Transcripts For CNBC Squawk Box 20131104

Billion. Tripoint is backed for gary sternlicht. Andrew, good morning. Theres some synergy there, as they say in the merger business. Also, we have some corporate buzz. The New York Times reporting that u. S. Authorities have expanded the probe into jpmorgans hiring practices outside of china across the asian pacific. Theyre focusing on south korea, singapore and india. The d. O. J. Was exploring other areas. We talked a little bit about this. Jpmorgan is the one that actually went to the d. O. J. And started talking about these other hiring practices and now theyve expanded their probe. There they are. Good news, in the i. P. O. Space, october was the busiest month for u. S. Offerings since 2007. 33 companies raised more than 12 billion companies. Finally, a new cnbc Associated Press poll is finding that the social Network Faces skepticism from potential investors and broader publica head of its initial public offering. Kayla is going to join us with more of those details in a minute. Joe, over to you, sir. Thank you. Dallas fed president Richard Fisher has a harsh message for washington. He says an ineffective frac shus and physically irresponsible government has slowed the u. S. Recovery and counter acted the stimulative effects of the feds super accommodative Monetary Policy. Double super accommodative i dare say. In prepared remarks to Australian Business economists in sydney fisher says in part, in his words, while the fed has been moving at the speed of a boomer in full run, is that a what is that . Is that a kangaroo. A boomer center . A boomer what . Boomer boomer esiason. He wasnt that fast, i dont think. They say it best exhibited the adaptive alacrity of a koala. Must be an australian thing. Without being anywhere near as cute as the koala. Thats interesting. Boomer may refer to animals, fictional characters, comics, video games. Doesnt explain it. Thats a large male kangaroo. Thats what we were just told. Large male kangaroo. So it doesnt have a pouch then . Not all kangaroos have pouches . I guess you wouldnt need one if you were male, right . Unless it was like vestigal. If youre male, i dont think you have one . I dont think so. Unfortunately some of us humans you know. Were not carrying babies in our pouch. Fisher mines less than it was. You have nothing. Fisher will vote next year on the fomz. He wasnt a Voting Member this year. Meantime, one of this years Voting Members, yes, jim bullard will join us on set at 7 00 for two hours and we may he may be a little different in tone and substance than plausser we talked to on friday. Theyre both hawkish. They have Different Reasons for why they get there. Yeah. Exactly. But they get to the same place . I think plausser is even more bullard has recently been more dovish than he had been. What i dont get is once you get him going and you get fisher going voting, does that actually change the dynamics . No. They all fall in line. Its interesting. Collegial voting. Plausser wouldnt have done qe 2 he said last week. But he voted for it. I dont know. Lets check on markets this morning. Markets continue to do well based on whatever you think it is. People have two different ways of looking at it. Either its the fed or its what the economy is going to finally do because of the fed up another 12 points. A decent session on friday. Oil has been a pleasant surprise for commuters from 195. The ten year, interesting on friday got down, now its back up its been anywhere between the 2. 4 and 2. 6 handle recently. The dollar has been moving in the right direction for travelers. Just recent, 1. 35. We could go on to 1. 35 which would help a little bit. Then gold made its move to the mid 1300s and immediately turned back down. Its been in the trading range for i would say about six months. So plausser becomes a Voting Member next year and bullard is a Voting Member now. Fisher he wont be. Fisher will be next year. Okay. You have new york, dallas, minneapolis, cleveland, philadelphia. I guess what im wondering, does the voting actually change the outcome . It sounds like the answer is no. If yellen says this is what were doing, this is what were doing. May get more contemptuous and more arguing. The minutes are more interesting. Theres joeys and theres boomers. Those are babies. Babies. Boomers are adult males. Theres a song, a fame yoousg so he was clued in. Smarter than we are. Finally figured it out. Knew more about australia. Lets get back to the top stories. Kate kelly joins us with the details of the sac settlement. Good morning. Reporter good morning, becky. It looks like today is the day after weeks of negotiating the embattled sac capital will finalize an agreement with u. S. Prosecutors to resolve charges of securities fraud regarding to Insider Trading. Theyre expected to pay a fine that amounts to 1. 8 billion. Thats 1. 2 billion in new charges related to the criminal settlement but at the same time they paid 600 million earlier this year in a similar but separate charge that theyll get credit for. This is probably the largest fine on record in terms of Insider Trading cases. Probably the largest as well for the u. S. Attorney for the Southern District in manhattan and certainly high ranking for the Justice Department as well. Instead of just pleading guilty to everything in the original indictment from july of this past summer, sac im told will have modified charges that they plead guilty to in a sort of separate court filing. We can look for that as early as today. That may go public today. The papers are likely to show up in court and then well hear, i think, from both the u. S. Attorney and sac and this is going to essentially end life as sac knows it, at least for a time. Whats going to happen is theyll lose their registration as an Investment Advisor with the securities and Exchange Commission and because of that they wont be able to manage public money. Theyll have a brief grace period, im told, in order to redeem the remaining outside money that they still have, but then theyll essentially convert to a Family Office early next year, becky. So that means theyll only be able to manage money belonging to steve cohn, the founder, certain employees and his family members. Hey, kate, couple questions this morning. One is this doesnt resolve any potential criminal liability for steve cohn, the man himself, is that true . Well, let me give you a dual answer to that. I mean, i guess it doesnt, although i think if they had the material for a criminal individual case against cohen, they probably would have brought it at this point. Now they continue to try current and former traders. In two weeks from now well see the trial of Michael Steinberg and i assume the fbi continues to try to turn witnesses against him. So i think you cant rule that out in the future, but i would probably not expect it at this point. The only reason i ask is because if you remember and you remember so well given now were talking about a 1. 8 billion settlement, 600 was already from a prior settlement, some people meant the whole thing was over. Here we are they would argue were sort of double dipping. It seems to me theyre taking a second bite at the apple, why not take a third . Right. I think thats certainly possible. The 600 from earlier this year is an interesting discussion. I think in the hedge 23u7bd cumulatikmu Cumulative Fund community, i think you would have expected this to be tied up. Instead you have steve cohen fighting personal charges that he failed to supervise errant employees, which is the nature of a pending civil case against them. And im glad you brought it up, actually, because that wont go away with todays settlement. Theyll still have to fight that next year and im sure that will have an impact on whether or not they can reopen as an Investment Advisor. One other question which is this, wall street has been a huge beneficiary of sac. Theyve been the largest fee payer to wall street in terms of fees off of just straight trades. What happens to what you think looks like the firm in the future and therefore their relationships with the rest of wall street . I actually would not expect substantial changes for now, and here is why. After sac was indicted on july 25th and between that and a protective order that the Southern District of new york and prosecutors there signed with sac, basically the street was given a certain guarantee. Sacs not going out of business. The government is not going to try to hasten that. They want to avoid hurting third parties, investors, you know, brokerage firms, prime brokers, what have you. Now theyre still operating out of that. If they become a Family Office theyll manage 9 billion. I know the plan is to keep things largely intact. They may have some additional layoffs. I dont think any of that has been determined. Basically theyll still be a high fee payer. When you talk to people on wall street, you probably have as well, andrew, theyll say this is an odd situation. This isnt sort of your everyday thing. Weve received assurances from the government that were okay in continuing these trading relationships. Otherwise, well move forward. Do you think once theres a guilty plea is there a firm that says, you know what, guys, youve been a great client, we cant do business with you . Reporter ive asked that question leading into today and i certainly think, you know, as we have some of these wall street executives on air we need to ask them that, but to my knowledge, nobody is planning that. The most dramatic thing ive heard is that theyre going to sort of reassess when this happens. But its the government that theyre looking to for guidance on whether they bear any liability for continuing to do any business. So far theyve been told they do not. Kate kelly, fascinating story. The biggest this has been going on. Its a soap opera that seems like its coming to an end. I dont know if it is. Its now time for the golden markets and well go across the world to lon ton to karen chow tso. You can see we are ahead by a third of 1 . Some of the individual indices to show you. You can see the core is still performing. The ftse is a backer. Hsbc, for instance, one of the banks reporting here today,. 4 is what you see across the ftse. Ryanair holdings, 11 of the down side its shares have slumped. They cut the profit target for the second time in two months. The ceo Michael Elyria claims the demise of the demise of alatalia will help them. One of the opportunities with the new 175 aircraft order is the fact that alatalia will get smaller. I think no matter what the rules are, the italians will continue to bail it out again and again and again. It will continue to create huge opportunities for us. Alatalia having impact across the board. Air france klm which is being forced to deny reports that its asked alatalia to cut 5,000 jobs. And alcatellucent shares are down 6 . Along with a 750 million high yield bond and elsewhere hsbc shares, i mentioned one of the better performers, 2. 4 higher. Analysts are saying the numbers came in line with forecasts. Hong kong, one of the outperforming regions. Heavy volume of stock and about 20 higher in the first 30 minutes of trading. You can see a very strong ticker in the stock price. Let me move to the other markets to share with you. Bonds up. We had numbers out too, heavy impact. Construction numbers impacting the markets. The highest level since 2007. Across on the eurozone as well, manufacturing numbers coming in line with the flash numbers showing an expansion. 1. 68 is what were seeing. U. S. Treasuries, 2. 61 . We are around the 4 mark as well, too, for italy and spain as you can see. Now crossed below the 4th handle. Not much pressure there on markets. A lot of liquidity in the markets. Let me toss it back over to you. Thanks for that report. We are also just days away from twitters first trade on the new york stock exchange. How does the public view it as an invest. Kayla has the results of a new pole. Twitter is set to price on wednesday and trade on thursday. Cnbc teemed up with the public to see how the public thinks about it. Half of all active investors dont think its a good investment. A number of those who dont think its not a good investment are high income respondents. Many people think it will be profitable in the next five years. One might think the most Optimistic Group would be the most frequent users, millen yals. When surveyed, 50 of the group said they wouldnt put their money in t. They have been weary about the stock market overall. There are broader questions about the business model. The majority of those with twitter accounts in the survey says they lurk or read news. More than half said theyve never even noticed promoted content. Twitters ad writers say 2015 earnings will be a turning point. Twitter in terms of overall favorability ranks low compared to its peers. Only 19 had a favorable view of the company. Thats pretty low compared to 47 for pb but, of course, potential facebook and google and linkedin had their dots, too. Its up because of their ipos. Because of the volatility and sentiment, its very likely that twitter underwriters will keep these shares to wall street as well. I wondered about that. Did we do a poll like that before facebook or is this a new poll . We did a similar poll almost exactly the same before the facebook ipo. 54 of people thought it was a good investment. Thats interesting. It is interesting. This guy, kayla, andy kesler i know andy. Weve had him on the show. Why twitters ipo is a bigger deal. Hes talking about ways that it will allow you to use the second screen. Thats why they hired the nbc person, because people watch tv and young people are tweeting while they watch tv. Some of these live shows, some of the shows that get the highest rating. It will be better than facebook for advertising. Facebook is up to 122 billion market cap. This is 13 billion. Why are our viewers not that bright for something . I dont this guys making the ka thas twitters a much bigger deal than facebook. The problem is its not as far along in its development. Facebook by the time it went public is making a profit, twitter is not there. Its harder to be able to point to that. More potential. Underwriters on the road are saying look at 2015. 