Transcripts For CNBC Squawk Box 20131219

Moment. Payback, right . As somebody who has had trouble once or twice on the George Washington bridge getting close to arriving. But arriving on time, im now well, now were one for one, i guess, because i had my one incident a couple years ago, and then i got close a couple of times. Joe looks good. Very dapper and hes so quiet. What was that, joe . Keep the camera on me, please. Thats the joe we know and love. Anyway, joe is on his way. Again, he had trouble and hit a pothole just outside of new york. Hell be here in just a little bit. The Global Markets reacting to the feds decision to begin tapering next month. The dow surging to a new alltime high adding nearly 300 points to close at 16,167. In asia, a mixed reaction. In japan, the nikkei closed at a sixyear high gaining nearly 2 to close at 15,859. Right now in europe, youll see at least with the Early Morning action that they are getting some pretty positive numbers there. In france, the cac is up by 1. 4 . Same story in germany with the dax. The ftse is up almost 1 in london. The fed is going to cut bond pur purchases by 10 million a month beginning in january. Treasury purchases from 40 billion to 45 billion. The fed is keeping rates unchanged. While the labor markets have improved, they remain concerned about the Unemployment Rates and will keep rates at these levels well past the time when the jobless rate dips below 6. 5 . Now, the fomc voted 9 to 1 in favor of the tapering action. Today, the senate will be likely approving Janet Yellens decision to replace ben bernanke as the fed chairman. Check out the futures right now. Things have barely buzzed, but that was a massive rally yesterday, set things on a strong, upward trajectory. I think part of the reason for that was because of what happens with the tenyear. It was incredibly bell behaved. The tenyear did not take off in terms of the yield taking off. This was not a huge surprise even though the markets thought this was more likely to happen in january. And we should point out, 2. 891 . Andrew, again, i was razzing joe even before he got a flat tire. Hes had a rough morning partnership told him he needed to practice his bowing. I have to bow to you. I dont remember we didnt bet against each other on this one. , we were on the same side. So i can bow on behalf of joe. Well but i was wrong. I thought i could claim im right because i did think it would happen in january, but you see where im going with this. Oh, yeah, in terms of the bet. The only bet we made was the direction over or under. And i number was 2. 87 . So we are winning, but only by the skin of our teeth at this point. Joe points out this bet isnt effective until end of the day tomorrow. Im claiming beginning of the day tomorrow because im not here on monday. I would have never imagined it would have wallied the way it did. And i wonder whether it will hold up. That is pretty amazing. And this is something were going to be watching closely. But that was incredible Market Action yesterday, both between the tenyear barely budge, that yield and the stock market taking off like it did. I will say that joe was right in his reason for bringing up this set, which was his point was that the market was well prepared for this and he was right on that fact. In fact, squawk likes to give credit when credit is due. One day does not all i was going to say is one day does not make a trend, so it looks like everybody is well behaved, but the question is actually how long they will be well behaved for. And i wonder whether over the next couple of days as people understand what this all means where things will really go. Maybe. But its usually the knee jerk reaction that is a little bit more out of walk. But im impressed that the market took things in such stride. Now, we are pretty busy handing out credit today. If you were watching squawk box back on december 10th, you heard Steve Liesmans call on the fed taper. I wish i flew someone who knew. Well, we might have a guy who thinks he knows. Its impossible to know, isnt it . Well, this guy is closer than others and his name is steve liesman. A taper by the Federal Reserve at its next meeting now in my opinion looks more likely than not. The economic taet, the markets reaction to it and statements by fed officials all point to a strong possibility the fed could move next week to reduce the amount of stimulus it provides the economy. Steve joins us right now from washington and, steve, if we want to be honest about this, you are the one we need to be bowing to. You were totally right on this and i am glad i stuck with it because you are the one who led all of us here. Thanks. I need one of those things like joe has with the big head,ite . I thought thats why joes head was so big because of his good call on the market. Look, i think whats interesting here is you just Pay Attention to the data and what the fed says. And i was thinking that i made a bad call in september. And when i thought a lot about that, its because i didnt Pay Attention to the data. I had a call in august about the fed tapering in september and then that jobs number came in weak september 6th and i didnt change. Then this number came in and i was on the balance, it could happen, it may not, but then that jobs number came in and then i i think the important thing was what you talked about earlier, becky, which was the rates and how they reacted. The market was well prepared, the fed was concerned about the short end that the market believed in its promise to keep rates low. Thats what we got yesterday when thinking about what the news was. There were three pieces of news this that statement. First, the 10 billion taper. That was split evenly between the treasuries and the mbs. The second was a measured wind down. 10 billion is the burden of proof and then the economy plus or minus. And then that dovish rate guidance. I didnt think that was going to happen, becky. I thought the fed might hold that in their pocket. But, really, at the end of the take, i think bernanke took out a little insurance on this move to make sure that the markets understood that they were going to remain low for perhaps longer than the markets think. And i asked him about that question at the press conference yesterday. We couldnt put knit terms of another Unemployment Rate level specifically. So i expect it will be some time past the 6. 5 before all of the other variables well be looking at will line up in a way that will give us confidence that the labor market is Strong Enough to with stand the beginning of increases in rates. So we had john riding on yesterday and he began talking about this idea of why didnt wall street see this coming more. And then i had an offline conversation with him. Its not whether or not the fed is communicating right, but whether or not the market is listening to them. And its something to think about. We were in the lockup and i was talking to a reporter next to me while reading a statement. And the reporter said to me, you know what . Its easier to write the taper story than the no taper story. It made a lot more sense. I dont want to criticize what they were listening to or looking at, but its interesting to see through the process of why you had the call right or the call wrong and the taper story to me was always the more logical one. Steve, this is all coming at a time when janet yellen could be confirmed as early as today. If thats the case, does bernanke step down and let her step into that position sooner than january . I dont think so. I dont think theres any particular reason for it. Bernanke was asked what yellen thinks about this and he said shes fully on board. I suspect thats retireight. The market is less inclined to think that yellen is way more dovish than bernanke. I think they think shes a bit more dovish. But i think janet yellen as i said several times going back to her history in the Federal Reserve has had moments when shes been more hawkish than the board. Moments when shes been more dovish. I think you look at the information coming in, we may do 3 growth in the second half, that big number in the third quarter, and now we keep revising up. So this inventory may be offset, it may not be that big, but second of all offset be better employment. And you know what starts looking good . The stock market looks like theres less air underneath and it more Real Foundation and then the jobs number we had looked more real if were doing 3 growth. It would be stunning if this was an actual handoff, a smooth handoff, a smooth transition the way the fed had always hoped it would be. I think that i would be a little less surprised. I wouldnt say its quite so stunning, becky. Theres so much things that could go wrong. If they actually pulled this off, that to me is pretty amazing. Thats true. I guess what i bristle a little about is the idea of the fed not paying attention. We know theyre paying attention. We know theyre looking at all this information. And then guys come on our air and we think theyre looking at stuff the fed is not looking at. The fed is loot looking at an awful lot of stuff. Whether or not they come to the right conclusion, 17 people around the table, very interesting to me that they shifted from the hawkish Esther George and now the dissent is Eric Rosengren from boston who we know to be more on the dovish side of things. He thought it was premature. So i think the idea is, okay, lets give it that the fed is paengz occupation attention to the things were all looking at. What is the right conclusion here . Andrew. Here is the question that i have. I agree with all of the data and sort of policy mindset that youre talking about, but i wonder how shakespearean this is given the fact that yellen is probably going to be confirmed today, given that better 23457bky wa23457b bernanke wanted to have a legacy. Hes sort of tying the whole thing up with a bow and its very neat. I just wonder whether there was a conversation about whether they do it in september or early 2014. You dont think it has anything to do with the sort of personalities involved in all of this and history . You know, i have always argued it does, andrew, in the sense that these are real people making decisions. Its not done according to a formula. If this were the ecb, i would say much less having to do with personalities in the sense that they follow almost religionly this 2 inflation target. The feds Monetary Policy is, you know, a little bit of science and maybe a lot more art is probably the better way to put it. I think it has something to do with it, but look, at 735, 5, a said before, the fed would still be speeding on most roads in america. So its still doinl doing 75 billion of qe. Its still saying its data dependant. He hands off the first move, which maybe is mormon ewemental, but look, they would still be doing 35 billion by june with 10 billion incremental stepdown fess they do that. So theres still quite a bit of stimulus. If the fed stopped buying, it would still be buying. Because remember, theres another part of this program in which theyre rolling over all the maturing debt. Thats a whole other things theyre going to have to deal with later on. Theres quite a lot of stimulus and mow the better Economic Data is doing a little less stimulus. And i think maybe the up shot of this is maybe were a little more dovish, a little mormon ewemental than it is at the end of the day. People around the table may be changing, but this is a developed plan. Theres less of a jarring transition going from one leader to the next. You know, becky, one more thing to andrews question. It was really about personalities. It wouldnt have had qe3 to begin with. Im pretty sure bernanke did not want to go out with another qe program in place at all. But what he did is he looked at the economy in september 2012 and said, you know what . It needs more of this stuff, so he does it. I think hes happier that hes leading with a bit of a stip stepdown. But at the end of the day, i dont think thats ultimately what drove policy. You have to get 16 other members or 11 other members to vote for this policy. So i think it was something that could have been driven by that, but ultimately it was driven by policy. Steve, again, kudos to you for giving us all the heads up on this. I am very glad to have followed and to have lisped to you along the way. Were going to do this conversation again at 7 00. Joe will be here and i know he has a lot of questions for you, too. But again, steve liesman, thank you. Thanks, becky. As we mentioned, the futures have barely budged. Up by almost 300 . Stocks again hitting new highs after that fed anoinouncemenann. Take a look this morning at oil prices. Youll see right now that oil is down by about 16 cents, 97. 64. And the tenyear, again, this is the major story because the tenyear note, the bond market has been very well behaved with all of this. The yield at this point, 278. 89. The dollar was interesting, it did strengthen after the fed. You saw the dollar index rising to a twoweek high. And this morning, the dollar is higher once again against the euro. 1. 3679 against the euro. Gold prices ended at a 5 1 2 month low yesterday in the evening trade. Theyve been pushing closer to 1200. In fact, right now, down about 30. Thats a drop of over 2. 5 or just over 275 . 1,204. 60 an ounce. Right now, its time for the Global Markets report. Ro ross, a lot of green arrows there, as well. A lot of green arrows this morning. Good morning to you. Not quite smaching the strength of the reaction we saw in the u. S. Equities yesterday we we had 1. 7 , 1. 8 . A little less than that. But on the getgo this morning straight out of the gate, we were up only 30 stocks were down. A little bit more, around 45 stocks are now down, but heavily weighted to the upside. The ftse yesterday very flat at the close because we hadnt had the fed decision. It was up five points. This morning one 65. We are a percent higher. The rest of the gains across the market, 1. 4 , the xetra dax, cac 40 and ftse mib, as well. We had retail Sales Numbers out of the uk today, as well. A bit of a tick up from the previous month in october, up 0. 3 . There was concerns about the u. S. Retailers this christmas season, Discount Stores doing better than some of the big grocers. Now, another stock to focus here, dassault up nearly 25 because theyve got a big deal from brazil for their planes and Dassault Aviation down 3. 