Rates that everybody has been taking advantage of that they simply havent been able to and it wouldnt surprised me one bit either if the bankers or wall street are beating down herba lifes doors this morning now that they got the financials back. Net debt is zero. Lever up your Balance Sheet just a bit, still stay conservative, go to two turns, two and a half turns of debt versus ebidta and that would get you to maybe a billion and a half, maybe 2 billion. When you net out debt, they have none at all, buyback stock, increase earnings per share, throw a multiple on it for 2013 and you end up with an 80 stock. Looking at the research and having conversations with holders, that seems to be what many are hoping for. Whether that takes place in the next two weeks or early next year you, no one knows but many would be surprised if it doesnt happen soon. Reporter theyve been somewhat paralyzed by having to wait for Price Waterhouse coopers to come back with the financials. You had some analysts on wall street who expected this to happen a couple months ago. The fact that they havent been able to do it, theyve been unable to make any kind of next move, as weve been forced to sit here and speculate on what that next move can be. Now were probably going to get some kind of clarity in the days and weeks and months ahead. It may not be exactly what we all have been talking about, but its certainly going to fall somewhere within those lines. I think thats a Fair Assessment at this point. No doubt. The buzz on the floor today is some of the traders are saying that the air is being taken out from herbalife stock today because of the vitamin news. What does that do to the core business of herbalife. The focus today is on the financials but it will be interesting to see if they have a response to that as well. Reporter i wonder what their response would be. Investors dont seem to be focusing on that news. I know the stock is off its highs but nearly 76 a share. The volume in this stock yesterday was just tremendous, the moment when they reopened for trading and they filed they did get their financials back and its been sitting at this level. You know, people like bill ackman have been sitting there watching it go up on a weekly basis and now its sitting where it is. So it all makes for a real interesting story going forward, guys. Thanks so much for that, scott. Keep us posted if you hear anything else. Meanwhile, if youre feeling like a billion bucks could be your lucky day, the mega bucks nearing that after 21 unsuccessful rounds. Joining us, chris, who hit the Mega Millions jackpot last year. Chris, thank you for taking the time to be here. Thank you for having me. Many people say if i win the lottery, ill quit my day job. What did do you . I went to work at 5 00al the next day. And what do do . I run a print shot in manhattan, it was a family business. 3. 5 million wasnt a life changer but it change as bit of your life. What was your first big Ticket Purchase . It was september of last year, we me and a gentleman in my office, wed been playing together for 25 years. He came in that morning and said were going to miami. Thats always our motto we were saying is were going to go to miami. Im reading you spent 20 a week on lottery tickets for 25 years. Thats roughly 26,000. Yes. Did you ever feel like this is never going to pay off, this is not a good investment . You know, it sounds like a lot of money but over the course of the time at the end of the day, look at the reward we got. Do i recommend go out and say my next dream is were going to hit the Mega Millions, im going to put my life savings in it . I dont think so. You say 3 million is not a life changer. But certainly you have to keep your motivation to work, right, to not completely just go to a desert island. Where did you find that . You know, i was brought up in a hard working family. I was brought up if you want to get anyplace in life, you need to go to work and produce. The dream is not going to just show up overnight. Like i said, 3. 5 million is a lot of money, a life changer for some people. But living in new york and new jersey, its really not. When you have a family with kids in college, theres plenty of money this jackpot for this competition could be raised again today. If its not won a couple of times before christmas, it could hit a billion dollars. Thats a different order of magnitu magnitude. Lets say you share that, thats 250 million. Would that type of money scare you . Thats a life changer. Thats how you end up in a lot of trouble, if you look at most lottery winners, half of them are broke already. Is there a whole thing you get plugged into . The lottery gives you a little bit handbook and guide and what to do and what not to do. Being i had Financial Advisers and family and friends that gave me good advice. I followed my fathers practice, invest your money and work hard. Cash option, 316 million in a lump sum. Do you have a ticket . Of course. I have more than a ticket. I have a few tickets. If you win ill buy yous lunch tomorrow. Chris, good luck. Thank you. Lets go to john harwood regarding the budget deal. Reporter 67 senators voted to end debate on the bill and get it to final passage. That will likely happen tomorrow unless members return yield time back to stop debate and get on to other matters. This deal is now on track to pass. You had nearly all the democrats and a good slug of republicans joining with them to break a potential filibuster. Thats a key moment in congress. The market not responding significantly. Some may argue that was already priced in. Todays squawk breakthrough, trying to let your kids bring their toys to life. Its not toy story but it does involve remote controlled toys. Well explain when squawk on the street comes back. Of the year me of ths at the lexus december to remember sales event. This is the pursuit of perfection. Yep. Got all the cozies. [ grandma ] with new fedex one rate, i could fill a box and ship it for one flat rate. So i knit until it was full. Youd be crazy not to. Is that nana . [ male announcer ] fedex one rate. Simple, flat rate shipping with the reliability of fedex. [ male announcer ] fedex one rate. Bny mellon combines Investment Management investment giving us unique insights which help us attract the industrys brightest minds who create powerful strategies for a countrys investments which are used to build new schools to build more bright minds. Invested in the world. Bny mellon. Afghanistan in 2009. On the u. S. S. Saratoga in 1982. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation because it offers a superior level of protection and because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Our next guest is letting kids bring their toys to life by giving them the tools to bring their toys to life with an app. Michael rosenblatt is the ceo of the toy company. Michael, good morning. Good morning. They did not have toys like this when i was a kid or you for that matter. What exactly does it allow kids to do with their toys . We really set out to figure out what the next level of construction sets was, and so what we do is we make these electronic smart bricks and it allows kids to add functionality to their toys. You have sensors, power bricks and action bricks and you can actually control any of them from the app or from each other. So if i kid wanted to, say, make their lego creation move, they could add these to it. Or if they wanted to build a working magic wand, then we make a set that does that. So if you have a sensor that actually senses when you swing the wand and you can do things like control your night light. As you swing the wand, you can control the night light. We make a bunch of different components so kids can make different things. Ive got a couple of things so maybe its little less abstract for people. Heres an excelerometer. Its a gift to Little Brothers and sister everywhere who want to annoy everyone else in the house, right, michael . Thats right. It became pretty clear early on that a killer app is playing pranks on your brother or sister. Weve had a lot of kids in the boulder area involved in developing this toy. They actually encouraged us to develop our entry level set, the prankster set because of that. That emerged pretty quickly. It seems this could be a help to parents as well. What does some of the Development Look like behind these . Well, we really set out to create a system so that kids could build