2015 is the year theyve circled on the calendar. We are hoping by that time we will be profitsable. Thats saying twitter is more important than the other social networks because it inspires a conversation. The others get you to go on there. Twitter has the power to get you to engage. Twitter is suffering from the facebook ipo. Twitter i use for work. Facebook i would never if i had to choose one or the other you sometimes tweet pictures from vacation. I would take twitter if i had to take one or the other. If i could only have one. Facebook, i dont use very often. Twitter is not suffering from facebooks ipo, its suffering because people have been leaving facebook because its been littered with ads. I think its almost a good thing that people havent noticed the twitter ads. I didnt see one until you pointed it out. I didnt realize it was an ad. Im not following them. It was an nfl thing that i almost wanted to link on. Its like who are you . Its not retweeted. How did you get on here . You dont realize it. I do. Most people dont realize it. When they ask do people realize there are promotion there is, youre saying they dont. The negative of that many people dont know. 54 of people just lurk on twitter. They use it either as a news feed, they just read. They dont retweet. They dont engage. The problem is if youre an advertiser. If youre comcast and you want to buy an adebayor on twitter, only pay how many times its engaged. If you link on it. I almost linked on the nfl. I didnt realize it was an ad and then i almost clicked on it and then i got busy. Thats the same with facebook. Paper click. It will show you the ad 10,000 time but comcast only pays if you click on it. Right. More people, more impressions. Certain banners you play a flat fee for. Video ad. You play a flat fee for the home page. Little things do bother me. You have strong powers of observation. My clock in my car. Drives me crazy. I havent changed mine yet. Thats my problem. My car is different than my last one. I used to have just it was easy. A manual thing. It cant be like that. I had every manual out. I couldnt i said, you know what, i know its an hour fast. It doesnt matter to me. Drives me crazy. And im driving and so yesterday i said, you know what, ill be back in a while and i left the family and i went out there and i until i figured out how to do it, i wasnt going you know what i had to do . I had to get in and i had to set it to where i live in the world because its based on gmt. So its minus five and something is different. Now they think i live in newfoundland because i had to change it where now i think because remember i had to go through my gps. Gps. I dont know how to change mine. I was driving to my cousin to the new york marathon. I saw the clock was 6 30 and not 5 30. Youre going to miss the marathon. Did you notice if you went to a bed, it was an hour extra this morning . I feel good today because i had an hour extra. Its going to take me a while. Even an hour later is still dark. It is. But i got to sleep until 5 00 today not 4 00 even though it said 4 00. In my car, i finally did do it. It was bad. It took me probably two hours. Can you change mine . I could have dropped the transmission by the time it took. This is the way another reason not to have a vehicle. Another reason not to have i enjoy my vehicle. Im not in this argument. No. You have to have a car. He had to rent a car to buy a pumpkin. Thats true. Anyway, coming up, googles executive chairman theres two kinds of people in the world, those that think the nsa that think snowden is a hero or who think hes a scoundrel. There are two people in the world. The nsa blasting the nsa over spying reports. Google likes to keep all their spying to themselves. They couldnt want other people having their spying information. What the d. O. J. Wants u. S. Airways and amr to do. As we head to break, the weather channels alex wallace joins us. 32 degrees this morning, alex. Cold. Yeah. Theres no way around it. Cold. Not just for new york city but the rest of the northeast. Very chilly start to things. A lot of 20s in the interior. Syracuse to buffalo, 20s. Therefore, no doubt about it we have chilled down those numbers. Good news is well get a chance to warm up as we head through the week. High pressure drifts east and on the west side the winds will turn more out of the south and the south winds are a warming wind. Well get a chance to see the 60s by mid week. Hang in there. We have some showers moving now from parts of mexico into texas. This is thanks to some moisture coming in from a Tropical Cyclone which has made its way through mexico. Moisture from the golf of mexico. A cold front from the north. Thats going to keep things on the wet side for today including dallas. We have some wintery weather. Parts of the rockies could see significant snow. The first significant snow for spots like the twin cities heading through our tuesday into wednesday. Thats your national forecast. More squawk box coming up in just a bit. Here we are, me and you on the road and we know that it goes on and on [ female announcer ] youre the boss of your life. In charge of making memories and keeping promises. Ask your financial professional how lincoln financial can help you take charge of your future. Oh, oh, all the way oh, oh oo. Welcome back, everybody. Right now its time for the executive edge. This is a daily segment focused on giving Business Leaders a leg up. Eric schmidt is blasting the nsa on spying. In an interview with the wall street journal he describes an act like this as outrageous and potentially illegal if proven. Its really outrageous that the National Security agency was looking between the Google Data Centers if thats true. The steps that the organization was willing to do without good judgment to pursue its mission and potentially violate peoples privacy is not okay. Its just not okay. So in that sense the snowden revelations have assisted us in understanding that. Its perfectly possible that there are more revelations to come. Schmidt says that google has registered complaints with the nsa, president obama and members of congress. Gentlemen, joe you were saying before there are two camps of people. Heres what the nsa said. The nsa referred to some of the press articles treatmently that they had misstated facts and mischaraterized the nsa. This is definitive. Unless theyre lying, the nsa follows all of the laws, regulations and policies and assertions do a grave disservice to the nation, its allies and partners and the money who make up the nsa. I was in the antisnowden camp but something i read yesterday in the New York Times gives me a little bit of pause. They pointed out that the nsa has 35,000 people working for it. It has a budget of 10. 8 billion. At this point they are collecting so much information. No morsel is too small . Yeah. Its a little staggering when it used to be you would do whatever you can when the agency first started. You would do whatever you can. Technologically they can do anything and there arent questions. I remember why you take it at face value what the nsa is saying. The fact that theyre collecting 320 million or 320,000 i take it at face value because i dont care what theyre finding out. Right, if i do something wrong, then ill worry about it. But im not smuggling meth, im not walter white. The bigger issue is if you have somebody whos getting ahold of that. The irs. When they give it to the irs and lois lerner i still havent seen my refund. They may already know about me. No, look, whatever it takes to you know, to make sure that were safe in the homeland. Youre okay with it. What i was unhappy with in the article im fine with it. There was the front page and two full pages inside of that. There was a lot of information in it. What i thought was not fair about the article, it buried some of the terrorist plots that they were unable to recover. I saw a picture of some guy in germany. It looked like he was getting an award. Couldnt have been in germany. He was in gefrm ma any . Yeah. Theyre considering giving him, you know you didnt see the picture of him holding was he actually in germany . Yeah. Hes looking at finding some sort of a deal so that he can he wants clemency in germany. Hard to tell you something you dont know. You dont know all the details. There are so many secrets surrounding it. We dont know so many of the things that you would need to make an educated decision on whether its right or not. But the idea lone that they have 35,000 employees. And google you know, schmidt has to succk up to the left because its google that i think of. The great thing about this is you dont have to be mad at the president for this because its bush anyway. He started it. The president was unable to stop it. This has nothing to do this is i would be somewhat if i wanted to slam the current administration, i could, but i dont want to. I dont have a problem with this. And the people that do have a problem with it, they dont really like president obama because theyre basically an extension of bushs at this point you have some on the Intelligence Committee saying look, some of the stuff they told us they were doing, its not true. Some of the things they were not doing, they didnt tell us about. Theres a select group of people who need to know. Theres no business implication. Im curious what you think of this. Google is a u. Hs. Based company. At t may struggle to be able to acquire companies in europe because the company you talked about it. I dont know whether thats you were worried about blackberry. I think youre in the same place. Well see. What happens if thats the case . I dont think it is. What if it is. Its like kaasa blank at tca. We are way better at it. Were better at everything. We are better at it. My concern, again, is theres an Oversight Committee there for a reason. Sharing stuff. Half the stuff we found out that they were mad about they had supplied to us. When theres no deal when some Company Needs to do a deal out there are you going to scream protectionism . Im he not going to worry. If you like mna, im all right. Youre fine . I dont think thats going to happen. Youre worried about it beforehand. Been worried about a lot of things. Growing the pie. No one over there thats a huge leap to say because of the nsa someone over there is not going to allow at t to make an acquisition over there. Theyre not. Lets see. All is fair in love and war. Business goes on. Its not personal, sonny. Im taking this tape in case this goes south. Its not personal. When we come back well talk about whether fracking is the future. We have the pros, the cons, etc. Behind the Energy Revolution. Stick around. I have low testosterone. There, i said it. See, i knew testosterone could affect sex drive, but not energy or even my mood. Thats when i talked with my doctor. He gave me some blood tests. Showed it was low t. Thats it. It was a number. [ male announcer ] today, men with low t have androgel 1. 62 testosterone gel. The 1 prescribed topical testosterone replacement therapy increases testosterone when used daily. Women and children should avoid contact with application sites. Discontinue androgel and call your doctor if you see unexpected signs of early puberty in a child, or signs in a woman, which may include changes in body hair or a large increase in acne, possibly due to accidental exposure. Men with Breast Cancer or who have or might have prostate cancer, and women who are or may become pregnant or are breastfeeding, should not use androgel. Serious side effects include worsening of an enlarged prostate, possible increased risk of prostate cancer, lower sperm count, swelling of ankles, feet, or body, enlarged or painful breasts, problems breathing during sleep, and blood clots in the legs. Tell your doctor about your medical conditions and medications, especially insulin, corticosteroids, or medicines to decrease blood clotting. In a clinical study, over 80 of treated men had their t levels restored to normal. Talk to your doctor about all your symptoms. Get the blood tests. Change your number. Turn it up. Androgel 1. 62 . Welcome back to squawk box this morning. Making headlines. The wall street journal reporting that they want to see a broad package of divestitures from amr and u. S. Airways as part of any deal to settle the merger plan. The d. O. J. s antitrust suit says the deal would harm consumers by reducing air service and increasing fares. That case could go to trial in a few weeks. This is a little dance going on. Fracking has made the United States the worlds Fastest Growing energy power. On track to pass saudi arabia by the year 2020. Thats according to a new book out tomorrow the fraccers. Joining us is the author, Award Winning journalist, greg zuckerberg. What i love about what youve done with this book is taking what happened with the Energy Revolution and tying it to the financial crisis where it was people who were on the outside who really saw what was happening first. Yeah, thats the shocking thing. So who should have been the one to see this Energy Revolution . Should have been chevron, should have been exxon, should have been the Industry Experts and they didnt. They were caught blindsided by this whole thing. Exxon literally, their headquarters is on the barnett shale which ended up being one of the biggest in our country. It was sort of these interesting entrepreneurs, outsiders in some ways who got it and believed in this country. Its a very american story for good and for bad i would argue. What these guys saw that nobody else realized, i guess it was a crazy way of getting the oil out of the shale that others thought couldnt be done. They figure out how to get the shale. Everyone knew there was a lot of oil in shale and gas in shale but everyone figured theres no way we can get it out. Lets go off shore, africa and asia. There are a few americans who said, no, we have to figure out how to do it in this country. They were small guys and didnt have options to go off shore. They had to figure it out. Who are some of these wildcats. George mitchell, son of a goat herder in greece. He was an immigrant. He was running out of gas. His company was called mitchell energy. Nick steinberger, i wrote about him. He had a break through and changed the country and the world. There are guys like harold ham. He grew up dirt poor. Couldnt even start school until christmas time each year because he had to help his parents in the fields picking cotton and watermelon. Now hes worth about 14 billion. His wife is going to walk away with more money than oprah. Thats a lot of money. Who is the publisher of this book . Penguin. Did you talk to them about the title . No one thought of meet the fraccers . Why would you call it meet the you are introducing the frackers to us. You didnt want it to be funny . We thought about it. You thought about meet the frackers. Look in the back of the book. It says meet the frackers. I thought it was only me. You know what, then its fine you didnt use it. We ran it past them. They were like, ah, no. I gave it a shot. Sticks in a mud. For business, right. For