Transcripts For CNBC Squawk Box 20131015

Last two weeks. The yields on debt that comes due in one month have risen to levels higher than yields for maturity thats dont secure for six months. Thats a big deal because normally an issuer would pay to borrow for longer periods of time. The institutions want to avoid being stuck with debt in the event of a default. Citigroup has told clients it would rather not take treasuries on october 24th as a sign of collateral. Andrew, this a sign your money is no good here. Weve got more on the situation in washington in just a few minutes. I dont know if people are going to be taking paengz or not, but i think we should see a number of Companies Set to post Quarterly Results for today. Before the bell, well hear from the follow. Citigroup, cocacola and johnson and johnson. Intel and yahoo are among the other we will be hearing from. Burberrys ceo is leaving the British Fashion house to move to, guess where . Apple. Angela ahrendts is going to take up a newly created position at apple with oversight of retail and online stores. Shes going report directly to ceo tim cook. Blackberry opening to publishers, appearing in major publications around the world today. The letter tries to reassure customers saying in art, there are no doubt challenges times for us and we dont underestimate the situation. But we should continue to count on blackberry. Blackberry is, of course, considering a sale or breakup of its operations. Joe. What does that mean . I mean, continue to count my blackberry still working . And you should be very happy about that. Lets check on markets. A onemonth bill . If you really want to look at the what weve seen, the effect of the worry, lets look at the effect on the one month or the three month. Billions . When youre talking billions, you know, the shortterm funding that goes on around the world, billions is a big number, but the global flow of funds and whats in one month and if you havent seen the panic in the two year, you i think if it was a real worry about, you know, a default, i think people would be selling and the chinese would be uncomfortable in the ten year and the 30 year, etcetera. As the headline pointed out, even the six month has not seen any panic. This is a technical thing. Maybe theres near term, maybe theres something that happens but you wonder what happens. If you go past thursday and later you wonder we saw the 2ekal reasons for the money market funds. I think the markets went up thursday, friday, and its indicated up higher today. All on the assumption that we get a deal by thursday or friday or through next week. And the actual day is not the 17th, its probably the 1st. I would beg to differ and suggest that actually next monday is the day when the markets what happens next monday . Theres apparently a couple of payments that they start having to make next monday where things could get choppy. Were going to talk to harwood and see what he thinks. Do you get the house today . I doubt you get the house today. Do you get them tomorrow . Probably not. So you get the senate done. Boehners name is not going to be on the default. I think hed let a vote go. But i guess the question is when does he do this . He would let it go to vote. But i wonder, would he do that by thursday . Would that be something that it took until friday or monday to actually do . These guys look askance over at the house. He hear them talking, theyre collegial, they remind me of the guys like delta tarr. What was his name . Im not going to give them a hard time. No, just hold off for a second. Do you remember the guy database have you seen animal house . The guy who yes. And then youve got the house. Delta house. Are they not delta house . Belushi, food fights but theyre the fun ones. But theyre insane, but swinging from the chandeliers and then the that is really good. Of course, the senate is thank you, sir, may i have another. In they have those dark rituals where theyre getting slapped and who knows whats going on there. But theres toga parties going on over at kai omega . Sorry, omega beta i dont want to do any actual fraternities. But they talk about how collegial they are in the senate. Yesterday, bob corker did tell us he got a little heated, actually almost rose out of the chair with ted cruz. And then he stopped himself. But that is heated. That is heated for the senate. Whew, wow, settle down, big fella. Whereas over there, its like mixed martial arts or mud wrestling naked. Are you into mud wrestling . No. But its the big two year, six year difference. You represent an entire state when youre the senate. When youre a congressman, youre a small its like the house of lords versus the house of commons. These guys are commoners, are they not . So i can blame the house if we end up in the beltway . Its the houses fault, trust me. And you will be down in the beltway. Im leaving after the show to go to washington. Oh, yeah, youre going to be down there. You recognize if we go to the 17th, i wont be going to a bengals day, right . God, ive got jim nance saying bengals, you say bengals. Bengal tigers. Bengal button. Mean wile, the last point i will make, does goal look to you like theres a lot of stuff going . No. Nobody cares. 1255. Do you see that thing on the left . We are slowly approaching if it goes through that, do you see that number at the very bottom . Were going to have to move that down below 1,000. Were going to have to put 900 on the chart, perhaps one of these days. Anyway, time for the Global Markets report. Ross westgate is standing by in london. Whenever i come can in, ross. God bless you. I love Worldwide Exchange and everything. But you get some squirrelly looking guys from time to time. What . Injury going to snut the guests . No. But i look at them. We dont have the hair is different. Just everything have you ever noticed you guys get some unique looking people coming in there for theres no way he can answer that. It makes him look good. I think unique is a good thing. A lot of the guests in the last hour are american, as well. I just assumed. I dont have the volume up normally. And i go, look at this guy. The big weird ties and the english i just think in general you get some interesting, quirky looking eccentric looking guests over there, right . That is the world, joe. That is the world and thats title of the show. Yeah, youre right. There you go. Thats what we do. Quirky Worldwide Exchange. Becky is right. I cant really comment any more than that. Thanks for that. Let me show you where we are with the debt debate going on in washington, d. C. Equities are firmer here in euro europe, around 8 to 2. Were not quite at the session high. We hit that around 30 minutes or so ago. Up 20 points, up another 50 this morning. 0. 75 higher for the xetra dax and the ftse 100. Cac 40 up 0. 6 and the ftse mib is flat. Utilities are the weakest along with industrials. Here is one we want to point out. Basic resources up 2 . Rio tinto, the worlds biggest iron ore producers coming out and ramping up production, fairly bullish. This comes on the back of figures yesterday which show record iron ore imports. Things are looking much better for the remaining diversified giants than they were a year ago. Basic resources have been the underperform underperformer. Take a look at the individual stocks in focus today. Its all about burberry, 4. 73 . Angela ahrendts is leaving burberry. Guess where shes going . Over to apple. Apple stock up up 1. 3 . Basically, shes going to be the head of apples retail. The last time she spoke to us in september she was very bullish about digitalzation of burberry products for things like the apple iphone 5s, as well. Thats where these going. Taking over at burberry will be the current chief creative officer chris bailey. Hes been there for around six years. There we go. Will she do similar things for apple . Thats what well have to look at. Right now, investors believe there is a temporary solution on the table in washington and thats pushing assets prices higher. Lets get back to that washington story and to john harwood. John, it looks like things are starting to take shape in the senate. When do you think we might see it . I think well see it today. The way it was taking shape last evening when they brock and decided Mitch Mcconnell was going to talk to his this morning you would have a continuing resolution through the middle of january. That was shorter than democrats wanted because they want to be able to in the budget talks negotiate higher spending levels. Republicans have been asking for a longer cr. On the debt limit, you would have that go through february the 7th. That is shorter than democrats wanted, but republicans wanted it short to keep the pressure on for a deal. The medical device tax would shed some on the right and republicans wanted to repeal as a sort of stop to the effort to stop obama care. That is no is in the discussions. They were talking about last night Income Verification steps that republicans had asked for. Paired with a delay in a tax that labor unions dont like called the reinsurance tax. Both of those are relatively minor provisions designed to give something to they needed something for having pushed this as far as they did. So it was looking pretty promising, both mcconnell and reid were confident that they could move this with their numbers. I think the odds are going good that they will pass in the senate today or tomorrow. 1234 some say i dont think Mitch Mcconnell will send us something that we cant and get a good number of republicans. Well see what happens. I guess the issue is how many republicans you actually get. Is there going to be something that will be carried by the republicans or will the democrats have to agree, too . Will it be a small number . I dont know how to forecast that. I do think most republicans want to bleeding to stop. They want this crisis to be over. But, remember, that ted cruz and the members of the tea Party Faction kind of overran their leaders in the first place. The leaders never wanted to go down this road. And so i think it is you have to assign some uncertainty to that outcome. The other question, john, is an extension like that is not an incredibly long extension when you start thinking about the holiday time that popped up between now and then. Is there the sense that there will be very real talks coming up with a proposal that could then be acceptable just a few months down the road . Yes. Theyre talking about having a budget conference that could conclude by middecember. And the aim of that conference would be to alleviate parts of the sequester, which members of both parties dont like and they feel its pinched too hard and replace those with entitlement cuts. And the question is is that a small deal or a big deal . If its a small deal, it might be able to be done without any additional tax revenue, which is obviously a problem for republicans. If its a big deal, a more ambitious thing that has more savings out of Social Security, democrats would insist on tax revenue. Is that possible in this environment . It hasnt been in the past. Dont know about this one. Is it going to be a deal that gets done by thursday or is this something that you think gets pushed past thursday and into this weekend . I would bet that it is done by thursday and john boehner will put it on the floor and pass it. You dont know how much the speaker and the house is going to be influenced and moved by objections from the right if those come. Okay. John, thank you. We will continue to check in on this and thank you for keeping us up to date. If its done, you know its done, then i dont see why hes down there. I dont think he knows. You know where i stand on that. You dont want to go. I dont want to go, but i think we are going and, therefore, im not going to the Football Game. He wanted to go to youd rather go to washington than the Football Game. Which Football Game are you going to . That was the bet that he and harwood made. Its the bet. Hes trying to make you say it. Im not going to. Coming up, amazon is steaming up with procter gamble. Were going to tell you why competitor res upset about that. The dodgers beat the st. Louis cardinals, 30. Cards lead the nfc at 2 games to 1. Monday, the San Diego Chargers didnt allow a touchdown in a win over the indianapolis colts. The chargers improved to 33 and the colts dropped to 4 2. But first, it is now time for the National Forecast with the weather channels alex wallace. Good morning. Good morning. And the big weathermaker here this morning is here across the midwest. The Northern Plains up in the west is our storm system. To the east, wet weather. Its a bit of a soggy one for us, duluth into minunesota. Snow in the western portions of south dakota. A little wintry weather to deal with this morning there. That will be generally what we find for the day for our forecast. Snowy here on the wes side. Then rain showers and storms moving through the western great lakes and the ohio river valley. That will all head east. So for tomorrow, interior northeast, buffalo, youll see rain. Those are showery conditions across the western portions of the great lakes. Now, behind all of this mess, we have temperatures dropping quite a bit. Through the midweek highs, it will be 10 to 20 degrees below average. Denver, 22 degrees below average. Temperatures stuck in the 40s. So those coats and jackets, they are coming out. Thats your National Weather forecast. More squawk box coming up next. [ man ] on december 17, 1903, the Wright Brothers became the first in flight. [ goodall ] i think the most amazing thing is how like us these chimpanzees are. [ laughing ] [ woman ] can you hear me . And you hear your voice . Oh, its exciting [ man ] touchdown confirmed. Were safe on mars. [ cheers and applause ] hi. [ baby fussing ] time now for the executive edge. Amazon is setting up shop inside warehouses of some of its key suppliers like procter gamble. Its all part of amazons push into everyday products like diapers, shampoos as it tries to stay ahead of warehouses and groceriers. Better compete on price and cut the time that it takes to get the items to customers. As for the other players in this deal, p g benefits because it saves on the transportation costs it would have incurred sending the products to amazons regional distribution centers. Guys, the grocers out there are up in arms. But this is a Good Partnership if you are amazon. I would hate this if i was anybody but amazon. I cant think theres anything wrong about this. I dont think so, either. Walmart is not there. Its a partnership. Hey, its a partnership. And kroger is not there. And amazon is there fist. And think how slim they can sell it so cheaply. But p g benefits, amazon benefits. Right. I was trying to figure out what the complaints would be, but i dont think you can come up with an argument. The question becomes the following, however. If walmart calls up p g and says we want space, and if kroger calls