2 . Boeing lost out, as well. We were looking at treasury yields a moment ago. We had an auction out of spain today in both five and tenyear. This is going to be a test because in may, when we had tapering, we saw periphery yields rise, as well. Today we had a key bond auction post the tapering decision and yield owes five to ten years in that auction came down from where they were just a few weeks ago. So on at the moment, it has been seen as a risk on event rather than a risk off event, becky. Back to you. Ross, just curious, the taper may have come as a bit of a surprise to some economists who were watching. But the market seemed very well prepared for this. I guess the same can be said of our counterparts there in europe. Yeah. I spoke to a lot of traders in the last week and they thought it was 50 50 whether they went in december. A lot of traders said this was 50 50 in their heads. Thats where they were positioned. I had a number of guests, i had one guest that came on prethe jobs report and said the fed will taper in december. And that was before the jobs report. That was the day of the ecb decision. So the strok jobs number is solidifying what people had been anticipating and expecting. Yeah. So, you know, and i am for one, becky, absolutely delighted because you and i never again have to have this conversation that weve been having for serve months. That is a relief. I am very relieved. A Little Christmas present for all of us. Ross, thank you. We will check in with ross again tomorrow morning and, again, thats ross westgate. When we come back we have much more on the Market Reaction to the feds decision. Next, management guru Jeff Sonnenfeld on the biggest stories. And the executives you need to watch in 2014. Plus, we have a packed lineup of squawk box newsmakers this morning, including erskin bowles, judd gregg, tom freedman will be here on set and the ceos of tupperware, leonard, j. Crew and steve swartzman from the private equity powerhouse blackstone. More squawk box right after this. Tdd 18003452550. You see opportunities. Tdd 18003452550 at schwab, were here to help tdd 18003452550 turn inspiration into action. Tdd 18003452550 we have intuitive platforms tdd 18003452550 to help you discover whats trending. Tdd 18003452550 and seasoned market experts to help sharpen your instincts. Tdd 18003452550 so you can take charge tdd 18003452550 of your trading. Welcome back to squawk box. Were coming to you live from new york city, the yale ceo summit right here at the waldorf astoria. This is the 75th year 75th time. Im only 94. You guys have been putting this together and all sort of ceos come and were going to have a number of them on the program today. Steve swartzman will join us at 8 00. Mixky drexler will be with us and lenar and several others. Its off the record and you dont get to hear what goes on inside the room. But to the extent that you can, tell us about the psychology you think about the manner day ceo and in the context, actually, given the news of the taper. Whats going on inside the board room . Well, you know, some of the issues have to do with the loneliliness of high office. Right now, theyre so overprotected, overguarded, it used to be that people in your line of work and my line of work would call the ceo on the phone in their office and probably get them. Now its impossible. Even calling the crazy hours, tunes of pr people, the attorneys and the overly manicured statements make it har hard for them to learn. So everything is a runoff show presentation. They go off to Investor Relations pitches. What do they learn . We try to create a forum where its truly peer driven. Its off the record, as you know, and they can joust with each other. But they have some critical issues. One of them is a time frame issue. The Large Companies are very worried about activist investors. Were chipping away bone and muscle sometimes, noits just fat becau because of some shortterm pressures. The biotechs are finding commercializing great inventions are not happening in this country. Its getting told off to chinese or others quickly. What is your feeling of confidence . We are talking about the taper today a lot. People say is that going to inspire confidence . You saw what happened in the markets. Fannistic. But is there a larger issue about confidence . Before we came on, you were talking about the fact that up in of these companies were spending any cash. We had been complaining about budget morale in congress and we had been complaining about uncertainties in global ripple effects in urine and el nino and whatever else. Thats not there now. What we see is a lot of cash hording and there are some issues with repatriation and taxes. But even so, there is a shell game going on with some taxes to talk about. But that still doesnt explain it all. Are there some other intelligent pent up opportunities to go after . So there was a generation that passed through, that dennis kozlowsky and most of them were honest, but there was an acquisition fueled growth where the serial acquirerers, as they used to call themselves, a lot of that sorted out and some crazy things that were put together. Now people are wondering, where do we put the capital, what do we invest in. And theyre like prometheaus unleashed. So help me with this. One of the other ideas is the idea of succession. Everybody talks a good game, but nobody wants to really be succeeded, if you would. A, what do you think is going on . Microsoft is obviously the biggie. What do you think is going on there . And longer term, or some of the bigger institutions, are they doing it right . It seems after a while, they like the job. They work almost as hard as you do. They feel a certain attachment to it. Many of them are of a different constitution than most of the rest of us. They want the world to be different because they live. Theyre not doing it for the cash. Theres a sense of legacy that matters to them. The more theyre in there, the more they see tun finished business. They want to somehow know theyre going to be remembered. Theres going to be a sense of creation behind them and that is something that does fuel them. At one event, we had Warren Buffett pushed Rupert Murdoch and jeff hazel to talk about succession. Bezos was silent, didnt want to talk about it. Murdoch said my mother is 97, shes doing fine. And buffett said ive heard of managing outside the box before, but people dont race to that conclusion. Ive got two quickies i need you to help me with. Amy shulman, pfizer. This woman was going to be one of the most high powered people in pharma. If not in industry period. She gets kicked out of her job after announcing that she was going the take the job on january 1st. Do you have any insight so what happened there . Pfizer is the Worlds Largest farm suitan california. Jeff kind ler was brilliant to put together the deal with them. The board room machinations are ridiculous. Its a shame. I think this is a company which has needed to calm down and wrestle through some of their weird board dynamics with predecessors. And if you were on the board of ford, not microsoft, ford, would you let this whole alan mulally story play out the way it has . Well, the real drama, it is a microsoft story. Theyre the ones who have to make a decision. Whether or not its a month here or there at ford, i dont think b it makes a decision. Inside ford, the command issues are clear, the sense of Strategic Direction some say you cant have a ceo publicly campaigning for a job whatever is going on i dont understand as a board why you would let this happen. Forget about what microsoft is doing. That i understand. Well, you know, meg whitman felt undercut when she took a look at the disney job. And Michael Isner let that secret become a public secret. She was undercut back at ebay because she wasnt announced that she was leaving. So she became a lame duck. In this case, alan mulally announced im a lake duck, ill be leaving in 2014. It will be sometime this spring. I dont think theres any drama about that. Bill ford will be the chairman. So theres not a lot of uncertainty. Thank you. Congratulation necessary advance on what is going to be a long day for you, but a great day. Im going to send it back to becky right new. Andrew, thank you. Jeff, we are looking forward to everything today. When we come back, we have two of the features executives from todays yale ceo summit. Rick goings and this isnt your mothers tupperware. You have to see how his company is expanding overseas and reinventing the storage business. Then at 6 50 eastern time, the chairman and ceo of on home builder giant lennar, and guess who is on set with me now, too. Im here. Surviving. Low profile tire. Yeah, i am here. The American Dream is of a better future, a confident retirement. Those dreams, theres just no way were going to let them die. Like they helped millions of others. By listening. Planning. Working one on one. Thats what Ameriprise Financial does. Thats what they can do with you. Thats how ameriprise puts more within reach. If yand youre talking toevere rheuyour rheumatologistike me, about trying or adding a biologic. This is humira, adalimumab. This is humira working to help relieve my pain. This is humira helping me through the twists and turns. This is humira helping to protect my joints from further damage. Doctors have been prescribing humira for over ten years. Humira works by targeting and helping to block a specific source of inflammation that contributes to ra symptoms. For many adults, humira is proven to help relieve pain and stop further joint damage. Humira can lower your ability to fight infections, including tuberculosis. Serious, sometimes fatal events, such as infections, lymphoma, or other types of cancer, have happened. Blood, liver and nervous system problems, serious allergic reactions, and new or worsening Heart Failure have occurred. Before starting humira , your doctor should test you for tb. Ask your doctor if you live in or have been to a region where certain fungal infections are common. Tell your doctor if you have had tb, hepatitis b, are prone to infections, or have symptoms such as fever, fatigue, cough, or sores. You should not start humira if you have any kind of infection. Ask your doctor if humira can work for you. This is humira at work. Good morning and welcome back to squawk box here on cnbc. Im joe kernen. Along with becky quick. And i heard andrew got here on time. Andrew, i drive 32 miles through newark every day. I drive myself through newark and i have brand new snow tires with a and i think they were expensive and they have a low profile. Low profile means that the side of the tire is only that this has happened to me before. I hit a pothole. Its not a flat from the bottom, its a flat from the side. So the alarms go off and im immediately down 20 pounds and im trying to get to the local lane so i can get off of the highway. To get to an exit. And then its down i mean, its dropping fast. So i made it to where i could get to an exit and im in, you know, a part of newark and im in an empty lot in a park of newark. I made it. I rousted someone out of bed who saved me. Who saved me, yes. And here we are. But my car has not been saved. Its a car. Its a car. Its somewhere between here and there. Eem glad to be here. So you got that, sorkin. You get here. I got it. You have someone driving you. Its ten minutes from where you live. You still dont make it. Its not 32 miles, so dont act like this this is not similar. This is not similar. Today, did you walk . Im going to enjoy this moment. Im enjoying this moment. I did walk over here today. You could have. Youre that close. Four minutes, it was even better. I didnt know you work here. I forgot. And when i was walking in here about 6 00 6 30, does it matter if im not here at 6 00 . No, actually, we had a fun time. Ive got seniority. Why cant i come why cant you come in late . At 6 30. Because we all have to show up. I guess we could take turns. Everybody show up a half hour later some day. Ive done it before. I overslept. Here is my question there for but by the grace of god go i. Im okay with it. But my question, i have two takes on yesterday. Number one, i hope were saying santa claus is here because he is here in a big way. But he is here and i would never weigh in on that part of it. The man is in the house. Yeah. But the man is here. Is he here . Wow. Oh, ben bernanke. Now, my question was did it go up . I had two takes on it. Number one, there are people that would say it went up because of all the people that wanted it to get started are finally relieved that its Getting Started. I dont think thats it. Number two, its still 75 billion, isnt it . And they said theyre going to keep Interest Rates at zero essentially forever now, too. So youve got an extended period of time that thats going out. The taper put is back on because the fed is still going to be here doing all of these things. We can say were ratchetinged it down slowly. The tenyear was so well behaved. We said that, too. We did. But you know where it is. Its 2. 89 . Between now and and we made a big deal about the idea. But my point was and i did give you credit. Even though at this point andrew and i would be on the winning side of that bet, you were right in that did market was prepared and it was going be and i wouldnt have been surprised with 1100 points or 150 points. But 300 was surprising. Thats a move. Thats a move. And its a but whats not surprising is that so many people probably didnt think that you were going to make that much more money between now and the end of the year. Right. What the heck happened . Everybody cashed in their chips, wanted to i did see someone the other day, im not going to mention any names. Used to be an anchor on cnbc. He is now a like supposedly a seesayer about markets and he was very negative, rally is over, definitely going to have a correction. It was on our network. It was definitely and this is definitely not what his prediction was. But what . Nothing. Anyway, andrew, hes listening, but hes hes here. Oh, he is listening. Yes. And he gets to wear his jacket today. Notice which suit it is. Thats that new suit you like, that light colored one. Yeah, but you know why, because Mickey Drexler is gomg coming on today. This is a Mickey Drexler special suit right here. The tie it really does look good. Is their lighting better than ours down there, too . I dont know. Andrew just they did a very nice job. Andrew looks good. Im just glowing this morning and im gloating this morning due to your car troubles. What are you gloating about . Im not gloating about anything. The open on friday. No, i made that clear. I said we had to do it friday because im not here on monday. Im drinking coffee. I always stop and get it on the way in. Youll change all your habits because this is good coffee. Anyway, you made it and were glad to have you here. Andrew has a lot of special guests retiring today. Right now, he has one of those very special guests. Andrew. That you can, becky. It is a bit of a christmas party. I have the ceo and chairman of tupperware here, rick goings. I didnt even know what are we calling you . A french like a member of the french the french legion debonaire. Thats what this is. Youre like a sir, if you would have been in the uk, you would have been nighte knighted effec . So youre a knight. But im not treated any differently. Well try to treat you differently this morning. Help us about a couple of things. I want to talk about the consumer and International Markets given that 80 of your business is outside the United States. But i want to talk about the taper and to the extent you think this is going to have an impact on the consumer at all and over Petroleum Prices that is a meaningful to you. I think anything can help the consumer and in this country particularly is is going to be a stimulus. I hear and i spend so much of my time outside the u. S. Talking with a lot of world leaders, i have never seen a time as weve seen this last four years as theres so much pessimism with regard to the u. S. Abdicating its role of leadership in the world. Not only on political affairs, but nominal affairs. To the extent that you see it, over the summer, there was a real issue when we thought about tapering. When the conversation was happening, emerging markets took a nose dive. Do you think this taper is going to do anything like that . I dont think its going to have a major effect. I think the big effect is going to be in europe and the u. S. And where the established markets of the world. The emerging markets of the world, theyre being driven mostly by an emerging middle class. In asia, 600 million middle class now, it will be 1. 