the paper back, we can switch it out. Meet the frackers. I show the characters. Each of the characters. Very clever. Most frackers. The word is begging for double entend entendre. Were you able to mention mother combined with frackers. The mother of all frackers. Greg, at this point people have totally bought into this, the idea of an Energy Revolution. Were looking at the numbers where were taking over russia, the amount of oil and gas that we produce in this country. What are the big guys doing at this point . Its a remarkable phenomenon. If youre over 30 years old you remember how just a few years ago we as a nation were running out. We were nervous we were running out of oil and gas. Now we have so much were going to export gas which is a crazy thing. The oil guys, big guys are catching up big time. Exxon bought a Company Called xto for about 40 billion a few years ago. The smaller guys, mitchells, harold hamm is doing well and continental made about 2 billion since my book went into print in july. The small guys are holding on. At some point you would think the big guys open up and buy them. Greg, we want to thank you for coming in today and wish you the best of look on the book is meet the frackers. Or the frackers. He said no to meet the frackers . He liked the idea, joe. We discussed it. In the end we liked this one as well. I think you need to go for it. I do. I do. In the reprint well do it. Got to make a phone call over there. We have a big week ahead for the Global Markets. Ecb decision thursday. U. S. Job reports friday. We have a preview of what to watch. Thats coming up on squawk box right after this. Farmers presents fifteen seconds of smart. So you want to drive more safely . Stop eating. Take deep breaths. Avoid bad weather. [ whispers ] get eight hours. [ shouts over music ] turn it down and, of course, talk to farmers. Hi. Hi. We are farmers bum pa dum, bum bum bum bum the ocean gets warmer. The peruvian anchovy harvest suffers. It raises the price of fishmeal, cattle feed and beef. Bny mellon turns insights like these into powerful investment strategies. For a university endowment. It funds a marine biologist. Who studies the peruvian anchovy. Invested in the world. Bny mellon. The main focus for the markets this week is the october jobs report due out friday. Joining us on the set, chief Investment Officer at corner stone wealth management. Alan, just in a nutshell, has the market been doing well just from the liquidity from the fed or because the liquidity is going to have a positive effect eventually on the underlying economy, therefore the market does well . I think both, joe. I think the fed has supported the equity market, but the equity market has been going up because of quarter 1 profits which have been strong. And that being helped by the qe 3 . I think so. I think its held Interest Rates down. Thats helped corporate Profit Margins which are an alltime high. I think the market is telling us the economy will get better in 2014. Do you think the wealth effect, animal spirits become kicked into motion and the consumer feels better and it counter acts some of the drags that weve had . I think it does. We can measure this. We have consumer confidence. The index is at 71 today. Its well up from the lows but its still far from the highs that weve seen at previous peaks in the market. Did you talk to bullard in the greenroom . I did. I did. Hes great, isnt he . Hes giving you jim bullard is over here going, yeah, yeah. Were both in st. Louis. He just said great mind. St. Louis. Nice heading, jim. Nice hitting. Ten runs every time they play the reds, they get ten runs. Still a great year. Still a great year. What happened . Theyre not going to beat boston. I dont think anybody was going to beat boston. Good pitching beats good hitting, doesnt it . Where are you on s p earnings next year . You know, we think earnings this year will be a 107. 50. Next year could be as high as 120. Not going down . Not going down. I thought corporations had already extracted things that they could from the cost side . The gdp is going to grow probably closer to 3 in 2014 and consumers are start to go gain some of that confidence now that washington is behind us. I guess well see. So as far as longterm, you know, nightmarish scenarios, do you ascribe to any in terms of a five or 10 trillion ball sheet if we get there . We have to get our fiscal house in order. Im talking about just the fed. Can they suck that back out . Can they bring the Balance Sheet back in to equal . Eventually they need to. I think youll hear that here in a few minutes. I think the fed has done the right thing by having the foot all the way down on the gas to get this economy back going again and when that growth is sustainable, the fed will pull back. So, okay. Then none of these things that we worry about, im talking about a Participation Rate of 62, food stamps doubling in the last disability, people more people on government assistance than with fulltime jobs at this point, on some type of government assistance. Does that ever start to reverse and head back the other way . It does when the economy starts to improve. This is all a reflection of what we went through . Nothing that were selfinflicting now . I do think an activist government needs to pull back to a better balance, but i think investors needs to take the focus a little bit off of washington and recognize that the real economy is slowly starting. I was just saying that to someone, that its a credit to the u. S. The resiliency of the greatest economy in the world that were doing this well with everything thats going on. Absolutely. Weve made it through. Were going to see more improvement next year. If investors are focused so much on washington, theyre missing the opportunity to being invested. Peace of mind is important when youre running a successful business. So we provide it services youc 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. Afghanistan in 2009. On the u. S. S. Saratoga in 1982. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation because it offers a superior level of protection and because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Welcome back to squawk box this morning. Our next guest argues the majority of investors dont have the edge. Once you accept this as a fate or fact, youre more likely to be better off in the long run. Lars explains it all in his second book, how to invest without speculation and sleepless nights. Lars is also former hedge fund manager, founder and chief of holt capital. And good morning to you. Thanks for having me. You are a professional money manager, or were, actively managing stocks. Mmhmm. And you think the whole thing is a crock . No, thats not exactly what i say. What i argue is just because some people have edge in the market doesnt mean that everyone has an edge. This is the Warren Buffett market. Most people cant do it themselves. And theres only a handful of warrens out there. Correct. And if youre going to do that, which index funds do you buy . Buy the broadest and cheapest index you can get your hands on. In the sense if you consider only equities for a minute, although it extends to other asset classes, you should buy the broadest index of equities anywhere in the world you can get your hands on, do it as cheaply as you can. In a sense, that would be the world equity index, as an example. Why did you get out of the business . As a long story short, i ran a hedge fund for five years in london. In the end of it, had a rough year, it wasnt rough, we were down 10 , 20 , return capital, and continued. What was the maximum amount of money you had . About 300 million. So, yeah, we did okay. Lars, let me ask you, do you think i heard the argument before about average investors not being able to do it. Do you think its a good deal . Or do you think people are better off . Well, what i want to do in this book is turn the argument on its head. Its not so much whether i come to you and claim, what is the ability to distinguish between me and 10 other lars that come and ask for your money . To say to you, i can pick the one out of maybe 1 to 1 1 2 out of 10 that perform in a tenyear period. Thats a tall order. If you cant do that, you probably dont have edge and youd be better off in an index fund. Where do you stand on etfs . I think theyre a great vehicle. When i studied this from a theoretical perspective in school, etfs were not a great alternative. Now there are quite a bit and much cheaper than they were. Would you ever invest in a hedge fund . Yeah. I sit on boards with several hedge funds. Okay. Keep in mind, im not you have edge . I think i have an edge in picking in picking those hedge fund managers. But also, keep in mind, again, if i didnt have it, you know, ive been in the industry for a long time since university and i know these people, known them for many years, i know a lot about finance. Some people might disagree. If i dont have it, what chance does my mom have . What chance do regular investors have . If thats the case, if you and i understand Warren Buffetts argument for this too, what is the analyzed return that you should expect as an investor . Youre probably not looking at 20 , 30 . Is 8 even fair . Some Pension Funds were expecting that and theyre not going to get it. No, and i think thats going to be a massive problem for the next generation. Not just because were expecting, if we assume equity markets, historically if you go back several hundred years all over the world, the risk premium has been 4 , 5 above inflation. You can see thats the return we have gotten for the kind of risk equity markets have been. And thats what an individual investor . And thats roughly, i think, if the risk is similar going forward, thats probably the kind of return we should expect going forward. In any one year, they could be massively, massively different. This is why an investor, its incredibly important to think long and hard about your risk levels. And how youre going to implement your portfolio. So, you know, risk is risk is a funny one. You talk a lot about. We appreciate the standard deviation. But i one of the other things i argue in my book is a lot of investors today are really amazingly concentrated in their portfolios. So your portfolio consists not just of your investment portfolio, but your house, your job, your education, your future inheritance. Right. And look at yourself like chances are, you know, you have a house close to here, your education is related to this industry. You have a job in this industry, alternatives in this industry also. Youre already pretty concentrated. Right. And if you add to that concentration in your investment portfolio, i think youd be doing yourself a disservice. Lars, thank you for joining us this morning. The book investing demystified appreciate having you here. Thanks for having me in. Coming up, jim bullard. Talk about tapering, jobs and more when we return. Customer erin swenson ordered shoes from us online but they didnt fit. Customers not happy, im not happy. Sales go down, im not happy. Merch comes back, im not happy. Use ups. They make returns easy. Unhappy customer becomes happy customer. Then, repeat customer. Easy returns, im happy. Repeat customers, im happy. Sales go up, im happy. I ordered another pair. Im happy. both im happy. Im happy. Happy. Happy. Happy. Happy. Happy happy. I love logistics. The squawk the squawk reserve, todays special guest host, st. Louis fed president james bullard. A Voting Member of this years fomc and never one to mince words. The taper, the economy, janet yellen and the future of the fed. No topic is off the table as the second hour of squawk box begins right now. Good morning, everybody, welcome back to squawk box here on cnbc. Im becky quick along with joe kernan and Andrew Ross Sorkin and steve liesman. Were watching the futures this morning. Right now, dow futures up by about 26 points above fair value, s p futures up by 2 1 2. And in our headlines this morning, we are expecting a settlement to be announced today between the government and s. A. C. Capital. The settlement would be worth 1. 8 billion when you include that 616 million fine that the firm has already paid. S. A. C. Would also plead guilty to one count of securities fraud. And twitter is facing a dose of skepticism ahead of the ipo later this week. Thats according to the cnbc Associated Press poll. 47 say buying twitter stock would not be a good investment. 36 take a positive view. And California Home builder tripoint homes is merging with warehousers Home Building position. The deal is worth 2. 