whatever they wanted. We realized as we started going that theres actually very few things out there that let kids build working things. So in terms of development, we really we said what would it take to make or enable kids to build any kind of working thing . We said, well, if we put more smarts into the building blocks, then we literally would make a system that is plug and play and in the most literal sense you can connect them together and you can start making things that work. So if you wanted to well, i think that our street sweeper set is not going to replace anybodys rumba right away but it gives kids a sense of building a robot. If it shoveled snow, we could use it out here these days. Girls who code, initiatives around the country that are trying to get kids to up their games when it comes to math and science, stuff like that. I think that the country is in a great direction in regards to s. T. E. M. We set out to create a really neat, accessible gate way to math and Science Learning that specifically like is separate or different from code. Org, we set out to something that required no Prior Experience to programming or electronics. We actually dont have programmability in our system yet. Its really like you program it literally by plugging the things together. So its actually and we really its also interesting that former head of software for apple and bono both investing in your company. Not what youd think of as robotics people but it appears to be all the rage. Lots of people going in that direction. Michael, thanks for being with us. Thank you. Okay. Well, it would appear that we have a deal. A deal is on the way in the senate. As we told you a few minutes ago by a vote of 60, the senate has just voted to end debate on the budget compromise, meaning that we could get a full vote that would mean effectively we dont have a Government Shutdown until at least 2015 possibly tomorrow morning. The shutdown debates are over. What about the debt ceiling . Well ask senator Johnny Isakson in just a moment. All the tech stocks with a market cap. Of at least 50 billion. Are up on the day. 12 lowvolume stocks. Breaking into 52week highs. Six upcoming earnings plays. That recently gapped up. [ male announcer ] now the world is your Trading Floor. Get realtime market scanning wherever you are with the mobile trader app. From td ameritrade. Open to innovation. Open to ambition. Open to bold ideas. Thats why new york has a new plan dozens of tax free zones all across the state. Move here, expand here, or start a new business here and pay no taxes for ten years. Were new york. If theres something that creates more jobs, and grows more businesses. Were open to it. Start a taxfree business at startupny. Com. Impact wool exports from new zealand, textile production in spain, and the use of medical technology in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 70 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. Just by talking to a helmet. It grabbed the patients record before we even picked him up. It found out the doctor we needed was at st. Annes. Wiggle your toes. [ driver ] and it got his okay on treatment from miles away. It even pulled strings with the stoplights. My ambulance talks with smoke alarms and pilots and stadiums. But, of course, its a good listener too. [ female announcer ] today cisco is connecting the internet of everything. So everything works like never before. Tim cook, Marissa Mayer and dick costolo will be arriving at the white house to speak to the president. The senate has voted by 67 to effectively end the debate on the final passage of a twoyear bipartisan budget deal, which the house will now pass in full probably tomorrow morning. Republican senator Johnny Isakson of georgia voted in favor of the budget today. He joins us now from capitol hill. Senator, welcome to the network. Good afternoon. There are problems with this deal clearly for some in the gop. Rubio has been speaking about the fact that it allows rates to rise and the reigning in for expenses for some of the young are military retirees. Did you know that it was going to pass by this margin . No, i did not know it was going to be by this margin. If you back away and take a 30,000 foot view, its the right thing to do. Weve given stability to american spending for the next two years. Ive been the principal support of the biannual budget in washington. The savings will be 100 billion in the second decade, 96 million in the first decade. We dealt with the American Peoples business and for the first time in five years we really got things laid out on a trajectory to do it right. Is the atmosphere changing within the gop . A lot was made last week on House Speaker boehners rounding on those who had rejected the deal before it was known. Critically now there are reports in the press that the same conservatives are pushing for a bigger showdown, probably at the beginning of march when the government hits its spending limits. Do you think thats something the markets need to worry about is it. I think the markets need to be encouraged that congress got its act together on this budget. Raising the debt ceiling is a significant issue. Last time we did it in all 11, we did some Debt Reduction as well. It is a big issue but congress will be in recess until early january. How do you see that playing out . That 60day window . Well, it remains to be seen how it will be played out but hopefully it will be negotiated between the two parties, hope fiscal cliff well come to a table of common ground, hopefully well bring stability to the marketplace while still addressing the rising debt and spending a and get our arms arod the rising spending. You were one of those in support the cloture. Its still an immediate increase to federal spending, there are no meaningful reforms in the near years. Are those critics wrong . The critics i listen to are the people i saw in church on sunday, the people in the mall in the afternoon, the people on my flight. This is the first time that were having debate where the American People are happy we found a resolve. They dont like all parts of it, but they like the fact that were not shutting down, not raising taxes and moving forward. Much of the tech sector is descending on washington today to talk with the president and some of his staff on a broad range of issues to the nsa issues to the healthcare. Gov web site. What advice can be offered to the Tech Industry at this time . Cyber security is the number one threat to the United States of america. We hope theyll work with us, the nsa and administration to thread those needles to the right to privacy while still gaining the information necessary to protect my children and grandchildren. Yet yesterday a federal judge said it was probably illegal for them to have collected automatically the phone records of every person in this country and then clearly the appeals process will go forward when those Tech Companies sit down and say, look, we dont believe youve actually prevented a terrorist attack from this information, do you see that as being negotiable in the future . I dont know how negotiable it is but we cant have ourselves with one arm tied behind our back. We need to make sure the Constitutional Rights of our citizens are preserved. We dont have involuntary search and seizure but we need to have the electronic information between the United States and Foreign Countries to track foreignknown terrorists who would do harm to the United States of america. Senator, well let you get back to work. Thank you for the time. The next thing is the market is up slightly, dow is up about 10 points. Financials one of the worst performing sectors and really going in the opposite direction of the market. Youre seeing the most actives being some of the big banks, this just seven days after the volcker rule was announced. Weve seen a drip of news, banks reshuffling their portfolios. They have said weve almost already done everything to comply with what we know about volcker, now were seeing the ancillary effect of them starting to react to what theyre seeing in the minutia in the language. If you look at the news thats come out, jpmorgan not addressing this on the record but a story in the f. T. That it will be trying to sell its global special opportunity unit, a group of about 35 people in hong kong, about 3 billion in assets that does special situations lefthanding, junior loans or debt facilities. Theyre looking