up and says, we want space but you know what . The only people who are going to get that would be walmart. Walmart is the only other player that has that. Internet sales are growing so rapidly, thats one of the advantages you get. Gets to you faster, your toilet paper gets to you faster. You use them for everything, dont you . We use them for everything. Prime, right . It used to be if you were amazon prime, you could order anytime at any time and it would come and you didnt have to care about the shipping price at all. You could order batteries or a toothbrush and you wouldnt Pay Attention to shipping. They did something in the past more on two where theyve changed the policy. If im an amazon shareholder i would say yeah, bravo. Some of the smaller items, they have an add on product. So now it will only ship when it ships with the next thing that you get. That makes sense. Thats a smarter way of operating. Because they had to be losing money on prime. You told me two years ago they had to be losing their shirt on you. Had to be. I think we need to run the days off. You know, walmart doesnt think this is very funny, i dont think. What do you think he thinks about that . Walmart doesnt think this is very funny, jeff. There we go. Hes listening from afar. We havent used it in a while. We havent. Did we replace it with paris hilton singing thats hot . Crickets. Crickets. Anyway, crickets. Closing arguments are expected today against billionaire Dallas Mavericks owner mark cuban. The s. E. C. Sued him after selling his stake in mama. Com after the ceo told him about a planned stock offering. Joe, youve had some strong thoughts on this. I just remember when it happened. It was like, we are going to sell some stock. He was like, youre what . You cant raise money now. And he goes, if you sell it, im out. I remember the whole time it didnt look like he thought it was inside info. I dont understand. If i called you up and i had real information i just remember the way it happened. It didnt seem to me that it was nonpublic information. Didnt cuban make it public right away, anyway . He said he was selling for that reason. Of course, i was surprised when fabulous fab, when that happened. I like mark cuban. I think this is a challenging one. No, no. You saw how much money it was, too. At best he would be fined 2 million. If it was meaningless for him to get in and out of. The canadian ceo refused to come here to testify. They testified by video in canada, which is a little strange, too, if youre on the jury. I just remember i dont remember the details, but i remember when it happened. I remember wa cuban said and he was incensed that they were doing it. And it wasnt that it was like, well, i found out theyre doing it. It was like, im not going to be in your stupid stock, then. But r but that would be like Lloyd Blankfein calling you and saying, im getting rid of your stock. I dont think he thought that want that it was confident information. My most interesting thing is this. Did you see this . Can you get in on this . What sitd . Those pink lynx are your immune system cells. And that big thing what is it attacking . Thats a cancer cell. Whoa. But it looks like some kind of big, hideous bug, doesnt it . But the immune cells are ineffective against that . No. Theres things you can do to get your t cells to get even more aggressive in recognizing cancer as nonself. But i thought it was cool. Now, they dyed the different cells so you could see them. But you look at that hid why heus looking cancer cell, totally uncontrolled, divides, divides, spreads and breaks off and colonizes other parts. And then you see these beautiful pink tcells in there, trying to you know, were doing our best. And if we can get those guys ramped up, to see whats not i am definitely going to read that article. Thank you, joe. Im trying to point out something valuable in the times. Every once in a while on a tuesday i find something. Rare. Tuesday is a big day because thats andrews column, too. Its hard to put an editorialal comment in the times. They still try to get something in there, but lard. Were going to check that article out and andrews column. Thank you. When we come back, some of the best known names in investing. We have Robert Shiller, plus leon cooperman. Hes going to share his best ideas for this market. And we have david pepper. Hes going to be sounding off on washington, the fed and his investing outlook. Amazing lineup. Stick around. vo you are a business pro. Maestro of project management. Baron of the buildout. You need a permit. To be this awesome. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. aaron purrrfect. vo meeeow, business pro. Meeeow. Go national. Go like a pro. Good morning and welcome back to squawk box here on cnbc. Im joe kernen along with becky quick and andrew ross sorkin. Sneed Senate Majority hes not here, but im going to talk about him. Senate majority harry reid and republican minority leader Mitch Mcconnell both sending out messages following yesterdays talks in washington. Its safe to say weve make substantial progress. Were doing our best to make everyone happy, but Everybody Knows were not going to be able to do that. Everybody understands were doing the best we can with all the frailty we have as people and legislators. Harry has come around. Remember for the last month hes been just, like, scary. Scary harry. And now since the deadline is here. You know, he gives it out, he takes yeah, now its but kumbaya. I think it works, though, because its such a change. I think they brought the guy we need in, too, hopefully. Who . You know who we need. Biden, man. Hey, guys, come on i cant believe i havent heard that. Hes around. Thats wa we need. I sort of make fun of him, but hes it doesnt matter which side of the aisle youre on, i dont think so. Would you like him to be your president in 2016 . It doesnt matter. Now i like him. Ive developed a he has friends on both sides of the aisle. He was there for a long time. I guess maybe i see a little bit of a little bit of you in him . A buffoonish nature and not trying to be mean or nasty. Anyway, the deal were talking about, the deal would enter the discussion would end the shutdown and reopen the government in the until the end of january. Negotiations are focused on raising the debt ceiling until the end of february. And he has a wife that is much nice that keeps him around and looks am him and just shakes her head. Thats sweet. Right . Trying to figure out who you are. In what . Yeah. Who is that vermont guy . Sanders . Yeah. Sanders the socialist . I didnt even think about that. Thats right. Hes a socialist. Never mind. Let me take that back. Let me find someone else. Rethink it. We have a corporate buzz this morning, macys announcing most of its stores will open on thanksgiving day for the first time in its history. Its a sign of how the Holiday Season is opening up. Its going to be opening most of its Namesake Stores at 8 00 p. M. Its a big issue and is consistent with what many rival res now doing. The Government Shutdown is two days away from possibly running out of money to pay its bills. But as weve been talking about, markets remaining optimistic that lawmakers will reach a deal before that deadline. Darrel crock is with Wells Fargo Private Bank and you do believe a deal will be reached by thursday . Yeah. I think well get a deal, becky. It looks like obviously theres a deal moving the senate. As joe just pointed out, we have mr. Biden to the table. If you remember in 2011, biden and mcconnell were the two architects of putting the 2011 deal together. So i think weve got those discussions happening. Theyll get it to the floor of the senate this morning. It will move on to the house. And it looks like theres probably the votes in the house. If you dont have a vote by thursday morning, do the markets panic at that point or do they give a little bit of leeway for a deal that could be done by friday . Certainly as weve talked many times, october 17th is not a default issue, right . Were not going to miss a principal or Interest Payment on treasury. No. But it doesnt make us look very good. Correct. It does give the markets some anxiety. I think you see the short end of the treasury curve, continue to react, the repo market, all the stuff that happens within those securities that are maturing within this window of time kind of late october, early to mid november. Forget about what the markets think. What do you think . If we push past that thursday morning deadline, is it a new world and a new arena where we are much more willing to touch the Nuclear Options . I think if we push past it, but theres a realistic chance that were close, you know, on the floor of the house and stuff, then i think the markets buy some time for them. If it looks like all the negotiations have really kind of broken away, then i think the markets do react poorly to that. So lets push through this. Lets assume theres a deal. We saw a selloff in the market down about 4 . Weve rebounded. What do you think about the prices of stocks at this point . We still think theyre very attractive. When we head into 2014, we would say by mid to later part of 2014, we have a target on the s p of 1850 to 1900. Which means about a 5 earnings growth. It means a little bit of multiple expansion. I think the risks, though, becky, when you think about this is weve talked often about the bernanke put, and the Monetary Policy on the bottom side of the market. Were quickly putting in what i call a fiscal Glass Ceiling on the top. We keep doing these shortterm deals and thats not buying both Congress Time to get the real issues, entitlement reform, tax reform, you know, a future fiscal pass on the table. So you stick yourself between this bernanke monetary floor and fiscal creel. The deals were putting together are smaller deals. The issues are big, but youre not worried about a drag on the economy between now and whats some of these deals are going to be january 15th . Is that the day . January and february. You dont think the overhang on all of this is going to ultimately create a real drag . I think it creates a well, certainly i think just the shutdown alone has taken off probably close to about 0. 5 to q4 gdp. Thats consensus. I think it troubles business and consumers confidence, you know, as we head to the fourth quarter. And andrew, thats the issue, as much as we want to see this deal and we want to get the whole idea of default behind us, the reality is pushing this out to a january 15th, you know, cr, living kind of cr to cr instead of a traditional budget process and the debt ceiling to february 7th doesnt buy us much time to solve the real issues. And i think thats where the markets longer term, if we cant get on a sustainable fiscal path, theyre going to start to react to that. Is it a sustainable fiscal path or a sustainable bucketary path so were not living, as you said, cr to cr, but thats different than a sustainable path. I think its both, quite frankly. We need to get back, as we know, the senate and congress hasnt passed a budget in five years. So we need to get back on an annual bucket that everybody can agree on. But beyond that, when you look at, again, what people forget is when you look at the budget every year, 80 of it is made up of three line items. Its entitlements, defense spending and interest on the national debt. The other 20 is the discretionary spendsing. Thats wa we keep negotiating over, cuts to discretionary spending. Thats a nonsensical issue if you dont solve for the bigger 80 . Thank you so much for coming in. Thanks, becky. Still to come, two well known investors, Leo Cooperman and at 8 00, david tepper. Plus, i dont think theres any question, shes shes been called the greatest golfer of all time, the only female to break 60 in an official event. She stepped away from competitive golf to focus on her own business ventures. Shell join us to talk about it when squawk box returns. I love having a free checked bag with my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. Its as simple as this. At bny mellon, our business is investments. Managing them, moving them, making them work. We oversee 20 of the worlds 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 peoples lives. Invested in the world. Bny mellon. Welcome back, everybody. Its time for todays squawk planner. Well get Quarterly Results today from cocacola, citigroup and Johnson Johnson. Intel, yahoo will be dominating the list of companies after the bell. We have one report for a market that is starved for data during the fed shutdown. The Empire Survey is out. Walmart is holding an investor date today. Its scheduled to begin before 9 00 a. M. Eastern time. Mike duke will provide an overview for the companys strategy over the next year. Other members of the executive Leadership Team will field questions. Joe, ill send it back to you. Thank you, becky. Our next guest is a woman of many talentalents. She found add golf academy, runs her own branded business, a charitable found algdz, a Wealth Management fund for athletes and much more. Annika sorenstein joins us. Its exciting announcement. For me, its no different than jack or tiger in terms of the ladies. I cant think of anyone that is even up to your low shoulders in term of your stature. Well, thank you very much. You made my day. Is there a champions tour for ladies at this point . There is a legends tour. But im still a little too young for that. You got out right at the top, too, didnt you . You could have won another couple of majors, i think. Maybe, thank you. Ive been a professional for 17 years and ive achieved everything i wanted to achieve. So it was time to move on with all the other different businesses. I had other passions in life i wanted to pursue. I was getting married. The beaten balls every day for two or three hours or maybe six hours. Or six hours. I think about phelps getting into that cold pool for like 12 hours a day. He said what do you mean youre not swimming again in atlanta . Its like you get in a pool for 12 hours a day and see how you feel. I love the game. Your nerves didnt get old like mine. You told me not to even say the y word or the s word. No, no, you have to stay positive in golf. Its such a hard game. The longest distance is between your ears. Its hard to stay positive when you know your next shot is going to be terrible. Why are you thinking so far ahead . One shot at a time. What can you tell us today youre doing thats new . We have partnered with 3m fortune 500 companies to support the ain this can i a award, global tournaments i do around the world with my foundation. We are so excited to have them on board. Theyre going to help me with our initiative we started in 2007. Its all about getting back into the game and giving some young people tools to help their game. Theres no other annika, is there . No. Ive been lucky. I have a name here in the u. S. That nobody else really shares. Its important for me. Why is it important