7 billion. And tripoint would become one of the top 20 u. S. Home builders as a result of that deal. Barry sternlicht will be here tomorrow starting at 7 00 a. M. On squawk. And a number of events of note this week. Tomorrow, were getting the release of this years most anticipated video game, activisions call of duty ghost. Well get them all. The latest installment of the call of duty series which sold over 100 million copies. I cant believe its 100 million. Was that video games and c. O. D. Was one of them. And there was another one my son got. Check this out on wednesday, twitter expected to price 70 million shares for 20 a share. Well have that ipo on thursday morning. But then on thursday, theres the ecb Rate Decision and Third Quarter gdp released. And on friday, the delayed government jobs report is finally out for october. So weve got a lot to look forward to. Or not. Weve got that going for us, which is nice as they say. We do. Dallas fed president Richard Fisher with a harsh message for washington. He says an ineffective fractious government has slowed the u. S. Recovery. And thats not that profound. But also counteracted some of the effects of the feds super accommodator Monetary Policy. I dont know if he said that or we said that. In prepared remarks to economists in sidney. Fisher says in part while the feds been moving at the speed of a boomer, a big male kangaroo which is not held back by air going into the pouch, a boomer in full run, the federal government of the United States has at best exhibited the ada adaptiadap adaptive alacrity of a koala. And with a lot of pressure on him to come up with analogies as good as that, youve got to include some koalas, boomers i appreciate your translating the australian for me. Boomer esiason or chris whats his face from espn. President and ceo of the Federal Reserve bank. And good to have you in. Good to be here again. We just got done playing baseball. Get done is the operative word, too. You were finished. Did win a pennant. If thats what youre hanging your hat on. Both you you know. You and the reds in the same place. I thought we were in good shape up 21 and had two games in st. Louis. Pitching is thats what i finally came to the conclusion of. The pitching really matters in the end. Oh, yeah. And i love and then youve got ortiz who ortiz was fantastic. Fantastic. Unstoppable. Almost like he was a superhero almost. Like he had some kind of super power. Anyway, what month will the taper begin . This is that hows that, steve . Let me do it the way steve would do it. Hell ask you this later. What month will the taper begin . No, joe, you do this, i dont. I do that . This is a datadependent program. And were going to look at the data and make a decision at each meeting. And so i do think weve made substantial progress in labor markets, unemployment is down almost a full point from when we started this program in september 2012. Weve got faster job growth to the tune of 40,000, 50,000 per month since we started the program as compared to the six months before the program started. But the last couple havent been they havent been theyve been a little mixed recently. But i think this motion of cumulative progress is the one you want to think about. And we have had a lot of cumulative progress in labor markets. And every jobs report that continues to show more jobs being created and a tick down in the unemployment rate, is going to mean the probability of a taper goes up. Plus, youve got skewed data. Yeah. This report here coming up on thursday will be hard to interpret. But arent they all hard to interpret . Does the fed have anies a risk on that number . I would use the second s, but brinksmanship. Do you put anything there when you talk about low sevens . Do you say its low eights . The Participation Rate, ive come around, seen research recently thats consequenvinced more this is demographic. Doesnt change the issue its there, does it . It does . The Participation Rate has been coming down since 2000. And if you fit a pretty good demographic model to that, youll basically predict itll be right where it is. So unemployment really is a pretty good measure of how were doing. Doesnt feel great. Welm, its seven you know, over 7 . Thats not what were used to in the u. S. But, still, its better measure of labor Market Performance than people have been giving credit for. Isnt there an argument, though, even though its demographics and people are retiring, were living longer and people are going to have to start working longer too . Theres the argument that some people retire because they cant find yeah. So the demographic model i have in mind is just, you know, you look at different age groups, men and women and maybe some other groups and you look at their propensity to participate in labor market. Then you look at how the whole populations changing and fit those propensities in and thats what you get. But this issue about living longer and maybe working more, that probably is not in the model. Eventually i would guess you would need to see the demographic model switching to suggest people dont retire until 68, 69, 70. If youre going to live a lot longer and start working a lot longer, that would be a new phenomenon. I want to follow up. Using the term substantial progress, i think, advised quite intently, right . So youre cumulative you said substantial. Cumulative is the most powerful argument for tapering. Okay. We started off saying were looking for, you know, substantial substantially better labor markets. Okay. So when you say that, youre saying the preconditions for tapering have been met . Yeah. Which means youre signaling by using those terms, it could happen at any meeting because the preconditions are met . We could cite substantial progress at any meeting. However, weve got other things going on. Weve got low inflation. Thats why ive been willing to be patient about this. Whats your hurry . You dont have to be in a big hurry. I also think we have room on the Balance Sheet whereas maybe some others dont think we have room on the Balance Sheet. What does room on the Balance Sheet mean . If you look at the size of the Balance Sheet relative to gdp, whos got the biggest one . Japan . Europe . Uk, u. S. . Were fourth out of those guys. Were actually low on that kind of a dimension. Were in the low 20s. The other guys are 25 , 30 . So if you think something bad is going to happen, youre going to pass some threshold and something bad is going to happen with the Balance Sheet, these other Central Banks shouldve already passed that and had that experience and they havent. So i think weve got, you know, i dont want to take too much risk right. But i think weve got some room to go on that. So sounds like youre putting another test on, which i guess has always been not as explicitly stated. Which is substantial progress on labor, but also, you need to see some measurable improvement in the inflation rate toward the 2 goal. Id like to see it heading back to 2 , id like to see some tangible evidence that were going back to 2 . Right now, were quite low or near 1 . We havent seen too much evidence. Whats the cutoff for when you stop calling rising inflation and improvement . What would you get to . Eight . Its improved to nine. No, no no and its really kicking at 14. When you set an inflation target. You should hit the inflation target. You should not its a weird word for rising inflation. You should defend the inflation target. What will our growth rate be including the shutdown in this quarter . The growth rate in this quarter . Fourth quarter. Yeah. I dont know. Ive been encouraged that the Third Quarter numbers are looking better. Tracking estimates about 2. 5 . 2. 7. 2. 7. By the way, the street consensus is below that. Been wrong on every quarter. Well, its around 2. 7, and the dow jones reporting on friday was 1. 9. So what you really have is Second Quarter actually came in stronger than expected. A good Holiday Season, put together a good string of quarters, well see what happens. Its a clean number. Thats before the Government Shutdown. The fourth quarters not going to be clean. You know, the Government Shutdown, i dont think at least mechanically, i dont think its going to have that big of an impact on growth. Those furloughed people are getting back pay and the contractors are just going to have to work somewhat longer in the next quarter. Theres some substitution going on there. Its probably not that big of a deal. It was a hit to confidence and that is a concern for the Holiday Season and for retailing. Were going to have a retailer on. I think a little bit later in the show. Well get some idea about that. Did you book that first guest . I had nothing to do with that. You talked to him in the green room, right . I did. Yes, the fed has been very effective. What did he say . Substitution. You lost in this quarter youll get in the next quarter. All of a sudden his just his smile. Its like job security for me. When they say stuff like that, someone needs to explain it. Wow. No, they dont. Please dont. Please dont. Please dont. Right afterwards. I didnt follow that point. Why, jim, would you and how many how many viewers at home have a little smile on their face, steve . This smile zero i hear from them, they send me emails. Were going to come back. A boomer can be a Navy Ballistic missile, or david wells, the former boomer . Yeah, we dont know what fisher meant. He said koala he probably meant speak like the local people. If youve got comments, questions about anything you see here, shoot us an email. You can also follow us, of course, on twitter squawkcnbc is the handle. The predecessors have smashed records bringing in millions for activision. Well preview call of duty ghost, and the upcoming Holiday Season. That and more coming up when squawk returns. Back toome welcome back to squawk box on this monday morning, checking the futures right now. The dow looks like it would open up about 30 points higher. The s p 500 up over three points and the nasdaq would open up close to ten points higher. Bids for blackberry, they are due today. If youre playing at home, you can well, not going to be that much. Get some credit cards together and buy the thing. A tentative bid from fairfax financial to take the device maker private, it would be for 4. 7 billion. Also scheduled to be firmed up. Other parties said to be vying for blackberry, lenovo is involved. And blackberrys cofounders also potentially putting in a bid. We are back with our guest host this morning, st. Louis fed president jim bullard. And, jim, both joe and steve already asked you, whats the month you start tapering. Let me ask it differently. Because after september, we all figured if you didnt do it then youre going to have a hard Time Starting before at least march or april. Thats where the fed futures are now, april, as a starting date. And the reasons behind that, youve still got washington is a mess. Theyre going back to the same negotiations that began in january and february and if that was a big reason for not going it last time around, would you want to start tapering before you you have any solution in washington . Yeah, thats a good question. I think we cant really wait for the political situation in washington to be just right because, you know, evidently, theyre going to be bickering forever here. So i think you dont want to put too much too much in that particular pot, i think. All right. Let me ask you this. And i know youre not speaking on behalf of the fomc. But in your opinion, would it be strange for bernanke to have his last official act to be something where he actually cut rates . Would he have to do that by january . Cut rates . I mean to begin the tapering. Yeah, to begin the taper if it were his last act, would that be strange if it were yellens first act, would that be strange either . I dont think the committee put much weight on anything like that. Its a continuous process. And, you know, and its a committee thats making the policy. And they want to adjust at the right time. And i dont think it would be any problem. You dont feel any pressure . Has that issue ever come up either directly meaning people are like physically talk about it in the room . Or is it sort of is there a little bit of a cloud . Or people in back channel where they say, well, bens going to be leaving soon. He wants to get this show on the road. You know, whats the no, i dont really its not really like that. I think the committees trying to get to the right policy. Theres always issues around Monetary Policy. We only have certain meetings every twice a quarter that we can make decisions. So we use our meetings as well as we can. I think if you start bringing in stuff like this, then, you know, you take all your meetings off the table, you cant make any decisions. Theres no reason to think theres going to be the same issue in three months. I think everybodys calmed down a little bit. But lets say the worstcase scenario happened, what are the chances the fed could go up . Zero . Well, if youve got a very bad situation and the committee would have to think hard about what we want to do next. But i do think qe has been effective and we could do more. I dont think thats likely but i certainly would not take it off the table. Less than 20 . Nobody knows with these guys. Right. We could. I thought you were going to say no way. What happened . On the taper . Yes. What happened back then . It was a close call. I think it was a close call. The data came in more mixed than we anticipated. We told the story in june that the economy would be stronger in the second half of the year. And as of the time of the september meeting, we didnt really have very much evidence that the economy was stronger. And so and i think for me, especially, inflations been low. We dont have to be in any hurry. You said cumulative why dont we get more data and go on from there . You just were selling us on the substantial cumulative, positive effects and its only gotten worse since the shutdown. But for me, you dont have to be in a hurry because of low inflation. I feel like im more confused than i was before you started talking. Before you started talking, i was convinced succeeding. And youre yeah, its probably successful from what the fomc would like the market to not really know whats coming next, right . No, i dont think thats true. When you can show how things how we react to variables in the economy. The truth is, weve never been able to get to that. Its too experimental of a policy. We dont have enough experience to get to that point. And we have not been able to get to it. And theres a lot of controversy, a lot of intellectual cross currents about the program. Thats where we are. And we do the best from there. What happened in september was the market thought it was starting to understand the fed more. The fomc more. That it would understand about when things would be more li likely. The market was surprised. Do you worry that the fomc has lost some Market Street cred . I think we enhance the credibility because we show were reacting to data. We said it was a datadependent policy and turned out to be a data dependent policy. I think weve got that part right. The other thing going on in september is the tenyear had gone up to close to 300 basis points. I think that was a surprise to many on the committee. Its since pulled back some from there. That was a big issue. Do you guys weve got to take a quick break. When we come back the street cred issue and i wonder if you sit around talking about this issue. If we kind of give our finger to the market, then we get a little bit of extra points ultimately. And how much of that conversation takes place of what the markets going to think versus what the public thinks, versus how its going to move things. We can talk more about that later. Fortunately, jim is with us for the rest of the program. Were also going to talk about the soldier in all of us, at least thats what activision is hoping when it releases the new call of duty ghost tomorrow. Well find out if they should be in your portfolio. Right now, taking a look at the futures, green arrows this morning, dow futures up by about 30 points, s p up about three points. 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. 