tv Squawk Box CNBC November 22, 2013 6:00am-9:01am EST
♪ higher and higher, straight up we'll climb ♪ ♪ getting higher and higher, leave it all behind ♪ >> good morning, everybody. happy friday and welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. and there is only one place to begin this morning's conversation. that is with the markets. the dow turning positive for the week yesterday, posting a triple-digit gain and closing above 16,000 for the first time. financials leading the way for the s&p as the index halted its longest running streak -- losing streak in two months. of course, this is three days that were down and i think gained back everything it had lost over the last three days just yesterday. as for that so-called fear gauge, the vix dropped below 13. with only a little more than a month left in 2013, why don't we look at this year's returns? the dow is up more than 22% at this point. the s&p is up nearly 26%.
and the nasdaq is up by nearly 31%. by the way, if those numbers aren't big enough for you, check out how far stocks have come from their march 2009 lows. the dow over that time period gaining nearly 145%, the s&p 165%, and the nasdaq nearly 213%. yeah. march 2009 lows, what a long way we've come. as you take a look at futures this morning, they're flat-lining at this point, probably unsure what to do after yesterday's big gains. as for the rates with the ten-year, at this point the ten-year is yielding 2.782%, so below 2.8%, but it's been rising and rising on the expectation that the fed is going to have to start tapering at some point, and that will eventually lead to higher interest rates. >> the obama rally's in full force. 2009. what happened in 2008? >> the election. >> yeah, that's right. here we are, baby. rich people are getting richer, though. that's the only problem. >> i know that's your new problem. >> here's my two anecdotes.
yesterday, over at the gym trying to, you know, get rid of -- what's the name of that new issue? potbelly.com? whenever i see that, i think -- >> what? >> well, i just, i was running yesterday. i'm going to get this down to where i look like bradley cooper or something. >> when you put on your jacket, i had no idea how much -- >> you wait until i have the six-pack, when i replace the keg with the six-pack. anyway, so, a guy says to me, joe, double, right? double. okay, that was number one. because if people are talking about bubbles, the bubble's not here. it's only when you're not talking about a bubble that it finally bursts. >> sneaks up on you. >> this morning, i have another ocd, and that is that i have to top off my tank. i need to get it all the way up so that it stays on full for, you know, how -- well, you don't know, but it stays on full. >> thank you. yes. >> that's when you get -- it stays on full for a long time! >> the gas station guy said -- >> no, not the gas station guy. so, i have to get it up there. otherwise, if it starts here, it goes right down. so, i'm out of the car and i
hear a guy -- >> i love these. >> i hear a guy, "hey, kernan!" i look over and he says, you say cab drivers don't watch or talk about the stock market. he's in a gw cab, which is right on route 46. >> yes. >> he's getting gas, and he says, i watch every day and i'm watching the stock market, i love the stock market, i love "squawk box" and i watch every day. >> yay! >> so, but he's not representative, i don't think. i don't think we're there yet in terms of where everybody -- >> right. >> but that does sound like things are starting to percolate. >> yeah, i think it's in the good stage where it's starting to spread out to -- >> maybe that means retail investors are ready to jump back in. last night, "nightly news" made a point about this, the first time the dow's traded above 16,000, so the word's getting out. >> but cab drivers. he said he was watching thinking -- >> is that true? >> thought i'd mention him. so, what does that mean? one guy says bubble, the other guy says he's watching.
i think it means -- >> i think they're starting to -- >> still a ways to go. >> fourth or fifth inning? middle of the fifth? bottom of the fifth. fourth? doubleheader? >> so far from seven, eight, nine. that's the point. >> and up 25%. i'm not going to mention my call for -- >> it's not one, two or three, though. it's not first three innings when you look at the gains. >> we're somewhere in the middle of the game, but where, i'm not sure. and you know, people is thank you democrats are always better for -- >> that is true, by the way. >> if you want to live like a republican but you -- i can't remember. if you want to live like a republican, vote like a democrat. that's what they say. >> there you go. >> and is it because of stimulus? is it because of -- is this the obama rally or the bernanke rally? >> that's the other thing to think about. i would argue the bernanke rally is the obama rally, because obama, he wasn't the one that -- >> he wasn't -- >> i agree with that. >> you know who was the original decider and who was on jay leno and who was with chris christie yesterday.
>> oh, i didn't know he with with chris christie. i knew about leno. >> you have to think about this -- >> 43. >> he's an artist now. >> i know, he's been painting. >> had mccain been on or a republican, hear this, it's possible that they would have replaced bernanke. >> oh. >> with somebody who probably would not have pursued this type of -- >> you might have kept bernanke the first time. >> and you may be right -- >> i think you would have been crazy not to have kept him in the midst of everything they had done. >> well -- >> you don't know the plot of your next book yet. i don't know the plot as to how we exit. >> i've got to work on that. >> see who wrote this piece about how qe is bad? >> no. >> a guy who's name is frickin' saving. thomas saving. how did they find a guy named saving to write a book about how savers don't -- >> are getting crushed? >> yeah. his name is saving. he's been unable to save. anyway, he wrote it with phil gramm. last but not least -- >> yes, sir. >> the one guy who wrote against -- if you like the rules, you can keep them. obviously not. the senate rule. one of the democrats -- >> well, three.
>> there were three. manchin, in a republican state, and the other one -- i have disparaged carl levin before. i have to say, class yesterday. >> class, right? >> right, because he's a -- >> look, i don't think this is a partisan move. this is about protecting the institution of the senate, and the minority was always supposed to have some room there. now, it takes two to tango, and the republicans have done some stupid things with blocking and just refusing to put any judges through. >> but it was just as bad when bush was trying to do it. >> there are more -- there have been more -- >> they started it. anyway, here's -- the "journal" got a little pissy here. listen to this -- "obama care would have never passed if mr. franken hadn't stolen the minnesota recount and if prosecutors hadn't hidden the expulcatory evidence that would have showed that alaskan republican senator ted stevens," false ethics charges, but this hid some of it. but it says if franken hadn't -- the former comedian who's got the biggest mouth in the senate now -- if he hadn't stolen the
recount, then there wouldn't be obama care in the first place. but you know what? obama care is -- the more that -- well, no, i just -- [ everyone talking at once ] you know, without obama care, we wouldn't have anything to talk about every day. >> this is true. >> but it does say that the rise above message is not getting through. this is about ramming it down -- >> do you think they listen to us? >> no, this is about not working together with the other side. this is a problem. this is bad for the institution. and by the way, a lot of the people who voted for it voted against it back in 2005, eight years ago when it was the republicans who were trying to do the same thing. everybody's changed sides. >> but obama now, after voting to raise the debt ceiling, he was also adamantly opposed to doing this as well. so, we know how politicians operate, but i was going to ask you -- >> just all these guys, tom harkin, a democrat in favor of it, says he's been waiting for 18 years, eight years ago said this was absolutely the wrong thing to do with the institution s
. mcconnell who was in favor of it eight years ago is opposed to it. basically, they just traded sides. >> am i okay with what? >> here's what happens now, he's not going to get anything through legislatively -- >> yes. >> so, he's governing through regulatory measures now. >> correct. >> now, any of the regulatory measures that are challenged at the district court of d.c., he can stack that court so he can -- >> yes, he can. >> okay. the other thing is, polls have him at 37%, 40%, somewhere between there -- >> not a good -- >> well, no! he can't -- who's going to be -- how much below -- i don't think he had 47%, like romney said, but he's got 37%. he's got 37% that will never waver for him, so -- >> he can't go any lower! >> i don't think he's worried about it. >> he's a lame duck. >> not now! how many votes do you need to repeal obama care in the senate now? >> that's a good question. >> 51. >> well, 51 because they figure if they got the majority, they would change the rules to continue this nuclear option. >> because why not change the rules at this point? when you've lowered the
standards. if you like your rules, you can keep them. let's talk about the markets a little bit more. we went off on a little bit of a tangent, but a good tangent at that. one of the big questions during the stealth rally, which we've been calling it, is who's actually taking part in this. let's follow the money. inflows of $4.28 billion in the week that ended wednesday, roughly in line with the four-week moving average. etf investors added a net $1.6 billion to their accounts. what about other investment vehicles? so, "the ft" reports that global money market funds are projected to lose 33% of assets under management next year. the paper citing moody's for that. the firm says that headwinds for money market funds include low interest rates, and of course, new regulations in the in the u europe. the thing about these numbers is who's participating, right? this goes to the cab driver thing and whether the cab driver's actually participating. that's a lot of money that's going into the market during this period.
i would have thought people, given the conversation we've been having on this set, where everyone seems to be a little anxious, that would have been the opposite. >> i think it's new money. >> but there was a time when people liked to, you know, if they -- they see social media and take a shot at something, and the stock market, i'm not saying it's gambling, necessarily, but there was a time where you could dabble a little bit and make a little money and take a vacation, you know? it used to work, and now people are just deathly afraid of another move to 6,000 or something on the dow. i mean, i think we've got time to slowly get people back in before they become bag holders, which happens to bad -- >> that's your point, maybe fifth inning or something. >> yes. >> not seventh, eighth or ninth. >> are you seeing in the seventh? >> no, no, no. >> do you sing in the seventh? is that the seventh inning stretch? >> that's the seventh inning stretch. >> you sing "take me out to the ball game." >> i think you want to be out before you get there, because you don't want to be around for eight or ninth. >> and you want to be out before
the full-figured gal sings. >> that's true. >> is that how we say it now? >> she's a lady. >> the plus-sized lady. before the plus-sized lady sings. >> what else is going on with stocks and bonds this morning? >> i don't think you can use the "f" word, right? >> you're skating very close to that right now. >> i'm drinking a diet coke. all right, we mentioned stocks and bonds, but what about the broader markets? i want to know what they said about gold, because we laughed when they said it, when they were saying it was going up, gold. goldman sachs is predicting a significant decline in gold in 20 2014. the precious metal is already down 20% this year and i could have sworn goldman was bullish on gold. >> look, david einhorn was bullish on gold -- >> i saw him yesterday. he said, well, i bought it in 2009, it was a pretty good trade. i remember him with his donut comments. we were up at about $1,500 on gold, weren't we? he was completely wrong with that. these guys never admit they're wrong. he's also got a new hairdo. did you notice that?