to sell that. Im not told its in direct result of volcker but it could become ensnared in this minute uta. Minutia. Even International Banks arent immune to this. And zhiweioions saying its tak 387 million charge to sell nonqualifying loans and lickifyilic liquifying portfolios and taking a hit. Theyre already starting to make big moves and take big charges to start complying with this. Interesting, too, because people had figured the bank himself already made enough moves to comply with what they thought the law was going to be but theres always an element of surprise when its actually announced. One of the most contentious areas is one of the Municipal Bond spaces. Its heavy in retail financial investors. It takes a longer time to place those. Banks that are issuing debt for, say, the university of california system, a lot of these public universities, think have to hold those for a long time. They cant really do that anymore. Some of this activity starting to shuffle around a little bit. Kayla, no doubt well talk about it many, many times in the coming days. If you can believe it, there are now only just seven days to go until christmas. So as consumers race to get the lastminute deals, which retailers will be the big winners and the losers . Well talk about that with the former sears ceo mark cohen when squawk on the street comes right back. I use daily market commentary to improve my strategy. And my local scottrade Office Guides my learning every step of the way. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. The energy in one gallon of gas is also enough to keep your smartphone running for how long . 30 days . 300 days . 3,000 days . The answer is. 3,000 days. Because of gasolines high energy density, your car doesnt have to carry as much fuel compared to other energy sources. Take the energy quiz. Energy lives here. [announcer]. If you think the best bed for one of you might be a compromise for the other one. [woman]ask me about our tempurpedic. [announcer] theyre sleeping on the newest tempurpedic bed. The new tempur choice. [man]two people. Two remotes. [announcer] firmness settings for the head,legs,and back. And with tempur on top,that famous tempurpedic comfort comes any way you like it [woman]ask me about the lumbar button. [man]shes got her side. And ive got my side. [announcer] tempurpedic. The most highly recommended bed in america. [woman]dont touch my side welcome back to squawk on the street. Of course, today is the first day of the twoday fed meeting, but not just any twoday fed meeting. This one really is being billed as super important. Why . Because the fed has to really do a balancing act regarding the the Balance Sheet. We can look at times in the rearview mirror, and maybe lehman jumps out the most with the huge leverage. Why is leverage important . Because leverage is a doubleedged sword. If things are going your way, the returns stack up in an aggressive exponential fashion, but they also reverse in a similar process. By many regards, if you look at what the feds borrowed in aggregate against the very slim equity on their Balance Sheet, youre looking at leverage ratio probably in the 65 to 70to1 area. Blows away some of the Historic Bank and banking explosions of the past. But, hey, its the fed. They can do whatever they want. And understandably, they end up paying out a lot of dividends so they cant build the equity, and many believe should they get into an issue, they could always quote unquote print their way out. But frtherein lies the rub. If the head has seany unintende consequen consequences, it would be like sending up a flare and the market would become nervous. I remember looking back at issues like the t. A. R. P. That turned out better than many expected, but its the unknown costs. Its how little we know about the exit. This is truly experimental monetary policy, and janet yellen boy, i dont envy her job at all. We look at the pile of excess reserves that were generated by the very good m. I. T. Models and forgot one thing will the cash end up into the system . But, no, the transmission lines are broken in many ways. Todays meeting and tomorrows statement will give us, hopefully, some concrete facts and dates about the taper. But in the end, the fact theyre moving so slow and the market seems to have quote unquote priced something small in and the reason is clear, if it was easy and something that could be done as free and clear as they have portrayed quantitative easing, we would already be out of the qe garage. Kayla, back to you. All right, Rick Santelli, a balancing act, indeed. Thank you for that. Ashed of amcs ipo tomorrow, Michelle Carusocabrera talking with the ceo about some of the challenges they face. Thats coming up next. I dont just make things for a living i take pride in them. 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Michelle carusocabrera has covered the company and joins us with some of the challenges its facing, and you are the chief International Correspondent at cnbc. But theres a china connection here, clearly. Reporter why on earth am i covering it . We did a lot of reporting this year on chinese foreigndirect investment into the u. S. Remember, amc theaters is the second largest chineseowned business in the United States after smithfield foods. I spent a lot of time talking to the ceo about the Movie Theater business overall. One of the key questions companies will face is about the shrinking release window, the time from it its released until its available on dvd or streaming. Five years ago, 130 days. Now, its closer to 90 days and getting shorter. Amcs ceo lopez said it was a challenge, but its not as critical an issue as you might think. The primary determinate in all of the success of the windows, the dvd window, the streaming window, the broadcast tv window, the paidtv window, netflix, is how the movie performs at the box office. The level of interest that consumer at large will have in a movie is limited. Reporter he says the numberone Decision Point dvd retailers use, how many dvds to vie of a certain movie, is how well it did at the box office. Its not hard to minimize what happens at the Movie Theater. Back to you guys. Okay, thank you very much, michelle. Jim cramer says buy that ipo if you can get a piece of it. They have something that allows crowdsourced shares, out of san francisco. One of the First Companies weve seen using this platform to do it. Cramer says to get in. I havent spoken to analysts about it. I thought actually its priced as a discount to its peers probably for a good reason, and that is its exposed to the biggest cities and the price the margins are less, and some of the regional some of the regional theaters may be bigger Profit Centers moving forward, was the information i had. Yeah, that wouldnt be too surprising. Also running times are getting longer, which means fewer showings per day, in addition to the narrow window of distribution. So Interesting Times for that industry. Guys, see you later on. Its 11 00 on the east coast. If youre just joining us, heres what you missed earlier this morning. Announcer welcome to squawk on the street. Heres whats happened so far the fed would have done better by all of us if it had not had theynamic model. We might have seen some of the negative impacts caused by the today. And taper, just start it already. Someone finally came on the air and said what i thought paulson, you know what, they have to taper because im tired of talking about taper. [ bell sounds ] and the market continues to grow, and i think were thinking internally we can do maybe 1,200 stores in the United States at this point. And thats because the world is continuing to change. Thats an exclusive sound bite he just gave you. Yes, thank you very much. Its true. I got it from him. No, theres a roadmap out there that looks to us like theres all these markets are available to us, and were going to go for it. The market has now gotten burned so many times looking for tapering and pushed it out. The markets will reprice if the data come out as good as i think it would. Well see the yearend tapering closer to midyear. Announcer the squawk on the street countdown to christmas is in full swing. Ho ho ho good tuesday morning, live at post 9 at the New York Stock Exchange with a eck check on th markets, after the dow did gain 129 yesterday. Were off 34 at the moment. The s p back to 1,777. 