7 billion in six years. So i think that is what is really going to counter this. Does it matter, the taper . It matters to some if youre selling modties. It doesnt matter much to us. If youre selling it 65 to 75 gross margin, it doesnt matter much. Explain that, though. During the commercial break, i said to you before you came on, i said i dont think youre going to like whats going on in my household. Because i think we use ziploc. I shouldnt use tupperware as the phrase. And you said, thats a lousy business. Thats a small piece of the business. Yeah. Its very much like laptops and computers and tain tabletops. That business got commoditized. I often use the example of what happens when jobs came back. He moved the bit from laptops and tabletops to ipod, itunes, iphone, the rest of the story. We moved our company. We used to be 85 food storage. Were 25 . If you went to a party in paris, it would be busy working women and the average of our better products, it would be 140 u 140. And theyre microgourmet products that youre a busy working woman, you dont have time and you dont want to cook. So our thats the responsibility of leadership. More the product line, selling method, etcetera. And the customer, of course, is always a she. We talk about that on the set. One final question, your stock now has 1100 bu 100 bucks. Up 45 this year. I know you cant talk about your stock. Do you think the market is going to grow the same way it has over the past year next year . Globally, no. But weve been happy for it now. We think were going to continue in our 5 , 6 , 7 top line, double digit bottom line. I think where people have started investing in us, they understand our Business Model better and they see how much he threw off. Appreciate you coming in. Were going to continue the Tupperware Party right here. I love tupperware and i love tupperware parties. I like that guy. Hes been on before. Do you know how to burp your tupperware . I do. And is there a better way to spend a saturday when nothing else is going on than invite everyone over and have a Tupperware Party . Seriously. And leftovers, theyre better, a lot of times, right . The second day. Meat loaf. Barbecue pork. I had some some weekend that i saved. Not the pork roast . No, no, the pork that i made in the crock pot. Its fun. I may have one. And you guys are invitesed. Coming up, fed watcher greg ip. Did we talk about liesman, the man . We talked to liesman. Hes coming back in 20 minutes and i told him it would be a whole new conversation because youd talk with him, too. We bought fully into what i know. And i said thank you. Thats why i knew with all these remember all the people that came in and said it wasnt going to happen . And a bit of news on facebook, Ceo Mark Zuckerberg is going to sell 41. 1 million shares worth about 2. 3 billion, all part of an offering of xhob shares of the social network. That has the stock down a little bit right now. The stock above 50, as you can see, 52. 75. Squawk box coming right back. announcer at scottrade, our clients trade and invest exactly how they want. With scottrades online banking, i get one view of my bank and brokerage accounts with one login. To easily move my money when i need to. Plus, when i call my local scottrade office, i can talk to someone who knows how i trade. Because i dont trade like everybody. I trade like me. Im with scottrade. announcer scottradeproud to be ranked best overall client experience. 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. The fed announcing a first step, calling it major, but i think people turned around and said, 85, now 75, its 10 billion, but it is the beginning. A step towards winding down quantitative easing. It will be 10 billion starting in january. Joining us now from washington is greg ip, the economist u. S. Economic senator, hes a cnbc contributor. Dont remember the last time you were on, greg. I dont know whether you gave us a 50 50 or what you said about a december taper. Do you remember . I dont remember. I think i was pretty split. Then when steve went with december, i went with december. What else could i do . Same with us. And then it started when steve went out on a limb and did it, it seemed like an outline call. But for some reason, by the time it came about to yesterday, the people that we had early in the day that were saying they werent sure, im like, how can you not know at this point when we got the budget deal . Thats done. We got a couple of good numbers and employment what they were talking about they needed. Thats done. And they were so close last time, its bernankes last chance to do it and if he didnt do it this time, hed really look like he was either sending a signal or just didnt have the yeah. Thats exactly right, joe. I mean, in september, when everybody was surprised and shocked and saying does your communication matter at all, he bent over backwards to say, look, there is the fiscal situation, there was the labor market data that looked weaker, we were concerned about the Market Reaction. It was a close call. We heard that from quite a few people afterwards, close call, that they really meant that. Then the concerns that the chairman raised in september had more or less been met. What i was surprised by was that it was actually to my view a somewhat hawkish statement in press conference. Not only did they begin to taper, but they put it on a more or less conditional glide path to zero by november of next year. And even though bernanke left open the door to sort of adjusting the path if the data turned out to be weak, there was no talk about ramping it back up. Given all that, its pretty impressive that the market rallied as much as it did. Thats good, though, instead of the idea that if things arent good we can go back up. I think saying we can slow down how quickly we set ago thing for november and saying we could slow that down, that was pretty smart. And dont you think the fact that the market rallied as much as it did, it might be saying if we thought we needed qe before, we dont need illustrate any longer. Its like, thank you very much, mr. Bernanke. Now the economy will take things from here. They still want the although Interest Rates, but right now, the view seems to be that qe has outlived its usefulness. The way you look at it, if it looks like it is better than the know and we still get still get 75, i can live with that. And santa claus. Theres a bit of a risk here. Twice before, they started to wind down qe. We know not out of the woods. This is still very much a job that janet yellen has to finish. Thank you. When we come back, the ceo of Home Building giant lenar, will rising rates stop the industrys building phase before it gets off the ground . Not based on what weve seen so far in this action in the bond market. First, were going to check out the squawk green room. We have two power players in washington and wall street watching up this morning. Erskin bowles and judd gregg. Coming up at the top of the hour. Stick around, squawk box will be right back. vo you are a business pro. Seeker of the sublime. You can separate runway ridiculousness. From fashion that flies off the shelves. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. natalie ooooh, i like your style. vo so do we, business pro. So do we. Go national. Go like a pro. But with less energy, moodiness, and a low sex drive,y first. I saw my doctor. A blood test showed it was low testosterone, not age. 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I have an offer for you. Hold on, its a group deal. Youre all in. I dont want to do business with kevin. Doesnt matter what you want. Its not your business. Shark fight. Shark fight. Shark tank tuesdays, backtoback episodes on cnbc. Welcome back to squawk box. Were coming to you live from the yale ceo summit in midtown manhattan and im joined with the ceo from lennar, Stewart Miller joins us. And thank you for being here. Good morning. A lot to talk about. Housing markets been like, seems like back and slightly on fire, at least in your world. But given the taper, i have to ask you, have you i assume. Have you been watching this carefully, waiting to figure out whats going to happen . I think you cant help but watch. Its been at the top of the news for the past months. You p cant help but have it at the top of your mind. And so, a, what was your expectation going into yesterday . And, were you surprised by the reaction . Look, i think going into yesterday, everybody kind of felt what the fed would do was a tossup. Youve had as many people saying it was going to begin as it wasnt going to begin. I was going to take the news as it came. In terms of the Housing Market and what itll mean to Interest Rates and mortgages, your thoughts. Well, you know, theres a lot of discussion around the Housing Market right now. Interest rates have been trending up, the talk of taper has spurred Interest Rates to start moving up. And that, of course, is a central factor in our business. But at the end of the day, the reason for the beginning of the taper is as much an important component is the fact that Interest Rates go up. The fact that the taper is being put into place is an indication that confidence is back, that the economy is generally improving, that jobs are generally coming back to the economy. And these are positive factors for the Housing Market. One factor of many. Theres a lot of pessimism out there. And we talk about coming back to the market. But the idea is in much better shape. Prices youve been able to raise prices 18 just in the past quarter. Look, at the end of the day, the Housing Market is better than it was, but it hasnt come back. Right. Come back is 1 million, 1 1 2 million per year, Single Family and multifamily. And this year census has it just about under 1 million homes, 1 million starts this year. How much of it is location based . Your biggest competitor was not able to raise prices at all in the last quarter . Well, the price increases are a question of averaging across broad geographies. So if youre skewed more toward california, youre going to have higher prices, maybe more price increasing. If youre skewed more towards texas or some of the lower price states, its probably going to be less in the way of price increases. But at the end of the day, the market is healing across the geographies and has been coming back slowly but surely. Whats your sense on the banks in terms of opening up, making credit available . Well, at the end of the day, the banks have been constrained. They are overseen by a regulator that keeps tight reins on how theyre going and how theyre thinking about their business. The banks have been slowly coming back to the market and providing capital and providing credit for people who are qualified. And basically were seeing a gradual healing going on as it relates to the banks, as it relates to the mortgage business. And thats whats bringing housing back. Stuart, thank you for joining us. Im glad youre as positive as you are. Becky, im going to throw it back to you. Andrew, thank you. We will check back in with you in a few minutes. When we come back, we also have new details from target on the credit card breach that affected 40 million credit cards and debit cards. More about that in a minute. Also Mark Zuckerbergs Facebook Stock sale. Weve got Additional Details you need to hear before you decide to sell. In the next hour, well also be talking retail with j. Crews Mickey Drexler and manny chirico. First, though, dont be fooled by this weeks budget deal in washington. And while politicians inside the beltway are squabbling, our news makers knows what needs to get done. Look whos here onset with us. Erskine bowles and judd gregg. Squawk box will be right back. I dont just make things for a living i take pride in them. So when my moderate to severe chronic plaque psoriasis was also on display, id had it. I finally had a serious talk with my dermatologist. This time, he prescribed humiraadalimumab. Humira helps to clear the surface of my skin by actually working inside my body. In clinical trials, most adults with moderate to Severe Plaque Psoriasis saw 75 skin clearance. And the majority of people were clear or almost clear in just 4 months. Humira can lower your ability to fight infections, including tuberculosis. Serious, sometimes fatal events, such as infections, lymphoma, or other types of cancer have happened. Blood, liver and nervous system problems, serious allergic reactions, and new or worsening Heart Failure have occurred. Before starting humira, your doctor should test you for tb. Ask your doctor if you live in or have been to a region where certain fungal infections are common. Tell your doctor if you have had tb, hepatitis b, are prone to infections, or have symptoms such as fever, fatigue, cough, or sores. You should not start humira if you have any kind of infection. Make the most of every moment. Ask your dermatologist about humira, today. Clearer skin is possible. Squawk ceo calls of the day. Anything that can help give the consumer in this country particularly some confidence is going to be a stimulus. Still to come on squawk box, retail legend Mickey Drexler, ceo of j. Crew. The name behind tommy, calvin, izod. You want to know what comes between me and my calvins . Nothing. The neverending battle against the deficit. Do not think i wont kill a dwarf. Erskine bowles, judd gregg, with their expectations from capitol hill. And later, as the world turns, Pulitzer Prize winning columnist Thomas Friedman of the new york times. His list of global risks for 2013. Squawk box spanning the globe, in your home, at your office and in your car, it begins right now. Welcome back, everybody. Lets get to our top stories this morning. The Global Markets getting their first chance to react to the feds decision to begin tapering in january, cutting 10 billion from the 85 billion bond buying program. That announcement yesterday sparking an incredibly strong rally. The dow adding almost 300 points to close at 16,167. This is a big, big rally all the way across the board. The futures this morning are decidedly less optimistic. You wouldnt be surprised by that after a 300point gain. The s p futures up by less than half a point. In asia, there was a mixed reaction. In japan, the nikkei closed at a sixyear high, gaining nearly 2 to close at 15,859. Right now in europe, the picture has been decidedly more optimistic. Its been following some of what weve seen here. In germany, the dax is up by 1. 