>> no. >> i don't know. anyway, the firm says that bouillon is set to fall at least 15% next year. goldman issued a report of the top ten market themes for 2014. a warning of the growing downside risk for commodities. gold this morning -- this probably would affect the precious metal because goldman had some sway, but it's only down $1.60, but that's a new, pretty close to a new intermediate term low. not quite. i guess it could almost touch $1,200 to get down to recent lows. as for oil, which we're waiting. i paid $3.30 for premium this morning. we're waiting for this to help the consumers, but we didn't see it yesterday, that's for sure. not from target or from the others. finally, as far as currencies go, as the tapering, i think, gets closer, but maybe it isn't, but we're back above 1.35. it is a relatively quiet friday on the data front.
two economic reports of note. the labor department is going to release job openings and labor turnover, the survey for september. that's at 10:00 eastern, not on our show. then an hour later, the kansas city fed survey. as for earnings, companies reporting this morning include foot locker, which for a while -- was that the one that was -- no. >> no, that was woolworth. >> and also, petsmart. someone the other day said people that have pets live longer, and i said, well, i'm going to live long, then. >> a lot of dogs. >> three dogs, a bunch of fish, a couple hamsters. there may be a shortage of data -- beta fish. >> i like the beta fish. >> you knew the second you went from -- >> true. but we still have plenty to discuss about -- i'm starting to know you. >> when you start with hamsters, it's just -- it's hamsters that got me. >> how did that -- >> i don't know. >> when did hamsters become some kind of sick joke?
i don't -- >> it's not a joke. >> has it come to that in society, where little kids can't have cute little hamsters at this point without some disgusting nuance -- >> i don't know. i don't even know what you're talking about. >> so, we're bringing in a special guest this morning, not right now, but later. atlanta fed president dennis lockhart, he'll join us live at 7:30 eastern. he's also going to talk about the rebuilding of atlanta after being ground zero for the walking dead and the walkers. >> they've made great progress. >> they have made some progress, but there was -- it was a wasteland for a while, just people, right? >> well, they've done well. i think the cdc is doing much better than it was, too. >> cdc's a real -- >> that was a rough case. >> that was rough. it blew up. why don't we talk about the global markets now with the "global markets report"? ross westgate is standing by in london. ross, good morning. >> hi, good morning, becky. good to see you. yeah, not much follow-through for european stocks following
that close on the dow last night. we're about 5-4 decliners out-pacing advancers, so fairly flat, but we are just about at the session lows. there was a bit of a kick on first thing this morning, then it sort of evaporated, the early gains. the ftse yesterday was pretty flat, and that's where we stand right now as well. this morning's gains down 14 points. the xetra dax is off 13. the big story this morning was a tick up in the ifo, institutes business climate index, europe's probably most important sentiment index that covers germany. 109.3, better than the expected 107.7. they say manufacturers are more optimistic and they're doing well on the back of stronger exports. that did just boost the euro up to the session highs as well against the dollar. the euro also up four-year highs against the yen. the kaycac is up. ftse mib down half a percent. breaking down the sectors this friday, pretty even steven, which reflection the normal sort of focus. basically, resources weaker once again. we are, we had that
disappointing manufacturing pmi from china yesterday. that's followed through to today as well, and the dollar firmer against the yen. media, technology a little bit firmer. keep our eyes on technology with the launch of the xbox as well today and see how that does against playstation games. we also heard from mario draghi today as well, two days in a row. he's sort of saying they talked about deposit rate cuts yesterday, but with the ecb meeting, there was nothing more on that today. he was much more focused on putting together a single resolution for winding up european banks, and this big disagreement between germany, who don't really want any mutualization of debt and banks in france and italy who say we need to have a fund to do it. draghi today very much trying to toe a middle line and get some consensus around that, but that will be a big focus for european politicians before the end of the year. yields as a result today on bunds just a little bit higher as well post that data. but otherwise, fairly flat market right now. back to you. >> ross, thank you for that.
we also have corporate news to get to this morning. the "wall street journal" reportion that charter communications is near a deal to get a loan to make a bid now for time warner cable. sources say that if charter turns to outside equity from sovereign wealth funds or other sophisticated investors, the amount would be less than $10 billion. keep an eye on time warner's stock, because there's going to be a lot of rumors floating around for the next couple weeks about whether they really are a takeout target. we talked about them as a possible one for quite a while now. >> expensive, right? >> it would be expensive, and -- >> the biggest ever, wouldn't it? >> no, no, no. >> $45 billion, $40 billion, something like that? >> from the biggest ever deal? biggest ever deal is vodafone buying management for $183 billion. so, there's a lot of room between -- >> yeah, but this for a cable company? $40 billion -- >> that's not bad. >> what was aol? that tha was -- >> that was $134 billion, right? you had to pay the premium for it. >> the kind of premium --
>> for this? 20%. >> yeah, probably. it's a pretty rare deal. >> it's a rare deal. in this environment? it's a rare deal, so, we'll see. >> what was the last one that was -- >> big deal of this magnitude? we haven't had a big deal of this magnitude in quite a while, so. no, i mean, vodafone buying the other piece of verizon. but that's not a real merger, so we'll see. also, this is a little deal but big deal to them. a jury awarding apple about $290 million in damages against the retrial of samsung. the decision restoring a large chunk of a historic verdict that the iphone maker won last year. samsung had argued it should only have to pay about $53 million, so to samsung, $290 million is a lot. to the coffers of apple, maybe not. >> right. >> maybe not so much. a decision on whether to approve bank of america's proposed $8.5 billion settlement with investors in mortgage securities
is now in the hands of a new york state judge. a nine-week court proceeding ended yesterday. the judge now must decide whether it's reasonable for the trustee of the securities to enter into the settlement, which is binding on investors. all right, coming up. well, number one, you know, you read things in the "post." i guess when the "post" had that thing about the bag man and the they sullied the two guys, the boston bombers, that -- >> but did you see the front page of the "new york post" today? >> that's not what i'm going to talk about. >> but i was interested in that, the reprint of what they printed 50 years ago. >> the "daily news" did the same thing. it's pretty easy to print your old -- i don't know. >> interesting. >> when you're reading the "post," here's the top line of the main article. larry kudlow, the charismatic msnbc anchor -- >> what? >> larry kudlow, the charismatic msnbc anchor. so, you know, they've got -- number one, you've got the writer, number two, you've got
the editor. number three, you've got -- it just, i mean, can you ever imagine larry, number one, our conservative friend, larry, at msnbc, number one? but just not knowing enough about larry kudlow to know that he works at cnbc? just read it with a grain of salt. when you read the "post," know what you're reading it for, for entertainment. it's like "mad" magazine. >> people make mistakes. it's a good newspaper and people make mistakes. >> oh, that's big of you. anyway, there but for the grace of god, the "the new york times." that's why. they won't correct this. >> i'm pretty sure that i've read things about myself that have said i'm from msnbc. >> i can't believe you're not! anyway, coming up, the ability -- i mean, that was your calling. anyway, the ability to talk on your cell phone during a flight. a major tech advancement or a coming annoyance. we'll discuss that next. but in all the stuff you read in the business section about us, about anything, i just, that's a pretty good example of how much
you should -- i believe about, what, should you believe 50%? 40%. and fox sports news and they've already done stuff about me and can't get any worse. the saints handed the falcons a fifth straight loss last night. drew brees throwing a pair of touchdowns. the nfc south-leading saints improve to 9-2. the falcons fell to 2-9, officially eliminated from the division race with five weeks left in the nfl season. first as we head to break, let's check out the national forecast with the weather channel's alex wallace. hey, alex. good morning to you! tracking some showers this morning across parts of the northeast. and that's generally going to be the case for a majority of the day. just sort of in and out of light showers out there for us, generally going tomorrow north of d.c., up into new england dealing with that threat for the rain. a little rain and snow mixing in as well, getting into the green and white mountains dealing with that. then by tomorrow, it will be a drier time for that 95 corridor, but back through the interior, close to the lakes, snow showers for the start of the weekend. tracking a line of showers and storms rights now moving through the lower mississippi valley.
with it, some heavy downpours and lightning. heads-up mississippi into louisiana. then back into the southwest, heavy downpours here into parts of arizona, including phoenix. and a winter storm taking shape. this is going to dump quite a bit of snow through parts of the rockies and then we have a potential for icing through parts of texas. that will continue into tomorrow as well. and continuing with our snow back across colorado and new mexico into tomorrow, there will be some spots doing pretty well. the ski resorts here, as you get into the san juan, could pick up close to 2 feet of snow. well, that's your national forecast. more "squawk box" on the way.
welcome back, everybody. right now it's time for "the executive edge." this is a daily segment focused on giving business leaders a leg up. federal regulators are considering whether to allow airplane passengers to use their cell phones for calls and text messages during flights. the announcement by the fcc sets up a debate over technical and social implications. if this story sounds familiar, it's because last month the faa said it would allow expanded use of electronic devices aboard planes, but the devices are still not allowed to connect to any ground networks, but guys, the social implications here are, do you really want to listen to people talking on a cross-country flight for five hours? >> greatest fear. but you have the buds to go in -- >> little buds. i still don't want to hear people on the phone. i'm okay with e-mailing and texting until the last second. that part i'm okay with. the phone part a little less so.
>> i wish i could have them banned in supermarkets. i wish i could say that the microwave is rotting the food or something, which is probably about as realistic as this. >> i have a different question for becky and joe here. and i know most of us often sit in the back of the bus during these flights, but to the extent you have an opportunity to sit in the front of the bus, where the seats are wider and things are more spread apart, especially international flights, do you think that those people should be allowed to be on the phone? >> well, you know, on the acela -- >> they have a quiet car. >> they have a quiet car. but in the other place where i know you demand to sit with your tickets, the front, you know, where you'll see all the muckedy muck going back and forth, people are on the phone there, in the most expensive -- >> it's loud. >> they do use them. and if i'm right next to them, it does sort of irritate me if a person is doing business for the whole three hours. it's like, oh, my god, but i do listen. >> remember, that's how that guy found out all the information, the reporter sitting there listening to them. i go back and forth because i can understand wanting to be on the phone, wanting to keep connected for business, maybe check in with the family, be
able to make sure that a car can get you. it's not off the record, but i go back and forth, the idea of being stuck on a plane listening to people talk endlessly and having no escape, whoo. >> you would see someone -- petraeus, his wife was sitting behind him and
i didn't know his wife was there and i saw him talking to some other young women and stuff, so i was watching that and i go, oh, his wife's here. but this all should be off the record, right? >> no, what happens on the acela stays on the acela? [ everyone talking at once ] >> i think it's on the record. >> yeah, it's fair game. it's fair game. >> hey, can i just -- you know, andrew convinced me, we have to be afraid -- like, "the post"? this is all i'll say about "the new york post," if there's one paper i read every day, no matter what -- >> exactly. >> it's "the new york post." >> there you go. >> it's the most fun paper to read out of all. if i miss the "post," i feel like i haven't read the newspaper. >> and page 6, it's that stuff you read -- >> you love it. >> you read it and you think, oh, my gosh, i can't believe
they did that! unless it's about you, then that's not true! >> they put jamie dimon, they put pictures of people, make it fun to read. >> they make it fun. >> page 6 is by far the best gossip column. if you don't read "the post," you need to
buy it every day because it is the best paper. is that okay? >> it's a great paper. i always loved "the new york times," but i read the "post" every day. >> not the "daily news," if you're sleeping, you can't sleep. you pick up that thing -- >> let me talk about the next story. new jersey is in the process of being the third state to offer internet gambling. a trial period began last night with some serious glitches. the most serious was some refused to believe some people were inside new jersey borders, when they were miles inside the state line. technical glitches, any time you have a new rollout, it's not surprising to see. >> that's true. what else happened yesterday? >> i don't really like this. >> i'm not a big fan of it either. >> i see the online gambling, it's just a bad idea. >> in fact, one of the stories we were reading today about it
was a guy complaining that he couldn't do it. the reporter was following him around, i guess, as he went different places, tried to get on. they also said he was an unemployed bartender. the idea that you're making it easier, even though at this point, there are still some difficulties trying to get on -- i'm not a huge fan of gambling, but -- >> what i really don't get about this, if you think atlantic city's suffering already, how is this going to get anybody in the door? >> although the casinos who are located there are offering these things, so maybe it's still -- >> i get that, but i don't get the strategy. >> i think it's just to keep -- >> it's certainly not job-creation. we've always argued the reason we need this is to create jobs. this is not creating jobs. >> it's the technology. >> to say ideologically pure, anything that starts trending towards the nanny state and saying i don't approve of this type of behavior, therefore i'm going to try and do things as the state that makes you not want to -- i mean, it's -- >> it's hard to put blinders on, though when you see what it does to people's lives. >> they do it to themselves, though, sort of, and they're going to do it one way or another. it's like trying to stop smokers
from smoking. you can try -- >> but we've done a great job of getting people -- >> but they do it themselves. they realize i want to get off. i want to stop doing this. >> well, but we've also made the incentives and the cultural incentives different. you don't think? because you can't go to a bar and smoke. therefore, if your friends -- >> but you can in certain places. >> but it's harder and more expensive. >> you can in the casinos in atlantic city. >> you need to go outside sometimes, but more and more, people just realize what's wrong with it, right? the kids. >> but i would argue the nanny state, if that's what you want to call it -- >> no, no, no. >> has made -- >> you decided that on your own. >> you don't think so? >> no, you're deciding that on your own. >> you think had none of those happened, had the prices not gone up, taxes not gone up -- ♪ know when to walk away >> let's go to break and then read "the post." the read on retail, the gap better than expected on profit and backing its profit forecast for the year. so, why are shares under pressure? we'll ask anjohnito willet list right after this.