for you to set up a foundation at this point . I guess youve done pretty well with golf and in life. You might as well try and share that. Yeah. I have achieved my goals in life. When i stepped away in 2008 i said, hey, i want to give back to the game of golf, i want to give young girls the opportunity to pursue their dreams. Golf is something i know, nutrition is something i know. And i think were at a time in our lives when, you know, you can give back. And i wanted to do that with annika foundation. So we have tournaments around the world. Im partnered with first tee and we created the nine healthy habits. I think golf is a great platform to show other athletes how healthy you can be. With a partner like 3m, is gives us the opportunity to do that. For me, its to inspired these young girls, theres nothing more fun. I remember when i was in those shoes. You look for opportunities, you have dreams. And for me to do that now is it couldnt be a better time. Is there anyone on the lpga that appears to have the you know, the potential to challenge any of your records, do you think . Well, there are a lot of wonderful players on the tour. We have Lexi Thompson winning this past week in malaysia. Shes only 18 or 19 years old. Im sure youve heard of lydia cole, an appear temperature or at least she was an amateur. Shes only 16 and 17 years old. Theres a lot of wonderful players out there. And theyre terrific young women, as well. Tiger won player of the year. A few times, yeah. As you did. You won more than anyone else, obviously. You had a scoring average one year of 68, right . Yeah. Those were some good years. They were. Do you think tiger i mean, you know, not just lpga, i think tiger is back. Is a major in the cards next year or the year after . Yeah. I thought this year. He was a contend her in some ft of the majors. I think he has five victories over all. Hes turned his game around and hes kind of the guy to beat nowadays. Can you explain, as a european, can you explain the ryder cup . Its not a curse, i dont think so. Theres something that happens to the u. S. Team and it doesnt happen in the president s cup. I dont understand it. And last year was unfortunately for us a prime example of that. And no one on the u. S. Team did things like ian poulter. No. Ian poulter has hes a ryder cup star. He actually is a neighbor of mine in orlando. Oh, nona . Yeah. Theres a few golfers there. Geez, ive never played there. Ive always wanted to. Waiting for an invite, are we . We have a lot of our guests and our viewers who are very interesting in philanthropy. Is there anyone lieu to as somebody you took lessons from or you look to as an example . Theres a lot of people in the industry of golf that i look up to. Arnold palmer has done a lot. He has several hospitals in orlando. I dont know if you can say we were lucky or not lucky. But we had a son that was born a few months early. So we spent a lot of time at the orlando hospital. Here is a gentleman that stepped away, spent a lot of time for philanthropy. I think as athletes were very lucky. We live a life that we enjoy in fulfilling our dreams. When we walk away, we have a chance to impact a lot of kids or adults to make the right choices in adults. Ive learned from our athletes, of course, and given the success in general. To me, its a good feeling to be able to do that when youre in a good place in your own life. Are you doing any apple . No, i dont, other than the product. But you buy stocks . I do. I love stocks. Thats why i watch your show a lot. I started to invest my own money early on in 1997. Im what they call kind of a blue chip chick. You are . Yeah. My dad worked for ibm for many years. I have a few holdings im pretty proud of, but im a longterm ed down. Just stay calm. Business hero is welch who was here on friday. Thats right. Hes a pretty good golfer too. Yeah. And you have a horseshoe in your golf bag. Its heavy, isnt it . Well, i dont carry the bag. Annika, thank you, and any time youre here, youre welcome i mean can we play . Yeah, id love to play. Well, now you know i live in lake nona, when the snow starts to fall, let me know. Let me just write your email down here. No, anyway, its great. We like all the stuff youre doing, as well. Thank you. I want to see you on the champions tour when youre ready 15 years from now. Coming up, its one of the newest trends in technology. Wearable devices that let you track everything from how much you sleep to how many steps you take in a day. Were going to talk about nikes push into the space when we return. Americans take care of business. They always have. They always will. Thats why you take charge of your future. Your retirement. Ameriprise advisors can help you like theyve helped millions of others. Listening, planning, working one on one. To help you retire your way. With confidence. Thats what Ameriprise Financial does. Thats what they can do with you. Ameriprise financial. More within reach. Ttrust your instinctsdo to make the call. To treat my low testosterone, my doctor and i went with axiron, the only underarm low t treatment. Axiron can restore t levels to normal in about 2 weeks in most men. Axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. Women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. Report these symptoms to your doctor. Tell your doctor about all medical conditions and medications. Serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. Common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. Ask your doctor about the only underarm low t treatment, axiron. At a ford dealer with a little q and a for fiona. Tell me fiona, whos having a big tire event . Your ford dealer. Who has 11 major brands to choose from . Your ford dealer. Whos offering a rebate . Your ford dealer. Who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires . Your ford dealer. Im beginning to sense a pattern. Get up to 140 in mailin rebates when you buy four select tires with the Ford Service Credit card. Whered you get that sweater vest . Your ford dealer. Welcome back to squawk box. Nike is holding an event where the company is expected to release the new fuel band. Its not alone in the space. I often talk about wearing a jawbone up band on my wrist. Its this one, not the other one. And Michelle Carusocabrera is also a fan of the fit bit. Yes. I dont know if people know what these things are. This thing wherever i go, whatever i do, i can take it in the shower, sleep. Yep. It tracks all my walking. Steps. Steps, running, whatever. If you go on a bicycle. You have to put it in your pocket so it knows youre actually moving. I have to input to say i was on a bicycle during this period. And the most important part for me is sleep. This will show you my sleep. For example, last night i actually slept here. You can see 4 hours and 28 minutes which is not great. Im messing it up again. Ive totally screwed it up. 4 hours and 28 minutes. And you can see my sons woke up, which didnt help. This shows the deep sleep like rem sleep and light sleep based on movements. The fit that has this that syncs wirelessly. Does yours sync wirelessly . I have to take it off and connect it. Oh, no, this just talks to each other automatically. And then if you can see here, ive got my minutes, my calories burned, my goal on how much weight id like to lose. How much i slept last night, how much ive eaten so far, how much im allowed to eat. Its got all kinds of metrics. So the nike, by the way, we should the fuel band is the one that Tim Armstrong from apple actually wears himself. Okay. And just hired someone from nike to go to apple. I wonder whatever we see is going to be the game changer. I didnt like the nike fuel band because, again, it wasnt wireless. The fitbit was wireless and also has a scale i like. But this one is wireless, i understand, the new one and measures your heartbeat. Supposedly. But no sleep. Coming up, weve got cooperman and his best ideas. Opportunities arent 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. At bny mellon, our business is investments. Managing them, moving them, making them work. We oversee 20 of the worlds 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 peoples lives. Invested in the world. Bny mellon. Can the senate save the day . I think its safe to say we made substantial progress. And everyone just needs to be patient. Hints of a possible deal in d. C. To raise the debt ceiling and stop the Government Shutdown. Details and Market Reaction are just ahead. Delivering alpha at omega. Value investing guru leon cooperman joins us for the hour. Find out what names he likes now, where hes putting his money to work. Plus, the newest member of the squawk laureate class. The second hour of squawk box starts right now. Good morning and welcome back to squawk box. Take a look at the futures. We did have some green arrows before. Well see if those are standing up. Dow looks like it would open up about 26 points higher. S p 500 about two points higher and the nasdaq almost eight points higher. That comes as we hit now day 15 of the Government Shutdown. But there are some hope of a deal. And thats what may be moving this market ahead of the Senate Leaders. Mitch mcconnell and harry reid say theyre not there yet but are close to an agreement to raise the nations debt limit. Optimism over a possible agreement helped stocks erase early losses yesterday, also set the dow and s p 500 to their fourth straight day of gains. Also, apple now hiring burberry chief executive. Going to run in 2014 after serving as ceo since 2006. She gets a lot of credit for the stock of that company. Apple looking for stability. Ron johnson, of course, left in 2011 for his illfated tenure at jc penney and his replacement left apple last year after only six months on the job. The next big apple product . Have a little burberry you know, its going to be colors. Its going to be colors. Logos on the back of the case. You know, she knows colors, she knows style. Its high end. And everybody i would say anybody who thinks theyre going for the low end, people said when they came out with the 5c. I dont know, maybe they want certain customers. You know, you need to know how to market. But i still hope they continue to have Technology Innovations not style innovations. She is not an engineer, but they also hired the former ceo or president eve st. Lauren. A lot of people say ralph lauren. Its ralph lauren. Leon cooperman why did he change that . We will formally introduce leon in a moment. We have one other piece of retail for you this morning because macys is planning to open its doors on thanksgiving. For the first time ever, macys will be opening most of its stores at 8 00 p. M. On thanksgiving night. The move is consistent with what its rivals are now doing. Last year, macys opened at midnight on black friday. Our guest host this morning is the squawk market master. Hes also one of the topperforming managers this year. Joining us for the next hour is Lee Cooperman, chairman and ceo of omega advisers with 9. 5 billion under management. And the fund is up 26 this year. Lee, thank you so much for being here. My pleasure. My pleasure. You talk stocks and we listen. And a gain of 26 , thats phenomenal. When you warned this year was going to be a tougher year than weve seen before. Its really just modestly better than the market. We benefitted along with a lot of other investors. My message this morning frankly is rather unexciting. I think that mr. Bernanke coupled with the modestly growing economies put the market in fair valuation. The profits are growing modestly, so really the future the market valuation is a function of what went into the earnings. And i choose to think in terms of 15 to 16 multiple. I put that on 109 in earnings. I dont want to sound so precise because the market isnt that precise. It gives you Something Like 1650, 1750 range or 17 and change. So the market is fairly valued. I dont think its overvalued, i dont think its a bargain anymore. I guess if you study the history of market cycles, generally bull markets move in three phases. The first phase, the bull market i refer to is wow, we survived. When youre heading down, looks like the worlds coming to an end. Nobody sees a turn, you get to turn because fiscal monetary policies and its the wow, we survived and that was really from the bottom of 09 to late 09. And the second phase of the bull market is reflecting that which is perspective. What i mean by that is the average economic expansion in the post war period has lasted about five years. You get four or five years of rising earnings and the market capitalizes that. And the third phase of bull market normally is like the exuberance phase, the silliness phase where people forget about the mistakes of the last cycle. There are pockets of market valuation that are silly. I noticed, i think i owned it for three seconds. Pot belly, you know, 100 and something times earnings, doubling from the ipo price, tesla having a market cap almost as great as half gm, a fraction of the revenues, you know, very competitive business. But by and large, weve not yet gotten into that speculative phase of the market. But i would say excuse me, as an investor, i think the market is reasonably valued and i have to kind of work hard and find stocks or macro themes that would work. I think the market will be higher. Lets say were saying 1650, 1750 is own fair valuation, profits go up 5 next year, 6 . Some market could give you 6, 7, 8 on top of that next year. I think the main pluses as i see it, the number one most bear markets are associated with recessions. And we dont see a recession. Chinas getting a bit better, europe is turning and the u. S. Is kind of grinding out 2 . I think the fed has created an environment where in all honesty theres no alternative to common stocks. Bonds have been very negative on for a few years and continue to be negative. I think the returns after tax adjusted for inflation are not particularly attractive. So youre left with cash earnings zero, bonds at 260 or 270, high yield is not high yield anymore, its 6. 