3m, one of the big blue chip winners up more than 2 on plans it will buy back shares through 2017. Of course, take a look at the 10year note. Well be watching this closely for the next oh, 36 hours or so. 2. 87 is right between the range of 2. 85 to 2. 9, that at least art cashin is pivotal for equities. And Steve Liesman is saying 2. 18. According to a poll of participants. A prior guest said 4 is the ceiling. Its a number that all investors are pretty much watching as the indicator for todays meeting. Meanwhile, some of the nations biggest tech executives are preparing to gather at the white house for a meeting with president obama. Healthcare. Gov and nsa on the agenda, as well as much more. It will include executives like tim cook and yahoo s Marissa Mayer. Eamon jabbers is outside with the meeting of the minds. Good morning. Reporter good morning. The tech executives are here at the white house. And they figured out a way to slip them in the building past all of the cameras out here from our network and others trying to get pictures of the arrival here. That meet something ongoing right now. The president is meeting with the executives in the roosevelt room. The question here for this meeting is, first of all, is this really going to be about healthcare. Gov . That was on the official agenda, but what you hear from folks who are preparing to go into this meeting is the sense that, you know, they really want to talk about the nags revelations nsa revelations, the sense that theres something from the spying agencies, pressuring the u. S. Government to allow them to tell the customers about what it is theyre turning over to u. S. Intelligence. That will be one of the hot topics in this meeting. Of course, theyre expected to talk for just over an hour here. So expected to be a fairly lengthy and substantive meeting. Well try to get comments from them as they come out, but no guarantees that will happen, as well. Obviously, a very, very sensitive topic here at the white house today, carl. All right, eamon, thank you for that. Well come back to you, no doubt. In the meantime, in washington, a bipartisan budget bill has cleared a key procedural hurdle in the senate, which does set the stage for a final vote on that deal. Our chief washington correspondent john harwood is also in the Nations Capital with more. John . Reporter carl, in the end, you had 12 republicans joining with all 55 democrats to clear that deal to cut off debate, end a potential filibuster. We now are going to have debate back and forth between the two parties for at least some period of time. If they take all the time thats allotted, the final passage vote will be tomorrow. And markets can be confident we go into the new year with some calm in washingtons budget wars. But, of course, we still have the extension of government funding, which has to take place in january, and the debt limit in february. Paul ryan said over the weekend that republicans are going to want something in return for raising the debt limit. I think the general sentiment around the capitol is that whatever they ask for is not likely to be much, or all that difficult, because at least for now we have achieved a minimum truce in the budget wars, lifting the caps the socalled sequestration caps that reduces fiscal drag, short term on the economy, substituting some less economically problematic, longerterm cuts, and that is about all washington can do right now. But they are getting that done. All right. Thanks so much for that, Josh John Harwood in washington. Thank you so much. Certainly a big thing we were watching in the markets today, also watching the fed, starting a twoday policy meeting today. What impact might a potential fed taper have on the economy in 2014 . For that, we bring in tom, the u. S. Chief economist at ubs, and dan here, head of cls here with us in the studio here. Tom, i want to start with you sure. A lot of people are talking about how to position the portfolio going into this meeting. A lot of people are saying potentially well get a taper tomorrow, potentially in march. Either way, it will happen next three months. Where do you want to be . I think whats interesting is the fact about whether or not it will happen tomorrow, it sort of drives home the whole idea on the fed wanting to be transparent and having credibility. If they really wanted to be that transparent, wed have a better sense, as well as the random guess, about whether it will happen tomorrow. For us, we do not think it happens tomorrow. We think the fed wants to see a longer string of data that shows theres been this improvement. Again, i love making this point on your show, im telling you what i think the fed will do, not what they should do. If it was up to us, qe would have ended a long time. The real question for the fed tomorrow, do they want to unload a surprise on the market . And i would argue that they dont. Well, dino, you were at the fed for sometime. If you were in their seat today, what would you do . Well, i think tom has it right, and this is they havent prepared the market for this. They would be introducing a big surprise. They would be introducing volatility to the marketplace that they dont want to do. They would also implicitly be saying we have a different view of the fundamentals than the markets have, and the big risk is that they have a big change on the inflation outlook. You know, inflation is low. What message would they be sending about the inflation outlook if they suddenly had a big switch in policy that the market is not prepared for . When you look at the dow at 15,851, the s p where it is today, and the 10year at nearly 2. 9 , you dont think its priced in already . You know, you make a great point. In september, the door was open for tapering. The market was ready for it. The s p at an alltime high. They did not take the opportunity to walk through the door. So ive got to think, you know, theyre waiting for more evidence, more concrete evidence that inflation is actually moving higher, and gdp yeah, the gdp report was pretty good. But a lot of that was because of inventory build. So you take that out, and youre still at a 2 growth rate, which is where weve been for four years now. Although, tom, jobs data has been okay. Yeah. Weve taken out the prerecession high on industrial production. A third of various survey participants do expect a taper tomorrow. How would this be a surprise to the vast majority of investors if, in fact, it happened . Yeah, so, carl, you make a great point, and thats, look, the data are they are on the fed side, right . All of the data have already improved, i would say to a substantial degree. So if the fed wanted, they could certainly use this sort of better tone. The data as cover for why they would go tomorrow. But again, it comes to and you get this from reading the minutes, its the fed is very sort of worried about unloading these negative surprises on the market. And i know the pushback on this. The pushback is, well, look, the fed surprised everyone in september. But again, i would beg to question, the fed surprised everyone with a dovish surprise. Tomorrow with be a hawkish surprise. The fed has data on their side, for sure, but the market is not braced for it in bulk as you highlight. And year end, tom, when you think about where the market goes, where the bond market goes, between now and the end of the year. Yeah. The indicators that most people would be watching, Consumer Spending. If that doesnt look to be all that great, where do you expect the market to go between now and then . Actually, we do expect Consumer Spending will look fairly constructive in 2014. In fact, what i would say, for 2014 as as a whole, we have a fairly constructive view. For us, we think the 10year yield will get up to 3. 60 by the end of the year. Of course, it wont be a linear process. Here we are, 2. 80, 2. 90, not linear from here to there. But by the end of the year, once tapering is well entrenched and we can actually start to have a conversation about the fed lifting rates, we do think that 10year yields will lift in a fairly dramatic way over the course of the year. Dino, one thing were also watching, growth in 2014. Do you think well see a significant rampup starting at the top of the year . Do you think it will take some time for that to trickle through . I think it will take some time. The last four years, the forecasts have been strong, and weve had disappointment. So the burden the burden goes the other way. I think tom makes a great point, though, about hawkish surprises versus dovish surprises. The fed doesnt want a hawkish surprise. All right. Well leave it there. Of course, well get the news fairly shortly, tomorrow afternoon, in the meantime, dino, tom, thank you for being here to discuss this. Meantime, breaking news involving russia and the ukraine. A potential normalization of trade. And michelle has details at hq. Michelle . Were watching the bonds of ukraine rally on the news out of an announcement out of moscow this morning, a 15 billion rescue package in the works. So weve seen the ukrainian 10year yield drop from 9. 