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of 72 cents per share, beating the street by a penny. that's the good news, but there's bad news in here as well. we're going to talk now to oliver chan, retail analyst at citigroup. good morning to you. >> thanks a lot, andrew. thanks. >> so, okay, overall number good, but let's talk about some of the things that put a little pressure on the stock in the market afterwards, or, well, the market was closed at the time. but nonetheless, the big issue being that comp store sales did not look very pretty. >> yeah, comp store sales were plus one. what i would say is gap continues to illustrate great consistency. so, this was the seventh quarter of positive comps, but a plus one maybe wasn't what people were looking for in terms of the bar. i would also speak to the comments around the promotional nature of the atmosphere right now. >> right. >> and if there's one trend for holiday, it's everything's on sale, and that's what's happening. >> so, this margin -- i mean, to me, the two takeaways from that release is the margin compression sort of a la what
you're hearing from walmart, target and everyone else, who says the next month is going to be a tough one. then you talked about same-store sales being up 1% at gap. that was true, but if you looked at banana republic, it was down 1%. so, the only thing holding this thing up in terms of the continued growth of this thing seems to be the online business. >> well, online is the major theme, and shoppers are definitely moving that way, and we do have a problem with mall traffic. mall traffic has been persistently negative, negative 1% to 4%, while online is growing at 20% plus. so, online and global are definitely key trends, you know, for retail at large, as we think about that. margins are a big deal. margins across the space. the gross margins are declining 100 to 200 basis points. and most of our retailers are expecting this trend to continue. >> do you think gap needs to shrink its footprint in terms of the number of stores? >> well, it's selective. i think selective store closures are pretty smart domestically as a whole. there are some pockets of good
opportunities. you know, shoppers are gravitating towards deals, so the outlet channel is a compelling idea, but a lot of the success or failure does come down to the product. we are kind of within this fashion dynamic, and it's discretionary. >> okay. oliver, just real quick before you go, what's your target on this stock? >> $48 and 15 times. >> okay, so we've got a little bit of room to move. >> up side. >> we appreciate it. >> thank you. >> happy holidays. >> you, too. >> all right, thanks. when we come back, the latest xbox launching early this morning as fans lined up for hours. but how does the microsoft console stack up against rival playstation? jon fortt will join us with the answers right after this. and then later, a "squawk box" icon and rebel, billionaire entrepreneur sir richard branson. he is headed for space, but before he does, he's going to join us from his private island. that's coming up at 8:40 eastern. stick around. "squawk box" will be right back. life inspires your trading. 0 tdd#: 1-800-345-2550 where others see fads... tdd#: 1-800-345-2550 ...you see opportunities.
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welcome back, everybody. the holiday shopping season has arrived, and so have two new rival gaming systems. jon fortt joins us with the battle between xbox and playstation. who wins? >> in the short term, i think sony's got a pretty good chance with the ps4, because they didn't have momentum heading into this console season. i mean, the xbox and now the xbox one had a lot of buzz. microsoft has been gaining a lot of momentum, but they made some key missteps about requiring at first the new kinect eye to be on, watching people, requiring online connectivity all the time. gamers didn't like that. sony's ps4 box is more of a social gaming appliance. it really focuses on the gaming aspect and it does its own marketing because it lets gamers pull other people in to watching what they're doing. it's good at multiplayer. so, in the near term, plus, it's
100 bucks cheaper. so, in the near term, i think sony's got a lot of momentum. >> but is that microsoft just kind of, like, you have to do it our way? why did they go that route? >> well, i think they thought they could. and also, you know how these companies are. they have this grand vision for how it will be if everybody does it their way. >> right. >> and they think, apple can actually pull it off, but they think if they can convince everybody and get everybody into the fold, it will be awesome. and sometimes, it backfires on them. but what microsoft's really doing is making a big play for the entertainment center. the xbox one, if you hook it up the way they want, it can really allow you to voice control everything. >> this kinect thing is amazing. the new kinect is even better. >> it really is. >> you know p 90 x, the gym thing? they have supposedly a new game where you actually look like you're on the screen doing it with tony horton or -- >> you can have him abuse you from inside the xbox. >> that is awesome. that's pretty cool. >> but for a while, you needed -- my son mentioned
something about that, that he didn't like, that kinect had to be on to do something? >> they basically wanted to micro manage your experience. kinect has to be on, you have to be online the whole time. it's going to be watching you, feeding you ads, that kind of idea. >> is it overstating it to say that the christmas season has a lot riding on video games? and the reason i say that, there haven't been any new hardware, and that's hurt the software -- >> in like eight years, yeah. >> and it's a big enough part of what you buy at christmas to where really successful video game, or it could add like a full point on to whether it's a good christmas season, couldn't it? >> yeah, for the season overall, it is important. this is the sort of thing that's going to draw people into stores. >> because yesterday we got really crappy numbers about other stuff and there are worries about it. >> let's face it, best buy needs this. >> well, look how good best buy is doing. >> yeah, target needs this. the holiday season is six days shorter this year, right? so, that's why we're getting all this discounting. something like this that is a
big draw into stores -- >> when did they change that? that's not fair. >> thanksgiving is later -- >> six days? i didn't even know they did that. they do that in the senate with the filibuster stuff? so there's six less days, the democrats voted -- >> it's the calendar. >> they voted to take away six days from the calendar? >> what is the eye? it actually watches you? could a hacker break in and be able to see you on these things, too? >> that's the worry. >> and everybody says no until somebody figures it out. really, it's for the gaming experience. you know, this one can recognize exactly who you are when you're playing the game, capture your motions, not pay attention to the people standing behind you, so you don't end up with them screwing with your game. if microsoft succeeds with this, they have more to gain. >> right. >> because -- >> can you cover the eye? >> you can do that. >> you can cover the eye, but then some of the functionality won't work, right? isn't that part of the issue. >> i don't understand why they won't let you turn it off, though. >> they have let you turn it off now, but at first, it was like, they weren't going to, and it was after pressure from the
uproar online, they said, okay, okay, okay. after a couple okay, okay, okays, the message is a little muddy. plus, they have to fix the software. so, some reviews say the software's not completely baked at launch, they're still making tweaks to get this exactly how people want it. so, that's why sony's got a shot here at a lose of positive buzz. >> did you buy one or the other, or are you going to? >> no, since the kids, you know? i turned to my dad. remember back in the late '80s, early '90s when dad tried to pick it up, how does this work? there are too many buttons? that's me now. i have become that dad. >> i don't think you can overstate it. didn't the latest do $1 billion on the first day or something? you look at the cultural influence of these stupid movies and all the actors and how much cultural influence they have. it takes them it might take them overseas sales in three months to do $1 billion. the video game does it in -- >> we get excited about first-day sales, a million units, but if the ipad only did a million units on the first day of sales, we'd be like, oh, it's a disaster! so, relatively speaking, they're both roughly 500 bucks.
video games aren't as big as they used to be. there are other things that have sort of exceeded them. >> but you think of old toys and kids don't want to, like, use their imagination. you can do unbelievable stuff with, parachute out of a plane. anyway. coming up, thanks, jon. no need to go to washington. we'll bring both sides of the debate to our set. political strategists sound off on everything from health care to the debt ceiling next. and then in the 7:00 hour, depending on where you are, in the next hour, one of our newsmakers of the morning, atlanta fed president dennis lockhart will be our special guest at 7:30 eastern.
welcome back to "squawk box," everyone. today, november 22nd, marks 50 years since the death of president john f. kennedy. you're looking right now at a picture of arlington national cemetery. this is where there will be a remembrance wreath laying ceremony taking place at 8:30 eastern time to commemorate that date. . we'll come back and check in a little later this morning. a number of political stories to discuss today. joining us now michael feldman, democratic strategist and founder -- i always say danny glover. is it glover or glover? >> thank you for giving me this opportunity to mention that again. >> it's what again? >> glover -- >> say it one more time. >> www.gloverparkgroup.com.
>> and kelly conway is a founder and strategist, we still love you although we used to call you a lot during the elections. >> you did. >> now it's rare we -- but here you are again. >> but i watch every morning. >> excellent. michael. i just read this and i don't want to start anything with you, but -- >> go ahead. >> he says this with a straight face about obama care. we forget this was a bill that was litigated in congress for a year and a half and passed by both houses and signed by -- >> a single republican vote. >> i didn't forget that. did you forget there wasn't a single -- a third of the economy or 20% of the economy. every other huge step like this, you would think to not cause a schism in the country and you see the schism we have right now, you'd think you try to do this with at least one republican. >> it didn't actually start with health care. a divided congress polarized. look, we're in a legislative process. we saw the latest incarnation of this yesterday with the so-called nuclear option. there is no bipartisan
legislation. the senate is stuck -- >> both sides are to blame for this horrible environment we're in right now. you've got to admit, you're reaping what you sewed. >> well, first of all, both parties haven't been able to get anything done in congress for a long time. >> you got obama care done, but look at the price you paid. was it worth it? >> well, i guess the question is if you're one of the millions of people who don't have insurance or somebody concerned about the drain on our economy. >> there were other proposals on the table that rahm was pushing, the pre-existing conditions open up states to competition. ways to getting it done in a bipartisan way. you needed al franken, needed the nebraska purchase, you needed, you know, scott walker came in and you needed to do it through reconciliation. it was an ugly way to get it done. >> there were a lot of ideas that began with thoughtful republicans who at some point abandoned those -- >> you kind of -- >> no, no. look, i worked in the senate 23 years ago. i worked for george mitchell
when bob dole was the republican leader. and during those periods of time, thoughtful people could get together and actually compromise on legislation and advance not just the president's agenda, but the country's agenda. >> and not try to take over 20% of the economy. and force americans to buy a product they don't need and can't afford. >> well, actually, i think there are thousands of people in california who are signing up for it who do need it. i think there are people in the country who are uninsured. if you're one of the millions of people uninsured or had a pre-existing condition, you couldn't get health insurance and now you can, you're happy to have an option. and we can have a political fight all day long about how it was passed, but nobody's addressing the underlying problem. it's not like -- and kelly, i'll ask you, is there a republican agenda out there other than stop the president, make obama care the issue? >> yes, i know there's a new mean about your side. forget him, he's going to twist in the wind with or without us. i want to talk about the policy. i'm a policy person. and a thoughtful republican. look, there are three options
moving forward. you either go to single payer, which is what a lot of people wanted from the beginning. >> kind of designed. >> and we're not going there now because there's no credibility for the president to push even farther to the left on that. number two -- i'm going to talk about three policies. single payer -- no, not talking about the votes, i'm talking about the president preening in front of the bully pulpit. the second one is to revert to the insurance centric system, which i don't think most people will do. and the third is to start over and look for a patient centric free market solution. a portability across state lines, tax equity, all the things people and republicans have been talking about for five years about health care. and, of course, health savings accounts. and look at some best practices within the states. the president isn't just losing republicans. he never had them to begin with on obama care. he's now losing in state insurance commissioners, democrats who are up for reelection in 2014. this is not partisan. if you try to make it about
obama, i think you lose even bigger and your party will lose moving into 2014, 2016. forget him and focus on obama care. people don't have insurance who should have it. we all agree on that. and i think it'd be difficult for the republicans, any plan they have to take out the preexisting condition coverage. there are some useful elements that have been litigated as you said. >> i think there are. but to say it's not partisan and we're making it about obama is a little strange when, in fact, the entire gop strategy stated overtly by senator mcconnell at the beginning of the administration has been to stop the president. what is the republican strategy now? >> how can you stop them? just answer this question. the republican strategy now seems to be to abandon what's left of the legislative agenda and make everything about the repeal of obama care. >> michael, what happened yesterday is not moving towards these open relationships where you work across the aisle. >> i agree. i agree --
>> what happened to the senate is devastating for the senate, the body of the senate. >> it's a horrible development. i never thought i'd see it come. but what do you do when you're president of the united states whose legislative agenda has been thwarted. i think it's fair to say that president obama has done more reaching out. >> he's hardly ever -- oh my god -- >> oh, that's tough. you really think this president has reached out to the other side. >> he doesn't even show up in congress. when's the last time he visited congress. >> he was there two weeks ago. >> wow. it's that time of the month again, i'm going to congress. he needs to get there. >> behind closed doors. everything, the president, he's got the earnest americans behind him nodding on some bully pulpit with another of the same speeches. it's frustrating for all of us. >> we've got to thank kellyanne and michael.