3, down from high teens, even at one time 25 . And then youre left with equities that are trading in line with historical evaluations. So theyre fairly valued, but where they come across as being undervalued. Bonds i think are overvalued. Who wants to buy an overvalued instrument . I think also, i dont think the process of investors moving out of the risk curve is complete. And really whats been happening the last four or five years is the buyer of tbills saying theyre yielding zero, i cant get beyond that, so im going to buy tbonds. The buyer of t bonds says thats unattractive, im going to buy industrial credits. Went to high yield, the high yield buy went to structured credit. And now the fixed income people are putting a certain percentage of their portfolio with equities. The process is not yet complete. Also, when i look at the flow of funds data coming out of the fed, i think institutions and individuals are still underinvested relative to benchmarks. So they used to be in the low 60s. So i think thats a plus. Id say that neutral plus of the market, the conditions for a bear market arent in place. And im trying to stock pick my way to the success. Weve been doing okay so far this year. I think theres no question of the negatives out there we should not overlook. I thought maybe i read somewhere they closed the circus but theyre still paying the clowns. Its disgraceful whats going on there. But its very complex. I felt at the time last year it was a defining election history of the country. You had to make a decision. And the public went a different direction than i would have gone. And this is the stress that were seeing. And you know, i would if you allow me, its a quote thats attributal to abe lincoln. This is a message, i think, given my political persuasions more to mr. Obama and nancy pelosi and harry reid. But this is what i would tell them. You cannot help the poor by destroying the rich. You cannot strengthen the weak by weakening the strong. You cannot bring about prosperity by discouraging thrift. You cannot lift a wage earner up by pulling the wage payer down. You cannot further the brotherhood of man by citing class hatred. You cannot build character and courage by taking away Peoples Initiative and independence. You cannot help people permanently by doing for them what they could and should do for themselves. And i think theres a lot of philosophical views in play here. But this country became great because all of us had the ability and right to achieve. And i fear were moving down a path we all have the right to receive. Theres a play on words thats very important. I think a guy i have enormous respect for has been on your program. Talks about the theft of the future generations and whats going on. And we cant seem to bring it together. Hey, lee, we had Erskine Bowles on yesterday. Hes still looking for a grand plan, the grand compromise. He thinks if we cut about 2 trillion in spending and are able to raise revenue, raise taxes of about 400 million to 500 million, he thinks that would take care of a lot of the longterm. Im not saying its hopeless. Im saying we have to come together. My theme and im an economist, i think i have a certain amount of common sense. The vast bulk of the revenues the government collects, they collect for wealthy people as it should be. Im a great believer in the income tax structure trying to give back as much as i can to society. But we have to sit down as a nation, our leaders have to agree upon what is the appropriate tax rate on wealthy people . Once you agree upon that number, that defines the revenue yield to the government. Then we have to size government to that revenue yield. Now, mr. Buffett, which we all have enormous respect for, i think, he would say and has said that if you make over 1 million a year, 35 . And maybe if you make over 5 million, close to 40 . Well, id sign on the dotted line for 40 . Phil mickelson i dont want to pay 62 marginal tax rate living in california. Were already there. Weve got to live within our means. Id pay 40 of my income to the government happily going forward. But were heading into a different direction than that. Do you think we can look over to europe and theyve never been the United States. And in terms of the ability to going from the ability to achieve to the ability to receive. And id say they have gotten to a certain point where they decided they wanted to have the ability to receive. They are certain countries over there are trying to bring back earned success and individual initiative. If they can do it what im getting at, can we go past the point of no return . Were at 47 . We can always bring it back, cant we . I worry this time. We brought it back with reagan and we have this argument over and over again. We have all this evidence of what builds wealth, but we forget every 20 years and start over. Im by nature an optimist. We can get it back . Yeah, i would say so. The trouble is generally speaking, we have leadership at a crisis in america. And mr. Bernanke has created an environment yeah, bernanke plays into this whole narrative. We dont have a crisis environment. Were living too comfortably. Theres no the fed doesnt want anyone to have any pain at all. Therell be pain. There will be pain. And europe can come back europe is coming back now. Structurally they can become less of an entitlement. Less of an entitlement state even over there . I dont know. I was saying we were probably going in their direction. The correction is the speed with which theyre going in their direction. Well, it matters. I think andrew here is getting upset with no. And by the way, for the record, im very, very socially liberal, you know. No my fiscal conservatism. He was saying that i dont believe but i think the American Dreams dead and you think well, you think its wounded. What i was going to question about where we are is whether you think we have moved towards what some people say theres a book called winner take all. And its about sort of the way the economy has moved over the last 30 or 40 years both through globalization, both through technology and both through the haves and have nots and therefore what do you do about that . And then the question becomes, this is the taking versus the receiving. How do you make up for that group . The American Dream were used to check the box, go to college, get a house, get a dog, wife, a job, it all works out. Thats much harder today if youre a young person. And the question becomes what do you do about those people. Try to educate them to adapt to the needs of the corporations hiring people. You have to have intelligent fiscal policies. No real fiscal policy initiatives because the people in washington dont get along. The entire burden of dealing with the severe recession has fallen on mr. Bernanke. Created environment of zero Interest Rates. Pushed up the stock market. Hes aware of something, hypothesize that 5 of change in wealth worked its way into consumption. Says lets get the stock market up, create a lot of wealth and that wealth will be consumed and that consumption will create more employment. Trouble is, very small Cross Section of the population owns stocks. So the rich have gotten richer like myself and the average joe six pack and pretzel guy has not benefitted as much. Theyve benefitted to some degree because their homes are more valuable. But its been a lopsided policy and we need good fiscal policy to create jobs, allow corporations to bring back earnings overseas tied to job hiring and get the machine working. But they dont get along. The guy that had it right basically was even bye. For all the lip service weve heard about the administration, middle class, middle class, middle class and below the middle class, theyre the people that when things dont go right, theyre the ones that get hurt the most. Most affected by ill conceived misguided well, anyway. Up next, bubble warnings, home prices and more, Robert Shiller joins us after the break. And the man that runs ooeaton, sandy cutler joins us in a bit. Squawk box will be right back. Our next guest is a renowned economist and familiar face to squawk viewers. He correctly forecast the dot com bubble in the late 90s and the housing bubble that led up to the 2008 crisis. And he was just awarded the nobel prize in economics yesterday. Joining us now as our newest squawk laureate, used to be a market master. Robert shiller, cofounder of the case shiller home price index. Congratulations, professor. Im happy. Its a good day. So, before we even get to i want to get to details on the nobel. But i want to know where you were when you heard it. Did you know it was coming . And, you know, what happens behind the scenes before this happens . Well, the funny thing is, the night before i read the guardian, the uk newspaper online and i saw my picture and it said a likely winner. I dont know what they knew. But then that morning that morning, it got to be after 6 00 a. M. And i thought, well, its too late. They were wrong. So i went and took a shower. Just as i was coming out of the shower, the phone rang and thats how i found out. Who called . Someone from the committee or someone sees it on the news and calls you . Well, someone i actually have met and known an economist. Hes visited yale about some years ago. So i know him. So it wasnt and just help us with this. We were talking about it yesterday. Is there a campaign, sort of an underground campaign that happens prior to the announcement . Are there people that are working as surrogates on behalf of people to try to get them this award . What happens . I know nothing about that. They were a well kept secret. We were all wondering. Let me ask you one other question, which is, you share this prize with three other two other economists. One of whom i would say comes at this from a very different place than you do. You have described the markets as irrational. Mr. Fama has an efficient market theory. What do you make of him . Not only does he have it, but hes the father of efficient i think well, he doesnt claim. He claims the term came from harry roberts, his colleague at chicago. But i think it was fama who popularized the term. So i think he has an ego involved. This is something that psychologists say. When you hatch a theory, you dont easily let go. Thats where he is. I think hes hes a brilliant man. He has a basic open mind. Hes open and interested. Hes rather involved in this theory. I imagine you think hes fundamentally wrong. The man youre sharing the nobel with, you completely disagree with. No, i actually admire him and i read him. Hes done a lot of interesting things. For example, this whole fat tail idea, the distributions have outliers that were not distributed. Thats one thing he hammered home. Hes a brilliant man. I read him. But i think its people develop biases. And its more i trust him to report the results properly. I think its just its almost political. Hes at the university of chicago, im at yale. You get im at Hunter College at columbia university. And i have a modest disagree with both of you. Did Warren Buffett get his net worth because the market is efficient . The other guests these five folks have every morning that have become very wealthy got wealthy because the markets efficient. In terms of market irrationality, the worst you could say about the stock market is maybe its discounted eight of the last five recessions. But by and large, the markets been a fabulous leading indicator. This last cycle, the average bear market i think was something down like 25 , down 58 . The retraction was negative 2 in gdp. We had a bear market twice as severe as the average bear market and by coincidence we had a recession twice as severe as the average recession. I think the stock market is very highquality indicator and the stock markets reasonably rational. Its not daytoday. You just got through saying that Warren Buffett made a lot of money, so you dont think i was addressing fama who said the market was efficient. If the markets efficient, how do people like you said it was efficient because its no, no im addressing two issues. Theres truth in both of their arguments. These guys dont get to be Nobel Laureates hey, bob, we need you for bubble analysis. And i remember you educating me on is animal spirits and how important it is in all market sort of action. Unprecedented qe infinity. Must have been good for the animal spirits although i dont feel were that excited about financial assets. But are we in bubble territory yet in terms of exit strategy . Theres so much to say here. Its not an easy answer. Animal spirit, yes, you know, part of whats up under grabs in congress right now is the traditional american spirit that you can make money and you can keep it. And thats under debate now. So we have this budget. This debt crisis. I think its not necessarily bad for the stock market because it the republicans want the rich people to keep the money. That has to be good for the stock market. Of course, bad for the stock market is the the reputational loss that this country could lose. Its a wash. I dont see any clear outcome for the market. So i dont have any alarm bells for the market at this moment. How about the fed . Well, looks like were going to get a really good new chairman with janet yellen. You advocated for her. Well, yeah. But what do you say to someone like leon who actually in the past 15 minutes suggested that the fed policy is actually whats created an even greater schism between the haves and have nots because people who own homes, their values have gone up. Those who dont, havent. If you dont, you dont. Well, this is a problem that weve left stabilization policy to the fed. And there should be a fiscal component to that. And the Congress Wont agree. Cant make that happen. And i would like to see scientific research. How about the National Institute for health, how their budget expanded rather than stimulating housing or the markets. Go ahead. Bob, could you talk about are we in the early stages of a sustained recovery in housing where we could be looking at rising activity over the next few years . Well, thats moderately rising is they look at the futures market at chicago. Thats the market forecast. Not dramatically rising and my surveys show that Questionnaire Survey show thats the usual expectation. But, you know, it could go either way. Its still a risky market. All right. Okay. Robert shiller, congratulations, again. I dont know if you have lunch or how this works with eugene fama. Im going to call him up and congratulate him. Ill treat them both to lunch. You got a lunch date. Thanks so much, robert. All right. When we come back, more from Lee Cooperman where hes putting his work right now. And later david tepper. Time now for todays afla krrc question. When did the debt ceiling first hit 1 trillion . To run your li . Okay, who helps you focus on your recovery . Yo, yo, yo. Aflac. Wow. [ under his breath ] that was horrible. Pays you cash when youre sick or hurt . [ japanese accent ] aflac. Love it. [ under his breath ] hate it. Helps you focus on getting back to normal . [ as a Southern Belle ] aflac. [ as a cowboy ] aflac. [ sassily ] aflac. Uh huh. [ under his breath ] i am so fired. Youre on in 5, duck. [ male announcer ] when youre sick or hurt, aflac pays you cash. Find out more at aflac. Com. [ male announcer ] when youre sick or hurt, aflac pays you cash. Peace of mind is important when so we provide it services you bucan rely on. With centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your information safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. Revolutionizing an industry can be a tough act to follow, but at xerox weve embraced a new role. Working behind the scenes to provide companies with services. Like helping hr departments manage benefits and pensions for over 11 million employees. Reducing document costs by up to 30 . And processing 421 billion dollars in accounts payables each year. Helping thousands of companies simplify how work gets done. Hows that for an encore . With xerox, youre ready for real business. [ female announcer ] youre the boss of your life. In charge of long weekends and longer retirements. Ask your financial professional how lincoln financial can help you take charge of your future. Now the answer to todays aflac trivia question. When did the debt ceiling first hit 1 trillion . The answer, in 1982. Aflac. Expectations. Welcome back to squawk box, everybody. We are just getting earnings from cocacola. The numbers. 