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You just need the right professional to help you take charge. Welcome welcome back to squawk box this morning. The u. S. Wants a major set of divestitures at large u. S. Airports if its to approve the proposed merger between American Airlines and u. S. Airways. Thats according to reuters which says the discussions are centering in key airports like washingtons Ronald Reagan airport. That trial set for a couple of weeks from now. Delta and jetblue, the first two to apply new rules about the use of electronic devices. So excited about this. You can now use those devices from gate to gate without turning them off. Its a grin. The exception, mobile phones and devices that connect to mobile networks, those must be put in airplane mode. Im still trying to understand how theyre going to enforce that policy. And scifi movie, enders game topped the Weekend Box Office taking in 20 million in north american ticket sales. They pushed last weeks winner, bad grandpa into second place. Becky . 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Because what you dont know, can hurt you. Urance. What if you didnt know that posting your travel plans online may attract burglars . [woman] off to hawaii what if you didnt know that as the price of gold rises, so should the coverage on your jewelry . [prospector] ahh what if you didnt know that kitty litter can help you out of a slippery situation . The more you know, the better you can plan for whats ahead. Talk to farmers and get smarter about your insurance. We are farmers bum pa dum, bum bum bum bum brian, youre a failure. Brian, youre a failure. I beat you. And i will im told theres some something you do in call of duty, different than the tea bagging that theres something you do what, you kill someone and show them. I cant believe you just went there. Okay. There is something in call of duty that you do that has nothing to do with highly anticipated call of duty, a new version of battlefield on store shelves already. Talk games stocks with the senior analyst. On jeopardy the other night, my son got the most the hardest one, a. C. Is coming out too, assassins creed, do you know that one . Of course. Its number four and its actually more like number six. Is that this week . Its same day well, actually came out last week, its probably about a 10 million unit seller, about half as big as call of duty and 2 3 as big as battlefield. Its a stupid question i asked you if you knew about it. But yeah, it was the hardest on jeopardy. Youre not that excited about atvi, ea, i understand, its up so much. Its up 100 . But activision with call of duty, why would this not be a time to buy that given that call of duty in the past has had such huge numbers. We havent had a transition like this in the past. Weve got two big consoles launching at high prices, the play station 4, and i think the wallet drain is going to be huge, because neither microsoft nor sony want to give an inch to the other. They battled it out in north america the last cycle. I think theyre both going after the early adopters. The same guys who buy call of duty, and theyre about to be 500 poorer after they buy their console. I think its got to hit activision at the margin, ea at the margin. I think its a good time to wait. Youd buy ae, though, before atvi . I think ea has a much clearer path to revenue growth. Activision has three giant franchises that drive huge margins but each vulnerable to competition. And i think were going to she that this christmas. Whether battlefield cuts into the lead, Disney Infinity cuts into sky landers lead. Theres room there for activision to fall off the perch. I dont think itll happen, but i think investors will be skeptical until they see it proven, activision is healthy in the screen. Ive been hearing about the new boxes too. So youve got to buy all new video games for play station 4 . Yeah. They arent back ward compatible. So yeah, yo uv got to buy the new version. Wow. And same with the other. And you would buy game stop now, as well . Yeah, game stops tripled. I think people are still underestimating how much earnings power. The stock trades at about seven or eight multiple, i think another 7 or 8 to go on the stock. And youre not the most modest guy, but you know abo about more about twitter than anyone else on the entire sell side industry. I certainly have more followers. Excellent. So we did a poll and our viewers are not that excited about the ipo, i guess. And that you think that twitter is probably a pretty good story versus facebook, right . I do. Twitters kind of the opposite of facebook, dominates among younger people and hardly used at all among older people. I think it just takes time and takes savvy Media Outlets like cnbc to start promoting their talent. I mean, you guys, most of you guys dont have followers as me, thats crazy. Ive got 36,000 followers, and i dont think anybody knows who i am. Why dont you guys all have 1 million followers . You will. Give it time. Once your outlet how did you get 36,000 . I think its my good looks. No, really, what did you do, michael . I get on tv a lot and i actually use the social media site to promote me as a brand. It works. Wow. What about facebook at this point . There are concerns about i mean, its 113 billion market cap, i think. 122 billion right now and its losing cache, you would say . I dont think so. The people who arent using facebook as much are young teens. They see everybody they know every day. They go to school with all of them, their entire universe lives within five miles of them. They dont have any real reason to be on facebook and dont appreciate the utility of facebook. We older people, i mean 18 and up, start to move away from home, our friends arent right at our fingertips, dont see them every day, we dont have their phone numbers, cant text them. Facebooks a great way to reconnect. You gain an appreciation for facebook when youre older, i think the same thing will happen with twitter. Well start using it. Who was the winner of that competition, michael . Its like saying who wins between ebay and google. Twitter is essentially a news site. And you track realtime news. You also can have a relationship with a celebrity who you dont know because many celebrities actually respond to twitter followers. Facebook is a place where you find your friends. There are completely different purposes so both of them are going to win. What about the effectiveness of the advertising on the platforms . Facebook far more effective right now, twitter only has three ways to advertise. Itll take a while before twitter actually figures out how to mine all the data that they have. I think theyre in the first inning. They havent begun to try. Okay. Zynga youd buy . Hes a little more shy than i expected him to be and hes not making bold pronouncements. Thank you. Thank you, appreciate it. See you later. Still to come this morning, we have much more from jim bullard. In the next hour, well be joined by haley barbour. Hell help us rise above the politics in d. C. Can a budget deal be reached . Well ask him that question and what washington needs to do to win us back. I dont always watch cnbc, but when i do, i prefer stocks to watch in the animal orchestra. Keep watching, my friends. So i c an reach ally bank 24 7, but there are no branches . 24 7. Im sorry, im just really reluctant to try new things. Really . Whats wrong with trying new things . Look mommys new vacuum cat screech you feel that in your muscles . I do. Drink water. Its a long story. Well, not having branches lets us give you great rates and service. Id like that. A new way to bank. A better way to save. Ally bank. Your money needs an ally. Customer erin swenson ordebut they didnt fit. Line customers not happy, im not happy. Sales go down, im not happy. Merch comes back, im not happy. Use ups. They make returns easy. Unhappy customer becomes happy customer. Then, repeat customer. Easy returns, im happy. Repeat customers, im happy. Sales go up, im happy. I ordered another pair. Im happy. both im happy. Im happy. Happy. Happy. Happy. Happy. Happy happy. I love logistics. Cani i can never get her to now shes going to perform this. Yeah. I told you about that two months ago. And you wouldnt listen to i get them i get the early call. I get the early call from sirius xm, i forget the name. Time warner cable upgraded. The firm believes fundamentals are bottoming, and now sees a tieup between charter and twc as more likely than not. Is that going to happen . I dont know. Time warner cable gets taken out. They do, but you saw last week they lost 300,000 subscribers. Its going to get worse. Thats another problem. But i think what happened with the cbs thing is a real thing. Especially, in new york city specifically. Theyre not losing another market. Its another market. The wall street had little column about and the big story was despicable me, 900 million i said theres the difference. This is comcast. You need a lot of hits to make that work. 900 million . From 78 million . Right. But you have to have that repeatedly. Cant be a onetime event. Gap downgraded to neutral from buy at Goldman Sachs, target cut to 40 from 42. Kohls upgraded to buy from neutral. What do you think . Ubs . Sure. The firm notes confidence in the turn around strategy. Target goes to 69 from 54. Then a. K. And stld, Steel Dynamics upgraded. The Goldman Sachs is moving its steel sector coverage view to neutral from cautious. It sees the sector heading to a sustainable recovery over the coming years and argues its risks associated with oversupply appear to be largely priced in. Although the company did downgrade reliance to neutral from buy. But went up on the other ones. Okay. Welcome you for a monday. When we return, were going to wrap things up with st. Louis fed president james bullard. Mr. Kernan will keep singing during the break, as well. Squawk box returning right off this. Coming up at the top of the hour, former mississippi Governor Haley barbour will join us to talk health care. The debt battle in congress and a lot more. Plus, plenty more to come from our guest host st. Louis fed president jim bullard. Keep watching squawk box on cnbc. First in business worldwide. Does it end after youve expanded your business . After your companys gone public . And the capitals been invested . Or when your companys bought another . Is it over after youve given back . You never stop achieving. Thats why, at barclays, our ambition is to always realize yours. In a we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. 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. Welcome back to welcome back to squawk box, we are back with jim bullard. We havent really talked to you about janet yellen too much yet. Not mentioned. We havent mentioned her name. I want to understand the dynamic of how you think a meeting is going to change under her leadership. I have a good answer to this. Yep. Very little. Very little . Shes been an insider. Thats the biggest thing about janet. Shes been at the table the whole time. She was my counterpart at the San Francisco fed for quite a while. Shes been vice chair of the board. She was on the board. She has a lot of fed experience. Shes been in the middle of designing policy. I would not expect a lot to change. Theres a lot of continuity. I guess from that perspective, having someone inside the fomc, whether you agree with them or not is preferable to having someone from the outside. Yeah, i think for an outsider right now, itd be a hard time to come into Monetary Policy. Instead of just having the policy rate, its become, you know, all these different things, all these different considerations. I think it would be very hard for someone from the outside. And you have no problem voting against her . Well, i havecember dissentede past and reserve the right to do so in the future. Shes been one of the most outspoken advocates for transparency at the fed, i think. Yes, she has. She designed the Current Communications strategy. She was head of the communications committee. And so shes done a lot of work on that. And do you think that has do you think thats been a positive . A negative . Do you think its brought more volatility to the markets and to your own decisions . Do you think it has helped, hurt . Well, first of all, it was a necessity. This policy is so complicated than what we did in the past that you could not go on being opaque, i think. That was one part of it. And i think we have made a lot of improvements, one of chairman bernankes goals was to find ways to be more transparent and get better communication with i think we have done that. Let me ask you a different question. We talked about this during the break. I said when you come on the show, you seem open but at some level, a little bit guarded, as do most fed governors that come on this program. Now that your meetings are recorded, inside the room theres actually both the minutes and then transcripts of what goes out. Yep. How open is the actual dialogue recognizing that effectively at some level youre also on tv . Well, theres a great story behind that because at one time in the early 90s, the committee did not know that meetings were being recorded. And greenspan, former chairman Alan Greenspan took a lot of heat from the committee when they found out how did they find out . I forgot exactly how this came up but there was an inquiry from congress and they had to admit that things were being recorded. That sounds thats when they came up with the policy about five years fiveyear transcripts. But it did change the character of the meeting. I was staff at the time and our president , i know was concerned about this. Does that mean actually reading a statement. And do you do that now . I jot down what im going to say but i adjust what im going to say compared to does that mean that the real action is going on behind the scenes . Meaning youre back channeling, on the phone with each other because you know these meetings are televised events . You know, we do see each other on many different occasions and but its too large of committee to do everything through phone calls. Youve got 19 people, and actually, ive tried to do it a few times, call around to everybody. It takes a long time. Its not that easy, actually, to have a lot of coordination. So the meetings really are meetings and theyre important and thats when you really get to hear what everybody thinks. One other quick one on yellen. People have said over and over again that ben bernanke was the perfect person to have in the midst of a financial crisis given his history, given what hed studied, the whole package. And that was an argument at some level for larry summers. Do you think if we hit another iceberg she will be as competent if not more so than either of those gentlemen . I think shes very competent. Plenty of background in the fed and her experience has been tempered, both on the Monetary Policy side, on the bubbles issue. Shes been through two of those. On regulatory issues, shes been in the middle of that. So shes very well prepared for this. Good resume for this. Theres things like this happening, right . I think this is the number one piece