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another market milestone. the dow closing above 16,000 for the first time ever and spurring a global rally. we'll tell you where to ride the next rally wave and what areas you should avoid. fed speak to end the week. atlanta federal reserve president dennis lockhart is our special guest from janet yellen to taper talk, we're going to cover it all. and guest host southern company ceo tom fanning joins us for the remainder of the show. his views on energy independence, health care and the looming budget deadline. this is from one of the nation's largest energy producers as the second hour of "squawk box" begins right now.
good friday morning, and welcome to "squawk box" right here on cnbc. i'm andrew ross sorkin along with joe kernan and becky quick. our guest host, thomas fanning, chairman and ceo of the southern company. one of the largest producers of electricity in the united states. we've got a lot to talk to him about. energy, i actually want to talk to you about obama care and a lot of other things. take a look at the futures right now. see how things are setting themselves up for the day. dow looks like it would open up off about a point. let's get you through some of the morning headlines. dow coming off the first ever close over 16,000. yesterday's triple digit gain also wiping out the dow's losses for the week putting it on track for the seventh straight weekly gain. the dow is up more than 22% for the year while the s&p 500 has
jumped 26%. we've got more on the markets in just a minute and i think we've sort of decided we're in the fourth, fifth, or sixth -- we have people who can tell us. >> paulson and bianco's here. >> what the innings are. >> yeah, jim paulson, not hank paulson. who's the other one, not john. >> there's a lot of paulsons. we also have other quick stories. the white house planning to push back the obama care sign up period for the second year of operation according to dow jones. now, the start of the 2015 signup period is reportedly going to be pushed back one month to the mid november of 2014. so think about a year from now. people would then have until mid january rather than early december to complete that process. also, charter communications reportedly closed to completing a funding deal to make a bid for time warner cable. we've talked about the potential for time warner cable to become a takeover target. the "wall street journal" saying a multibillion dollar agreement
is close to completion but it isn't clear yet which banks might participate. and you can see time warner stock there. and what did we say? about $45 billion deal? >> $34 billion, what would you ask for? >> i think i'd throw 20% on top. however, somebody would say this thing has already run on -- the premium's already built in. >> right. >> you know what someone's going to do. they're going to look at the 30 or 60-day average before rumors emerged. and that's sort of where you probably got -- and then maybe you look for 25% premium. tom, what would you do? >> about what? >> you're selling southern company you'd say -- you'd need 100% premium. >> oh, absolutely. somebody's got to provide clean, safe, affordable, reliable energy for people. >> similar market caps, it's amazing. >> yeah. >> that's another good one. you can own four southern companies or facebook.
we're going to start doing these annoying comparisons, right? i mean southern company. >> it's legitimate. you wonder how, you understand the growth potential. >> some day boeing might sell enough of these jets to be worth -- >> it is astounding when you consider the value of electricity to the economy and how important it is to grow. >> and i wonder, if we had a big -- we'll talk about this later -- if we had a huge solar flare, is it possible for one of your things to get knocked out for a year. >> highly unlikely. >> those kinds of things, they would tend to happen more like -- >> should i buy tuna? cans of tuna? >> absolutely not. listen, joe, we're in great shape. don't worry about that. >> yeah, sounds like. glass in bag, nothing to worry about here. nothing to see here. the dow very unlikely. that's all i got. very unlikely the grid could go
down for like four years. >> no, no, no. >> the dow coming off a record close while the s&p 500 is two points below the all-time closing high. joining us now is jim paulson, chief investment strategist, and here onset we have david bianco. i'm sorry, david, but paulson, we've talked about him so much. when he's here, we talk about him. this is like his own pr machine, "squawk box." but the reason we talk about you is we're trying to gauge where we are because the market as you correctly thought and, david, i think, too. but as you correctly thought has been going up. and you always make the point when you go through what we went through, for years, people are scared. first, they've got to get it out of their system that the world's going to end again any time soon. and then there's a long period after that it's not actually overheated. it's just back to normal. what inning are we in right now at 16,000 in a baseball game and not a softball game? >> i think we're in the middle of the game.
i think maybe in the fourth or fifth inning, joe. i really think this thing probably has another five years to go. and i'm talking about the economic recovery and that means the stock market probably, as well. and i do think it's because it's going to take that long before people get confident enough before they start doing stupid things and start blowing themselves up again. people are getting more comfortable. but i wouldn't exactly say they're confident or exuberant. and that tells me we probably have longer to go. i do think that next year is going to be kind of a volatile year maybe and flat a little bit in the stock market. i think money velocity's picking up, we just don't know it yet. and the initial response to that is the economy gets better and the stock market goes nuts and i think that's part of what's happening here. but ultimately, when we find out next year that money velocity's starting to turn faster, that will really change the conversation of the fed, make
tapering a panic, if you will, and probably cause a correction in the stock market. so i could see the market running up, letsz sa's say the o 2,000. but if we have a flat year next year, i think we might proceed higher than the 2015 and beyond. >> we'll get to david. but if we had another five years without a recession in the economy, wouldn't that make this like a ten-year period without a recession? and recessions in the past usually they come from a variety -- you know, they only come from a couple of different places. and certainly we don't look like we're overheating from inflation. but you think we can go ten years without a downward move in gdp? >> i do, joe. actually, since demographics have slowed in the rate of growth in working age populations slowed down since the middle 80s, we've had longer recoveries. we used to have the variety of boom bust, but the '80s were --
that recovery was eight, nine years long. 2000s was six, seven years long. we're having longer recoveries because they grow slower, they grow longer. i think that's what we're doing here. >> you were here when ronald reagan was president in the '80s. >> yep. >> i'm joking. he's not your -- your hero's in right now. david, what do you think? >> well, my thoughts are similar to jim's, which i feel good about because i'm a huge fan of jim's. >> we talk about jim quite a bit on the east coast. >> it's like their own pr. >> it's important to recognize inventories are moderate, capex, balance sheets are great, the financial system is de-risked. i think this is a long last cycle. most investors want to know how much upside in 2014. my message to them has been you've got several years of a healthy return still ahead. >> obviously, i just have one different question, though. for this year, if you're an investor, we're coming up on
december. >> right. >> why don't -- do you lock in your gains and are people going to get out? if you're a hedge fund? >> hard to get back in. >> no, i know it's hard to time things. but invariably, there's always -- december can be a dangerous month. >> andrew, many of my clients ask the same question and that's why we do have a 1750 year-end target. markets ahead of that. for longer term investors, i would say stick with the course. but there's a few pieces of unfinished business that we have to look to next year particularly getting a tapering, a continuing resolution. >> if you need that money before when. >> i think if you want to protect gains, lock up a good year, you can do it, but we would advise doing it with big cap tech rather than defensives. >> where are you on that, jim? you think there's going to be a little bit -- a tough december? people going to get out? >> i don't think so. >> don't they have to call it a day and get out? >> yeah. i don't think so. i mean, i don't know.
it's sort of random when you're talking about 30 days about anything could happen, i think. it's really tough to time. but i think -- my gut is, andrew, that we go higher yet get even -- get more exuberant and then have maybe a little correction some time later next year. i just as soon ride through this. i get a sense we don't have a top and there's some indicators suggesting that, as well. i would like to stay more cyclically oriented. my favorite sector is material stocks. i think commodities might have the best year. i think stocks might be flat, bonds get killed. i think the ten-year yield goes to 4%. and i think commodities have positive returns. in stocks, you could play that in material stocks. >> can you play that in caterpillar? are they just too hard hit by what's been happening in mining right now? >> i like caterpillar overall. those types of stocks, becky. i think that's a good play. one surprise next year too on
top of a panic tapering that's forced on the fed because velocity turns up. i think we're going to see capital spending come to life. you look around the globe right now, this is the first time in this recovery as a ceo sitting on unspent cash i can look around and go, look, u.s. is accelerating to three. i've got positive and rising growth in europe, in japan and reacceleration of the emerging world all entertainment. so we don't have fast growth. that's the kind that presents opportunities for ceos that haven't existed until now. >> david, final word, yeah. >> well, we think china's doing well, but we think a lot of the companies exposed will be under pressure for longer. but i do think capex picks up and like most of the industrial companies, i do agree quite a bit with jim. we do probably have a bit of a santa rally. but looks like we pull january
into 2013. but the bigger message is it's been a great four or five years. those who have the courage to participate. we're telling them to stay in the market for the next several years. >> he's in minnesota. he's positive. i mean, it's like, i hear little christmas, you know, like parable. >> i also suggest the gophers are going to beat the badgers this weekend. that's how optimistic we are out here. >> gophers beating -- and you said it just like -- like you're in fargo, the gophers. they might do that this week, jim, okay. david, thank you. >> thank you. >> appreciate you. don't forget, you elected a wrestler and then a comedian. there's something in the water in minnesota. huh? >> we have a sense of humor. >> you certainly do. you certainly do. up next, guest host and southern company ceo tom fanning on energy independence, obama
care and much more. a governor with a boa, like a yellow feathered boa. >> he used to wear that. >> hulk hogan, right? >> no. >> yeah, it was. >> no. >> i thought it was -- at the bottom of the hour, we're going to be joined by atlanta fed president dennis lockhart, the latest fed minutes. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. tdd#: 1-800-345-2550 life inspires your trading.
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welcome back to "squawk box" this morning. take a look at shares of footlocker. they are on the move. beating the street by 2 cents. revenue also topping consensus in third quarter comp sales rose 4.1%. also, shares of petsmart are worth watching. the retailers earnings topping estimates, revenues were in line. the white house is under pressure to pick the pause button on obama care. how are ceos tackling the affordable care act. we're going to ask tom fanning, ceo of southern company and he's going to be named deputy chair of the atlanta federal reserve come january 1st. we want to get your views on tapering and the markets. we can go to obama care. but actually, i want to go one place first. you said during the commercial break after we heard from jim paulson who is very optimistic about the world that you're a little less so? >> look, i think we are seeing a recovery.
what we thought would happen this year in fact did happen. we saw a flat first six months and said the second six months we're going to start to recover. but the recovery has been so much more fragile than what we thought it would be. it's been lower in nominal terms and more fragile. look at things like university of chicago that's had this uncertainty index. it's two to three times higher than what it's been in history on a nominal level and way more volatile. and why is that? i think there is so much event risk. when you think about the frozen politics we have and the cliffs and everything else we have to fight through. there's a lot to be done on the fiscal side that would improve the economy on a sustainable basis. w we're just not seeing it. and i think these kind of hurdles that stay in front of the economy will inhibit people from making long-term bets in capital and employment and a variety of other things. >> people like you, you mean? >> well, we have -- >> ceos not spending money to do what they need to do.