35 , the cac in france, better than 1. 1 , the ftse by 1 . And the tenyear has been the story. This is what weve been talking about the whole way through. All right, 2. 9 , but still, that has been a steady and gradual advance for the yield. Market reacting incredibly well because you had to imagine people were expecting this was a very likely scenario. Dont want to lose, though. Youre going to lose. We dont know yet. It got down to 2. 64. 2. 64 yesterday. 2. 6 to 2. 9 is still small. Would you take the over or under whether the tenyear yield would push higher or lower if they went ahead and tapered. The number we made that bet at was 2. 87 . No, 2. 7something. Youre right i think it might be 2. 78. You said 2. 76. I can find out. Im thinking it was 2. 73. It might come down to that. You took the under . I thought the tenyear was ready for taper. I do have to say, he was right. Even if it turns out that he loses the bet, he was right the market the last time, the reason they got scared the fed was because it went up to it went up 30 or 40 basis points and was headed toward 3 and they were worried they were losing control. This time, they managed it much better last time for the taper they were ready. I think it was acting well then, too. You know what the best part of it is, the loser has to do. Youre right about everything. Even though based on what happens. Were not getting credit for making the bet, which was dependent on the fed tapering. Right. We were assuming the fed was going to taper and only half the people in the world thought the fed was going to taper. Target is reacting to a major breach of credit card data. And youre out next week. I am. Just tomorrow. Yeah. Its about its about an and or two. He went along with her. What was the time frame for this . The under could come back. I think it will tomorrow. Tomorrow. Not in your lifetime. No, it has gone down a few times. And eventually, it will be based on economic prospects, not on the perceived manipulation of the fed. You could take the senate position, too, which is youre right whichever way it went. Im sort of doing that. And thats a skill you have that i think would be valued somewhere. But you cant seem to find a home where you can last at this point other than your cnbc gig. Seems to be always welcome here. You might need, if thats all youre doing, you might need to downgrade a couple of things in terms of how you live. We dont pay very much. Target, the retail giant says its working closely with Law Enforcement and financial institutions. They say theyve identified this issue of about 40 million Credit Debit Card accounts. 40 million accounts. 40 Million People who shop there. Between 27th and december 15th. Target is partnering with forensics firms to investigate the incident. I spoke with them this morning. This is pretty complicated. You think 40 million cards, theres only 310 Million People in the United States. All for people shopping at target stores in the United States not in canada and not online. Something that had to do with the information where you swipe the card. I spoke with them this morning and asked, what is this . Its got to be somebody who was responsible for that swiping technology, they said they cant talk about it because its still an active investigation, but they did say it was a sophisticated crime. They cant narrow down which stores, they basically any store. If you are someone who shopped there during that time period, you should also be taking a look, just monitoring your account, making sure theres no fraudulent activity that comes in. If there is, you call the number on the back of the card or call target and theyll resolve it. I dont you know i did. I shopped there. Thats why i was calling this morning. Whats going on . Because i definitely have shopped there. Shopped online. I may have indirectly shopped there. Thats a big wide swath of time and 40 million cards, tells you how many people shop there. It does not apply people who shop not if youve shopped online or in canada. But if youve shopped at any store in the United States, then you should be on the lookout and make sure youre watching your account. We also told you about the news earlier this morning, the news on facebook, the Ceo Mark Zuckerbergs going to be selling 41. 4 million shares, 2. 3 billion. Its part of an offer of 70 million class a Common Shares of the social network. The stock has been trading down by about 4. 25 percentage points. You should know, though, this is the majority of this that zuckerberg is selling. 31. 5 million shares were sold to pay taxes on 60 million options being exercised, which means more stock coming into this. Not lowering his stake or trying to get out of this. 9. 9 million shares being sold for profit. And 18 million shares are being gifted to charity. He continues to own about 18. 8 of the company and has about 62 of the Voting Rights as the controlling stockholder. Hes also selling some, about 1. 6 million shares hes selling and facebook itself is issuing 27. 05 million newly issued shares. Also, a victory for congress yesterday as the budget deal was finally passed. But it does go does it go far enough . And how will it play into the debt ceiling . Joining right now to talk about this morning, who weve been talking to this morning, Erskine Bowles, the cofounder of the campaign to fix the debt. Judd gregg is former United States senator and the cochair of the campaign to fix the debt. He also served on that deficit commission. Welcome to both of you. Thank you. This is the mini budget deal. Mini grand bargain. You didnt make fun of me. But some other members of the team. Then you took credit for it. You want credit for mini grand bargain . It did sum it up exactly. Well, its a nothing burger without any ketchup and the pickle. At a practical matter, it was progress in the sense it was bipartisan. Erskine, obviously he is the force behind getting something constructive done in this area. And he and i both look at this as reasonably positive. Its positive and great to see people working from both sides of the aisle and coming together on this. The thing that concerns me, does this take the impetus off the larger problems that exist . Can you still get to these big issues like tax reform and make sure that theres still momentum behind that . What do you think . We have to at some point in time. I dont think either one of us think anything significant done next year, unfortunately. As i think joe said, im not in the hallelujah chorus on this deal. This is a teeny, small deal, but its a step in the right direction. It doesnt do anything to reform a tax code so well be more globally competitive and reduce the deficit. Doesnt do a darn thing to reform the entitlements that in a manner where we can actually bend the Health Care Cost curve and slow the rate of growth of health care. Nor does it do anything to make Social Security sustainably solvent. We have the same big challenges that the congress has been unable to deal with. Weve got the default out there that will lead to great uncertainty again. Whats depressing is were told and i love paul ryan and he said, look, this is all we can do. Weve got the house, 2 3 of government we dont have. And then im thinking, okay, we have to wait for an election till we can do these big things. But then i think, do we need all three branches of government under one party to do something . And then if it was under republican or democrat majority, the democrats would do it completely differently. Probably be all i dont know how they do it. But the republicans might just cut everything. The only way to do it is bipartisan. We want to do it bipartisan but we cant do it because it is bipartisan. Its so hard with the way the congress is microdivided. And its represented within each party. Yeah, extreme left and extreme right. Its much harder when we did the balanced budget agreement in 1996 between president clinton and speaker gingrich. Who should we hope for to do it . You would hope for republicans to do it. But erskine, youd hope for the democrats to do it their way. I hope, whether republicans or democrats to come together and do it. Right. Youre not doing anything now, are you . No, im not. Erskine, hes a national treasure, he should run. Youre right, joe, you hit the nail on the head. You cannot for a lot of reasons. And the number one reason is the American People will not buy product that comes out of the congress on big issues like medicare, medicaid and Social Security. And tax reform unless its bipartisan. You didnt say aca in there, did you . Well, that was the problem of aca. Thats what i mean. And you have to have a bipartisan product. And the problem is the momentum for that isnt there. And there isnt a Pressure Point to force it again and the leadership isnt there. So we got to have a congress that recognizes that if they dont want to pass on to our kids a country where the standard of living drops. And it will drop. The simple fact is, our standard of living is going to drop unless we get this under control. Then youre not going to get it done. When you left the senate, you left, several people left and said there wasnt really the center there anymore. And that concerned you. You liked being in the center that erskines talking about. Do you think its gotten better or worse since you left . Well, in the sense the folks who worked together gave up the ideological ambition. I was chairman and ted kennedy was ranking and i was ranking and ted kennedy was chairman. We work together. We both knew in order to accomplish anything, you had to govern. And you had to do something. So you had to reach an agreement. Today, unfortunately, there isnt a willingness to come across the aisles because as erskine alluded to, the extremes in both parties are controlling the megaphones. And they control it on the National Scale and they control it regrettably within the parties. And they dont allow Constructive Forces to govern. And unless you govern, you cant accomplish anything and you cant govern from the sidelines. Its like pal al simpson says, you should never go into business and never get married. Erskine, how big are the problems . When you look at Social Security, i mean, i dont want to bring everybody down this morning, but what do you see looming . Oh, look, first of all, i think we ought to Say Something good about what paul ryan and patty murray did. A couple of good things in that bill that i really like. One, they got rid of the worst cuts in the sequester, in my opinion, both stupid across the board cuts which no business would ever think about doing. But they got rid of those that had the most adverse effect on military readiness and economic growth. And thats a good thing. It also got rid of the threat that were going to go through another one of these government shutdowns. And for the first time in four years, we have a budget. Weve been operating on a monthtomonth basis. They say, what in the world is going on in the u. S. If we dont change as judd says, well end up, my generation which i think, you know, as the one that messed this whole thing, well be the first generation to leave the country worse off than we found it. And thats got to be unacceptable to us. Should be. Thats why weve got to keep working at it. We have budgets here, i mean, and we need to do a commercial. Then were going to come back. Much more with Erskine Bowles and judd gregg. Plus, the dow surging to record highs, what should the investors do now that the fed has made its move . That discussion on the way. Theres a saying around here, you stand behind what you say. Around here you dont make excuses. You make commitments. And when you cant live up to them, you own up, and make it right. Some people think the kind of accountability that thrives on so many streets in this country has gone missing in the places where its needed most. But i know youll still find it when you know where to look. Welcome back, everybody. Take a look at the futures. Barely budging, but of course, this is coming after that big santa claus rally started by ben bernanke. Market was okay with all of that. Bond market was, too, and the dow up almost 300 points. Even that shot of bernanke. If there were 85 billion in there carrying that big bag. Theres still 75 billion. You wouldnt even be able to tell the difference between the bag, would you . I mean, that sums it up right there. Took a while to realize that. They were saying for a long time that tapering isnt tightening. Could you tell if there w was if there was, you know, whats 10 of 85 . You couldnt tell if that was a little bit less. No. One less hess truck or something. Erskine bowles is the cofounder of the campaign to fix the debt. Served on the deficit commission. And judd gregg, cant seem to hold down a job. As a former United States senator and the cochair. No, im kidding. Commerce secretary. I knew you were not going to make a good lobbyist. Would you . Well, i actually enjoyed the factor i was out there promoting i enjoyed that. Youre still. I didnt actually do much. My view was they asked me to do this because they wanted engaged in the issue in how we reconnect with the American People, the importance of their every day life of markets. If you had to work in the morning, the job is probably tied in some way to the Capital Market supporting the job. Its all tied into the Capital Markets. And we are having this major disconnect in america today, from the private sectors importance in the creation of economic activity. 