of Macro Economic news weve received in the last few weeks here. Very low inflation. In europe, you guys might know, i was in europe in the spring, and i gave some speeches over there. I was trying to get them to pay more attention to the low inflation rate and think about extraordinary policy actions they might take. The ecb has not been one to do qe or to do forward guidance. And its only recently that theyve come around. So this will be an important juncture for them. I was just seeing, youve got that and lets say china i dont know, things, maybe theyre not growing as fast as we think they are. Lets say the Deflationary Forces start to increase again so that you like being able to continue qe without worrying about inflation. But if we never get if we go years where if you wanted to, you have cover to stick with qe. Because inflation stays low. Would you stick with it . Sounds like youre saying, you know, as long as we dont have to worry, why not do it . Why not get some of the benefits, even if its questionable as long as inflation is low. What if it stays low for another two or three years . Well, a couple of years would be a long time. And i think were in an experimental policy and were still experimental. Youd have to make a judgment at that point about what you want to do. I think were okay for right now. I dont want to go too far into the woods here. Okay. If you wouldnt just continue qe to try if inflation didnt respond by moving higher. That wouldnt be a reason to continue qe. If things get better in the jobs market and the economy, then youll end it because of that . Well, if youre going to end it with inflation low, you have to ask yourself how are you going to hit the inflation target . Well, you might not end it if inflation stayed low . Well, how are you going to hit the inflation target . Do you want zero inflation . Do you want minus one . You could see a position where the jobs numbers start to respond . Japan kept Interest Rates low for 15 years. Keeping Interest Rates low and doing 85 billion a month, you could keep talking about how long you keep i think you should think about qe more as a normal policy when the policy rate is at zero. Its a very reasonable thing to do to substitute for the fact that you cant lower Interest Rates any further. Its reasonable to do bond purchases. This makes a lot of sense. Very conventional Monetary Policy. If youre at zero. 85 is a torrid pace. I will give you that. And 1 trillion a year is a torrid pace. And id rather get out of it if we can. But id like to meet our goals. Wow. Would you if the Housing Market started to turn around, would you shift away from mortgage back securities and focus it somewhere else . Yeah, i think theres been a lot of talk in Financial Markets about whether if we tapered whether it would be on the mortgage backs or on the treasuries. For myself, i think just keep it simple and do both at the same time and not try to be tricky about that. Do you think the guys that really hyperbolic guys when you put in a Government Program crisis, you never get out of it and itll be forever. And i made it the metaphor that instead of priming the pump now its just gasoline for our economy. What are you worried about . Keep filling the tank. What are you worried about qe . Is there a limit to its inflation. Youre worried about were going to set off a 70s type inflation. But its not coming. But if you wait the camp, including my own staff, has to think about, you know, has to reexamine some theorys here. I mean, are you just going to keep saying this big inflation is out there in the future . Five years in the future . Or are you going to adjust a little bit compared to the evidence . I would have thought by the time we got to this point with this big of a qe program, i would have thought that were running pretty high inflation and id be coming on here, you know, trying to be trying to but that isnt what has happened. Everybodys got to reexamine their theorys a little bit about whats going on here. The question is whether you see it in time. Thats going to be the trick. Yes. And the issue for the fomc has often been behind the curve, not soon enough. Right. Very cognizant of that. Were going to have a lot more still ahead this morning. When we come back, former mississippi Governor Haley barbour, well talk to him about whats happening in washington. By the way, check out the futures right now, dow futures indicated up by 45. They have picked up a little bit of steam this morning. Squawk will be right back. My mantra . Family first. But with less energy, moodiness, and a low sex drive, i saw my doctor. A blood test showed it was low testosterone, not age. We talked about axiron. The only underarm low t treatment that 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. 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One hour with jim bullard. Your money, your vote, tomorrow is election day, but today marks one year until the midterm elections. Were going to tell you what to expect from tomorrows races and whos on the hot seat in 2013. Haley barbour will join us to talk politics, health care and a lot more. It is monday, november 4th, 2013, and the third hour of squawk box begins right now. Welcome back to squawk box. Here on cnbc, first in business worldwide, im joe kernan. Our guest host this morning jim bullard, many from president bullard sounds pretty good. Doesnt it . Thank you, man. Yeah, youre welcome. First, though, becky has your morning headlines. S. A. C. Capital is expected to complete its deal with government prosecutors today. The firm will settle charges with the guilty plea to securities fraud and a 1. 8 billion fee if you include the 616 million theyve already paid to the sec. As part of the plea, s. A. C. Will lose the Investment Adviser administration with the sec. Kate kelly has been following the story and will join us later in the hour. Unbelievable story. Its the end of a soap opera and maybe a continuing soap opera. Also, a number of events of note, tomorrow, we get the release of this years most anticipated video game. Thats going to be hitting the stores. Its the latest installment of the call of duty series which has sold over 100 million copies. Twitter expected to price 70 million shares for as much as 20 each. Theyll probably go on sale the next morning. On thursday, though, theres also an ecb Rate Decision and Third Quarter gdp. Were going to be getting that. And on friday, the delayed government jobs report for october and we will see what the Government Shutdown has meant to the employment or unemployment picture. Also, election day coming up tomorrow and with no federal races for the house or senate on the ballot, the virginia and new jersey gubernatorial races have stolen the spotlight as well as the contest for mayor of new york city. Continues to lead, rather, cuccinelli in the polls and Chris Christie expected to win reelection over democratic challenger barbara buono. And today, also marks one year is that true . One year until the 2014 midterm elections. Some key state races to watch. Here we go, weve got Senate Majority leader mitch mcconnell. Hes going to be facing a tough challenge in kentucky from Tea Party Challenger matt bevan. And Lindsey Graham also expected to be challenged by one or more Tea Party Candidates in the primary. Alaska democrat may have to defend his seat against joe miller as the Tea Party Candidate who won the republican primary in the last election but lost to a writein campaign for lisa murkowski. Also North Carolina democrat kay hagan. Won her first term in 2011 but likely to face a tougher challenger. Were going to get a quick check on the markets, take a look at whats going on. Dow would open up about 44 points higher, s p up four points and nasdaq up over 12 points. Obama care to the ongoing budget battle, the chaos on capitol hill continues. Joining us to talk about these stories and more is haley barbour. Hes also Founding Partner of bgr group. And governor, its great to have you here today. Thank you, becky, glad to be back. What do you think, you shake your head, scratch your head . Well, for governors who get paid to do things, you know, it really is concerning that washingtons just constipated. Theres nothing else you can say about it. The president doesnt lead, the republicans, i thought, really did themselves a lot of damage. The democrats are not interested in working together. I mean, theres nothing to recommend it right now, except for republicans, the real shame of it was for three weeks, we kept obama care off the headlines. Thats what baffles me. You have leaders of the Tea Party Movement that dont see eye to eye with the traditional establishment of the Republican Party. How does that get resolved . Well, ill tell you a little bit of a tweak on that. They dont disagree on policy. If you take the average regular republican take 20 issues, theyll be the same on 18, 19 issues, on taxes, spending, deficit, debt, health care, energy. Its been over tactics. These fights have been over tactics and strategy and what irks me is to see groups like the Senate Conservative fund attack conservative republican senators, not over their policy votes but because they disagreed with them on political tactics. Now, theres no place for this, you know, purity in politics is the enemy of victory. And what we want is what you said a while ago. Republicans want to take over the senate so wed have the house and after next year the senate, we have to win six seats. Weve got at least seven good shots. And for our guys and people like cruz to want to start big fights over tactics is a setback. Lets focus on policy where people see the difference between us and obama. Who leads the party to that conclusion, though . There hasnt been someone who has been able to. I think governors do. If you look at governor and is their records of success, whether its scott walker, john kasich, rick perry from texas had a fantastic run. And thats where we are actually in control. When youve got one house of congress and the other partys got the other house and the president and youve got a president who doesnt want to work with you then you look to those governor. Huge victory in new jersey, democratic state, why . Because hes done a good job. Thats what people want. How do you get governors from both sides of the aisle working with people in washington. I mean, the question weve been asking at cnbc is how do you win us back . Because right now, the average American Voter doesnt have a whole lot of confidence in washington. How do you actually up into that . Well, first of all, get the governor i was a governor for eight years and we had a Good Relationship with our congressional delegation and with the whole congress, particularly after katrina, when there was something going on and we needed help and it had to be it was a unique disaster unprecedented disaster and we needed unprecedented support. Weve got a lot of democrats who helped us. Barney frank, a little bit more liberal than i am. Barney frank wrote a letter to every democrat in the house and said, please support governor barbours plan. Now, thats the way it ought to be in times that are serious. And the fiscal crisis in our country is serious. And we ought to be trying to work together. But governors can help that because theyre used to leading. And youre right. There are a lot of democrat governors who are who want to do the same thing. They balance the budget every year. They dont go four years without a budget. Thats just unheard of in state governments. So we want to push more of what were doing in the states up to washington as an example. Barney frank is no longer in congress. Who do you look at from the other side of the aisle. Of the governor who will work to get things done from the other side of the aisle . Its very hard. And one of the reasons is the difference in attitude of the obama administration. I mean, we have a president the president has to lead. Congress cant lead. You can get help from congressmen like congressman frank who helped us in our time of crisis. But the president has to lead. And on the democratic side, hes not showing any leadership that gives any democrat member the idea that what they ought to be doing is trying to work with the republicans. Then do you write off the next three years as it cant happen in washington . I dont think you can write it off. I think its good theyve got this Conference Committee thats going to try to work out a budget deal. Im not overly optimistic because the president says means 1 trillion in new taxes. The republicans say a budget deal should mean more economic growth. They also say no new taxes. Well, they say well produce much more revenue but not by raising rates. And history bears that out. But theyre so far apart, the only way they can get there is if the president does like reagan does or did or did like clinton did. And both of them were ready to lead and to try to work out compromises that were good for the country rather than worrying about politics. They were both governors. Former governors. This guy is not a governor. Well, Community Organizer is not a good Training Ground to be president. No private sector, not a governor. Good luck. You said it, we cant write off the next three years but youre writing off the next three years. Im not. Might as well. I think republicans are going to do very well in 14 election despite the Government Shutdown. Well, president s at 40 this morning. 