>> but we're almost on the extreme case. >> i know, but all long-term investment. ceos have to think about things longer than a year. >> that's right. >> look, you know, i share the optimism, things are getting better. they're not getting better nearly the rate we have potential -- >> i know you're a ceo and not a market player per se, but does the dow at 16,000, tdoes that make sense to you? >> the potential is so much higher. >> he's just like some investor of his own money. >> i know. >> but listen, how i translate that question, would be how the southeastern economy going to grow and how do i put assets in place to make sure energy is going to support the growth we need to have to grow the economy. >> it drives me nuts, you talk about how fiscal things going on and one person's fiscal thing is the opposite of another person's
fiscal thing. you don't want these guys to get together and vote for another $800 billion stimulus bill, do you? >> no. joe, i think there are so many -- >> is tax reform fiscal wise? >> i do want tax reform. >> you don't want these guys to get together and -- >> well, i wrap tax reform in there, wrap the whole kind of downsizing a government. >> that's what i mean. downsizing of government. other people want fiscal parties to get together. >> no, no, no, no. i've been on the record a long time on that. >> you're going to be on the atlanta fed soon. >> well, i'm on the -- >> but no, would you want -- would you be in favor of tapering? or do you think things are so fragile you wouldn't? >> well, so i want to leave that decision to yellen and bernanke and my friend dennis lockhart and all that. but i'll tell you what i see. >> right. >> and that is the potential for the economy is so much better than what we're showing. and the nominal growth rate is,
you know, i don't know half of what we should see and there's so much event risk and volatility out there pulling the support out of the economy right now is probably not a great thing. >> but as an electric company, you have a very good idea about how consumers are doing. >> you bet. >> how businesses are doing. tell us exactly what you see at this point. >> well, it's roughly what we said. in other words, the first six months were flat. the second six months we thought we'd see somewhere around a 2% growth rate, we're seeing about 1%. >> do you think that was because of the government shutdown? >> it's all of that. i think people, you look at consumer spending. i think this whole event risk and shutting down the government and are we going to pay our debts. that makes people at a very elemental level nervous. and i think one of the greatest things. you talk about fiscal policy. we've got to be for growth somehow. what we've got to do -- and i think there are things we could do i could talk about later to give the united states where we can give ourselves an
unassailable advantage to grow jobs and make american lives better. you know, 48% of the families we serve in the southeast. we serve 4 1/2 million. 48% of them make less than $48,000 a year. and those families want better. a better place to live, they want better medical care, education, kids to have a better life. and what we're seeing right now is so much uncertainty that those folks that are just trying to make ends meet are having to make tough economic decisions every day. and why can't we? we have frozen government and one of the things i want to talk about a little bit later is how the business community can step up and try and fill that void. >> this is the argument we have every day. we want growth. one side wants private sector growth, the other side thinks that most of that growth can be engendered somehow by government policy. >> i think it's pretty clear that if the government tries to step in the middle and supplant certainly the private sector, what you do is -- >> democrats at all. >> well.
that is not clear at all. >> well, i would argue the good intentions of democrats there's a bridging strategy. >> the only type of growth you hear proposed by the white house is they call it investment, which means higher taxes to spend on stuff like infrastructure or whatever -- that's all we hear about. education. and there's nothing wrong. we need to fix the education system. >> that's right. >> that's all you hear about, the growth is going to be engendered by more government spending not by getting out of the way of the private sector. >> and the answer is clear and not higher taxes. >> of course it's not clear. they get a budget deal, they want more revenue. >> it's interesting, which is right, it's a bridging strategy. >> what? >> a bridging strategy. >> but how do you -- >> you get from here to there. >> it is a bridging strategy. but how do you get unaddicted to it? >> that's the issue. i don't disagree. >> you want to build the bridge to nowhere. you want to build a bridge where there aren't any rivers. >> we're building bridges at this -- on this table. >> building them, tearing them
down and building them back up. up next, bill ackman is back.
and check out the blog, this week our top ten bands list. share yours with fellow viewers. check out squawk.cnbc.com for more. still to come -- from taper talk to janet yellen, atlanta fed president dennis lockhart goes on the record with "squawk box." it's an interview you can't afford to miss. and it's only right here on "squawk box." as this. at bny mellon, our business is investments. managing them, moving them, making them work. we oversee 20% of the world's financial assets. and that gives us scale and insight no one else has. investment management combined with investment servicing. bringing the power of investments to people's lives.
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welcome back to "squawk box." william ackman is renewing his attack on herbal life at a conference today. it's been almost a year now since he shocked wall street with the $1 billion short bet against the weight loss company accusing herbal life of being behind a pyramid scheme. he plans to present his case a second time now likely with hundreds of power point slides. all over again at the robin hood investment conference in new york. herbal life has denied it is a pyramid scheme, which tries to make money by new members who pay fees rather than relying only on the sales of goods.
>> he's covered that, has he not? he's covered a lot of his shorts. >> i don't know what he's done in terms of what he's done. >> that's painful. >> a painful situation. this has been a tough situation the whole year. yesterday, dan loeb -- what was the stock he mentioned? >> i don't know. >> they did, they did, they did. i'm going to tell you right this second. >> i saw einhorn liked micron. dennis lockhart joins us up next. and later, 'tis the season for celebration, we're going to talk about the beer business in a moment. on the need to fix our broken immigration system, there are signs both political parties in washington get it: washington is lagging behind the country on this... ...this issue has been around far too long... and yet, we wait. reforming our immigration system would dramatically reduce our nation's debt...
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welcome back to "squawk box," everyone. in our headlines this morning, one of apple's biggest suppliers coming to the u.s. it's going to be investing $40 million to build a plant in pennsylvania and hire 500 workers. that plant is not intended for specific customers like apple. but will have a general focus on
the high-end of the tech market. the bank of japan chose to keep the current monetary policy in place after a two-day meeting. there had been thought that they would boost the economy after the economic growth slipped to 1.9%. that is half of the prior quarter's rate. and a new york state judge will now decide if bank of america's $8.5 billion settlement with mortgage investors should be approved. this comes after a nine-week court proceeding that ended yesterday. there is no indication when that ruling might come. >> i've got one quick mention because i screwed this up, ackman did cover 40% of -- >> i knew that. >> he did that back in october. and we should say herbal life stock is up. >> and herbal life, unless they're selling a bunch of stuff that people then like sit on it and aren't able to sell it to the end user. it seems like their results have made it harder to prove his case. don't they keep selling a lot of stuff? >> they do.
they do. >> is that lending up some where in some channel and never getting to the end user where people take it? i don't think it's possible now. >> the question is herbal life hasn't told you some of the statistics. >> i like the candy bars. >> i want to clarify that. >> that's why i asked you. i thought he had covered some. we should also tell you the senate banking committee approving janet yellen's nomination by a 14-8 vote. that does send the nomination to a full senate. joining us now to talk about the future of the fed is dennis lockhart. he is the president of the federal reserve bank of atlanta. also our guest host today is tom fanning, the ceo of southern company. and will be named the deputy chair come january 1st. president lockhart, thank you very much for joining us this morning. first of all, your thoughts on janet yellen. >> well, janet's a very qualified candidate for this position.
as qualified as probably any person who has been put up in recent years. she's certainly a highly respected colleague. i've gotten to know her very well over the last few years. and one of the things i emphasized isn't stressed so much because of the stress on monetary policy is that she's been a reserve bank president like me. so she knows something about supervision and regulation. she knows something about the different services we provide the financial system. she's really well rounded. >> we need to fix -- >> president lockhart, we're having -- no, it's on his end. we're having some problems with president lockhart's microphone, we're going to get this fixed. if we could take a break right now. when we come back, we'll continue this conversation with the atlanta federal -- atlanta federal reserve president dennis lockhart. we'll be right back. gonna be a . you're talking to the guy who hasn't approved a new stapler purchase in three years. but then i saw the new windows tablet, with a real keyboard, usb port, and full office. it's a tablet that works for work.
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using data predictively to help power entire cities. so the turbines of today... will power us all... into the future. ♪ welcome back, everybody. we fixed our technical problems, let's get back to president lockhart. you were just talking about what you think about janet yellen. go ahead, sir. >> yeah, so i get another chance to praise my colleague janet yellen. she's extremely well-qualified for the position. you know, she is a fine
economist. but one of the things i would stress which is part of the job is that she's familiar with the reserve bank. she was the president of the federal reserve bank of san francisco, of course. that means she knows something about supervision and regulation. she knows about the various services we provide the banking system. she's extraordinarily well rounded for this position. and i certainly hope she's confirmed. >> president lockhart, we've been trying to get a feel for the economy and that's the one thing we've been talking to tom about this morning. what's your sense of where we are in the economy right now? and how things are chugging along or aren't? >> well, i think tom and i see the economy in a similar way. it's certainly growing, but growing at a slow pace. the anticipated acceleration and growth that we hope for in the second half of the year really hasn't materialized yet. i'm forecasting that we will see
a pick up in 2014. but at the moment, seeing a slow growth mode. >> that doesn't sound like you think tapering should begin as early as december. >> no, i'm not saying that. i think it should be on the table at the coming meetings. chairman bernanke said that in his recent speech. and i fully expect we'll be talking about in december, january and march. the way i think about this is the -- the tapering decision should happen if it is going to happen when the economy is ready and when the market is prepared. >> we had, president lockhart, it's joe kernan. we had our buddy bullard on. and he convinced me. he made such a case that since nothing's going on inflation wise, we'll do this forever if we have to. he said, why not basically i'm
paraphra paraphrasing. consequences to this. so as long as employment is this high and inflation is this -- unemployment is this high and employment is this low, why not? it says every month that it goes on, the exit strategy becomes more difficult and more dangerous. it's fine that everything's going along right now. but i just wondered, do we really know what lies ahead? and as the old expression, the guy that jumps off a 50-story building, you know, thinks he's flying for 49 floors. well, i do think there's a fair amount of uncertainty the longer term consequences of the balance sheet. at the moment, i don't think we're in the danger zone. i think it's manageable.
the exit will be manageable when the time comes and the shrinking of the balance sheet in all likelihood years ahead of us, plenty of time to prepare for that, get the necessary tools in place. even running some experiments, that kind of thing. the reality is, we've never been in this place before and managing a very large balance sheet and ultimately normalizing it. and consequently there could be some things that happen that are unanticipated and there's some risk associated. >> is there any canary in the coal mine? any canary -- if there's nothing to see in terms of something coming, is there anything that would be, you know, a sign of real trouble? how would you know? you said you don't think we've gone along -- we've gone too far in this process. how would you know if you don't have a canary in the coal mine? how is it? >> well, you know, some things just aren't knowable.
and, again, the way i think about this question is it's not any one risk or cost as we use that term a lot of financial stability, disruption of markets, trouble with downsizing the balance sheet. it's not any one thing, it's likely a scenario in which things come together at the same time and in a combination that's unanticipated. those kinds of things, that kind of scenario planning very, very difficult to do and particularly years ahead. and i have been one who has been somewhat favoring the idea of beginning to phase out and change the mix of policy tools, phase out the asset purchases. i'm simply one that -- to some extent works from his gut. the bigger the balance sheet gets, the more we're dealing with an unknown factor in the economic future of the country.
so my message at the moment is we're going to remain very accommodative for quite some time. and all likelihood, a number of years but the mix of tools that we use can change. and that's where the tapering decision comes in. >> you said, though, the tapering decision is going to be based on two things. one is when the economy is ready and one is when the market is prepared. what does that mean? the market is prepared? >> well, i think with ef been trying to get across a couple of points that are very important and the market may or may not actually to the extent there is a mind of the market actually buy into these points. one is that there's a distinction between the great policy. the targeting of the federal funds rate and the asset purchases. those are two separate tools and they're not tied together when
we make a move on -- for example, on asset purchases. it is not necessarily signaling that there's any change in the policy for the interest rate. >> right. in other words, tapering -- >> second point -- we've been trying to put across that view and it's not been broadly accepted. certainly not as you look at some of the reaction in the market to either the minutes or to discussion in the public about the possibility of tapering. but they are two separate tools. we have a mix of tools. we can put together, i think, a mix of tools that will preserve the very accommodative stance of policy for quite some time. >> hey, dennis, this is tom. appreciate you being on. you and i have had this chat before that value is a function of risk and return and how the fed thinks about that relationship.
we've talked a lot in joe's commentary about the risk side. in other words, how do we feel about growing the balance sheet and how do we unwind? give a little more insight on the return side. in other words, gdp growth. in other words, unemployment when we're really facing significant underemployment. how do you think about those? >> well, the way i think about this. yeah, the way i think about it is, you know, there's a cost and a benefit to any policy, as a matter of fact, and there are winners and losers with any particular stance of policy. so with quantitative easing, we take on, perhaps, some long-term considerations, concerns, risks. but i think up until now certainly, i think the net impact of the asset purchases has been positive, certainly they have influenced long-term
rates. the stock of securities that the fed now owns certainly puts weight in the economy on riskier assets and investment in riskier assets. have supported the recovery. but certainly it is supported what we've been able to achieve so far. i think it's worth noting the initiation of the most recent round of asset purchases in september of 2012, we have, in fact, made quite a bit of progress on the employment front. a lot of people have been put to work. we've had rather good employment numbers now for the last year, really. and certainly in the last three months it's over 200,000 jobs net per month.