53 cents, in line with expectations. Revenue in line with expectations too. Revenue 12. 03 and the estimate was 12. 05. The case volume is up 2 . Below what the street was expecting, 2. 9 is what the street was looking for. Yeah. Europe, case volume down 1 . The street looking for a loss of more than that, drop of 2. 1 . Ive got to look through north american case volume up 2 . North america, thats better than expected for north america. So its not north america or europe that are the problems, just looking through the release right now. Take a look at that stock, its well, its flatlining at this point. 2 growth in global price mix, though. Case volume flat. The company thats the problem. Expected to be up 3. 3 . It hasnt been great. It started out, it hasnt been good. Its given back most of its gains. Company tried to get ahold of the asperthame angst. And thats our own critical trial of how many people have had this artificial sweetener. But you get uncomfortable about artificial sweeteners and company tried to get out in front of it and its safe. But you hear rumblings that you dont want to drink like three diet cokes a day. There is a diet coke story now. The other problem was eurasia and africa. The street looking for a gain of 7. 1 . And the food police dont like bloomberg. You know me, i drink diet coke, occasionally diet pepsi. Paulson used to drink six to seven cans of diet coke a day. Hes your guinea pig right there. Whats he doing now . Is he still drinking six a day . Less. No longer needs to be awake some people would think my doctor told me i could get kidney stones from the acid in diet coke. The chairman and ceo says they delivered sound Third Quarter results in the confines of an ongoing challenging environment. Lee, your thoughts just about the emerging markets and volatility thats taking place. Would you call this what he does a challenge Macro Economic environment . Well, its a very slowly growing environment. Theres been a major expansion in Profit Margins for u. S. Corporations. I think theyre going to start to be challenged. I believe if you look at the earnings that are coming out, revenues are generally missing and theyre a higher percentage of companies missing this quarter than any time in the last couple of years. Theyre okay on revenue. Do you think the pepsi business model, do you think you should own a salty Snack Company . Now coke is sort of. Its a favorable viewpoint. I think theres no question. I dont own coke or pepsi. But basically, theres no question that coke is being challenged by a lot of alternative beverages. Teas and and theyve tried to get into that a little bit. Yeah. Its a very extremely well run company theyre going to try to sell you everything. Who bought the vitamin water . That was pepsi. That was pepsi . They also have not worked out too well, i understand. Really . I love it. I dont know if thats worked out. Nelson nelson pelts wants to split everything up over pepsi still. Not involved. Not involved . Not involved. Stocks up now up about 20 on the bid. But its down from almost 43 1 2, its down to 37. 91. Up about 19 cents. Also saying that wow they did see sequential improvement in the business compared to the second quarter. They remain constructively discontent and resolutely focused on further advancing the global trajectory. Well continue to watch that stock in the meantime. Lets take a look at the other headlines this morning. That senate deal to end the Government Shutdown and raise the nations debt limit is closed. Although Senate Leaders harry reid and Mitch Mcconnell say its not quite there yet. An agreement could be announced later today. Blackberry is publishing an open letter saying although times are challenging, you can continue to count on blackberry. And apple filling a big hole in the Retail Executive ranks hiring burberry ceo to run the operations. Apple shares have been indicated higher. And much more when we return from leon cooperman including names hes investing in now. As we head to a break, Steve Liesman playing the role of treasury secretary lew as he fields calls and decides which bills to pay and which to put aside. But is the choice his to make . Okay. Tell me how much is in the account. 42, 686,000,302. 65. Pay the interest on the debt but delay Social Security a couple of days, okay. Until theres 30 billion. Hold on a second. Good afternoon, mr. President. Yes, sir, pay Social Security right now, mr. President. Understood. Did you hear that . Shut down the Justice Department and the yes, i know that closes the courts and grounds the planes. Okay. All right. Good. Courts closed, Social Security paid, interest paid. Not good, but not that bad. Defense secretary hagel, how can i help you, sir . Yes, im aware of the military payments due november 1. Im going to do my best. I understand how important it is to pay the military. Yes, defensive democracy, sir. Can you hold that thought for one minute . Can you hold on, mr. President . Yes, im sorry. Yes, mr. President. Im watching the Market Reaction now. Right. Not good. Unemployment insurance . I dont know, mr. President. We might i understand might is not good enough. Well find a way to pay unemployment. Mr. President , i hate to do this. Can you hold on one second . I can tell you categorically the Environmental Protection agency will not be funded. Yes, i know the environment support. Listen, hold on one second. Hold on. Senator cruz, i suppose good afternoon. No, sir. Construction on highways in texas will not be funded. Why . Because we hit the debt ceiling, sir, thats why. Hold on one second, hold on. Mr. President , no, sir, i was not yelling at you, im sorry. But if you could hold on one second. Hold on. Im sorry, i dont have a lot of time for the counsel, what do you mean . I dont have the authority to make these choices between payments. Hold on a second, mr. President , i have some very bad news. At a ford dealer with a little q and a for fiona. Tell me fiona, whos having a big tire event . Your ford dealer. Who has 11 major brands to choose from . Your ford dealer. Whos offering a rebate . Your ford dealer. Who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires . Your ford dealer. Im beginning to sense a pattern. Get up to 140 in mailin rebates when you buy four select tires with the Ford Service Credit card. Whered you get that sweater vest . Your ford dealer. Stock picks from our guest host Lee Cooperman, 9. 5 billion in assets under management. You said you own 95 things. We have roughly 95 positions in the portfolio. I quickly can i could come up with a number, average in each one. Youve got 9. 5 growing in assets. Big and small. Big and small. Youve had stuff for a long time. Yeah. You want to talk about your big positions, favorite positions, newest positions . Get as many as we can get in and make the case for some of them. First youve got to understand its important, were value investors. Somebody looking to pay less for more whats behind that index, index of 500 companies. We think on average grow 5 a year. The average yield about 2. 1 . Sells about 2 1 2 times book value, debts around 35 of capital, return on equity about 15 , somewhat elevated versus history. And for those statistics youre paying about 15 times earnings. What were looking for is to try to find more growth lower valuation and more yield and more asset value. To spend their money. And i would say generally speaking given the fact that the markets in its own evaluation were finding ourselves going to the red chips not the blue chips. Going into not the major companies. But companies that have a good story, a good valuation and we have to be patient. You know, were not traders, were investors. We brought up sprint, aig. Yeah, sprint is an example. Absolutely brilliant in his acquisitions, vodafone japan, everything hes bought has been extraordinarily well run. We owned sprint started buying 2 a share. We tended our stock to the company. I think it was 765. I made a note since the end of the tender offer, soft bank bought 75 million shares, taking the ownership a little over 80 . If you look at proper Profit Margins for this business, the growth in revenues we think sprint could probably in two years earn over 1 a share. A stock of 6. Great. All right. Just one example. Pick out some other ones and were going to have more time later to look people did see your five or six picks. When youre running this stuff, you dont even know if i still own them. Right. You didnt give that to us . I dont know what they ran there. Quick mention of vitamin water, bought by coke not pepsi. When we come back, well talk more about the fix the debt campaign. Ceo of eaton corp. Will be joining us. First day of my life by bright eyes youre not just looking for a house. Youre looking for a place for your life to happen. Although there are hopeful signs out of washington, there is still no definitive agreement to end the Government Shutdown and raise the nations debt ceiling. The clock is ticking on this. And joining us right now to talk about the impact of all this is sandy cutler, the chairman and ceo of Eaton Corporation also a member of the ceo of Fiscal Leadership Council for the campaign to fix the debt. As we get closer to this deadline, are you getting more nervous we will actually reach an agreement . Well, good morning, becky. I think news of last night and the discussions youve been having this morning, its a little bit encouraging we seem to be getting to the point where theres at least a coalition coming together to postpone the debt ceiling. And i think any economically intelligent person cannot find any solace in the fact we might have a debt crisis where we cant pay the countrys obligations. A lot of work to be done in the next 24 to 48 hours. And its critical as we start to address the fundamental issue which is not the continuing resolution, not the debt ceiling, but the fiscal crisis here in this country and needing to find a way to reduce our debt. As the Government Shutdown or all of the talk and kind of whats happened, has it affected eaton in terms of the economy or anything thats gone on there . Well, i think as a number of your guests have been talking about this morning, i think part of the damage is in for the fourth quarter. Any time you end up with a period of hesitation like weve seen over the last couple of weeks, it does affect consumers and business and trading partners. Were talking about shutting down the government respectively in the u. S. , the rest of the world has not shut down. The rest of the world is moving forward. But theyve got significant questions about our country and our ability to really convert the promise of democracy into the promise of strong comic growth. And thats obviously a condition we all have a big stake in and is really important that every one of us be in contact with our legislators urging them to find a solution. Has eaton put any plans into place if we do breach the debt ceiling . Would that impact on your company . Or is this something youre concerned about as a Business Leader in general . I would say more concerned in general. Its very hard, i would think, for any one of us to forecast the impact of this crisis could be. Frankly, weve been through this three times in the last 3 1 2 years and i think an awful lot of people have gotten to the point where they feel like this is the wolf at the door once again and it hasnt materialized. Clearly, this is very, very serious. Its an issue that i think is hurting our credibility around the world. Our trading partners look at us with a real question as to whether our form of government is working today at at time when the u. S. Used to be the model for Economic Growth. A lot of people question it. The plan moving through the senate right now is one that push off both the debt ceiling and would continue Government Spending through at least the early part of next year, maybe get into january and february on each of these things. That would be so they could talk about some of these larger issues that youre concerned about. What happens to our longer term plans as a government. What do you think those plans need to look like . You know, clearly i think we all know these facts, 17 billion in debt. No budget for the last four years. These are situations that we have to address. And clearly, both parties have to come together, we have to have a bipartisan agreement to deal with both entitlement reform and the very important issues of fundamental tax reform and defense spending. All subjects have to be on the table. Everyones going to have to give a little to get this to be solved. The question is not a plan that solves things in three to four months. The question is a bipartisan agreement on a tenyear plan for beginning to reduce the increase in our debt. This is going to take a long time to solve this problem. But it shouldnt take a long time to put the plan together to address these issues. While the fix the Debt Coalition isnt advocating a specific set of solutions but we are advocating a bipartisan agreement to address those four elements. Sandy, thank you very much for joining us today. Thank you. Dow component, j j up after the Company Reported 1. 36 adjusted and thats above expectations. Of 1. 32 on revenue which was also above for Johnson Johnson. 1. 32, revenue was pretty good at the company. It was above, you dont see a lot of Global Companies able to boost revenues. I think it was a 3 boost on 17. 6 billion in sales. The outlook is 544 to 549 and the estimate is 546. Its a good number and the stocks trading higher. We have citigroup. If you look there, we miss on both the top line and the bottom line on the revenue side. You can see it there. At one point, 1. 02 x items versus 1. 04. On the issue of revenues, they came in at about 18. 2 billion revenues, the consensus estimate 18. 