40 , down from 42, down from 51. That didnt help anyone in this latest shutdown. Thats right. And look, i remember 95, 96 when we were blamed more for the Government Shutdown. We came back, we went 99 as many seats in 96 as we did in the greatest republican victory of three generations. In 1994, we won 227 versus 230. I think well do very well in 14. And thats the real important election right now. 16 will take care of itself, right now we need to focus on 14. Who is the person who is the leader of the Republican Party . Is it john boehner right now . Mccain, romney . Who do you look to as the voice . You know, when i was chairman of the party, Newt Gingrich and bob dole. Two very different people with very different ideas. I was the chairman, i certainly wasnt the leader of the Republican Party. But when youre out of power, there isnt one leader. Were going to have a very large field for president in 16. Going to be a lot of capable people. But not one of them today you would say thats the leader of the Republican Party. Tomorrow, i think what youre going to see, christie wins, i think in virginia mccollough in the polls. Great lesson for conservatives, heres a libertarian going to take enough but its kind of a flawed candidate that should have been much easier for the republican candidate. And if the last guy hadnt gone out with such a, you know, with all the scandal and everything else, it would have been a lot easier for cuccinelli. All true, but the democrats cant get a majority in virginia. And by conservatives splitting up, we elect democrats. Thats tea party where do you come down on christie as a president ial candidate . I dont know if you read excerpts of this double down. But theres a dossier put together with some pretty nasty stuff about him, which is one of the reasons it sounded like mitt romney ultimately chose not to put him on his ticket. Well, i havent read the book let me say that to start with. I dont think its for sale yet. Its for sale tomorrow. I havent read it. Christies been very successful in a blue state. He is not liberal. Hes conservative. Hes more conservative than romney but hes not as conservative as haley barbour, thats for sure. I think how he does for the next two or three years, hes going to be chairman of republican governors. Does he how we make republican governors set the agenda for the country rather than get bogged down in washington. Thatll be a test for him. I think the guy has got real potential and huge advantage for him to be in the new york media market. He has seen so much more than the governor of, you know, louisiana, or the governor of wisconsin. And well just see. Hes clearly in the field as a serious, serious candidate and he should be. Its weird, andrew, some of the stuff thats in the book he was vetted before he became governor. I mean as some of the stuff theyre talking about. How can we go back to that and say look at what happened here . I dont know. As you know, i really like Chris Christie, and what i dont understand about that is the people reading that dossier. Went to his friends . Came to the conclusion that in the book from what ive seen of the excerpts, it says not only didnt they want him on the ticket because of it but they said actually they thought if the stuff came out publicly he wouldnt be able to run for governor again. Thats how bad they thought it was. Most of it was i didnt think it was most of it was the last couple of weeks when the president came back and christie hung out with him. And the other part was when he gave the keynote speech and didnt mention romneys name. It wouldnt have helped anyway. He might as well. It wasnt going to work. He basically gave his own speech. Those are the two things that p. O. ed the romney camp. I didnt understand. And their staffs too. And i think maybe i didnt know christies staff as well, but the romney staff. Bringing up romney, though, does force me to mention that the democratic candidate of virginia, ive known for years and years, his Campaign Strategy has been exactly obamas. Hes not run on why terry ought to be governor. Hes run on whats wrong with cuccinelli. He was out spending ten to one and 3 4 of his advertisements were negative. Thats become the democrat theme. Dont expect me to run on my record, but boy, this other guys terrible. Right. Right. Governor, i want to thank you very much for coming in today. Thank you, becky. Thats Governor Haley barbour. Yeah. I dont know. Whos going to win . Alabama again, right . The trifecta looks to be like. And now Florida States number three now. Anyway. More coming up from our guest host. I was harkening back to our off camera conversation. It should be outlawed. Too much better than everyone else. Why bother with the games . Jim bullard, more from him, and then at 8 30, hudson bay Ceo Richard Baker will join us. First on cnbc. His company completing the acquisition today. Check out the squawk box market indicator. 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. Welcome back to squawk box, everyone. Welcome back to squawk box, everyone. We do have some earnings news and job cut news from cereal maker kelloggs, cutting the workforce by 7 . Part of a cost savings program. Also reported quarterly profit of 95 cents a share. That beat the streets expectations by 6 cents. Up by less than a percent in the premarket. And sisco, the one with an s, not the c. Reported a penny above estimates, the market environment was challenging for the customers during the course of the quarter. I find that so confusing. Someone should change. All right. Lets lets make it easier. Lets get back to our guest host jim bullard. Were we done with our inflation conversation . People got kind of a lot of people are tweeting about it and talking about that now. Have you always have you changed recently and become even this is almost like a new theory that you have at this point, i think. Dont we always think its different this time . I mean, volcker had to come in and save this, uyou know, save the entire world because we let it get out of control last time. Im talking about inflation. I think it could happen again and i have been worried about it. Yeah, absolutely. Theres global Deflationary Forces that have given you guys cover. Yes, global Deflationary Forces. What is going on . Whats driving that deflationary process. I think thats been what low inflationary. Cheap labor . Globalization. Greenspan would say all these workers coming on from emerging markets which is a good story. Bernanke says its driving real Interest Rates low. You made the case for qe almost becoming a Permanent Program if inflation were to stay low for two or three or four years. I think its a reasonable way to operate when the policy rate is at zero. As long as youre stuck so that the criticism used to be if the fed got to zero, its pushing on a string, it can no longer do anything. You came up with a different way to do it with bond buying. There is more to do and were doing it right now. Yes. And the only the only way that you would ever see that come back to haunt you is through inflation. As long as inflation stays low, nothing else can go wrong. One other way, asset bubbles and bubbles are a serious concern and no one can ever pick one out, jim. No one can ever see it when its inflating. I dont agree with that. Tech bubble was blindingly obvious and the housing bubble also blindingly obvious. How should the fed react to those very huge bubbles. I dont see anything of that magnitude going on right now. I made that comment elsewhere and people have come back to me saying they do see big bubble. But i dont see anything of the magnitude of the housing bubble or the tech bubble right now. Ive got to jump in for one second because we have news on blackberry. We had news on how the stock looked like it was dropping. Now reporting that Blackberry Limited is abandoning the plan to find a buyer and will instead raise 1 billion of new funds and replace the chief executive and some directors. Thats according to sources to that newspaper. The Smartphone Company had spent the last 2 1 2 months seeking a buyer, received a letter of intent from investors, Fairfax Financial Holdings to purchase the company for 4. 7 billion. Fairfax had until today to complete its detailed expectation of blackberrys books. Lenovo was potentially there, partnering up with qualcomm. At least that was the talk this weekend. But now, apparently to this report, blackberry off the table. That stock down. See if you can send me a text right now. Yeah. Your phone will still work, at least for now, but ill tell you without a partner. Youve got to think to yourself, what is the plan. And i imagine whats happened is none of the bids or at least indications or signals have come in. People wonder all the time if this was for real if there was a real deal behind this. Whether anybody would buy the thing. Off the table, makes you wonder yeah, nothing was really there, not that they decided to let me temper this by suggesting this is according to unnamed sources. We do not have this confirmed yet here at cnbc. Do we know hes definitely gone . If hes not there, who is . And he just you know, life is moving pretty quick. I want to make sure it doesnt pass you by. There was criticism, this isnt the guy that was going to be able that was less he didnt do much when he came in. We have questions ourselves. And now hes gone. It was thurston howell, but this was torstin hines. An unbelievable turn in all of this. Well dig into it and find and the other question is, their new plan involves raising 1 billion by selling convertible notes to investors. We dont know who those investors will be. Says he will depart the company, and the company will announce changes to its board. Wow. Wow, wow, wow. This is all according to the globe and according to sources, a big headline on their website. And hines is out. So we will bring you more and we will also have go ahead. How about a bond market bubble. Lets say the stock market isnt a bubble. Yeah. Thats a good leading candidate. The tenyear at 140 basis points or 160 basis points seemed incredibly low. And so there, i think, you can make a case. But now the yields have come up some, so right. But what about the worry that eventually if the feds not there to buy a paper, there really is no other buyer. And what happens in a market like that . Couldnt you thats the big worry about the fed losing control, isnt it . If theres a complete vacuum and youre not buying and nobody else is there, then we could go up to what. Yeah, i think we certainly do not want to be in the position to be supporting fiscal recklessness and congress and through the political process. And i dont think that anyone on the committee wants to be supporting that kind of activity. But how much how much of the u. S. Treasury supply is the fed buying right now . The fraction of the outstanding treasuries held by the Federal Reserve is not as high as it was, lets say in the 1970s. Its actually not as high as you might think. Its actually kind of close to the average level that weve held. Now, you could say, well, thats because a lot of treasuries have been issued, which is true, but were not buying, we dont hold particularly the large fraction compared to what weve held in the post war era. So the people that are really worried, the people that worry about currencies in general and the only way since were off the Gold Standard, the only way to keep the dollar strong is that the fed has to be sort of cognizant of their duty. And their overriding duty. Thats not a concern. You see that as long as inflation thats what as long as thats what inflation targeting is about. Is you get you probably cant go back to the Gold Standard. But the modern incarnation of the Gold Standard is to say were going to target inflation, were going to tell people what were trying to do and be held accountable for it. Youre supposed to hit the inflation number that you choose. Is there any way the global Deflationary Forces are sort of masking that were making a mistake here. That youre able to do it because these are external things that are allowing inflation to stay low but were really building up some kind of something will blow up on us later. Yeah. You think its a risk were taking. I think thats a risk were taking. Theres the dislocations of the market the markets not getting cleared like it normally would by price discovery. Yeah, maybe. All right. Well i wouldnt like to be you. You know what youre doing. Well come back and talk. Well ask you about this. Plenty more to come throughout the hour. Plus, more on the blackberry news. The Company Reportedly abandoning its sales plan and replacing ceo hines with who . I dont know. Well find out. And i just tried calling blackberry and if you try to call the Company Directory says no one there at this point. But that may be because hes the ceo and they never wanted it there. [ male announcer ] what if a Small Company became big business overnight . Like, really big. Then expanded . Or their new product tanked . Or not . What if they embrace new technology instead . Imagine a companys future with the future of trading. Company profile. A Research Tool on thinkorswim. From td ameritrade. Customer erin swenson ordered shoes from us online but they didnt fit. Customers not happy, im not happy. Sales go down, im not happy. Merch comes back, im not happy. Use ups. They make returns easy. Unhappy customer becomes happy customer. Then, repeat customer. Easy returns, im happy. Repeat customers, im happy. Sales go up, im happy. I ordered another pair. Im happy. both im happy. Im happy. Happy. Happy. Happy. Happy. Happy happy. I love logistics. Welcome welcome back, everybody, lets get to one of this mornings top stories. The s. A. C. Settlement expected to be finalized today. And kate, this is a biggy. Reporter this is a biggy, becky. Certainly the probe has been going on for years, the indictment happened in july and weve been expecting a settlement. But today were likely to see it. Im told the documents are generally all but signed right now. And were just waiting for a more official announcement as to whats here. Well probably be hearing from the u. S. Attorney for the Southern District some time today. Dont know exactly when. But the key issues in the settlement are for starters a fine that totals 1. 8 billion, this, of course, factors in an earlier 600 million settlement on related charges, but the 1. 8 will be the headline number. This is a record for an insider trader penalty as well as a high number for the sdny and the Justice Department. Also, s. A. C. Will plead guilty to at least one count of securities fraud. Details still to be determined. But im told while they wont plead guilty to essentially promoting a scheme of Insider Trading which was part of the original corporate indictment, they will plead guilty to fraudulent market activity among other details. Well be looking for that, as well. Whats going to happen today . The documents will be made public, well be looking for they any time now. Well probably hear publicly from both sides at one point. Perhaps this afternoon. Unlikely to see anybody in court today, although the guilty plea will be sort of physically registered by lawyers for s. A. C. , becky, once a judge signs off on the accord. Kate, thank you very much. When we come back, shares of blackberry are halted. The stock has dropped on the report that the company was abandoning the sale process. We can confirm that now. Well have more on that when we come right back. Plus, hudson bay completing the acquisition of retailer. Joining us next on a first on cnbc interview. Right now, though, take a look at the u. S. Equity futures. This morning, the dow futures up by about 41 points, s p up by four. More on blackberry in a moment. Clients are always learning more 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. 