9 to 8. 8 . The more immediate decline in the bonds, and the yield is now below 10 , up from earlier from 15 . So thats a pretty dramatic intraday move. The announcement earlier comes out of moscow from putin there was a 15 billion rescue package. Ukraines only got 17 billion worth of sovereign bonds coming due in the next two years, so that would be an enormous lifeline to suppress the Interest Rates. Bottom line, we dont know what duration russia plans on buying, but certainly it will be a big help, plus theyre going to set cutrate gas to ukraine, as well. Thats going to help the picture, as well. Thats the big headline. The secondary headline is, if we are to believe the announcements out of moscow, ukraine, and this drama we have seen with protesters in the main square in kiev, the Ukrainian Government has sided with russia. I say, if we can believe what comes out of moscow, because remember, it was last week where the European Union leadership had said ukraine was about to sign a deal with them. Its been operatic in nature. Right now, we are seeing ukrainian bonds rally and the currency recovering, as well. Back to you, guys. Meantime, the barricades in the square drawing pictures to les mis. Thank you. Tomko bu coburn unveiling h annual look. Reporter how you doing, carl . Senator tom coburn is out with the latest edition of the ways book, 130 billion of questionable Government Spending thats shahappened this year. The headliner, 7 billion worth of military equipment being destroyed as troops leave afghanistan, and keeping lights on in underutilized or unused federal building, some 616,000 to promote romance novels. It paid for a documentary, love between the covers, a traveling exhibit, and a website. We still provided money to study romance novels. We provided money to the state department so they could buy people some votes to like their facebook page. And we even helped nasa fund studies of us, congress. Coburn, a longtime deficit hawk, saved some of the harshest criticism for the money to launch healthcare. Gov, for what the senator calls one of the worst product launches since new coke become in 1985. The incompetence of rolling it out, nobody could not be critical of. And the amount of money they spent, when you talk to the people who actually do this for a living and know how to do it, were going to pay four, five times more than what it should have cost. Reporter in comparison, the compromised budget deal the senate is poised to approve cuts just 23 billion from the deficit over 10 years, versus 30 billion this year that the senators talking about. Kayla . All right. Hampton pearson with that, thank you so much for that story. Meanwhile, watching shares of facebook. Theyve more than doubled so far this year. One analyst is upgrading the social network this morning. Hell join us to explain why he thinks it has more room to run. Also ahead, Rick Santelli in chicago. Rick, what do you have . Well, i tell you what, ira harris had me thinking, the yield curve steepening a bit. Why . Many believe its pricing in a taper. Wow. We have mike newton to talk about what a taper would mean for emerging markets, bottom of the hour. [ male announcer ] the new new york is open. Open to innovation. Open to ambition. Open to bold ideas. Thats why new york has a new plan dozens of tax free zones all across the state. Move here, expand here, or start a new business here and pay no taxes for ten years. Were new york. If theres something that creates more jobs, and grows more businesses. Were open to it. Start a taxfree business at startupny. Com. Afghanistan in 2009. On the u. S. S. Saratoga in 1982. 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All day on nbc, were looking at the drivers of this years bull run. We have dominic chu focusing on one area in particular, performance is quite appetizing. Am i going to get hungry . Oh, get hungry, kayla. Consumer discretionary are among the best performers. Lets say youre feeling better about the job or financial situation. One thing youre likely to do is dine out more often. Its a lot cheaper than buying a new car, lets say. One place you may see early signs of a more bullish consumer is in the restaurant business. Now, beyond the biggest names in the industry like mcdonalds, yum brands or chipotle, there are other big standout stock performers arent as big as they are. Theyre in the broader market. What if youre looking to just relax after a long day of work, sunny afternoon, watch the football game, you may go to buffalo wild wings. The shares have just about doubled in value this year. And then, what if you want to go a little more upscale and grab a usda prime ribeye steak to celebrate the big promotion or maybe a pay raise . You may go to ruths chris steakhouse, and the Parent Company there has doubled as well this year. And fiesta restaurant, that owns taco cabana, up over 200 , so a real big performer. We asked Nicole Miller reagan at piper jaffray, her best idea for the coming year this year is the cheesecake factory, likes the established brand and the growing dividend and the stock buybacks, three big cases there. As to what to avoid, she is not hot on panera because of negative traffic trends and lower guidance from the company. So thats our quick look at restaurants. You will want to stay tuned, carl, in the next hour, well track an industry tracked closely by the investors. Back to you. Cheesecake, im sure fans of Big Bang Theory will like that. Reporter im a fan myself. Yes, i know. The wintry weather keeps going. How big of an impact on the retail . 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Because of gasolines high energy density, your car doesnt have to carry as much fuel compared to other energy sources. Take the energy quiz. Energy lives here. There are only seven shopping days to go until chris marx so as consumers race to get the lastminute gift, which retailers will be the biggest winners and losers . Joining us is mark cohen, former of sears canada, and Sears Roebuck company, and its great to have you. Good morning to you. Good morning. We knew this calendar would be tough, right . Fewer shopping days. We knew it would be promotional. Has it been more promotional than you thought . This is the most promotional Holiday Season ive ever seen. Its not just the short calendar, but the weakness of the business starting in Second Quarter coming right into the fourth quarter. Did the merchants go in to heavy on inventory, and why . Why wouldnt they have seen this coming . Merchants are divine optimists. [ laughter ] some, i think, have been care l careful, conservative, and are not promoting promiscuously. Others are desperately trying to liquidate the trailing inventory. You give credit to costco, nordstrom, bloomingdales, those who kept the promotional powder dry. There are a handful of retailers who did not expand their promotional behavior during the Holiday Season, at thanksgiving. Thats a tremendous tradeoff between topline sales, gross margin and expense. They dont necessarily have to liquidate inventory. Others seem to have begun the scramble as early as the beginning of november. There are five winter storms so far this season. It seems like a lot. The jury is really out on whether that helps or hurts retailers. Whats your take on that . The big news last year was hurricane sandy, which was a Tremendous Positive opportunity this year, although it doesnt appear to have been a positive opportunity for comps, when youre looking at versus 2012 . Very much for retailers in the northeast and midatlantic. But this time of the year, there are always bans of snow, sleet, and ice that are disruptive for a day or two. So its more or less baked into the historical calendar. Theres an op ed in usa today this morning about the mall as we know it in this country. They argue its dying, that 10 of enclosed