6. Seems to be around fx issues, currency fluctuations and so were looking at that stock now down off marginally. Also looking at some of the other issues related to expenses. They did bring those down from about 4 last quarter and theyre now releasing 675 million of mortgage reserves, mostly for u. S. Mortgages. People are going to take what they want from that. Lee, you own shares of citigroup, what do you think of what you hear initially . You know, its 2 cents less than expectation and a base of 1. Its not the end of the world. Id have to really read into the release i would want to have with my partner and develop an opinion. As i said before, the Third Quarter, youre seeing a lot of revenue and earnings misses, can is different than youve seen the last couple of years. Were getting toward the end of a strong profit cycle and profits arent the game. Only growing 4 , 5 , 6 . Its the question of the valuation. We certainly can control our costs. Is there some question in this report about it . The loan loss is 26 billion in the period. If someone says, hey, we can control our costs i was just pointing it out. Sounds like theyll be laying off some people. Yeah, we certainly can, but sounds like hes saying that in response to because the stock is down now. Its down about 80 cents or so. Or maybe its in reflection, we cant control the revenue numbers. You can control costs. 200 million of those revenues, currency fluctuations and thats a hard thing to control. Thats a hard thing to control. Legal expenses is only 600 million. They dont have jamies problems right now. They dont have jamies problems. Coming up, david tepper, find out what hes thinking. The third update from his original amazing call we had 2 1 2, 3 years ago. Well be right back. Weekdays are for rising to the challenge. Theyre the days to take care of business. When possibilities become reality. With centurylink as your trusted partner, our visionary Cloud Infrastructure and Global Broadband network free you to focus on what matters. With Custom Communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. Every day of the week. Centurylink® your link to whats next. More stock ideas from Lee Cooperman. Plus big names helping investors rise above the rhetoric. We have david tepper from the tepper rally to the tepper taper. Squawk box will be right back. Bny mellon combines Investment Management investment servicing, giving us unique insights which help us attract the industrys brightest minds who create powerful strategies for a countrys investments which are used to build new schools to build more bright minds. Invested in the world. Bny mellon. This hour on squawk box, an exclusive extended interview. The economys not going to pick up in the next three months and the feds going to come in with qe. Then whats going to do well . Everything. David tepper talking about the fed, the markets and the Government Shutdown five months after he told us the fed tapering would be bullish for equities. Guys that are short, they better have a shovel to get themselves out of the grave. Plus, unveil details of a highprofile robin hood conference to benefit new yorks neediest citizens. Earnings alert, well bring you the numbers and dig through the report with an analyst. The third hour of squawk box starts right now. Welcome back to squawk box here on cnbc. First in business worldwide. Im becky quick along with joe kernan and andrew ross sorkin. Hedge fund manager david tepper will join us in a few minutes. Joe has a roundup of this mornings earnings reports. Really . Okay. Citigroup reporting earnings of 1. 02 a share. That was 2 cents shy of estimates. Revenue light, as well. Results hit by a slowdown in bond trading. Thats the headline on the report. A little bit negatively affected by fixed income operations. Were going to dig through the report with an analyst later this hour. Among other major results, couple of dow components. Cocacola reported earnings and revenue that were in line with consensus. Worldwide case volume fell short of estimates. But north america was better than expected. And thats what has the stock trading higher. And Johnson Johnson earnings were pretty good, beating the street about 4 cents. Thats a nice move, premarket. Revenue also above expectations. Lets check on the markets, this would be four Straight Days of if it were to trade higher, but its now indicated lower. Maybe a little trepidation. Wed been higher for most of the session. Yesterday we managed after a weak open to as the developments in washington turned somewhat positive. We ended with our Third Straight gain yesterday. And we had a little bit of news out of well call it uk and silicon valley. Burberrys ceo moving to apple. Angela ahrendts as Senior Vice President as oversight of retail and online stores. Shell be reporting directly to ceo tim cook. And we were talking about this earlier. Shes an expensive hire. She was the highest paid executive, i believe, in all of the uk. Not just as a woman or man, last year she made in total 26. 3 million. I assume some of that has to be in stock. It cant be the stock. But nonetheless, i assume if youre leaving a position like that to go to apple, and she doesnt run a hedge fund. Wow. I assume in the uk where they dont like to pay you. They frown upon that. You have to assume that tim cook is offering her a lot. An ipad, an iphone. You think thats all you get . A free ipad and iphone . I dont think in the uk they would want people not to be old money. Not be people who have had it in the family for hundreds of years. I thought they would want people to do well. I thought they do. They dont. In terms of what you might bring into the government. Lets get more stock picks from Lee Cooperman. Lee, in 2012, for delivering alpha, delivering alpha conference, you gave ten stock picks and it was pretty incredible because you went 10 for 10 on those. Got lucky. Well, i think theres a lot more than luck that was involved with that. You gave ten picks just this year for delivering alpha once again. And id like to revisit some of those stocks you picked and maybe mix in you have to remind me. Let me tell you about the new ones. You were going to talk about technology stocks, one of them, qualcomm. Weve been kind of disappointed not in the fundamental performance, but the stock price performance. We rotated out of apple and apple was trading to 600 and put the money into qualcomm. You know, as i medical examiner mentioned, s p, fortress Balance Sheet. Their chip is going into most all of the smartphones. We think probably grow after high growth rate this year, probably 10 going forward. Very reasonably valued buying back 5 billion worth of stock. Its very cheap. Motorolas solutions thats a new one. That was not on your list. Its very hard at any one point in time. The margin, were looking to put more money into europe. We like michelin, the tire business, the oil service, swatch in watches. As i said before, given the view that the markets in its own fair valuation, were looking for the medium sized company, one that we like. Getting paid 11 while you wait. Cim is the symbol, we think the economic value is somewhere near 3. 50, paying a 36 dividend, stock around 2. 95 a share. If you can stomach a turn around, Warren Buffett says reputation for brilliance tackles the business with reputation for poor fundamentals is usually the reputation of the business that remains intact. We have a very positive view of sandridge, a wellregarded hedge fund, launched a proxy fight, replaced management. On their website, they thought the underlying value of the business was somewhere between 11 and 12. We think around 10. The stock is 6. We think the news could get progressively better. We think theyre an acreage position and would justify a price, probably 50 higher than it is presently. And we think things are an improving trend. Lots of Different Things like that. In a large cap if you want large cap, you know, a Major Company in the Life Sciences business and actually acquiring Life Sciences. The deal should close in the fourth quarter. Probably grow 2, 2 1 2 times more than the economy will grow and above a market multiple. I saw aig on your list. Is that . I say whats going to happen with aig is some time in the next two or three years, the book value and the market price are going to cross the market. The book value over 60 and the stock trading around 50 and the book value will rise and its an improving situation. Its not the company it was before they were forced to divest many attractive businesses. One of the most important is the Insurance Company in asia. We have a large position and their stock is up a lot. It tend not to recommend things up a lot because im trying to look for things that have not moved. And there are a few of those. The markets moved a lot. I say we like citi, probably will sell off a little bit. Maybe we like what we read, we might add to the position. I mentioned fisher, one thing, you know, carl icahn has had a golden hand this year. The one thing he owns i own that hasnt done well but i think is cheap is transocean offshore. The oil rig company. Stock yields 5 . Trading at single digit multiple. And carl is a guy thats done very constructive things in the marketplace. And so i wont say im riding his coat tails because i owned it before he owned it, but he tends to be an activist and i look for wellrun companies that management gets compensated and do the heavy lifting and i benefit from it. Not to say his approach is wrong. Who has the higher market cap . Intel or qualcomm . I guess qualcomm since you asked it. No, 116 billion for qualcomm. I would say qualcomms fundamental outlook is stronger than intels. But people dont realize that. Thermal fisher must be 30. Their market they serve is 75 billion market for Life Sciences, growing at like i said 2, 2 1 2 times the Market Growth rate. There are a lot of individual stocks that are cheap. Just keep in mind that the bond markets very homogeneous. My job is to find the 1,300 stocks and either be short or avoid the 1900 stocks. And thats the and i think thats more of the game going forward. I would be surprised. We were off the camera. I said what would make me bearish . Because im really kind of complacent going along, the stuff in washington is scary. I think its going to work out. A lot of air time devoted to something thats going to go away shortly. The longer term issue of whether were going down the path of receiving or achieving. And im not overly optimistic. Receiving or achieving. What will make me negative is a 10 , 15 quick rise in the market, getting into that third phase of exuberance which were not at now. A view of a recession emerging. I think as much evidence of the economy picking up a little momentum and losing it. And what would make me negative, frankly, is very strong Economic Growth because that would bring the fed into play. Right. If we start seeing 3 , 4 type of growth and tapering off the table. Tapering begins, the markets will start to worry. Right. Thank you so much for joining us. Thanks for having me. Its been our pleasure. From one great guest to another, well be welcoming david tepper, the markets, Government Shutdown and the fed. Were going to kick things off with our change the world series. Look how Corporate Philanthropy is making a difference. Were coming back in a moment. [ banker ] sydney needed some Financial Guidance so she could take her dream to the next level. So we talked about her options. Her valuable assets were staying. And selling her car wouldnt fly. We helped sydney manage her debt and prioritize her goals, so she could really turn up the volume on her dreams today. And tomorrow. So lets see what we can do about that. Remodel. Motorcycle. [ female announcer ] some questions take more than a bank. They take a banker. Make a my financial priorities appointment today. Because when people talk, great things happen. A lot can happen in a second. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Welcome back to squawk box, im here with Hedge Fund Manager david tepper talking about the markets, the fed and the Government Shutdown. But first thats our tease for you. But first, were going to continue our change the world series. Its squawk box own focus on Corporate Philanthropy and how its making a difference in the world we live in. Were joined by the executive director of the robin hood foundation. Theyre here in part to talk about the mission and the conference november 21st and 22nd. And it is a killer lineup, david. Both davids. And how did this come together . I mean well, we were thinking if you want to apply investment principles to Charitable Giving which is what we do at robin hood, what better way than to bring together some of the worlds greatest investors to have them share investment insights and save lives. And you get every big name. I assume is that how this works . No. Youre on the board now. Ive been on the board for a little bit of time. Not now. How many friends did you call to make this happen . I didnt call friends, they called friends. I said okay. Its easy for me. They were the i think i dont know where the idea. Was it einhorns idea . They said lets save lives and provide higher returns. Right. And how much does a ticket cost . 7,500. How much can you make in a day doing this . How much can you make in a day . Doing this. The whole point is to raise the money. Oh, to raise the money. I thought if you were talking about if you come to the conference and listen to the investors, how much can an average guy come and make. And the answer is, of course, he gets a positive return on his investment. How much can you raise in a day doing this . Thanks to our good friends at jpmorgan who have sponsored the conference, were going to end up netting somewhere between 3. 5 million to 5. 5 million to save lives in new york city. Youve done pretty well. And at some point you have to decide how you were going to participate in the world of philanthropy. I know youve hired a couple of people to help you. Yeah. Listen, you know, ive been involved for a long time. Ten years ago, before that i was involved, but ten years ago, a major gift to Carnegie Mellon that youre probably aware. Yeah. Being involved in philanthropy as you probably know, started with you put money in a box. Absolutely. Every day to help poor children. So how did that start . It started a long time ago. A long time ago. But for me, look, when i got to any kind of point of being able to give, i knew you had to give back in different fashions. And robin hood, you know, i got to robin hood probably i think two years, three years ago i went on the board of robin hood and basically that was the idea that, you know, i i had a lot of my career in new york city although im in new jersey now. Right. And i wanted to give back something to the city of new york. And also, the other thing with robin hood, i thought they could use one representative from new jersey. Right. You have not signed the giving pledge just yet. No, i havent signed. I found jesus a long time before buffett found jesus. And he was jewish jesus. Anyways. I have not signed a giving pledge. But because its really complicated for me the giving pledge because you do the charity. But for us, we do a lot of other things. We do things on the political side. We led the reform fight in new jersey and that was not strictly a charity sort of deal. So its like you dont want to make a contract unless you are going to do exactly that contract. So i dont you know, and i actually feel i dont need to do it. I was doing it for so long my whole life. Right. David, for those viewers who dont know or who just think of robin hood broadly, what does robin hood do . Robin hoods mission is simple, we fight poverty in new york city. 1. 