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. Welcome back welcome back to squawk box, we have a big headline. Shares of blackberry now halt, the device maker abandoning the plan to find a buyer. Instead, it is now raising 1 billion of new funds through a convertible note. Also, blackberry will be replacing the ceo and some of the directors. Today was the final day of deadlines for bids. There had been lots of chatter about whether it was going to come in with qualcomm. Fairfax holdings had put a bid in earlier. Some people thought they were trying to set a floor. That floor clearly has failed. They will be part, we should say, of this 1 billion investment through this convertible note. About a quarter of the investments going to come from fairfax. Apparently, other Institutional Investors will take the other part of it. Basically, it means their bluff didnt work. The bluff didnt work, but why you would put more into a bond for a company that seem that seems tough. Seems like desperate times. Its going to be a pretty attractive convertible, ill bet. Its going to have to be, right . Yeah. We should also note that john chen will become the executive chairman of the company. Thats going to be a new person brought to dpsh. Executive chairman. Executive chairman. And as we said earlier, hines is out. Theyre going to do a search for a ceo . It imagine. Thu is now an independent company all over again. It raises all kinds of questions. Jim, we were talking on break, you pointed out that the Federal Reserve has about 10,000 blackberries it uses. Yeah. Youre on the Telecommunications Committee thats been looking at this very issue . Yeah, the Information Technology committee. Yeah. Which is the issue what happens if blackberry no longer yeah, like any organization, weve been trying to put plans in place over the last year and a half while this saga has been running. And so hopefully well have a good reaction. Do you still type with your thumbs . I use i have a blackberry, but its theres no key pad on it. There isnt . No. President obama has a blackberry. I hear he does. Most of the white house uses a blackberry. This is going to be a huge concern for a lot of people across the globe. Im pretty good at dictating now on the iphone. It works. Yeah . Put me in the training. Angela merkel, by the way, uses a samsung. I dont know what that means. More accessible to the nsa, i dont know. So anyway, thats the news of the morning and thats going to be getting a lot of attention today in the markets. Lets talk about hudsons bay, the company is expected to complete the acquisition of retailer later today. Reporter good morning, becky. Im here at saks fifth avenue in new york city with richard baker, the ceo of hudsons bay company. An early congratulations on the deal today. Lets get started off with why saks. How important was real estate as we sit here and sort of the crown jewel of saks . Well, saks was very important and relevant for us and something we worked on really since 2006 for three primary reasons. First, we had an opportunity to grow saks into canada, Hudson Bay Company is the dominant Department Store company in canada and through our infrastructure well be able to open six or seven stores, very robust online saks in canada. So thats a road map to growth that wasnt available to saks previously. Additionally, we have about 100 million a year of synergies between the two companies. These two Companies Share a lot of the same dna and have a lot of the same principles and structure allowing us to really take advantage of the 100 million synergies. Additionally, we now have enough real estate and enough ebitda that would allow us to create a reit which would really give our shareholders an understanding of the tremendous real estate value that we have. So investors would be able to do a sum of the parts, valuation, and see what the operating companys worth. So the ceo of saks for a number of years, hes now no longer going to be the ceo of the company. Well, i think for the customer, saks is going to look just the same way as it always looked except we now have opportunities to be more efficient and opportunities to grow the business in new places. And most importantly, through our reit structure and our capital structure, well have a lot more resources in order to reinvest in the stores. So as weve talked about, the beautiful store were sitting in, the flagship new york fifth avenue store, we will be able to spend 200 million to 250 million to renovate the store. So going into the Holiday Season, its important to discuss the state of the Luxury Consumer or that highend shopper. Do you think its Getting Better . What does it look like . Weve been on a long road to recovery. And i think while its bumpy, the government does what they do, the increased taxes, were seeing improvement every month, every quarter. And im optimistic about this Holiday Season. And im really optimistic about the future, not only for saks and the luxury shopper, but for our mid tier Department Stores and our off price, as well. And you spoke a bit about the expansion into canada, i know its been a big part of the strategy. Is that going to continue . Will you expand that part of the business into canada . Yeah, i think we have a great opportunity with our outlet business. Not only in the u. S. But also in canada. We have a lot of plans were working on and we think its going to continue to be a big part of our Growth Strategy going forward. You touched on a couple of moments of what you think shareholders can expect. Is there anything else as im a shareholder to understand how this acquisition is going to add to that ultimate shareholder value . Well, we really have under our business, four major brands. And with our capital structure, we plan on reinvesting and making each one of those brands as spectacular and special as we can make them. And i think thats going to create to the overall value and success of our Company Going forward. Wonderful. Congratulations on the acquisition closing today. Ceo of hudsons bay company. Becky, joe, andrew, back to you. Great. Coming up, well talk more about the surprise news from blackberry. Plus, much more from our guest host st. Louis fed president jim bullard. And tomorrow our guest host will be chairman and ceo barry sternlicht, well talk energy, politics, more, tomorrow morning at 7 00 a. M. Eastern. Its as simple as this. At bny mellon, our business is investments. 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Welcome back to welcome back to squawk box, the big news in the last 15 minutes, shares of blackberry under a lot of pressure. They will begin trading at 9 00 a. M. Eastern. Lets recap what happened so everybody understands. The final bids were due for that company today. The company, though, no longer up for sale. So its going to go alone on its own. Its going to be receiving 1 billion of investment from fairfax which had put a bid on the company earlier, seems like a fair a failing effort at putting a floor on what the company was worth. But apparently nobody came in and hines is now officially out. Steve . Yeah, i wanted to get back to our guest host jim bullard. Lets talk about your favorite place after st. Louis, which is washington. Two senators talking about the possibility of holding up Janet Yellens nomination. Rand paul for an audit the fed bill. Yeah. And Lindsey Graham for information about benghazi. What do you think of this idea of holding up the fed nomination . Well, its up to the senators how they want to handle this. The vice chairman yellen will go in for her testimony here pretty soon. And i think shell do a good job. Shes always well prepared and well scripted. Do you worry about the fed being a political football in washington in that regard . Well, its not so much the fed, its the appointments process generally, which has been bogged down in recent years. Id like to see a smoother process there. Thats not my job. I dont have any ideas. Speaking of smoother process, can you walk us through what you think it is you think you can hear when it comes to the budget process and the debt ceiling debate that would make you comfortable enough to pull the trigger on a taper. How would this play out in january and february . Well, like i was saying earlier, i think it looks like theyll be bickering in washington for a long time to come. So i dont think that we can afford to wait till the political waters are completely calm before we decide to make a decision. So i kind of hate to put too much emphasis on partisan bickering in washington as sort of a special variable or special situation. You know, if its really out of control, you know, we might pause for jst a minute. But i dont want that to be driving fed policy. But in september, very specifically the economy has to drive the policy, not partisan bickering. Very specifically drove policy in that you were concerned about a shutdown. You were concerned about reaching the debt ceiling. Why would you not be concerned that could happen again in january and february . We did and we were turned out to be right. You know, it turned out to be a shutdown. Like i was saying earlier, i dont think that the mechanical effects of the shutdown are actually that big on the economy because theres just some shifting around. Yeah, like a real default would be worse than inaction. The kids are swimming above niagara fall, makes you nervous. But theyre still going to be swimming there. I know weve got to go. No one thinks of doing default anymore. So were done with that . Yeah. Okay. And sometimes well, its not as bad as default, i guess. Steve, thank you. My pleasure. And well have more still to come. Plus, right after this commercial break, were going to talk to an analyst about the blackberry news and jim cramers getting ready for the trading week ahead. Squawk box will be right back. So you can have a getaway from what you know. So you can be surprised by what you dont. Get two times the points on travel and dining at restaurants from chase sapphire preferred. So you can taste something that wakes up your soul. Chase sapphire preferred so you can. Breaking. Breaking news. Blackberry falling sharply after abandoning a plan to sell itself. We have daniel ernst on the phone. Big disappoint, no . Well, yes for them. Not a huge surprise. What i really want to know, and maybe well never know, did they abandon the plan for the sale or simply never get a real bid . The fairfax bid was never fair. They had a big stake in the company also. I agree the fairfax bid was never real. What i do believe was real is they took this time a serious process to see if they could sell the company. There was a lot of different speculation about who that might be. We knew the majority of u. S. Tech probably wasnt going to be able to do it. I thought the qualcomm idea was somewhere interesting. As an analyst that covers this company now. Now, this is going to be a standalone company. It is going to have to try to be independent. Does it have a feature . What is the future of this company in. Great question. If you look at premarket trading with the stock around 6 30. The market cap is 3. 3 billion. They had 2. 3 billion in cash at the end of the last quarter excluding the new money they are raising. It is not particularly expensive. It is trading at ruffle four times depressed ebitda. Is the new Management Team now that heinz is out really understand what was going on here. Heinz was so convinced they could bring out a new operating system seven years after the ship had sailed. What do you make of john chen coming as executive chairman. He has a really good record. People like him. Does that give you a good hope. If their plan is adoption of 0110, i would say forget about it. People still like the keyboard. People still like the secure network. If they replace os10 with android or microsoft operating system, they could provide a niche business to enterprise and people that like keyboard phones. There is probably a market for that. It is very small i think they could do it. I want to bring jim cramer into this conversation. What do you make of this news . To me, this is just a company in total disarray. Maybe they can raise money. They are burning through money this. Feels a lot like a desperation move lets see at the follow the nokia desperation move, maybe they have something that can be sold to someone. I done think that can last. When you hear dan say the stock is cheap, given the multiple, do you say, sure, it is cheap but cheap for a reason . Well, i this i that, yeah, stocks are not stocks tell the truth all the time. This is a company thats in a tailspin. We all know it is in a tailspin. Yes. It has some intellectual property that is worth something. There were a lot of private equity firms that have looked at this thing. Maybe they have stepped forward now. You cant do a thing. Things that i have heard from sources that when we were reported this out, this was one of those transactions where if you were an lbo firm, there was no l you could put on this. No leverage you could put on a company like this given the dete deterioration of the business. If you believe that, it becomes very limited in terms of who the buyers are. We will a secular decline in dell. Michael dell stepped up. The Balance Sheet was unbelievable. There was something to work with there. The ceo, just out the door. We all know him. He was doing his darn best. It just didnt matter. Dan, let me bring you into this. You heard what jim had to say. Is there any sense in buying the stock according to you. It is cheap for a reason. What im saying is, is there a real strategy here to turn it around. With stock down almost 20 , premarket, there is a potential shortterm opportunity here. It is a bit of gambling. I do think there is a market for hand set to the keyboard, run in, secure network. I this i they have that. They just have the wrong operating system. The question is, can they scale down . Unfortunately, we have to run. Jim, we are going to see you in a couple of minutes. Well be back with jim bullard in just a moment after this quick break. 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Always a pleasure having you here and we hope you are coming back. Thanks so much for having me. Make sure you join us tomorrow. Squawk on the street begins right now. Indeed, what a day for blackberry. Im Carl Quintanilla with jim cramer and david cramer at the new york stock exchange. We have a stunner from blackberry. The smartphone maker abandoning a plan to sell itself but will receive a 1 billion investment from Fairfax International and thornstein heins will step down. David has been working the phones. Give us a little color as to what