100 . And the public sectors dominant role. In talking about the private sector and free markets and all those things, but you sort of have to knee jerk whatever the industry in terms of regulation, youve got to be against every regulation, right . You cant do that. Youre not really like that. Youre going to look at things on a casebycase basis and decide. And they would probably want you to hate everything about dodd frank. There wasnt much about dodd frank i didnt feel was incorrect. Im the one that recommended judd for this job. But i would have for the same reasons. There are very few people that have respect this guy has for both sides. People are willing to listen to him. Hes got good judgment and thats why he wouldve done a good job at this if he liked it. I dont think he would like it. But he gave it a try. There was basically a personal situation. Going back to talking about lets get erskine to run for president. How about a Bowles Simpson ticket . It is the most i look at where our priorities are and i really do think it is. And heres what scares me most is that lets say that the feds right and the economy has made it up to a new level of, you know, above stall speed where were not quite as worried. Weve already made progress on the deficit. Were going to get lulled into if the economy improves, were going to make more progress and were not going to think its as important. Its not going to be staring us in the face anymore. We may not touch it for another five, ten years. I dont think so. Look, i dont think the markets will allow that. Some day the markets going to wake up and its going to look at us and say youve got a dysfunctional government, youre addicted to debt, but clearly the fiscal path that were on is not sustainable over the longterm. You have no plan whatsoever to deal with this like every other business in the world or organization does. And every couple of months, youre putting the full faith and credit of your country in jeopardy. We see more risk, we think this is a riskier investment. We want more money for our money. Does it take a crisis to get people to act in washington . A lot of people think it takes a crisis or a lot of people like judd and myself working to give them the support they know. But if they make these tough political decisions to reform a tax code, to reform the entitlement programs, that well have their back we pivoted. Some people saw political reasons for. We pivoted from obama care to income inequality in a big way. We didnt pivot to this. We didnt pivot an income equali equality. Nobody wants a society from the bottom up starts to rupture because of that. People have far different ways of how to address it. This is probably a much better way to address how to fix it because it would open up the job creators to a more certain future than raising the minimum wage. Giving strength to unions so they can unionize better. Why is your party approaching it from that side of things, erskine, im not blaming you. Lets talk about health care for a minute. You cant have a subject where the scabs are any rawer than that. If you think back before obamacare, things werent that great. We spend twice as much in this country on health care than any other developed country in the world. Thats true whether you talk about it on the per capita basis and gdp. And those 30 Million People who didnt have health care insurance, they were getting health care, but in the emergency room. Creating a huge government bureaucracy doesnt seem to make it less expensive. Lets think about it. In 1981, we spent 10 of the federal government on health care. Last year before obamacare, we spent 25 of it on health care. Thats not sustainable. We had to do something. And what weve done done in this report that judd now worked on, weve taken 625 billion out of the cost of health care. We have provided Everybody Health care insurance, but we have real programs to reduce the cost of the first ten years and another 2. 8 trillion in the second ten years. Thats what you do to slow the rate of health care. Those are all tough choices. Do either of you think that the government can do things directly to try to just redistribution . No, i dont. The government cannot grow an economy. In my opinion. Can you divide it up more evenly. Can it be divided up more evenly . When the government tries to divide it up more evenly, it becomes less even. If you look at history, the only forces that have actually created prosperity are Market Forces. Thats the fact. And when you start to dampen with excessive taxation, you reduce the force generating the prosperity. The perception is that the market is what leaves people behind because its heartless and its driven by greed. Well, compared to socialism. Where do youre preaching to the choir here. Its easy for me to explain. Im very proudly saying i am a capitalist. I believe in Market Forces. Im living proof that Market Forces actually work and can change the future of a country. Thats why they dont take your calls anymore at the white house. We want to thank Erskine Bowles and thank him for coming in today. Thank you, erskine. Youre leaving . Yeah. That terrible last shot, i made you laugh, at least. Im going to a mortgage board meeting. When we come back, we also have the retail legend behind j. Crew, Mickey Drexler live from the yale ceo summit. By the way, check out Darden Restaurants. Looking to boost shareholder value. Something an activist investor has been pushing for for a while. You can see the stock is down on this news. Drop of about 2. 6 . Squawk will be right back. [ male announcer ] this december, experience the gift of true artistry and some of the best offers of the year at the lexus december to remember sales event. This is the pursuit of perfection. [ male announcer ] how can power consumption in china, impact wool exports from new zealand, textile production in spain, and the use of medical technology in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 70 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. [ male announcer ] this december, experience the gift of exacting precision and some of the best offers of the year at the lexus december to remember sales event. This is the pursuit of perfection. If you were watching back on december 10th, you heard Steve Liesmans call on the fed taper. He joins us now from washington. One thing you need to concede. We did not waver in backing you. You spoke and i was fully onboard with you even if it hadnt worked out. Yeah. Telling him you were going to blame him entirely. Yeah, i would have blamed you entirely. The people saying it wasnt going to taper, i was just dumb struck they couldnt see it was going to happen. You also know, when you went out on a limb, looked like 10 . By the time it happened yesterday, most people were at 50 . Some higher. Yeah, i thought you guys were a little reckless in backing me. I was confused by that. Likewise. Im by myself out here im good at taking you out with me, i suppose. Lets move on, what weve done, create a little chart here, 10 billion reductions every month, heres what it looks like, 75 in january, youre down in june, 5 billion, if you take bernanke at his word, heres what he said about how the fed will step down on qe during the year. The steps we take will be data dependent if were making progress in terms of inflation and continued job gains. Ill imagine continue to do at each meeting a measured reduction. That would take us late in the year not by the middle of the year. If the economy slows, or we are disappointed in the outcomes, we could skip a meeting or two. On the other side, if things really pick up, we could go a bit faster. All right. So heres the base case. 320 billion, if you add all that up. 10 billion reduction in the meeting. A little bit lower, quite a bit lower, actually, than the cnbc fed survey. The streets going to have to kind of adjust that qe outlook, more like where they were before the september meeting. Look at Interest Rates here, heres the feds forecast, september forecast compared to december. You can see cut off a quarter and then cut off about a quarter in 2016. Couple quick comments here. Forward guidance in our view, basically saying that the fed won this run. Im going to give you one more comment. Ian shepardson says investors will become increasely nervous about the risk of being on the wrong side of a change of heart by the fed, especially if wage growth picks up. Guys, i think we dont relax, we go on quickly, the new thing for the market, i think, is going to be watching inflation, growth and inflation and whether or not that fed Forward Guidance is something that they stick to. Believing the fed and the promise for 15 is the big theme for 14. Can we get the sponsor of the all America Survey and sponsor you . Well see what you think they will do. They were wrong again, right . Well, thats a serious issue, joe. All we need is one person. I think what youre saying is serious. I dont understand why the street wasnt there. Interesting comments about that yesterday about that. Why wasnt the street on board with this change . Youve got to go back and look. Follow the data, the statements. I think the street was, it was the economists who werent. Well, its interesting, it locks in janet yellen. The new chairman has not been confirmed yet. Shes locked in now. This plan. Thanks, steve, weve got to go. Big stuff coming up. We never have this guy on. Right now, were headed to the waldorf in new york city. Andrew is joined by a special guest. Andrew . Hey, becky, thank you. We have the entrepreneurs, the reason im dressed in these clothes. Mickey drexler is here from j. Crew. Youve done all sorts of things with the gap. I dont need to talk about your history. You know the consumer better than just about anybody. One of the things were trying to gauge is the state of the consumer. Whats really going on . If you think you know the consumer better than anyone, youre in trouble. We keep a close watch, you spend time in stores. I think the consumer is the most difficult part of our job is getting the product right and figuring out when the consumers going to like it or not like it. But it just, in terms of this holiday season, are you surprised . More confident, less confident than before . Ive lived through a lot of holiday seasons, and you can predict that 2014 would be more promotional than 2013 if thats possible. Ive lived through it. Starting on black friday through christmas day, its sale after sale after sale. And for us, its product after service after product after service. But the environment is if i cant be creative, if i cant be inventive, im just going to lower my prices. Do you think theres a race to the bottom thats going on right now . I think its a very longterm slow race to the bottom with a sector of retail, yes. Where does that leave you . Interesting question. Where does it leave all of us . I think when stores depend upon low margins or promotions, they train their customers. Leaves us as its leaving a lot of retailers today with a battle on margin. Because we have to remain competitive, you have to remain perception wise competitive. And when everyone including the media all day long is saying its black friday, get goods on sale, and they show a smallish percentage of the population lined up for sale. It leaves us looking how to be more creative and continue to balance our margins. 30 of your sales are done online. Yep. What does that do to the margin . Is it improving your margin . Or is it the fact that people go return half the product at the store . Its a very long answer. What does it do to the margin . Most profitable vehicle we have is our online business. Its one location, one cost center, and its leveraged like crazy around the world today. Now, on the other hand, its given everyone an opportunity to check prices instantly in their hands. So for us, you can only buy j. Crew at j. Crew. Its positive for us and also a growth vehicle for us and i think most people today. 30 people online and growing. What does that look like in five years from now . Im going to guess. We are International Online and over 100 countries today. Im going to guess and dont hold me to it, 35 to 37 if the retail continues to grow. Youve got ha lot of shopping malls out there not growing today. Does that mean you create more stores while this is going on or less longterm . You make every investment in stores where you think you get a return on investment. Weve expanded to the uk. Weve only had 65 made well stores, which in my view is not a lot. You open stores where the returns are appropriate and you can make money. You open the store in london. Opening some stores in asia. Big issue in hong kong, asia, writ large is they love branded merchandise. And the j. Crew esthetic is no log logos. Right. Branded is we have a trendometer. The trendometer says theyre going this way and this way. And if you read about it, the competitors who have logo say theres less desirability on logos because logos has made it very democratic and very commodity. Anyone can carry a logo unlike ten years ago because you couldnt afford it, maybe. Other online. Amazon is getting into fashion. What does that mean to you . Well, it doesnt mean anything new other than you have a huge, fantastic competitor who doesnt make a profit. What does that do to everyone else . Im more comfortable because amazon doesnt sell our products and not competing with us. You look at goods sold on amazon and 50 other places. And oh, by the way, you can pay full price in certain stores, too. Go to your device and check the price. Youre on the board of apple. Weve got to run. You look at whats going on with apple and the google fight. Where do you see this going . Well, thank god its not my fulltime job. I dont have to worry that much. Okay. Thank you for joining us. I am wearing the suit you told me we have a scoop for the fashion people. Youre going to be changing how this looks . No, were not changing that. We are doing a little wider lapel and a slightly different cut as another concept suit. Okay. I will take it. Mickey drexler, happy holidays. Thank you, you too. Joe, back to you guys. When you leave the shirt out, does it have to be any shirt you leave untucked to look cool . Or is it a shirt with less tails than a normal shirt . Well good question. Well, the key and im not an expert on this. Ive been doing it for years yes, you are. It has to fit, of course, and it has to be the correct length. Thats the most important thing. And theres a tail issue to this. So he has his can you see . He has the tail out a little bit. Well, its more comfortable. Right. Well, i dont know. So youve got to you always do that. Ive done it since ive done it for many years and i dont do it because, oh, its in fashion. It was always more comfortable. And i think today comforts critical and feeling who you are and natural about dressing. But there are rules and regulations we can go over that after hours. Thank you. Im going to unbuckle my pants then. Please, dont. Just to be comfortable. Please dont. You said oh, hold on, ive got to ask. Joe will help i think weve got to run. Thank you, mickey. Thank you. Im uncomfortable again. Target targeted in a credit card breach. We have the details after this. And then the ceo of pvh will join us. The owner of brands, were going to talk retail right after the break. Stick around. I wanna spread a little love this year [ male announcer ] this december, experience the gift of true artistry and some of the best offers of the year at the lexus december to remember sales event. This is the pursuit of perfection. [ male announcer ] the parking lot helps by letting us know whos coming. The carts keep everyone on the right track. The power tools introduce themselves. All the bits and bulbs keep themselves stocked. And the doors even handle the checkout so we can work on that thing thats stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. So everyone goes home happy. You can fill that box and pay one flat rate. I didnt know the coal thing was real. Its very real. David rivera. Rivera, david. [ male announcer ] fedex one rate. Simple, flat rate shipping with the reliability of fedex. Open to innovation. Open to ambition. Open to bold ideas. Thats why new york has a new plan dozens of tax free zones all across the state. Move here, expand here, or start a new business here and pay no taxes for ten years. Were new york. If theres something that creates more jobs, and grows more businesses. Were open to it. Start a taxfree business at startupny. Com. Welcome back to squawk box, everybody. We want to talk about an important story. Retail giant target says the payment card data was stolen from 40 million customers, 40 million credit cards or debit cards. Started back on that busy black friday weekend. Went all the way through, i believe, december 19th, december 15th. If you shopped anywhere at any target store in the United States between november 27th and december 15th, you should be aware. Theyre telling you you should check out your account, make sure you dont see any fraudulent activity. Investigators believe the data was obtained from software installed on machines that customers used to swipe magnetic strips on their cards when they pay for the merchandise. This does not affect the stores in canada, does not affect the online target store. Its not clear how the attackers were able to compromise at so many target Stores Across the country. But, again, this is a growing issue as we worry about Cyber Security around the globe. And only six days shopping days left until christmas. So where . Where . Where are consumers spending their money . Joining us now is manny chirico, ceo of pvh. Only six days left and there were six fewer days. Its harder to start with and sales are by definition be later . Sales are coming in later, more compressed. And the entire promotional environment is much more promotional than it was this time last year. So its just a very hard situation to read, very choppy. The weather this last weekend in the United States really didnt help throughout the northeast. But the last few days, weve really seen a pick up in business as weve gone forward. All in all, its about traffic. About who was able to get there, right . Exactly. Its about traffic and its about price point. And, you know, two stories, really, going on. I think this year successful retailers are going to be the ones that can manage their gross margin, manage their markdowns and the challenge, i think, were seeing is that the environment has got much more sales and price promotional. But at the same time, inventories, the highrisk areas we were dealing with last year, much warmer season, we dont seem to have the issues in cold weather apparel, outerwear, and those tended to have a big exposure post christmas. I think the Silver Lining in this might be Gross Margins postchristmas might be stronger. The good news is, the weathers been happening out. The bad news, the calendar hurt. If you add it all up, what will we be looking at . I think when the score cards all done, youll see sales up 1 to 2 overall on a comp store basis. I think profits will be a mixed bag. I think, again, youre going to see winners and losers across the board. I think Department Stores are going to be winners. Theyve really driven the online. Macys in particular, dillards, i think theyve driven the online portion of that business. At the same time, and theyve had the loudest voice right now. You see the kind of promotions and advertising thats going on to really drive the consumer in. And even jc penney you think its happening. Its happening. Its a turn around. Thats like turning around a battleship. The story on pennneys. Everyone has to watch the gross margin. I was talking to people who say they get great discounts for coming in. Maybe thats what they need to do. And the other thing, theyre really changing the mix of business. Really refocusing back on some of their National Brands and private brands. And i think really what youre going to have to watch. I think the apparel business has come back. Their Home Business has always been one of their most profitable areas and productive areas. If that business can get back on track, that went through a lot of for lack of a better word, damage under the old regime and getting that business repositioned and re getting it back to being the kind of profitable business it was, it drives the consumer into the store where she purchases that and shes buying apparel. Another she and specialty not so good. How could it be . I walk the mall and im not going to name names, but the competitor said is everything is 50 to 70 off. And here it is december 15th. Calvin and tommy are good for you. Theyre driving the business. Internationally in particular and also here in the states, those are the two engines. You own speedo. You knew i was going to go here. Do you own a speedo . No, and i dont wear my Shirt Sleeves out. You dont does speedo make a long . If i get a speedo, i dont need to do a tiny thing. 50 of the business is hard goods, goggles. Speedo goggles. Very highmargin business. Then theres the performance component that you see in the olympics on the pool. And michael phelps. And thats been a big component of the business. People historically think about i do. Faber shaving his entire body, putting this oil all over himself. Thats no longer the case. Shaving the body and doing all that with the racing suits that no go from your yeah, just got one. Now go from your knees to your shoulders. Thank you. Green. Lime green. Merry christmas, everyone. Coming up jim paulson gives his assessment of the fed move, what it means for the markets. He was kind of right. Squawk box will be right back. Still to come, Pulitzer Prize winning author tom friedman from the economic recovery to global challenges facing business, we cover it all. Plus, former wells fargo chief Dick Kovacevich. How naughty was he . Oh boy. [ male announcer ] fedex one rate. Simple, flat rate shipping with the reliability of fedex. [ttdd 18003452550 can take you in many directions. Searching for trade ideas that spark your curiosity tdd 18003452550 you read this. Watch that. Tdd 18003452550 you look for whats next. Tdd 18003452550 at schwab, we can help turn inspiration into action tdd 18003452550 boost your trading iq with the help of tdd 18003452550 our live online workshops tdd 18003452550 like identifying market trends. Tdd 18003452550 now, earn 300 commissionfree online trades. Call 18886282419 or go to schwab. 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I think finally weve got the fed to give a vote of confidence to the recovery. I think the markets reacted accordingly. Theyve reacted positively to it. I think theyll continue to it. I think one of the things hanging in the way of confidence is if the fed can drain the qe excess reserves, thatll be another risk thats off the table for the future that would help, i think, the economic outlook. Its a good thing. So there are a lot of reasons why it happened yesterday. One, theres still 75 billion, right . Number two, you think it indicates the fed is comfortable ratcheting up the expectations for the economy. You think this was sort of a, you know, giving a nod to things an endorsement, if you will, of maybe a little bit better growth. And you think they have any idea . Should we listen to them in their forecast . Well, their forecast about as good as anybodys, i guess. We all miss some and make some. Theyre no better or worse than that. You also think it was you think it is an uncertainty how this plays out as this gets out. And it removes some of the uncertainty to start getting out . Were starting down that path. Thats going to continue to be an unknown. What does it mean to get 3 trillion that could come through the lending windows . And thats going to continue to be on investors minds until they get it drained. But, joe, i think the big thing in the room at the moment that caused the fed to do what they did is just the economic momentum that exists. It is really on fire here. You know, jobs are up and they revised up the previous months. Retail sales were revised up. Youve got housing hitting 1 million annual rate, industrial productions booming. I mean, i think thats the elephant in the room. Thats whats driving these markets higher is the momentum to the upside pushing stocks higher and pushing bond yields higher. Jim, weve got to go. Sentiment improved pretty quickly. I heard a lot of people saying no santa claus rally, the correction is here. A lot of people saying that. And we built it up quickly. Thanks, jim. By the way, we want to thank judd gregg for being here on this big day for the markets. Thank you so much for joining us. Pleasure. Thank you for having me. Well see you again soon. Pulitzer prize winning author tom friedman is going to be joining us onset. The American Dream is of a better future, a confident retirement. Those dreams, theres just no way were going to let them die. Like they helped millions of others. By listening. Planning. Working one on one. Thats what Ameriprise Financial does. Thats what they can do with you. Thats how ameriprise puts more within reach. [ male announcer ] how could switchgrass in argentina, change engineering in dubai, aluminum production in south africa, and the Aerospace Industry in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 70 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. Thomas friedman joins us for a special one hour event. From the state of the economy, the feds decision on Interest Rates and the taper to global issues facing business, we cover it all. Plus, the state of financials, and what we can expect in 2014 from former wells fargo ceo Dick Kovacevich as the third hour of squawk box begins right now. Welcome back to squawk box, everybody, im becky quick. Well, you know our top story today, of course it is yesterdays taper story and the ensuing rally after the fed made that announcement. Listen in. Starting in january, we will be purchasing 75 billion of securities a month, reducing purchases of treasuries and mortgage back securities by 5 billion each. Its important to note, though, even after this reduction, we will be still expanding our holdings of longer term securities at a rapid pace. With those words from ben bernanke, stocks took off. We saw the dow surge closing at a record high after gaining almost 300 points. A lot of this because of the tenyear and the action there, it was a very steady and slow increase for the yield. Dow futures down by less than 2 points. Were going to talk about all these issues. We do have to get out to andrew. Attending the yale ceo summit and he just grabbed a special guest. Andrew . Thank you, becky. The special guest we grabbed is steve schwartzman, the chairman and ceo of the blackstone group. And we can continue that taper talk conversation because you perhaps more than anybody have to have views and its going to have an impact on your business. Are you surprised . Actually, im not very surprised. Baa uz the market overreacted when he said what he thought is going to happen with the taper in june. And it ran Interest Rates over 100 basis points for actually no reason. He gave a series of criteria they were not met and people were surprised in september. This is pretty gradual. Its a good thing to happen. We have a bet going on at the table that joe is on one side and becky and i are on the other side about whats going to happen to the tenyear. Your expectation in the shortterm, you think the nonmove yesterday, if you will is just going to were going to stick around where we are . Well, over time the tenyear will go up. Thats not a bad thing if the economy is going up. And these things were normalize. You cant figure it out. In terms of how thin to slice the baloney. But over time, if the economy improves, rates will go up. And you think its improving at a good clip . Its improving pretty modestly. I think theres a lot of bullishness, which feeds on itself. The real world is moving ahead. Its not barrelling ahead. Now hold on, it sounds to me youre more pessimistic than at least the way the market is today . Well, when you actually, andrew, have an economy that grows at 2. 5 2. 75 and a stock market that goes up 27 , seems somewhat disconnected. Therefore you think were in for a correction come 2014 . Well, no ones smart enough to know that. But it seems low probability that markets continue going up at 17 . Okay. If thats the case, what do you do . Both from private equity standpoint, from a housing standpoint. Youre in just about every business these days. Right. Well, we like housing. Housing is a terrific thing. And one of the facts most people dont know is in the last 40 to 50 years. When Interest Rates have gone up. 26 years out of 26, housing values have continued to go up. Just the opposite of what most people think. And with the largest owner of homes in the United States and so weve seen housing in this last year go up in the cities were in. Somewhere between 20 and 22 . That will slow down. But itll continue to go up. Joes got a question for you. Steve, when history books are written a couple of years from now, will we look back on qe3 . Specifically qe3 as something that was helpful or counterproductive to getting the economy going, do you think . I think well look at it as modestly helpful. You know, each of the qes have had less impact. The first one had the most. I think that the fed was basically trying to fight the dysfunction of washington by just keeping the economy on an even kiel. And theyve had enough of it. And the inflation that everybody said was going to be there, of course, hasnt happened at least yet. So i think its time to slowly bring this to a close. And i think most people would agree with that. Steve, ive got a different question for you, in a post volcker world. We talk about the big banks all the time. But i actually think of you as possibly way more powerful than any ceo of a big bank these days given all the businesses youre in and the fact that in many respects, you are becoming the bank. Youre getting into auto loans, all sorts of other businesses. What does blackstone and all of your brethren ultimately look like . And how does that do you think youll ultimately compete, if you will, with jpmorgan . Well, nobody can really compete with jpmorgan. Theyre a hugesized institution and we are not a bank. We do not take deposits. We do not look for guarantees from federal governments. But what we do do and we have done for almost 30 years is look at interesting opportunities where the credit risk to the extent that were talking about credit as opposed to equities. Youre going to be providing more and more capital, lending more and more money through different avenues and vehicles. Well be raising money from institutional markets, some from retail. And well be putting it into things where regular people need the money or Companies Need the money. And in that regard, were finding a lot of areas where now for a variety of reasons like volcker, other institutions arent able to do that. I must say that through