8 million new yorkers live in poverty. Weve got to all come together and create a giant community of caring. Thats what we do at robin hood. Right. I want to ask you both about this. This is something i will say in advance i completely disagree with but i want to put it out on the table. There was an oped in the new york times. The oped was controversial. Not you, though. Not me. They want to know what im going to say back. This is peter buffett, son of Warren Buffett wrote an oped over the summer and wrote the following. As more lives and communities are destroyed by the system that creates vast wealth for the few, the more heroic it sounds to give back. Its what i call the conscious laundering. Feeling better about accumulating more than any one person could possibly need to live on by sprinkling a little round as an act of charity. I imagine youre in the philanthropy business. What did you think of this . Hes a terrific guy and a long time robin hood supporter. I know he has the biggest heart along with a big brain. Hows that . Thats a nice answer. But, david thats thanks, boss. No. Look, look. People give from the heart and give back. I plan like, you know, you said about the pledge. I plan to give back as much as i possibly can. Who knows if its 50, 80 or 90. I dont know what the heck that means. I really dont know what that means. Spreading back and spreading money around and the systems the system. I didnt create the system thats out there. But i can try to make things better. And whether its when you see Different Things that are wrong, you try to make them better. Did you think to yourself as Warren Buffett did that he was going to try to accumulate wealth in part because he thought im going to give it away at the end but i feel like im a Better Capital allocator and can actually do more by not giving it away early . One thing it takes time to actually give money away intelligently to tell you the truth. It really does. And try to get, impact for people. Something that robin hood does exceptionally well. Thinking about how theyre going to get money back and having impact on people. And to give money back willy nilly just sprinkled out, it doesnt work. It doesnt get to the people. You want to take some time. Thats why a lot of people give money back when theyre 65 or 70 or 75. Coming more toward the end of the career. But for me, since i was giving back major money ten years ago, im not that old. Let me ask you one other question. You have pioneered what some people describe as the roi version of philanthropy. Youre focused on the numbers. Got this thing started from the beginning. Are there certain pieces of charity and philanthropy that should not be measured by roi . Absolutely. We know Little League is a great thing, piano lessons are great things. Theres no way of measuring the return on investment for Little League and piano lessons. You should still help kids play Little League and make sure kids who cant afford piano lessons get piano lessons. In terms of the business focus on philanthropy, a good thing broadly speaking . Absolutely. Hold ourselves accountable. Come on, theres so much work to be done, we cant waste money. Let me say this. When we had Different Things during sandy, which we were really involved in new jersey and involved in the whole tristate area. At that point in time, theres times when robin hood will say, we have to go to strict roi. But there are times when we say weve got to get out there as fast as we can do. We know people need help. Right. And you just cant worry youre going to have the you know, normal sort of times when you have the best. Youve got to get people help. And if you make one bad investment, it doesnt matter. Youve got to help people. Youve got to help people. And so robin hood recognizes that at times. Theres a time youve got to do what youve got to do. Thank you for doing this. Youre going to be sticking around because were going to talk bribery. And it worked. By the way, i know its morning tv and were not on broadcast. Youve got to watch your mouth. I love you, though. Did you not notice . What did i say . As joe would say, like at a zoo. Andrew, i disagree, that was perfect and its not broadcast. Its cable. And that was fine and the oh it was the b. S. Comment. The other thing thats beautiful. Bull manure. That is a guest list that looks like we would kill for that and we have a lot of those people on squawk box as guest hosts. Its so great, its a way of combining. You can give them a little look its for charity. Thats a list youve got druckenmiller, everybody. Thats phenomenal. I thought about paying. You should. Joe, you have so much money. Hey, joe. Come over here. Joe, youre rich. Come over here. Thats a bunch of bull shih tzu. We should say. Dont be nervous. Im going to promote this now. You can purchase tickets by visiting robinhood. Org. And well talk more to this david when we come back, but thank you, david. Tepper will be sitting over here. A lot to talk about. After all the stuff he said in the past, still probably one of the best performances in the last couple of years after he said it. So, i mean, future performances past performance no guarantee of future, but does it year in and year out. Listen to this. More from david tepper when we return. If theres a true taper, there better be a true taper or else youre back into the last half i think you might be in the last half of 99. So guys that are short, they better have a shovel to get themselves out of the grave. With centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your information safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. At a ford dealer with a little q and a for fiona. Tell me fiona, whos having a big tire event . Your ford dealer. Who has 11 major brands to choose from . Your ford dealer. Whos offering a rebate . Your ford dealer. Who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires . Your ford dealer. Im beginning to sense a pattern. Get up to 140 in mailin rebates when you buy four select tires with the Ford Service Credit card. Whered you get that sweater vest . Your ford dealer. Maestro of project management. Baron of the buildout. You need a permit. To be this awesome. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. aaron purrrfect. vo meeeow, business pro. Meeeow. Go national. Go like a pro. Welcome back, everybody. We have a quick earnings central recap for you. Cocacola earnings matching wall street estimates. The stock is up today by about 1. 3 . Johnson johnsons earnings beating the street by 4 cents. Revenue also topping estimates that stocks up by 1. 3 . And citigroup reporting earnings of 1. 02 a share. Two cents below what the street was expecting. Revenue was a little bit light. Hit by a slow down in bond trading. Stock down by 1. 3 . Earnings at dominos pizza, missing revenue by a penny. That stock still is down by just over 2 . When we come back, much more from our special guest david tepper, the markets, the fed and the debt negotiations. A lot more, stick around, squawk box will be right back. To make their money do more. ann to help me plan my next move, i take scottrades free, inbranch seminars. Plus, their live webinars. I use daily market commentary to improve my strategy. And my local scottrade Office Guides my learning every step of the way. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. Sometimes they just drop in. Always obvious. 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. Welcome back to squawk box. We have a special guest onset with us. David tepper, i dont know the exact date you did the very first interview here, but the markets up about 90 since then. What you do is not simple. But what you said at the time was either the economy gets better and the market goes up or the fed makes the economy get better and go up. Thats whats been happening. You said they better taper at some point or its going to be like 1999. Now, they didnt taper. Theyre continuing, was there a good reason for them to put it off in your view . Or do we start worrying about the negative effects of all of this qe . Now, joe, you know i was going to Say Something right now besides the tapering economy. And the thing i was going to say to you. There was this onegame playoff between the Pittsburgh Pirates and cincinnati reds, you didnt mention anything about it yet. This is what ill say. What will you say about that . Who won that game . It was a sevengame series. Dusty baker got fired because they lost the last six games. You know, but didnt recognize news flash for you, pittsburghs out, dude. And the cardinals. I dont know how you can have i see you your happy endings not coming from me. Thank god. Youre welcome. Go back i got in trouble for the b. S. Comment before. You did get in trouble, only from only from the censors, i guess. They didnt taper and i thought you meant, look, otherwise it would be 99. And 99 ended badly, didnt it . 99 didnt add badly. It ended fantastically. Eventually. 2000 ended badly. Look, i mean, theyre not tapering for a long time now, unfortunately, or fortunately depending on and they have no choice. Is that fortunate or unfortunate . I dont know. Its unfortunate whats going on in washington, d. C. Right now. Right. Thats kind of forcing their hand. It mean, look, the governments still shut, things are going to obviously slow down and now they have a shortterm looks like they may have a relatively shortterm deal. Right. Which is going to not create the kind of confidence you would quite like. Now, if you can get a big broader budget deal, thatll be great and markets can fly. In the meantime, to know the uncertainty of three or four months may be a little tough for markets to really fly up. On the other hand, on the other hand, you know, my basic belief has been when you have this large qe, markets go up. Markets go up and you have a chance for asset prices to go up. You have a little bit i think generally speaking, markets will go up. I dont think youre going to get, you know, 99 because i was talking about not tapering in a world where you didnt have politicians who have nearly lost their minds. I was talking more stable environment if they didnt taper. So you dont have that environment. But you said the fed, they didnt taper and they really cant right now. Is that because theres no way they can. Yeah, because of the washington situation. Look, if it wasnt, you know, the fed, people criticized the fed one way or another. But they basically said what they said they actually kind of did. The economy didnt pick up. It wasnt just employment. People have their just one statistic but the economy was just not, you know, growing a lot. You didnt have great jobs numbers, you had the employment rate going down but because of participation as much as anything else. So, you know, i i was a little surprised but not that surprised and understood exactly when they did taper why they didnt taper. It was because the economy wasnt at their projections. Well, if it wasnt quite at their projections before this nonsense, certainly not at the projections now. And the question is going to be when will you have the momentum in the economy to start . Certainly not now. You know it has slowed what has to be affected and probably not for the next three to four months because you have this overhang again. Does it come in march . Maybe. Does it come in june . I dont know now. Thats definitely going to be sort of, you know, a pushup to markets. But, look, i mean, if cruz wants to, you know, do something incredibly stupid in the senate which he could do some maneuvers or the house doesnt want to pass this thing and god forbid and i hate to use that name in vain, but push us into a day of default or any kind of verge of default. Although we really wont default on the 17th. That is just incredibly bad. And, look, its not bad for its not great for me but its horrible for the middle class. Its horrible for poor people. Everybodys mortgages if they they if they default, its not a big deal. Its a huge deal for every single american. Its the biggest deal for the middle class and main street. If they dont get that, if they really dont get that, well, you know what, i hope their mothers had at least one smart child because its not anybody there. If we get something out of this in terms of entitlements or something that brought people, brought the president to the table in terms of addressing the longterm structural wishes we have. Was some of it worth it . Was some of the wrangling worth it . Sure. First off, what we should do is just theres this question about the 14th amendment about what it says or doesnt say. They should just pass something in congress to say i and i know they had something up there. Say the debt would be paid always. Do it another way. They dont have to worry about the contracts and other things in question. Do that, and that will make things much more stable and let the economy not have these issues. Theyre doing it for china, doing it for japan, no. Youre doing it for main street. Youre doing it for the average guy. If you let us default and Interest Rates go up on average 50 basis points, the treasuries, everybodys mortgage is more expensive. Everybodys mortgage is more expensive. And thats what matters. Is it if we dont make payments on Social Security, on veterans benefits, other things promised. Or are you talking default on treasuries. Im talking technical default on treasuries. Its really bad if you dont do Social Security. Its a different issue, though, when you dont make a payment on treasuries. If you dont make a payment to Social Security and week delay, its a week delay. That doesnt have any implication on every single american. Okay. When you start messing around with the debt of the United States of america, which by the way has not missed debt payments when we were way overleveraged at the time of the revolutionary war. When hamilton made the decision to make the debt payments and didnt miss a debt payment during the civil war. This is the time youre going to choose to miss a debt payment . This is a time . The republicans would say, though, they think theres enough cash in treasury to prioritize and pay those commitments to the treasuries to the to the debt commitments on that and they could stretch that out for some time. Do you agree with that . If theres not an agreement by thursday, friday, next monday, do the markets react . I mean, obviously you can do it on the math and if they want to pass Something Like that to be very narrow, they should do it. If they want to do it at some point, that would be a good thing. What they cant what you cant do is then you still have the military contracts and other things like that