malls will go out will basically shutter in the next nine years. Theres security concerns, right . Theres the power of online shopping. Do you think thats anywhere remotely true . Well, theres two issues of enormous consequence. First of all, the disruptive influence of the internet. More and more customers are buying more and more products, more and more often from the comfort and privacy of their own home. The second issue is that there are too many malls, there are too many stores in too many malls, far too much square footage, and so, theres a crash coming of sorts. I dont think it will be abrupt. And as always, the most popular locations will prevail and the b c malls wont. And theres another survey from the Retail Federation saying that as of last week, 32 million shoppers hadnt even started their Holiday Shopping. What is that lastminute rush for that shopper look like . Do you have to discount even more, or do you capture them in the store regardless, because they need to get it done anyway . Well, unfortunately, retailers have trained their customer to wait, because the discounts only get deeper, the deals only become more available. So quite a few customers wait, and many customers, in fact, as you probably know, shop after the holiday. The fed is starting a twoday meeting today. Weve been watching the 10year all morning. 2. 86 , about there. Theres an article today about Companies Like sears, jcpenney, radioshack, that are sort of teetering on the brink and saying that they are only in existence because theyve had access to easy money. They can refinance at a really attractive rate, and theyve been able to sort of roll a lot of the debt over. Talk about the survival of the fittest if some of the retailers what happens when yields start to rise . Well, look, i think the middle ground that sears and jcpenney occupies is a killing zone that doesnt have any forward viability. This year is going to be very, very tough for both of those stores. Radioshack is trying to represent themselves represent themselves in a new format, but unhappily, its the same old stuff that customers can find elsewhere. Again, the disrupter is the internet and amazon is a major force of nature in that regard. If Interest Rates do go up, inventories become more problematic and these companies will struggle. Finally, your thoughts on sears specifically as we look at some at the shares, what lampert, lands end, to grow . I dont think so. I think they have essentially killed sears. I dont think theyll go out of business anytime in the immediate future, but theyve clearly gotten into a death spiral that i dont think anyone can pull them out of. Have you done your Christmas Shopping . Have you done your Holiday Shopping yet . I actually have, happily. And where did you shop . Where did you give your business . I on the internet. Yes, in fact, on the internet. Having spent my life in stores, i have an aversion to the crowds. Mark, thanks for coming in. Good to see you. Mark cohen, formerly the ceo of sears canada. In two minutes time, the bells are set to sound across europe, and well have the close and the impact here on the u. S. , coming up after this break. Switchgrass in argentina, ld change engineering in dubai, aluminum production in south africa, and the Aerospace Industry in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 70 of our mutual funds beat their 10year lipper average. T. 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[ male announcer ] this december, experience the gift of unsurpassed craftsmanship and some of the best offers of the year at the lexus december to remember sales event. This is the pursuit of perfection. 11 31 here on the east coast. Look at a lot of red over across the pond. For that, we bring in simon hobbs, whos back with us to take a look at whats moving. And there are pockets of deflation across europe today. As we await the outcome of the fed meeting tomorrow, and the whole question of what inflation here means for them, be aware the Swedish National bank cut rates today. Cut their Interest Rates, because Inflationary Forces or Deflationary Forces are present there. Greece will get 500 million. European car sales are stabilizing. German Investor Confidence is at a sevenyear high. But the underperformance of european equities over the recent period continues. Remember, that yesterday we had a very strong day for european equity, because the data was so good. Look at this chart here. You see the way in which europe is heading down, whereas the United States is kind of stable to slightly negative. So a big underperformance that continues there. Because oil prices have been falling down 8 , 9 over the last three months, a lot of the big Oil Companies are not as clear as they might be about the future capital expenditures. So some of the oil services, equipment makers, indeed oil Seismic Survey player in france, ccg, won today. You can see how thats taking down some of the engineering groups. Today, a towering figure, angela merkel, in the wake of having formed a Coalition Government finally in the wake of the german election, was reelected for a third time as the chancellor of germany, and took the oath. Really a towering figure without european politics now, having managed to occupy so prolifically the Center Ground in the largest economy in the euro zone. She emboldened, guys. Now, of course, goes off to european Leaders Summit thursday and friday in which Banking Union will be front and center. Back to you. What a year she has had. Phenomenal. A survivor. Thank you so much, simon. The dows losses have accelerated, and lets get to bob. Looking at the dow industrials. Were down right at the lows for the day. The important thing is its fairly narrow amplitude. The dow is moving in a 60point range, and the average daily basis is 125 points. Remember, were not moving in a very big range. In terms of the movers, what you want to look at is the fact that the movers are the high beta names, so biotech, airlines, housing, the gold mining index is down more than 50 this year. So those the movement of those kinds of group, higher beta name, suggests the market has more cautious tone to it. If you look at the vix, i pointed out this morning, the dow is up 130 points yesterday, and the vix went up. That is a very unusual situat n situation. And it suggests traders are buying puts, this is an indication of the option interest. Theyre buying puts, because they are very nervous about the fed decision tomorrow. In fact, whats unusual here is that spot price in the vix is higher than the january futures contracts, so the vix is inverted a little bit, and thats an indication of the shortterm nervousness around the fed meeting tomorrow. Im still surprised, though, at somehow bullish the overall town is of the market. Heres the basic scenario for 2014 from the bulls as they have described it to me. The feeling is the fed will announce a modest taper, probably january, but the datadependency will be there. Theyll make a big thing about that. If the data worsens, the fed will adjust the taper up or down. And thats the key thing. The bottom line is the bulls believe the fed put is still very much alive in 2014. Thats why theyre feeling better on that, including, of course, better economic data. Meantime, the two biggest drivers, arguably the biggest drivers in 2013, was dividends and buybacks. We saw that today. You see boeing and 3m up. Boeing 10 billion buyback, 3m, 35 increase. And, guys, a new record year for dividends and the highest level of buybacks since 2007. Back to you. All right, bob, thank you so much. A lot of people saying thats why the market has been rising so strongly, because a lot of the shares are being taken out of the market. Well see what 2014 holds. For now, thanks, bob. Thank you. Over to Rick Santelli in chicago with the look at an impact of the fed policy on emerging markets. We got a little taste of this earlier this year. What do you think is waiting in the wings . Well, i think there could be a lot of volatility. Id like to welcome mike newton discuss this very topic. Thank you for taking the time this morning, mike. Thank you, rick. Listen, i know that emerging markets have their own set of fundamentals. I get that. And there are many traders that come on, and strategists on cnbc every day, that talk about issues of correlation and push many Investment Strategies in emerging markets. But on a very large level, mike, would you