i think that all speaks to the total package of policy being somewhat effective. and so i think the benefits have outweighed the costs, certainly up until this point. >> president lockhart, i have a question for you, we love having you on this program, we love having all fed presidents on this program to learn how they think about all this. but i wonder what you think of the communication strategy of the fed. and how you think the markets take the varying different views of different presidents who make public statements or public speeches and what kind of conversations happen between you behind the scenes about what you're willing to say or what you aren't saying out there. >> well, andrew, let me take the second question first. there's very little coordination and we all really are independent agents and can say pretty much whatever we want. we have rules of the road that
all of us conform to. but we do operate as individual voices. i think the -- let's say the well versed observers of the fed understand exactly what they're taking in when they listen to us. they're taking in individual opinions that are taken to the table for what turns out to be a consensus decision at the end of the day on policy. and then that in turn becomes a vote and the 12 who have the vote are the ones who actually make the final decision on policy. but we are speaking as individuals. and no one should take what i have to say, for example, as speaking for the fed. >> hey, dennis, we all thought you did a great job preparing the markets for tapering last time. and i think the stock market had gotten back to where it was so
it was a perfect time. and i'm going to give you the benefit of the doubt you were anticipating the problems in washington and didn't make for a good time. maybe that was the fact that did it. but at the time i was worried that you guys got spooked by what happened in the stock market. and i'm hoping a 3% move in the stock market wouldn't cause you guys to rethink retapering. is it the stock market or the 2.7 or 2.8 on the ten-year that did it which could hurt the housing recovery. which causes you to -- like we mentioned earlier, the reaction in the market. which market are you talking about? hopefully it's not a stock market. >> no, it's not the stock market, it's a broad financial market that move interest rates and have ultimate influence on the real economy as economists call it. and it is the real economy
effect that really matters at the end of the day. the housing market would be one. and other interest sensitive markets, just including general consumer activity. as i remember the period in september prior to the decision to not go forward with a tapering move, the jobs numbers had weakened. we could see the fiscal deliberations in congress coming. and so there was some concern about whether the jump in interest rates was really going to have an influence on the recovery of the housing sector. all of those things, at least, i took into consideration. tom fanning earlier was talking about event risk. well, certainly looking forward to october and the resolution of
the fiscal questions in congress begin to look like a clear example of an event risk. so i think the decision to hold off has been vindicated, really, by what has developed and event risk may be with us again in january. >> all right. president lockhart, we want to thank you very much for joining us today. we appreciate your time and we hope to see you again soon. >> thank you, becky. >> okay. >> there wasn't a sole -- soul behind him in atlanta. >> i thought that was -- >> still photograph. >> oh, was that a still photo? >> i think it was a still photo. >> i didn't see a living soul. >> when we come back, we're going to talk about whether obama care is killing employer-sponsored health insurance. home depot and ge are just a few
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looking to boost sales with a variety of fresh fall and winter flavors. we're joined with the brothers jake and is president and ceo of the company, jacob -- see, they make me keep saying this, andrew. can you imagine? which was a family business and a craft beer maker which is a tough decision to make in the first place. has it paid off? been good? >> absolutely. excellent partner, 25 years now and for a lot of reasons our family decided to go with -- back then, the second largest brewer in the country to partner with them so they could learn about being more creative and innovative about making craft styles of beer from our family. it's been a great success. >> i love -- i love beer, but it doesn't love me sometimes in terms of my -- that's the thing that wears me out.
i don't know what to drink. i've never drank bourbon and hard liquor, i don't know about that. now i'm drinking white wine and i don't really feel, you know, like -- >> you drink white wine? >> yeah. >> it's hard to order white wine for me and i kind of hide. i like beer. i like beer, but it just adds to my problems. >> one of the things you have to do is always enjoy beer in a glass. pour it vigorously in the glass you release the carbon dioxide, you get rid of the gas, the beer adds more flavor when it's enjoyed in a glass. >> the other thing, by the way, you're not supposed to drink the beer cold. what i've said is i've used bottles cold. >> right. big difference. try to drink it around 45 to 55 degrees, which is a little bit warmer than ice cold. but you'll get more flavor, the aromas will be terrific and our styles of beer, we make a wide variety, they're all different. >> the first six go down so smooth that, you know, then i'm on -- >> god bless you. >> the other thing we always say
at our club is we're always in search of the perfect beer. we hope we never find it. >> yeah. >> and it's fun to see how you come up with innovations around taste. >> tell us about it. >> this is shandy and you talked about summer shandy, the explosive style of beer we've been able to make and take nationally for the first time this past year. it's been a huge success. this is the fall version of summer shandy, which summer shandy is lemonade and beer. how would you describe this? >> it's not sweet. it's a little bit more tart, it's very bright flavor, citrus flavor and people are absolutely loving it. >> yeah, sold twice as much as what we expected. and then for the big beer drinkers, you'd love this because it's got a lot of dark, rich malts with it. with a little vanilla. and it's absolutely -- >> done with real vanilla bean which imparts the flavor. it's absolutely wonderful for
the holidays. >> give us a cutoff on what we can accept from people. >> how cold are one of these things? >> you should try one. >> if you're going to have that, try the -- >> here's the thing, though. >> thank you. >> andrew -- >> this is good. >> yeah. >> you and i can drink together now. just the girls. >> thank you, cheers. >> my bottles are gone now. coming up, richard branson on the stage of his global business and the economy when we come back. honestly? no way did i think a tablet was gonna be a good deal. you're talking to the guy who hasn't approved a new stapler purchase in three years. but then i saw the new windows tablet, with a real keyboard, usb port, and full office. it's a tablet that works for work. plus, it's got apps and games, for after hours, of course. compared to an ipad -- way more value. these tablets are such a steal; i couldn't find a reason not to buy them. ♪ honestly, i wanna see you be brave ♪
at bny mellon, our business is investments. i couldn't find a reason not to buy them. managing them, moving them, making them work. we oversee 20% of the world's financial assets. and that gives us scale and insight no one else has. investment management combined with investment servicing. bringing the power of investments to people's lives.
invested in the world. bny mellon. afghanistan in 2009. on the u.s.s. saratoga in 1982. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation because it offers a superior level of protection and because usaa's 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.
think your company's health insurance plan is safe? well, a new study says as many as 100 million small and large business policies could be canceled next year. find out where the cuts could hit hardest. goldman's bond guru expecting job growth in the near future. calling it the housing handoff. how to prepare your portfolio. >> sir richard branson joining us to talk about the future of space flight and more. catching fire, the second installment in the "hunger game"
series expected to be a big draw at the box office this weekend. the third hour of "squawk box" begins right now. welcome back to "squawk box" on cnbc, first in business worldwide. i'm joe kernan along with becky quick and andrew, my good sport, because the wine cooler jokes go all the way back to faber, 17, 18 years. >> i know. >> if you're in manhattan, i'm going to say you drink wine coolers. >> and you drink white wine. >> i go, make it two of those. >> i prefer chilled zima. has to be chilled. >> our guest host this morning, definitely, i can tell you are a beer drinker. >> he's like a bourbon drinker. >> i'm democratic with my
desires. >> when they took it away, i saw you reach for it. >> i'm not proud of it. >> what are you going to do? >> more from tom still ahead. and he drinks because he knows the entire grid could go down at any second from a solar flare which he admitted earlier. first becky has your morning headlines. we're going to start things off with the markets. the u.s. equity futures today have barely budged but that's because after yesterday, we did see a triple digit gain to the first close. the s&p 500 has jumped 26%, you have seen incredibly big moves. >> okay. and we've got corporate news, as well. charter communications reportedly close to completing a funding deal to make aed by for time warner cable. it's close to completion, but it isn't clear which banks might be participating or if a formal bid will be made for time warner
cable. that stock has run in anticipati anticipation, i would argue at some rate that a deal is coming. also, the console wars are officially underway with the launch of microsoft's xbox one. you going to get one? >> yes, both. >> you're going to get both. gamers in more than a dozen countries started snapping up the console at midnight. the predecessor, the xbox 360 was the top selling console in north america. but sony reported strong sales in the ps4 debut that happened last week. check out shares of sony and microsoft over the past year, and sony cutting $250 million from the entertainment business yesterday. some people giving some credit to dan loeb, the activist investor. we were talking about activists and what all that means. >> and a new report analyzing the impact of obama care is estimating that somewhere between 50 and 100 million jobs -- i'm sorry, policies
could end up being canceled with small to medium sized businesses when it's all said and done. here now to explain it, the resident scholar at the aei who conducted the analysis. stan, i mentioned that report to someone yesterday who said that was -- it was vastly overstated. can you make the case? are you talking about the certain amount of time. isn't it a year? a lot of these policies come due at the small to medium sized companies. they won't be in compliance with obama care. >> next year. >> is it one year? >> it's in the coming year. so, look, the administration talking point has been that only 5 million people are affected and will see the current policies change. >> only? >> yeah. >> which is, you know -- even though they say, hey, we had 26,000 sign up, like that's a good number. >> yeah, exactly. >> but only 5 million will lose their -- >> right. exactly. they've gone to saying, no, if you like your plan, you can keep
it to saying, well, look, it's only millions and millions of people. the point i've tried to make is that it's not -- it's not -- that's not even true. it's not just millions and millions of people. it's tens of millions of people. there's a lot of people in the small group market who will see their plans be canceled or changed over the coming year because their plans even though they predate the law will no longer have grandfather status. and a lot of the new minimal essential benefits and they'll be subject to community ratings. and even in the large group market, of course, plans will be subject to new taxes, like the reinsurance tax and things like that. >> couldn't companies just say, okay, what do we need to do? we want to keep it. to coming to compliance. isn't it possible on the exchanges that some of the plants could be the same price
and they would come into compliance and there'd be no reason? >> it's possible. of course, 100 million individuals affected is the very high end of the estimate. it depends on, you know, how material does it change have to be to qualify as a cancellation. but it certainly, right, you go on to the small business exchanges. it's a bit of a lottery whether you have, whether you'll see plans that are similar to what you had, how the provider networks are different. and, especially, i think, for firms that have relatively young and healthy workers. they'll see plans that are much more expensive than the ones that were able to -- >> at this point, how much cheaper would it be for these companies. they need to pay a penalty if they get rid of their plans? how much would the plants have to go up to where they'd say, hey, i'm paying the penalty and you go on the exchange? >> well, it'll vary from firm to firm, of course. there'll be i think a more attractive option for firms that have relatively low pay. young workers, maybe
construction firms and things like that. but i think -- a lot of firms, i think, in the end, are competing for -- especially more innovative firms with high skilled workers are directly competing with large firms that aren't faced with as many of these problems. and they will try and continue to offer health plans. and this will make it harder for them to compete for talent. >> is it a bad thing if a person who has an employer plan that's not that great. is it a bad thing if they end up in a really good plan on one of the exchanges at an affordable price? >> well, i think what is a bad thing is that they are not given the option to choose for themselves. it's obviously very subjective what a bad plan is. do i need a plan that covers me for acupuncture and maternity care? not really. i think in the ideal situation you give people the chance to choose. >> although, stan, right now if
you are covered by a big employer, you are covered for maternity and you are paying for that. no matter what. >> for sure. >> and that's how it works and makes maternity care more affordable. >> oh, of course. and if the large employer wants to fund maternity -- wants to have all the employees to pay for maternity care to make the total benefit packages that it offers more attractive to the employees, then that's fine. what i'm just saying is, you know, you go from a situation with people who have plans and the administration promised them they'd be able to keep those plans. now they aren't and they're clear winners and losers and it's not true that only 5 million people in the individual market are affected as lots and lots of people with employer-provided insurance who will see their plans disappear or change materially. >> what's scary is if you remember when they were trying to pass obama care, they'd take one example of someone that had a pre-existing condition. and that can go -- you get so
many mileage out of -- look when you do the personal story of this person that was affected by not having insurance. if you went to every one of those 5 million people, this is going to get really ugly for people that are mad. you're going to be able to find people in every state that are willing to go on record saying this is what happened to me and my plan was canceled. i don't see how you -- if it's 5 million there and even if it's only 20 million more based on -- >> yeah, seriously. >> i don't see how the pr battle gets won. >> especially because -- a lot of this will materialize in the run-up to the midterm elections. >> to november, i know. >> no, i agree. >> well, you know, it's fun -- i wish everything -- i do wish everybody could get great health care and everyone was covered. but being in the news business is going to be interesting for the next 12 months. >> that's for sure. >> and, apparently, andrew, zima is such pajoritive, not even
andrew should be labeled. >> i don't know if they make it anymore. >> it is unfortunate. >> it's unfortunate? thank you. thank you. appreciate that. >> it is unfortunate that you drink zima. on monday, we're going to talk to the white hat hacker. this is another thing. the security vulnerabilities of the obama care website and advised congress to scrap the site and start over. david kennedy. >> this is another one. we had one on here yesterday. >> the whole thing is a mess. coming up, he's been called goldman's bond guru. going to join us next. he overseas more than 575 billion in assets. he'll explain how we could see job growth thanks to the housing handoff. and later, sir richard branson will talk to us about the future of space flight.