to have this balance with. Thats really something for the democrats to do. Its really something for, you know, the president to put forward at some point in time. To have this situation when you dont have that in place and have the republicans put, you know, the threat of default and already affecting treasuries right now and who knows whats affecting. And already affecting peoples mortgages right now is its Social Security, to miss Social Security payments is somewhat cruel if it goes on for any period of time. Theyve done cruelness. To the average american right now. Right now already. Okay. Whether its one basis point to two basis points or three basis points. You know, when you lose your reputation, okay, its very hard to get your reputation back. Okay, so when you miss a treasury payment, thats not a one week or twoweek deal. You dont get it back so fast. Itll take years and years and years. And we cant afford. We cant take the chance. Cant be monkeying around, cant be playing around. And these guys who were debating guys in college. Im so happy they were great debaters. So happy, so smart. So smart. Theyre so smart that theyre so stupid they dont fine. So frickin stupid. We have a saying, you have to be stupid before youre smart. You have to know what you dont know and admit you dont know some things and some of those guys dont do that in congress. But you cant you cant say im going to default for two days and its all going to be good. Its not. Its not. You know, you can muck whenever you need muck . Yeah. If these muck. Which is better . You can use either. Can i use muck and frick . When you first said that either the economy will improve or the fed will be there to make an improvement, in your wildest dreams did you know they would go to zero for a long time. When you said that did you have any idea three years later wed be sitting here with 85 billion a month . No. You knew what it would take, you didnt know what this is what it would take. Thats a commentary on how slow its a question of which part of their mandate you want to emphasize. Inflation has allowed them to do all this exactly right. Its incredibly low. And if they why not do it . They can do it, i guess. I mean, its obviously the reason not to do it is to make the Balance Sheet big. Give me the upper end of the Balance Sheet where youd say holy shih tzu. Shih tzu is a dog and you can say i didnt i have to bring my dog bengji in one day. Is 5 trillion possible . If the long end goes up 100 basis points, People Holding these bonds were at 2. 3 trillion in losses. Joe, it depends on what part of the treasury they own. So obviously if they own 30 years and 5 trillion 30 years or something, huge problem, but if you own, you know, 1 trillion of one year, that problem goes away in one year. So the question is how they eventually do their Balance Sheet. Now they have it spread across, they can shift that around. And i at some point believe that they should shift it whether they do or not to make it more to make it more consistent with their Interest Rate forecasts and where they said theyre going to hold Interest Rates. If you move it on the short end, then you dont have the problem youre talking about. Okay. If you make it bigger in five years and its all five years and under. Its okay. Its gone. The problems gone in five years. What im trying to figure out people say well it cant be gone because youll let the economy its really a question of how the economy gets good. Is there enough supply to pile everything in there . Well, may not be enough supply in that part of the curve. You would have to you have 16 billion i dont have 16 billion. How much . 19 billion. If you dont have 19 billion you would have to position yourself if it was going to be a messy exit. You would do a lot of stuff. We would see you doing stuff. Did you expect it to be a messy exit . Will you tell us . Yeah, you know what, whats your number . Ill give you the first call. Write it down. After hes dumped out of no, no, no. You dont think its going to be a messy exit . No, not yet, no. They might as well keep the pedal to the metal then. Well, hopefully the economy does get better. I dont know, the real question is not only that, the real question, what does this tapering do for you. Thats not im sure of this point in time the marginal advantage versus the marginal advantage of keep buying versus to the economy versus just cost of making the Balance Sheet. Were going to go to break. Would you rather have would you rather win a nobel prize or make 2. 2 billion in a year. The prize. Well be back. Because hes already made hes already done it. It should be a yearly event. Three of them win every year. Were going to slip in a quick break. More from david tepper. First a look at shares of citigroup. You still own that dont you . Dumped it yesterday. The Company Reported 1. 02. Made a lot of money on that thing. More tepper in a minute. The debt ceiling deadline hits on thursday. Well bring you the biggest names from the world of investing and business tomorrow. Three hours with the oracle of omaha Warren Buffett. Plus, fedex chairman and ceo fred smith and spanx founder and selfmade billionaire. You cant afford to miss squawk box tomorrow. I know what youre thinking. Transit fares as in the 37 billion transit fares we help collect each year. No . Oh, right. Youre thinking of the 1. 6 million daily Customer Care interactions xerox handles. Or the 900 Million Health insurance claims we process. So, its no surprise to you that companies depend on todays xerox for services that simplify how work gets done. Which is. Pretty much what weve always stood for. With xerox, youre ready for real business. Just by talking to a helmet. It grabbed the patients record before we even picked him up. It found out the doctor we needed was at st. Annes. Wiggle your toes. [ driver ] and it got his okay on treatment from miles away. It even pulled strings with the stoplights. My ambulance talks with smoke alarms and pilots and stadiums. But, of course, its a good listener too. [ female announcer ] today cisco is connecting the internet of everything. So everything works like never before. Welcome back, everybody. Lets get back to our special guest david tepper. David, youve been coming on for a while and the last several times we talked to you you said you thought stocks were cheap. We spoke with Lee Cooperman in the last hour. He says he thinks stocks are fairly prized. He thinks theyre the best asset class when you look around comparative to bonds and Different Things. Would you say stocks are cheap here . Would you say they are reaching a fair valuation . I heard a little bit of what lee said. And he was talking about multiples. And the real question listen, putting aside some of the stuff in d. C. , okay, because this is making it difficult to invest right now. Or, you know, like i said real economy for other people. If you look historically at what multiples are. What lee was saying was growth was a little lower than it has been historically. What people ignore is that Interest Rates are also lower and will be lower. Okay. So if you take both sides of the equation that should make it p e, they both have come down, i think, perspective, not just because of the fed. I think theyre going to be lower in the future. Where they might have been 5 before theyll be 4 now. And so i think both sides will be lower. So if you take that and you believe that is a fact and, you know, a lot of people say, well, you know, Interest Rates are too low now and i you know, historically when you have a 4. 5 multiple, 4. 5 Interest Rate, 5 Interest Rate, you have 20 multiples. I think your Interest Rates will be more like 4 okay now. And maybe your growth instead of being historically 3. 5 or 3. 25 might be 2. 75 going forward. Both sides will be different and i think youre going to end up with a higher multiple in the future. Not right now but in the future. I think youre going to get more toward a normal multiple of 18 to 20 times. And historically if you had 4 Interest Rate to 4. 5 , youd be in the low 20s. Thats where youd be on a multiple. So i this is just a multiple question. So if you get over this nonsense in d. C. Lets say they get a deal in d. C. Lets, you know, cross our fingers, hope they get a deal and dont put us through yearly stuff like this were going through right now. So youre looking perspectively. I think you can get 18 to 20 times multiple at some point. If youre trading around 14 times, little like the 14 times next years numbers right now. You can have, you know, pretty large increase in stock prices to get to there. To get to there next year. And talking about current multiples being right and thats kind of where they are. And listen, i dont know right now if youre asking me if the markets high, low, whatever. You know, its low if these guys dont screw it up and its high if they do screw it up, okay. So i mean d. C. Has that much impact . Well if you if you do something incredibly stupid even if its 5 , it does have an impact, right . Ive got to put that in calculations. And, you know, it makes a little hard to really be out on a limb and youre investing until this stuff clears out. On the other hand, this makes it difficult. If you dont have if youre not investing and this thing goes, youre going to be lagging far behind. Especially for people who are not up where the market return is. You almost fell there. Youve always been a very good reader. I think you were the first to come on this set. And when you were walking through what the fed was actually saying. And one of the things they said this all ends. It was supposed to end in a year meaning the tapering was supposed to end by 2015. Now does it end in 2016 . The tapering or the easy money youre saying . Or the lower Interest Rate. Im talking about the tapering. I think they were saying that the low Interest Rate environment was going to end in 2015. I dont think they ever really said anything about the tapering. They talked about the assumption was they had to get through tapering. They have to get through tapering. If youre asking me when its ending, i think it ends when they see employment picking up. And whatever that means. When they have that part of the economy picking up. Right. Thats the question, if it doesnt pick up, what did they do . And i can make an argument that at some point they should be moving theirup, what do they do . At some point they should more treasury purchases in and keeping them out with lower Interest Rates. The shorter Interest Rates probably affect other parts of the economy. So can i make that argument at at some point and you would probably like that because that, as we talked about before, is a lillies krttl little easier to manage than having a fiveyear out there and threeyear out there. Its not as hard to get out of that situation. What about the situation of mortgagebacked securities . Has that had a big impact on the Housing Market . Im sure its affected Interest Rates in the Housing Market to a certain extent. The fed has done everybody likes to criticize the fed but we had a really, really, really bad situation back in 2008. And this could have all turned out like the 30s. You know what it didnt do . It didnt turn out like the 30s. Yes, is it perfect for main stre street . No. But are there soup kitchens and lines and the blocks . There are some but not like anything like the 30s. Its really difficult to say this plan did not benefit the average guy. The average guy has a cheaper mortgage, theyre buying cars again pup see those rates. So they are benefiting in some respect. Did you not see the horrible, horrible stuff that happened when you had a similar type of events with potentially banks rolling over. So, listen, the fed wanted to make the Housing Market better. The Housing Market is better. Cars are being sold. And the middle class, while not great is not theyre not they havent gone down and become poor. Right. Like they did in the great depression. So depending how you viewed your measurement of what they did, i think you have to say it certainly didnt hurt, what they did and i would actually say that they really did a great job. The viewers are fine with the language that theyre just saying please no wardrobe malfunction. No wardrobe mall financifunc . I was up so late, i got up so late, thats why i was on late in the set. I slept in. Sew i didnt shave. Im trying to figure out what color my face is today. Do you have a pasty on . Just in case i have two pasties on. And were going to show themto you. When we come back, we have the last word from david. Plus well look at this mornings earnings reports right after this. 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With Custom Communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. Every day of the week. Centurylink® your link to whats next. Welcome back to squawk box. Check out shares of mollycorp this morning. Chairs of fedex getting a boost, announcing a 32 million Share Buyback program. When we return, our special guest has been Hedge Fund Guru david at ttepper. We will give him the last word right after this. You make a great team. Its been that way since the day you met. But your erectile dysfunction it could be a question of blood flow. Cialis tadalafil for daily use helps you be Ready Anytime the moments right. You can be more confident in your ability to be ready. And the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph like needing to go frequently or urgently. Tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. Do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. Do not drink alcohol in excess with cialis. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, seek immediate medical help for an erection lasting more than 4 hours. If you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use and a 30tablet free trial. Welcome back. Teppers here. Were invested in some individual names in europe. I worry that the worst thing can happen that were worried about. Lets say unemployment doesnt come down. Lets see we have a slow down. What if the fed can never get out . What if inflation does finally come back where theres no adverse consequences that were seeing now . You dont worry about that . People are still too negative you said . I do worry about those things. Inflation is not coming back any time soon. The Unemployment Rate will come down . I think the Unemployment Rate will come down. There may be some structural things. Theyll figure it out. If inflation goes too high, theyll stop what theyre dpooi. Im taking away 20 times earnings look, look, ill leave you with one thought. 15 seconds. 10 seconds. We are at 14 times next years. Whether it goes to 16 like lees said, if we get over this crap in washington is that all i got . I got more. Love you, though. Thank you very much, david. Great having you. Now its time for squawk on the street. Good tuesday morning. Welcome to squawk on the street. Im Carl Quintanilla with david