agree with the fact that the sales of the emerging markets economies in many ways are either filled with liquidity from Central Banks like rfed, or it gets taken away and has a huge impact on the economy and the Foreign Exchange . Can you elaborate on that . Sure. I think for all of the emerging markets traders, it was very tricky back in may when the taper talk first started coming out of the fed. All of the countries of the capital, importers such as brazil, india, turkey, south africa, that have been slow on Structural Reforms and dependent on foreign capital, have been hit hard and will continue to be hit hard. Since introduction of doddfrank, liquidity in the space has dried up. Looking ahead to next year, lets assume u. S. Rates will be higher, which is what i strongly believe, the markets will come under a lot of pressure. Liquidity, as i said, has been reduced. What you may end up seeing is quite a vicious cycle, where fixed income investors dont have many options other than to hedge in the short term through the affects market, which then weakens the fixed income markets further and leads to a rather nasty outcome. One quick point on the election cycle. The elections in many of the key emerging market economies next year, and that will present a redilemma for policymakers, because there will be pressure to keep policy easy into the elections. But against that, these countries dont want excessive volatility in their effects and fixed income markets, and that will be nasty. Compared to how it was in may of this year, as president reagan once said, you aint seen nothin yet. All right. Mike, im going to force you into a 2014 prediction, and some of our correspondence, you say maybe traders need a strategy should north korea fall. Now, do you think that has a pry probability to happen in 2014, first . Yes or no . Yes. Okay. And what trade or strategy would you recommend to take advantage of such an action . I think what you should do right now is to buy topside, low delta strikes and dollar career. The volatiles are quite cheap. And i think that for so long the collapse of north korea has been the dog that hasnt barked, and people are naturally quite reticent about putting money to work in this trade, because they thought it was going to happen ten years ago. Its obviously been a loser. But that gives you an advantage to get involved while its quite cheap. Its really different in pyongyang. You have a horrendous internal power struggle going on mike, ill have to stop there. But youre the first guy to make a unique 2014 prediction, and if it happens, youre the first guy thats going to be on my cnbc guest spot. Thanks for taking the time today. Merry christmas. Thank you, rick. Merry christmas to you, too. Kayla, carl, back to you. Rick, thank you so much. Shares of facebook have been on a tear this year. They have officially doubled since the start of 2013. Our next guest upgraded facebook this morning, and after a short break, hell tell us why. In todays markets, a lot can happen in a second. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Open to innovation. Open to ambition. 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Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. natalie ooooh, i like your style. vo so do we, business pro. So do we. Go national. Go like a pro. Stick with innovation. Stick with power. Stick with technology. Get the new flexcare platinum from Philips Sonicare and save now. Philips sonicare. Coming up, hitters week continues on the halftime report. Mario gabelli has the new picks he thinks will outperform next year. And a top fund manager is here with why he thinks one of the years worst plays will be one of next years best. Plus ubss Paul Richards reveals the three currencies poised to win in 2014. All straight ahead at the top of the hour. Kayla, well see you again. All right, scott, well be watching. Meanwhile, facebook getting an upgrade from neutral to positive from susquehanna, this as facebook confirms the testing of the video advertising. Lets bring the man in, brian nowack, and thank you for being here. Thank you. It has been rumored that they could be rolling out video ads and now confirming that theyre testing it. What will the test period look like for users and analysts . So, for user, silent rolling ads directly in the news feed, and then when users interact, theyll expand and see a full video ad, and at the end, youll get a carrousel of other suggested ads to potentially watch. What could facebook potentially gain from this . Its been talked about for a long time. The last time we heard about this in july, i believe, there was a report saying it could be as much as 2. 5 million per 30second ad, saying it would rival super bowl ads. How profitable could this be for them . It could be a very big deal for facebook. You have that you have that big of an audience, and you start learing on video advertising, sold at much higher average cost per thousand, its not a reach to say advertising alone could add 1. 1 billion of advertising, which to put it in perspective, in next year, we think theyll do 10 billion of advertising, so the idea of adding 1. 1 billion from video adds a lot to the platform. Thinking about to some of the upgrades earlier by other analysts looking for video ads, one thing, and s p inclusion was another. Yeah. We got both of those. Do you feel like youre getting to this a little bit late . I dont think so, no. I think that the video numbers still are not in in a consensus of street numbers. We are as were upgrading the stock, we are 4 above street expectations in 2014 and 2015. And theres no video advertising in my numbers, because i wanted to stay conservative. The extent to which this test rolls out over the next three months or six months into next year, its all upside still to come to the model. And when you think about the real kicker from video advertising, more advertising dollars flowing over that platform is going to give you a revenue acceleration, as well as potential margin expansion, because of the high incremental margin of advertising dollars. If if this is a three to sixmonth test, when will you see it in earnings . The first half of next year. It wouldnt be a stretch. Meantime, david admitted the newsfeed is crowded as it is, and theyll limit the number of sponsored stories. Some argue that gives you more dollars, even though it provides less product. Yeah. Is that a good problem to have . Should they be worried . Its a good problem to have. The steps theyre taking to limit the ad supply suppression growth are very good long term. This is the same playbook out of google, and quite frankly, weve been waiting for other online display players to do this, because in an environment when pricing is still low, like it is on facebook, and advertising return on investment is still high, the steps that theyre taking to limit ad impression growth will actually drive pricing higher, and there is room for facebook pricing to grow, which basically will mean faster overall Revenue Growth on the platform. 68 price target right now. 54, 56. Well see where it goes. Brian, thank you so much. Thanks so much. President obama along with Vice President biden, susan rice, valerie jarrett, did meet with the tech executives in the roosevelt room at the white house today. It turns out they talked a little house of cards. Take a listen. Im just wondering if we brought advanced copy of the house of cards . A cameo. You willing to do a little cameo . Well, i wish things were t t that its true. With kevin spacey, man, this guy is getting a lot of stuff done. This guy is getting a lot of stuff done, as he talks about Kevin Spaceys part. When we come back, one outspoken judge is taking on too big to jail and why we havent seen more highlevel wall street prosecutions when we come back. Were aig. And were here. To help secure retirements and protect financial futures. To help communities recover and rebuild. For Companies Going from garage to global. On the ground, in the air, even into space. We repaid every dollar america lent us. And gave america back a profit. Were here to keep our promises. To help you realize a better tomorrow. From the families of aig, happy holidays. Federal judge jay rakoff has harsh words for the government when it comes to pros cuecutinge people responsible for the financial crisis. Scott cohn has more. Reporter scott, this is a sitting federal judge, and one thing you can say about