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welcome back to "squawk box," everyone. equities may be on fire with the dow closing above 16,000 yesterday. let's take a look at how fixed income and the credit markets are performing. joining us onset is john biner, cio and co-head of fixed income. he overseas more than $570 billion in assets. and jonathan, we've been talking about what it means for the fed. what it's going to mean for the ten-year, bond prices overall. don't you think this is going to
be something that can slide into easily if they start tapering? or is the market going to have a severe reaction? >> well, i think the actual tapering itself may not cause a severe reaction. i'm really hoping they're going to do it soon so we can stop saying the word taper. i would say the market is ready for a reduction in the asset purchases. i think the market is a little bit on edge, though. because in some sense the fed's been the biggest buyer of fixed income instruments for a while now. so investors are not sure of the price they see on the screen. is that the real price? >> right. >> once the fed starts to step away, you know, where are we going to settle out? >> it's going to be interesting. what do you think? is it creating a big distortion in prices right now? >> well, we do think that interest rates are likely to continue to go higher. it's a combination of positive economic growth view. and the fed through qe has been successful in keeping longer term interest rates lower than they would otherwise be.
we do think we're going to key seeing rates go higher in the long end. >> where would the ten-year go? they would say they were going to start tapering, start pulling a little bit back. >> well, i think it's a combination of that and the data beginning to be stronger. just them coming out and saying we're going to taper, i think you're going to see pressure there. we could see that on the ten-year some time soon and could see a 4% rate some time before the end of next year. >> sounds like they decided to go out with that. to try to prevent the ten-year from going up when it happens. it's almost like they consciously said, hey, listen -- >> we have to coordinate this. i think they did. >> everybody says that. they all say the same thing. >> you heard from lockhart, too, who said the economy is ready. >> that's the thing. they directly control the short rate, they've essentially
controlled the longer term rates through qe but don't want to stick with that policy. so they're in a bind. they're trying to keep longer term rates low for longer but it's going to be tough for them to do that. i found it notable i heard words like large unknowns, risk, experiment, hunch, those are words that don't give investors a lot of comfort. >> all right. what got me is that we don't see anything. we have no idea what we're looking for but we don't see any signs this is going to be a problem to unwind. but we wouldn't know what the signs were anyway. >> well, he did say he went on his gut, though. the idea that bigger is harder, we're in uncharted territory. it was an interesting conversation. we've been talking with tom fanning, our guest host and he was talking about how he sees the economy growing but at a slower than expected rate. i wonder how that plays out, where you're trying to decide where to put your money. >> sure, it's something we're always focusing on and trying to figure out where we are in the economy, where do we see growth going? inflation going and so on.
look, we actually -- we've been in a period since the recession of this very sort of bumping around the bottom, 2%, we've sort of gotten used to this 1%, 2% gdp levels. we feel pretty confident, though, this is it, the time we start to accelerate. not into a boom, but something that may feel like a boom. something like 3%, 3.5% gdp starting in 2014. it's a big part of that. not that we're going to see big price gains. we've seen, actually, pretty big price gains in home prices. but we actually think we're going to start putting construction workers back to work. we way overbuilt then we way underbuilt and now we think we're going back to an equilibri equilibrium. >> yeah, we've been seeing a resurgence and then a pullback, resurgence and pullback. and the rate of growth has been roughly half of what we thought it would be. it is accelerating, but there's so much uncertainty out in the
market. so much event risk that you're creating a fundamental for businesses that will create a sustainable economic growth rate to not show up. so long as there's that much uncertainty, people won't commit to long-term growth. that's my worry. i hope you're right. >> and i think you're right. in fact, i think the uncertainty has caused such anemic growth over the last few years. companies have been sitting on cash, cash has been piling up on balance sheets, but we're starting to see that uncertainty to some extent go to the wayside. i think the ending of qe, i think, actually, there's uncertainty now, but i think once we get beyond that, i think that's another thing to get past. we've had elections, we've had fiscal issues, you know, some of that has calmed down. so we do think combination of a less uncertainty and, you know, a lot of money sitting on balance sheets that basically needs to get put into the real economy and earning zero right now probably going to earn zero for another couple years, we think it's going to happen this
year into next. >> i know this is not your topic, but goldman just came out with a big call on gold. did you see this? >> i did not. >> then i won't go there. >> i wasn't going to answer the question anyway. >> joe was saying -- >> it's a big company. >> you have a big call on gold going up and now on gold going down. >> were you involved in that deal? >> no idea what you're talking about. >> just wondered. >> bonds have a sort of implicit sometimes relationship. >> one last question for you, have you seen, we've been waiting for this great rotation out of bonds into stocks, have you seen that? what kind of money's going into bonds right now and what do you hear from your clients? >> well, it's interesting, i think you're starting to see it. you're seeing some, we've seen flows into equities, haven't seen in a while. but it's interesting within the bond market, there's a great rotation within fixed income. more core bonds, taxable bonds,
high-quality tax exempt bonds which you think about what drives the returns. it's income. but those coupon rates are very, very low right now. and it's price appreciation or depreciation. when rates go higher, you see prices going down. we've seen negative rates of return and those high-quality bonds and long-term bonds this year. you start to see people moving away from the traditional and more towards the untraditional. people buying floating rate securities, bank loan funds have been popular, maybe too popular, we do like the asset class. but there's been tremendous flows there because you have rates that are going to float as interest rates go higher. and a big one for us and across the industry has been the so-called unconstrained bond fund. what these really are portfolios that don't focus on buying high quality long-term government bonds, they go across the entire global fixed income universe. they tend to use strategies to mitigate interest rate risks. even if they go up, these funds don't necessarily get hurt. we use hedging strategies to try
to essentially cause fixed rate bonds to turn into floating rate bonds and they could be really opportunistic. so when there's sellers in the market, these funds can actually come in because they're not tied to a particular index. they can come in and generate a better return. so going much more flexible and hedging a lot of that interest rate risk is really what investors are focused on. >> are you credit sensitive there? >> yeah. so the thing is, these are not money market funds, they're not earning zero, which is good. but they also have to take some risk. what we're saying is don't load up on taking long-term interest rate risk. take other types of risks. it's some currency, it's some credit, it's some emerging market exposure. taking advantage of the distress in the muni market lately. it's risk. there is risk there you're trying to achieve a pretty attractive income stream and total return. but it's different kinds of risk. a great diversifier to what a typical allocation, a bond portfolio, which is essentially
buying high-quality long-term bods bonds and sort of sitting on them. that strategy may not work over the next few years. >> thank you for coming in. >> thank you for having me. just moments ago, virgin group chairman sir richard branson tweeted the following, said, want to spend your big coins? how about a ticket to space? we'll discuss live o on @squawkcnbc. he'll join us in about ten minutes. [ male announcer ] once, there was a man who found a magic seashell.
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welcome back to "squawk box," everyone. federal regulators are considering whether to allow airplane passengers to use their cell phones and calls. for calls and text messages during flights. this is an announcement by the fcc. it sets up a debate over technical and social implications. guys, we were talking about this earlier. those technical considerations are one issue, the social ones are a very different one because the question again becomes, do you want to listen to people talking the entire plane ride when you're trapped and can't escape. andrew and joe, i think you felt like i did about that. >> yes. >> yes, we did. >> and we -- we don't disagree on a lot of things, do we? >> no, but a lot of times we'll have a different take on a story, kind of bring a different opinion. >> this one, we're all in cahoots on. >> we both like white wine,
chardonnay -- >> and zima. >> and this is the next question and i guess they've figured out, look, it'd be really tough for flight attendants. flight attendants, i think their union came out and is going to be opposed to this. they're going to have to police all this and it's difficult in the airs right now. >> how is -- >> so you can do it in the air? you don't need cell phone towers? >> because you run off of wi-fi. >> i think they're going to find a way so you're not going tower to tower, but i don't know every plane is equipped for that. >> to do that in coach. and most of the planes they added an extra seat per row. >> you have more people talking. >> in new york city, they don't allow you to do it in the subways. >> having said all this, i would love if i could be the one talking and staying connected to work. he is an original "squawk box" icon and rebel, sir richard branson tweeting the bit coins could buy you a trip to space. he'll join us in a few minutes to explain. this week "squawk box" is live with your top bands of all
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welcome back to "squawk box." let's look at some stock to watch in today's trading. petsmart reported third quarter profit of 88 cents per share, 2 cents above estimates. revenue, however, was slightly below consensus and below analyst forecasts. also, take a look at footlocker, beating estimates by 2 cents, revenue also beat consensus, footlocker, 4.1% increase in same-store sales was better than the 3.5% average analysts had estimated. comps. >> easier. >> better phrase, yes. >> and then united continental was upgraded to buy from neutral at goldman sachs. goldman says the airline is in a position to post outsized earnings and growth in 2014. and specialty grocer, the fresh marketer earned 23 cents per share in the fourth quarter. sales were also below forecast and the company cut its full-year forecast for the
second time. >> "catching fire" already off to a massive start. how big will it be? and what does it mean for the studio behind it? julia boorstin joins us onset. i can't wait, i have tickets to go tonight. >> i saw it monday and i thought it was good. i really enjoyed it. it's already well on its way to setting some new records. it could be the biggest non3d opening weekend projected to hit as much as $175 million even in the u.s. this weekend. now, $175 million would make it the second biggest opening weekend of all time. fant fandango says it's top selling of the year with 90% of all this week's ticket sales and we don't have midnight sales yet. but analysts are expecting more than $30 million from last night's u.s. box office. now, overseas, the film's expected to bring in more than $400 million over its run where it will benefit from a bigger fan base for jennifer lawrence,
the star of the film, as well as bigger fan base just for the franchise as a whole and the books they're based on. now lion's gate has been wise to extend the successful franchise. it's splitting the third and final book and series into two films. >> really. i didn't know that. >> and the final film is hitting theaters in november of 2015. the big question, what then? its recent "ender's game" film was fine, but won't spawn a successful franchise the size of "hunger games" or "twilight." warns of a potential earnings cliff coming up in the fiscal 2017 when the "hunger games" franchise wraps up. the question is, can the studio parlay the success of twilight and hunger games to consistent success with young adult films. earlier this week, michael burns came on the air and remarked that the rest of the studio is on the rise. >> we're not just a one-trick
pony. we've got an enormous library, our television business is doing great. we have a new show we're kicking off with hulu, "orange is the new black" is doing great for netflix. >> the hunger games this weekend, the more powerful lion's gate brand will be to launch new franchises down the line. you're seeing it tonight, becky? >> yeah, the kids are dying to see it. we bought tickets long in advance. >> the first time around, you were kind of opposed to this because people were killing each other. >> well, i found the first film somewhat appalling. the first film was about kids killing kids. i wasn't that big of a fan. >> she won, didn't she? they've got -- >> it's kids killing kids. >> it's a twist because there's also this entire trying to keep the man down and her being the symbol of the whole thing. there's a lot of different layers. >> you said it was the second -- if you say it was the -- >> the first one will be the avengers. this will be the biggest non 3d
of all time. >> what was the biggest? >> the avengers. >> what's that? >> a big marvel film. here's the -- >> the hulk and -- >> 2d films, tickets aren't as expensive. so this would be the biggest 2d opening and the second biggest of all time. >> i thought i l bought 3d tickets. it's on imax but not 3d. >> yeah. >> "the hobbit" they did three, they split the last one to do two. that's tricky, isn't it? >> they're smart. >> leverage it a little bit. . >> thank you, julia. richard branson making news this morning tweeting. explaining why he's getting behind the alternative currency. back with richard in a moment.