the financial crisis and its aftermath, weve grown three times. Right. These other institutions have shrunk. And we havent had credit issues. So perhaps our regulatory structure which exists, regulated by the sec is efficacious for us. I should note before we go, we are in the waldorf astoria. You had the ipo, which was a success. You have about 8 billion profit on paper. How long does it stay on paper before it gets realized . Well, i think its over 10 billion. Over ten now . And it gets realized, as they say, in due course. The Company Appears to be doing very well. Im under a quiet period restriction. So i cant really talk about it. Last week was a good week. Okay. Well leave it there. Happy holidays. Thank you for joining us this morning. Thanks, andrew. Appreciate it, steve. Guys, back to you. Thank you, both. Whats 2 billion here or there . Not following that closely. Nor would i be. Joining us for the next hour to talk global risks and the strength of the economy is Pulitzer Prize winning author Thomas Friedman. Hes also the author of from beirut to jerusalem out in paperback right now. Well be talking a lot about things. But tom, we know the economy here has stabilized a little bit. There do seem to be tectonic shifts when it comes to other areas of the world. You can think about a lot of places, whether that be iran, whether thats be whats happening in the middle east at large. One thing weve been talking about this week is ukraine, the decision they have to make between west and east and putin pushing them very hard to choose east. Hes making big grabs. Yeah, theres no question that putins feeling more and more isolated. And worried about being surrounded by the west as it were. And dangling gas to the ukraine and also twisting their arm. I dont think thats the one, though, that is the one that would really roil markets per se, some impact in europe. The big enchilada will be china and the south asia situation. And they do have to worry a little bit. I think the big debate thing im wrestling with, are we seeing the end of chinas peaceful rise . Thats one thing, to really throw their muscle around, or are we just seeing a frightened china. Which in some ways could be frightened by what . Frightened by themselves . Yeah, the huge task they face having all of these stateowned industries, knowing they have to make this transition to more marketbased economy. Knowing they better get rich before they get old because theyve got to go from two maternal grandparents and two parents all saving for the mac laptop of one kid to one kid paying the nursing home bills or two parents and maybe one grandparent. Theyre starting to recognize that, but maybe a little late. Well, its not just the one child policy. What they have to use up is how do you go from an Assembly Economy to a knowledge economy and censor google and bloomberg. Weve had our own at the new york times. How do you loosen up to have a true knowledge economy and not have the whole thing come unstuck . I mean, i dont know how xi shing ping sleeps at night. I prefer to use the term 1 6 of humanity. How 1 6 of humanity makes this transition to a more marketbased economy to something more consensual, thats going to affect everything to the cost of the value of our currency. By definition, there are a majority of the public in china still thinks that i think they have an idea that theyre not quite as free as the rest of the world, but they also understand that its not possible right at this moment for that to happen. Theyre behind the way things are being done right now. I dont know how long that lasts, really. Yeah. Its a good point that, you know, what you see when you go there. There is a real nationalist streak there. There is a strong sentiment that we are a country coming back. And were going to find our rightful place in the world. And that does give the government some extra leeway in administering pain. The danger of that, though, that can really flip to some aggressive nationalism if you get into one of these fights with the japanese we couldnt imagine not reading something that was true, for example, or not more than one person gathering in a place. We cant imagine. They havent had it, they dont miss it as much. There are about 300 million bloggers in china. So xi jing ping has to make a twoway conversation. And weve never seen this before. My own view is, were seeing more of a frightened china. I wonder when it turns in into you know, when you pass that point of no return. Two years, five years . Youve had the debate on this show. Ive seen it, two schools, one that says this place is going to blow. It cant go on like this. Its a screaming short. And then theres another view which says they have big problems but big tools. And i think theres a real tussle in the market. And both in the market and in the academic analytical community, which is going to be. One school does say, hey, you look at the empty buildings, the place is going to obviously implode. But another school is to say what if theyre just Getting Started . What if were just about to see the payoff of 30 years of building amazing infrastructure. That is another possibility, too. I guess its weird to try and figure out how we deal with them. Do you try to contain or appease them . And if youre scared. I never thought of them being scared. Right. I think the Bush Administration and the obama administration, which have really had a continuous policy, done pretty well. Draw red lines where necessary, build bridges where possible and its got to be subtle. You hope two of our planes dont run into each other again off the coast of the china or two ships off some god forsaken rock in the south china sea. Well have more with tom friedman after our short break. Series had nothing to do with tapering, but i saw some disturbing stuff on the news lately and i want to ask you about that. I know its not chemicals anymore, but its horrible. Anyway, well talk about that later this morning, breaking economic news, jobless claims, datas going to be released. Well have that reaction to the numbers right ahead. Ig business . Like, really big. Then expanded . 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Off camera, we talked about how we fix these political issues and entitlements. And we agree on this. Its a problem we cant do it in a bipartisan way. But if we elect three branches of government that are the same and they do it their way, thats not going to work either. We cant do it bipartisan, cant do it partisan. Its not going to get fixed. Well, its the definition of stuck, joe. And what sort of depressing about any of these recent political upheavals weve had, what you sense is no one gets punished for bad behavior, you know, and thats the real definition. They were elected by people right. Exactly. What some people view as bad behavior. I dont know who can break us out of this, but we definitely need to. I hope somebody throws a hail mary here. There was a glimmer with paul ryan and patty murray, wasnt there . Yeah, and i think what you see put him on top in wisconsin right away or in iowa. And that tells you a lot. Where the center of the country is and where it wants to go. I continue to believe that part of what happened in the market, 90 of its bernanke. But could we argue that 10 was actually they did this mini bipartisan deal. Yeah. I feel the country for a long time felt like were children of permanently divorcing parents. And if that isnt a downer in terms of longrange thinking, longrange planning, i dont know what is. How much of that factors into the market, i cant say. I do believe a huge stimulus would be if the parties did get together and still did some kind of grand bargain that would allow for shortterm investment and infrastructure. Every time i come up here to do your show or visit my own newspaper, you know, you go through penn station and come up that escalator. They were invented before suitcases. You know, just like, who invented those escalators . Thats true, you cant get a bag its flying from the jetsons to the flintstones. And more and more everywhere you go you feel the sense of crumbling. A slow decline. You know what allows us to do that, 3. 5 gdp. Yeah. And it solves a lot of our entitlement issues. And it solves a lot of income disparity issues. It solves so many things. If we would have a singleminded focus on how to get the 3. 5 . Not from government, from the way its done. The way we did it in the past. And i dont i wanted to ask your opinion on the latest discussion that the president introduced with income disparity and how to do it. I think the way to do it is by growing at 3. 5 . And that sounds like a trickle down 2. 0, but you need to generate wealth and prosperity in the private sector that hopefully i dont see it, the minimum wages and unions are not going to do it, are they . I think we need to be discussing both but in a really intelligent way. On the first side, i think were in the middle of a huge inflexion point. We talked about this in the show. Underneath is a subprime crisis in post 9 11, the wiring and plumbing has changed in the last decade. A lot of the walls were blown away. And the central socioeconomic fact of that and wed talked about this last time i was on the show, average is over. And the thing that sustained the american middle class for 50 years, the highwage middle skill job is gone ksh im a big believer. I want a net, but be able to afford that net. Its all focused on what government can and cannot do. Rather than stimulating, nurturing and inspiring people to go out and start stuff. You feel underneath all this bad stuff. Theres still like 2 growth whatever. What is it . Thats all the people out of washington who didnt get the word. They didnt get the word that chinas going to eat our breakfast and germanys going to eat our lunch. And they clap rate on stuff. If we unleash more of that. Are you on the Editorial Board . No, i dont there are we have people come in that talk about the Energy Revolution possible in this country and you talk about middle level goodpaying jobs. There are people who think it wont just happen in energy but because our input costs will be so much lower well narrow, you know, the advantage of labor being cheap abroad. Well narrow that because our energy could be so cheap from this revolution. Not only that, its also the time you need to get goods from the floor to the shelves totally against shale, totally against fracking. Joe, ill let them talk about the editorials. Im all for shale and fracking. Theres no one that wants to do it in a way thats not thats redundant to say. Im not sure about that. Really. Actually, there are. But matt damon made a movie about that. I think theres a lot of small, you know, wildcatters in this field. But to your bigger point, i think were actually we are so close to greatness. I think youre right. We could do it again. A few big things. If you look at all the trends going our way, we are so close. I really believe that. And whats holding us back are our politics. 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When we return, much more with tom friedman, plus the jobless claim numbers. Well head to chicago and the trading pits and get the numbers after the break. When we return, former wells fargo ceo Dick Kovacevich on the fomc meeting and what it means for 2014. Squawk box is back after a quick break. 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. Serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. Common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting and increase in psa. Ask your doctor about axiron. Welcome back to squawk box, everybody. Were a few seconds away from the jobless claims numbers. Weve been watching the futures ahead of that. The futures are down, but barely. Dow futures down by about two points below fair value. This comes after the day of a major rally. Dow up almost 300 points after the announcement it will begin a taper in january weve also been keeping a close eye on the tenyear. The yield is creeping higher. 2. 922 . Its behaved very well and thats why you saw the big rally in stocks yesterday. 2. 922. Were getting closer to 3 . Still, you have to say this is a wellbehaved bond market. Claims data is going to be important. Rick santelli is standing by at the cme in chicago. Go ahead with those numbers. Initial jobless claims popping on the screen at 379,000. So its up exactly 10,000 from a very slightly revised 369. Continuing claims moving from just under 2. 8 to just under 2. 9 million. You know, i guess one could call the tenyear behaved. But i guess that would be like calling a lion behave that was in a very tight cage. Im not sure im buying it. But remember, they will be able to widen those bars on their own. The long end of the marketplace is not under the thumb of the feds program manipulations. But well have to see over time. As far as the equity rally, you know, who doesnt like santa claus, right . One beard to another, anyway. Back to you. Rick, thank you. What would it take to get the lion to push through some of those bars . Well, i i couldnt tell you precisely one. But i would think that the biggest thing in my opinion that all the world central bankers fear any kind of decorum of actual success. Once the velocity of money and the economy picks up, my guess is youre going to see a very large normalization of rates. But where i think many went wrong five years ago when they looked for these dynamics is they never thought it would take so long to right the economy. And for all those that think the economy is cooking in grease, ill say the same thing i did yesterday, we basically zerped out at the end of 2008. If you listen to smart people like bill gross or ben bernanke 2015, 2016 before implementation. Eight years of zerp for an economy if it was a textbook case in economics would probably not be graded as a stellar economy. Yeah. Thats true. Thats my view. What do you think of the gold move . Down another 30 today sitting at 1,200. You know, theres so many factors. I remember trading gold 79, 80, anybody who tries to peg gold is one or another. It has multipersonalities, its a schizophrenic commodity. Sometimes its an economic indicator, sometimes its an Interest Rate scenario where a sterile commodity and a rising rate environment loses its luster. Maybe it just has all the wrong types of Investors Holding it. In the end, i think the original gold moving high was an end of the world trade when youre better with a bag of beans than a bag of gold. Well see you later. Great. Joe asked you a little bit about syria earlier, we never got a chance to address it on air, though. How big of a problem . Look, were out of the situation but youre right, you watch it every night on nightly news. Is it good we did that . Lets talk first of all about syria geographically. Okay. Before all this happened, one of the points i tried to make was that when libya has the resolution, it implodes. When tunisia has the revolution, it implodes, syria explodes, goes out. Because all the communities are connected