judge jed rakoff, he is not shy, not when it comes to routine settlements with big banks like citigroup and bank of america, and not shy about blasting the u. S. Attorneys office, where he cut his teeth. This opinion asks the question a lot of people have been asking, why no highlevel prosecutions following the financial crisis . He doubts there was no fraud. The failure to prosecute those responsible must be judged one of the most egregious failures of the criminal Justice System in many years. He criticizes attorney general eric holder and lenny brewer. You dont go after the companies because theyre too big to jail, and you dont go after the individuals, because that would involve the kind of yearslong investigations that you no longer have the experiences or the resources to pursue. The u. S. Attorneys office in manhattan, which prosecutes most securities fraud cases, has declined to comment. We just got a statement from the Justice Department in washington, spokesman brian fallon, saying the judge does not identify a single case where a financial kbektive should have been charged but wasnt, says the department has brought thousands of cases. No comment yet from lenny brewer who left earlier this year for private practice. Carl . Interesting, scott cohn, thanks, back at hq. We want to get more insight from a former federal judge who presided over the galyon group. Good morning. Good to see you. I dont know if theres a code between judges where you dont criticize each other, but does rakoff have a point . I think his remarks are a bit intemperate, and maybe the headlines are intemperate more than the article he wrote. Do you believe theres been a breakdown, either in on the part of prosecutors on the part of judges and senting . Did sentencesing . Do you think the public deserves more orange jump suits . I believe its been approached on a professional basis. It has gone after people in the criminal law when they thought that they could, and i dont see any indications theyre pulling punches in their criminal investigations. They certainly have indicted people at the bottom of the chain, the mortgage brokers, the individual applicants who lied on their mortgages, some of the banks involved. Once you get beyond that, the trail goes a little cold, if you will, and proving a case in front of court is difficult. Judge, some of the postcrisis regulation has actually aimed to single out executives, perhaps in an attempt to make it easier to prosecute them should another crisis come along. From what youve seen, do you think that will be effective . Is that a good road to take . I dont think its going to be effective to go after big fish in this situation, because its going to be very, very difficult and probably impossible to make your case. If you look at what the s. E. C. Has done in the past number of years, theyve had some spectacular failures of proof. You think about lehman, and there is a great the New York Times ticktock about how they ended a bid to go after some of the lehman executives and ultimately there was a breakdown at the commission level, seemed like politics got the best of them in that scenario. Do you think the s. E. C. Under Mary Jo White will suffer the same fate . I dont think theyll suffer the same fate in that sense of the word. But the reality is that fraud in complex transactions requires a very intensive and longterm investigation. And theres a limit to what resources government can apply to it. If its a criminal case, if its an Insider Trading case, if its cut and dried like a madoff case or Bernie Ebbers case, thats one thing, but an entirely different kettle of fish to attempt to pin the Great Recession on any individuals lapel. Are we at a point now where the statute of limitations essentially has left people thinking, if it hasnt happened by now, it probably wont happen at all, some of the highprofile prosecutions . Well, i dont think the statute of limitations is a bar in the minds of the government. Maybe some of the defendants e are potential defendants are hoping thats so. But the government usually has a way of extending statutes of limitations pretty readily. So i dont think thats an issue. All right. Well, certainly attorney general eric holder has pledged more cases to come in the new year, so it seems like that statute is extended. Come back more often. All right. Nice to see you. All right. Meanwhile, pot tourism is on the rise in the two states where its legal. Thats washington and colorado. Both of those states are taking drastically different approach when is it comes to the high flyers. Well bring you the full story when squawk on the street returns. Thats why you take charge of your future. 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S. , real estate in hong kong, and the optics industry in germany . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 70 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. Welcome back to squawk on the street. Im kate kelly standing in Downtown Manhattan outside of the federal courthouse where the fate of s. A. C. Trader Michael Steinberg is soon to be determined. Jurors deliberating in the case as to whether steinberg engaged in Insider Trading in the years 2007 through 9, work working at s. A. C. , had just begun conferring about what to do about the charges within the last half hour or so. After instructions from the judge, they were told to go off, choose a foreperson, they did that. They have chosen juror number 12, a lady. And they are deciding right now on the various five counts, as part of the case. Well bring you additional details, carl, as they unfold, but were told theyve already asked for Additional Information from the judge, including a copy of yesterdays closing argumenas and some exhibits. Kate kelly, thank you so much. If you are believe it, pot tourism is on the rise on the west coast, but the two states where weed is legal have very different ideas of how to deal with the baked backpackers. Here at post 9 to explain is our own jane wells. Great to have you back. As someone just said on twitter, if anyone can turn post 9 into pot 9, that would be jane. Im not sure, again, what to make of all of this. You mean pot tourism is up . I am shocked shocked, i tell you guys, washington and colorado are taking two very different approaches. Colorado is planning for tourists to come to smoke pot next year, and buy it. Washington wants to keep them out by limiting the amount of supply to only whats needed for residents. So how much is that . Well, it hired the rand corps corporation to find. Usage is more than twice expected. 575 metric tons of marijuana is being consumed this year in washington. The state thought it was only 85 metric tons. Washington recently hosted the National Marijuana business conference as it prepares to issue licenses to sell pot for any adult use whatsoever after the first of the year. Yes, people, this is happening. Its real. And for those wondering about the dollars and cents, based on current average retail rates in seattle, that 175 metric tons is worth 1. 4 billion. The state will start taxing that about 50 , and assuming people will pay that much to buy legal, it could mean 700 million in extra tax money. But thats a big assumption. Washington wants to phase out untaxed medical marijuana dispensaries, get all pot on a tax and regulated system, but theyll trigger a lottery and some dispensary owners have no priority over newcomers. Ill try to apply for multiple license through friends and family members and get my odds to go up. Yeah, everybody is gaming the system. How did rand i think of them as the Bland Corporation from dr. Strangelove using federal data, coming up with the numbers, and guess what percentage of washington states Adult Population uses marijuana on a monthly basis . What percentage thats a dangerous thing to guess. Just guess. 20 . 20 . No. Its only a little over 10 . An estimated 556,000 people out of 5. 3 million people. Those are stunning numbers. Still no small number. Always good seeing you. Thank you. Our jane wells here at post 9. Lets get back to headquarters and scott wapner and halftime. Guys, thank you so much. Super mario is in gabelli, here for the hour with the 2014 playbook. What new stocks has he found and what will lead the market next year . Overseas opportunities. Which emerging market is best for your money next year . A top fund manager will give you the play. We do begin with the marks and march