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welcome back to "squawk box." we're going to speak to virgin group founder richard branson in a minute. but in the meantime, let's get back to our guest host tom fanning, ceo of southern company. wecht talked about -- we haven't talked about obama care in a real way with you. we're talking about these other issues. but has it actually impacted your business in any way? >> well, it absolutely is impacting everybody's business, right? when you look at what's going on right now, it's a disaster, okay. and, in fact, i'm so sympathetic, i think, to the
problems they're having. i had 15 different jobs at southern company in my 15 years there. one of them i was cio. and we all know that means career is over. the challenges these guys face in putting these big complex systems is enormous. and if you think you're going to get the thing solved by the end of november, you know, i think that's a pipe dream. so this is going to be something in my opinion that's going to go on for a long time. so, the problem remains, what are we going to do about kind of health care? you can't solve the problem of america's long-term financial integrity without dealing with all of these issues, health care being one of them. we're seeing 8% cost increases. so we clearly need to do something. is this comprehensive change the right way to go? not for southern, not right now. it was interesting, i had another ceo talk to me about this. and he has -- we have 26,000 people, he had over 100,000 people. and his comment was any ceo that doesn't push their employees into the single payer system and
let america subsidize them should be fired. well, i just don't believe that. you know. my company, southern company's not run by a spread sheet. the ability to attract and retain people and something as critical as health care for the deep technical talent that we need to make, move and sell electricity is a really critical strategic issue. it's not a spread sheet kind of issue. so, of course, there are really good things that come out of the notion of broader health care, but there are ways i think to get there. so how is it impacting us today? we are simplifying, streamlining our offerings. we are looking at ways -- we've adopted a lot of the features of the affordable care act right now covering preexisting conditions, portability, 26-year-old all that kind of thing. so there's i think a glide path we're going to have to adopt going into the future. >> no, i was thinking the other day, we were having another
discussion where people argue what has caused health care inflation to subside over the last couple of years. >> the recession's a big one. >> some people say recession, other people say obama care's already working to hold down costs. and i finally realized since obama care basically caused the recession, it did hold down costs. it's not an argument anymore. not causing the recession, but causing it to remain. causing it to remain weak. >> weak. >> see how i brought all sides together? >> always. >> yes, it is obama care. >> listen -- >> the affordable care act isn't going to solve that. >> but isn't -- the question is, is the short-term pain for a long-term gain? the long-term -- and i imagine if you were to talk to people in the obama administration, they would suggest to you their thought is they're going to lower costs for everybody that ultimately maybe they do move to a single payer and more companies move people off and that's better for the economy. that's the argument that's made in certain circles, right? >> we believe health care is a
huge differentiator on being able to attract and retain people. and i think we've been able to demonstrate year-over-year over year, this is a huge benefit. and it makes a lot of sense to -- and we can always improve. and there's obvious dominant solutions to improve this issue. like one is, we need a much more informed consumer. >> and it's -- andrew -- >> you think you compete on your health care plan? >> sure, part of it. part of it is a pension plan and everything. >> absolutely. >> if someone -- >> even with young people. >> if i worked for a company that said, hey, fatty, if you want to get a discount on your life insurance or this insurance, you've got to do things to get in better shape. if the government tells me that, but if the company i work for, you're perfectly entitled to induce me to a more healthy lifestyle. i feel like, no, i'm going to
have two big gulps if i want. >> then it's your choice. >> and i'm at a company. when it's coming from the private sector. >> we've experimented with those ideas. you raise the premiums to everybody and give discounts to the -- >> the people with the right behavior. don't smoke, don't -- >> this issue of the more informed consumer is really an important issue. >> i wish there was a way. when you go to your doctor's office, they say we'll bill your insurance agency and let you know how much it costs. it's crazy. >> we're going to put a quick pause on this conversation if you could only because our connection to mr. branson has been met. here we are. we should tell you that virtual currency bitcoin has a new backer this morning making news right here on "squawk box." sir richard branson tweeting moments ago that virgin galactic is accepting bitcoin. and founder and chairman of the virgin group. sir richard, thank you for joining us.
>> thank you. >> why accept bitcoins? >> why not? it's a currency that -- a new currency, new, exciting currency. i'm also invested in a great, exciting new payment process. there are a lot of people who got into bitcoin quite early on who made quite a lot of money and are all interested in going to space. virgin galactic is a bold, entrepreneurial technology. it's driving a revolution and bitcoin is doing just the same when it comes to inventing a new currency that, you know, we'll have to see how it goes. >> there's a lot of people who have done very well. >> it occurs to me that bitcoin or the value of bitcoin has been volatile. it's gone up and down in a very meaningful way. even over the past couple of
months. when you accept bitcoin, i don't know when your first flight is going up. you don't know what it's going to be -- you just sold it -- you just sold a ticket using bitcoin, but do you know how much the value of that ticket is going to be worth to you one way or the other? >> yeah. the first ticket we sold was literally today, which was to hawaii, who made quite a lot of money by getting into bitcoin early on. as she's paid us in bitcoin, we transferred that money, actually, into dollars so if she ever, you know, a fixed price we can actually pay her the money back if she changes her mind about going to space in a few month's time in dollars at the time she paid it. so, you know, there's not a lot of risks for us as a company taking bitcoin. and i think it's, you know, it's
fascinating to watch what happened with bitcoin. i think congress has been spending a week looking at it. they might bring in some regulation. i hope it doesn't stifle the innovation of new technologies like bitcoin. >> you're an investor in bitcoin. what is it you see about bitcoin? some people suggest the success means that the dollar ultimately has to fail, for example. that this is the equivalent of buying gold. >> well, i -- i wouldn't want to risk saying publicly that it's the equivalent of buying gold. i think the fact that there's a limit -- going to be a limited number of bitcoins out there and it'll ultimately be capped, you know, unlike normal currencies where governments can print more currencies, it gives it a sense of security. but obviously there are risks involved in new ventures like this. it has been only going a year. it soared up in value.
there's been spikes and lows. but i think one day it will settle at a price that, you know, i personally believe higher than the price it is at today. >> do you see a day where you're not transferring? it's funny, when you said you were transferring the bitcoins into dollars, it made me think it's really not the future of bitcoin. how far are we away from a time when you wouldn't be transferring those bitcoins into dollars? >> well, you know, if we -- if we didn't have to give brief up to three months before the person flies, you know, we wo d would -- we could keep it in bitcoins and we could take a risk. but we'd rather, you know -- i've invested in bitcoins, i'm holding on to bitcoins and i can afford to take a risk with my
own personal money in it. virgin galactic, we've got other shells and -- >> what price did you get into bitcoin at, by the way? >> a while ago. i think anyone who got in early on has done very well. but the people who bought last week have done well. >> right. >> it's -- >> and how many bitcoins does it take to get to space on a virgin galactic flight? >> it's a very good question. but if you could -- it's -- >> we convert back to dollars. >> if you convert $250,000 into bitcoins. the bitcoin is going up in value pretty quickly. not many bitcoins to go to space these days. >> richard, we've been talking about this proposal to allow passengers to talk on their cell phones while they're in flight. what do you think about that? we were a little concerned about the idea of having an entire cabin full of people all chatting away at the same time and being trapped there with them. >> well, look, it's been bizarre
you've had to turn your phones off in the past when, i think, as the airline owners we know that the regulators know it's not an issue for safety. i think what's likely to happen if you'll have talking cabins like you used to have smoking in the cabins where people can talk and quiet cabins where people can sleep and not talk and that's the kind of thing we're looking at doing and introducing in the various virgin airlines around the world. >> do we pay more for the seats in the talking cabins or more for the seats in the nontalking cabins? >> on virgin you pay the same price on each seat. >> i imagine you might have seen the news. singapore air, which i know is in business with virgin is doing its last night from new york to singapore directly. it's an 18 1/2 hour flight. the longest flight in history. and it's apparently no longer a
viable business. and i wonder what that portends for other long haul flights. >> well, look, i think the exciting thing with virgin galactic is we're building -- we're doing that for a purpose. and that is virgin galactic, we would like to do new york to singapore in one hour traveling around the world at 26,000 miles an hour. that will happen hopefully in my lifetime, it will definitely happen in my children's lifetime and say maybe singapore airlines has seen the writing on the wall and is getting ready for our virgin galactic flights. that will be the future and it will be incredibly exciting. >> you're still doing this, even after you saw gravity? >> i've got a funny feeling when
your friends start arriving there in one hour, you're still at the airport waiting to take off. >> richard, real quick before you go, i don't know if it's right behind you right now but the great house on your island, i know you just rebuilt it. there was the fire, we talked about it about a year ago when it happened and i had the great fortune of actually seeing the old house. what's is look like? >> it is right behind me. it's rebuilt, it's beautiful. we've actually got -- [ inaudible ]. >> we should do the show from there. >> come and do the show from here. >> all right! >> you got a deal.
>> sir richard branson, thank you for joining us this morning. >> save that tape there. >> we got an invitation. it's real. >> was that an invite? >> that was a real invitation. bona fide. >> bona fide. that's the word i've been looking for. we've been sitting next to each other for a while now. we finish each other's sentences. >> that's exactly the word i was looking for. >> coming up, your list of stocks to watch. is today friday? >> it is. >> that's so good. tem, there are signs both political parties in washington get it: washington is lagging behind the country on this... ...this issue has been around far too long... and yet, we wait. reforming our immigration system would dramatically reduce our nation's debt... grow the economy by 5.4% ... and take bold steps to secure our borders. on this, both parties say they agree:
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let's get done to the new york stock exchange. jim cramer joins us now. we like to get substantive stuff out of you, jim. there's not that much happening. you've seen gravity. are you going up in one of branson's things? >> no. i did fly virgin out of san francisco. it was just such a pleasure. >> really? >> yeah. pilot jeff came out to me, bought a lot of kinder morgan on my recommendation, talked about where he got in and the situation. just a terrific guy, terrific plane ride. >> if all you do is accept
bitcoin and turn it into dollars as quickly as you can to make sure you don't have currency risk, is that a currency? >> the government didn't shut it down. i thought one of our arms of government would say this is a money laundering thing, we don't want to do it. this a terrific way if you're a bad guy to money launder. the government is not showing any foresight here. it's a shame because i'm sure if you got ben bernanke in a room, he would say this is a real bad idea. >> what's the game this week? there isn't one, is there? >> well -- >> i meant college. >> sunday night is unbelievable we have that, the pats. >> a giant redskin game, they should flex that. >> that's going to be like 30 million. >> it's going to be our biggest
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last thought? >> we're talking about the economy, and affordable care act and innovation and all this stuff going on, it's fascinating that slow growth ran the economy, unacceptably high unemployment. now it seems people are starting to doubt and it's time for business to step forward. >> have a great weekend, everybody. see you on monday. "squawk on the street" starts now. ♪ we work hard, play hard, work hard ♪ >> good friday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. the dow did close about 16,000 yesterday, wants to add a little bit more. we wait for bill ackman to renew his attack on herbalife today.