to communities around it. Theres one way to fix syria and i think only one way to fix syria. An International Peace force has to go in, take over the country, take down the bad guys. And create a political transition that will allow citizenship to emerge, probably a 20 to 0year project. And because everyone knows that, no one wants to take it on alone. Ultimately the community will have to do it, i believe, because syrias such a keystone for the whole region. Youll have a little afghanistan now with crazy really out of control jihadists coming in and out of syria going back to their home countries. Right on israels border. Ultimately, i think thats probably where well have to go. But right now, nobody wants to step up to the challenge. With the way it played out, we felt like, you know, we had accomplished something in terms of, you know, like maybe we do, maybe we dont get neutralized all those chemical weapons. But in the process, the misery didnt change. At the time people said is it different to die from a horrible bomb or from chemical weapons . And now were seeing stuff on the nightly news where the situation and saudi arabias totally mad. Theyre freaked out. The core problem, though, theres no country in the world that can be a democracy with the level of sort of tribal and sectarian issues with a country like syria has. I was in syria in june, late may working on a documentary on a climate Environmental Issues that led to the arab spring. And we interviewed the Syrian Army Commander in the north. And at one point, he introduced his Leadership Team to us and it went like this. You couldnt make this up. My cousin, my brother, my brother, my cousin, my nephew, my son. How do you build a Democratic Politics only with a long transition. We dont know who those guys are in this case. We havent determined if these are people we want to be working with or helping. Yeah, it turned out with the arab spring, people wanted to be free for Different Things. Some wanted to be free to be more sectarian. Some wanted to be more islamists, and some wanted to be democrats. But there was no real consensus. And without an army of the center that can really think about whats going on in the middle east. Basically whats been happening is were seeing an entire region go from vertical to horizontal where it can be governed by the different communities reaching a social contract. How do we live together as equal citizens . Now, when you go from vertical to horizontal from britain, france, dictators and kings to horizontal, you either better have a military that can make that transition, thats egypt, you better have a midwife to help you through it. Or you better have a mandela. If you dont have a mandela and dont have a midwife and dont have a military, youve got syria. I think about the progress weve made around the globe, the last five years were rough from an economic point of view. Europes looking better, americas looking better, things have gotten better on an economic perspective, but are we safer or less safe just from geopolitical standpoint . Well, a couple of things. One is we are in a world where lets go back to the middle east for a second. A region that is incredibly pluralistic region with no pluralism. All these minorities, sects, we forget what freaks we are. We forget that we have twice elected a black man whose middle name was hussein who defeated a woman to run against a mormon. We are freaks compared to the rest of the world. And what we do is really hard. And we are working on it. A work in progress. Look at the middle east and a syria and you think how far theyve had no great Founding Fathers who wrote an amazing constitution. Theyve had no great civil rights leaders. Theyve not been through that process. Thats an incredible source of strength, to be a Pluralistic Society that can manage immigration if we ever get an immigration bill through, to be able to take advantage of the worlds greatest talent. It goes back to what joe and i were talking about before, which is were just a few Big Decisions away from greatness. We have energy going our way, pluralism going our way. We have an innovative culture going our way. Its washington, d. C. And a politics of hyper partisanship thats holding the whole thing back in my view. And all this is happening as thats happening. They go out and start new companies, you know. And we always when we look back, democracys messy, right . And it is. But theres messy and theres messy. Were prodding along slowly, arent we . Its so suboptimal and gets to your point, with our generation retiring, the baby boomers, we know what erskine and judd gregg were talking about earlier this morning. We just cant keep going along riding on our reputation. Right. Its the whole question of are we exceptional . You know, being exceptional is not like an honorary doctorate you get and get to have it for the rest of your life. Its something to earn and reearn every year. And were sitting back with our feet up. Exactly when the rest of the world is putting on their shoes and wants to run faster than ever. Well, up next, what the taper means for financials. I have a guy who knows a little bit about financials and that is former wells fargo ceo Dick Kovacevich will join us after the break. Were watching target this morning. The retail giant says payment card data was stolen from 40 million customers. No the to worry, thats dont worry about 13 Million People losing their insurance. We dont worry about 40 million. Starting ining on a busy black. Investigators believe the data was obtained from software. Not a big number. Not a Fake Software installed on machines that customers use to swipe the cards. 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If were making progress in terms of inflation and continue job gains, i imagine well continue to do probably at each meeting, a measured reduction, that would take us to late in the year. Not certainly not by the middle of the year. If the economy slows for some reason or we are disappointed in the outcomes, we could we could skip a meeting or two. On the other side, if things really pick up, we could go a bit faster. Dick kovacevich is the former chairman and ceo of wells fargo joining us now with reaction. Was it a little bit of relief that we at least are Getting Started, dick . Absolutely, joe. I think its a very important step. I think if you look at whats happened in our economy, its been, as you know, joe, its been growing at about 2 . Thats far below the 3 that weve been growing for the last 50 years and even further behind the 4 that we grow after a recession. And people are confused about why that happens. And i think its pretty obvious why its happening. And that is because the private sector Decision Makers have had little confidence. Little confidence in our government, little confidence in our Monetary Policy, and the reason im sure of that is because theres trillions of dollars on corporate Balance Sheets and quite frankly individual Balance Sheets, as well that is earning zero Interest Rates. So you have record high liquidity at the highest opportunity cost weve ever had. And the fed says its going to keep Interest Rates at zero for a couple more years and still that money sits there. And the fed comes out, has been coming out every other month saying the economys not very good. We what were going to do qe1 and thatll improve things and were at 2 and they said, that didnt work, well do qe2, and that didnt work and qe3 and were still at 2 . And that doesnt increase confidence, it decreases confidence. So the fed now saying that the economy is doing better and we can taper, increases the confidence level of people. And i think we saw that in the stock market. The litany of uncertainties for ceos, weve gone over them a lot over five years and were talking regulatory issues, the looming entitlement issues, tax policy, all those things we think of, you can sort of call some of that activist government to some extent. But do you include the Federal Reserve and qe3 as actually counterproductive to the economy recovering more quickly . I asked swarzman that question earlier. He said itll be a mild positive qe3. Do you actually think its one of the Things Holding people back from investing in the private sector . Yes, because it was being justified by the fact that the fed was saying that the economy isnt doing well and is and implying that its not going to do well. So we need the continuous boost. Do you believe the fed, dick . Theyre forecasts have been no better than anyone else. But you say because people believe the fed thought the economy was weak, weak enough to need qe3, thats why people werent investing. Exactly. And because they dont notice the feds forecast have always been wrong. But its not just the fed, though, joe. Weve let other confidence building going on. As you know, weve had a government shutdown, havent had a budget for four years. And not only a budget, but for two years. I think the debt ceiling is going to get passed. And lets look at our economy, it is true that our economy is still only growing at about 2 . Not much better than it has in the past. But i believe the base, the base of this economy is much more solid than the 2 indicates. And, in fact, i think the probability of the economy improving from where we are here is much greater than the economy going down. And that was not the case a couple years ago. And the reason is that the there are very Important Industries that were actually declining by double digits a couple years ago. Like housing, like automobiles industry, like residential and commercial real estate that are actually increasing today. Japan, thats been stagnant for 20 years is actually growing. Europe appears to be stabilized. Mergers and acquisitions are starting to occur. The ipo market is actually red hot. None of those conditions existed before. I think we now have an environment that if we can keep the confidence moving. And there are things we need to do to keep that going. But all three of the important ingredients, the economy itself, the Federal Reserve and our government have moved dramatically from where theyve been. And that is confidence building. So what do we need to do . I think that we need to immediately act to bring the trillion dollars that is on corporate Balance Sheets overseas today, bring it back home and get it to work. And you do that by charging a 15 surtax. And that 15 on 1 trillion, 150 billion can be used to reduce the deficit or in combination might be used to fund an Infrastructure Investment which some democrats have been wanting to do. And secondly, we should recognize whats happening on the energy front. And its very, very important. I think we should approve the keystone pipeline, not just because it improves employment. But we have the opportunity its about national defense. We have Canadian Energy increasing. The United States will now be the largest producer of energy in the world. Which hasnt been the case for 50 years mexico just passed a law allowing private sector, probably some u. S. Energy companies to extract the reserves we know that already exist in the gulf of mexico. And we will no longer be subject to the blackmail of rogue states like the venezuela and iran and we dont have to incur trillions of dollars of expenses in taxpayers money to be able to be involved in civil wars in the middle east. So theres a lot of things we need to do to keep this confidence building. Wow. Those are some pretty good guidelines, though. Were all feeling pretty good at the dow, 300 points will do that to you. We appreciate your time this morning. Thank you, joe. Coming up, a chicken breast super bug. Beckys favorite stories. A result of a test by Consumer Reports could have you changing your order. A few headlines for you this morning. Facebook Ceo Mark Zuckerberg is going to sell shares worth about 2. 3 billion. The sale will reduce his voting power from 56 to 56. 1 from 58. 8 . He still has about 62 of the Voting Rights as the controlling stockholder here. Part of this is being done to pay taxes on 60 million options that are being exercised. Part of it is being sold for profit. You have index funds that are going to have to be buying this stock. Also, Darden Restaurants are looking to sell off the red lobster units. From lobster to ducks. We both the golden goose, the networks may have been slightly cooked. Phil robertson has been put on indefinite hiatus into reaction to some antigay comments he made. From ducks to chickens. About half of the raw chicken breasts carried antiresistant super bug bacteria. The group said it tested for sex types of bacteria in 316 raw chicken breasts. Almost all sampples contained bacteria. Use the lesson dont eat raw chicken. Cook it. Cook it well. Cook it so its almost not juicy. Wash your hands. Were going to finish things up with tom freeman and im going to come to you out of left field, i think. Squawk box will be right back. Stick around to squawk on the street to see at carnival joins the gang at post 9. Squawk box will be right back. Open to ambition. Open to bold ideas. Thats why new york has a new plan dozens of tax free zones all across the state. Move here, expand here, or start a new business here and pay no taxes for ten years. Were new york. 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Janet napolitano is going to lead our delegation over there with some of our openly gay athletes to almost send a message but almost to tweak, to some extent on whats happening there. One of our columnists said it might have been better if the president went with these athletes to even emphasize it even more that sending a this is almost just like a, you know, poking someone in the eye rather than engaging with them on the policy directly. What do you think . Joe, this is a long story. It goes back to nato expansion, which i was an opponent of for some of these reasons. Lets go back to syria. Theres no big problem in the world today that we can address without russia. The problem is postnato expansion, hey, running against america is really good policy here, these people want to keep us down, et cetera. Its just not a healthy situation. We dont have time but do you think the president should be going . Is this the right way to its hard to say. I havent thought that one through. All i know is we need to find a way to work with russia. Its just going to make him mad, i think. I dont know. Were tweaking we need russia on every big problem to resolve it. Tom, i want to thank you so much for spending the time with us, its been great. That does it for us today. Make sure you join us tomorrow. Right now its time for squawk on the street. Good thursday morning. Welcome to squawk on the street. Im Carl Quintanilla with simon hobbs and kayla tausche. Cramer and david are off today. The dow surges nearly 300 years. Futures indicate we are going to give some of that back this morning. The 10year note near the highs this morning. Gold is being absolutely punished. A sixmonth low down more than 30, did briefly trade below