Transcripts For CNBC Squawk Box 20131223

Analytics reporting bargain hungry shoppers bought less. Sales fell by mid single digit percentage at brick and Mortar Stores on friday and saturday. That compares to the same days last year. But, heres the important part, it does not include online sales which of course have been the story of the season. Wellknown industry analyst dana telsey will join us with her thoughts later this morning. In the meantime, Steve Weissman has the headlines. Apple announced it has signed a longawaited agreement with china mobile to sell iphones to the worlds mobile phone users. It could add billions of dollars to apples revenue. It will start january 17th. China mobile will begin preorders on wednesday. Eunice yoon will join us. Tiffany must pay swatch 449 million in damages over a failed joint venture to produce and market watches. Tiffany is cutting its full year profit outlook. Boeings unionized machinist workers will vote january 3rd on the latest contract. Where boeing makes the 777 voted two to one against the companys initial offer. Under that deal production of boeings next jet would have remained in washington state. In the aftermath of that boeing said it would look for other places to build the 777x. Steve, todays the day. What is today . The deadline in washington. The day of the day, the deadline for americans to sign up for Health Care Coverage under obamacare. Unless youre one of the groups that somehow got some type of exception to the mandate, and its all very confusing. The white house says the website is going to be able to handle the lastminute demands. Well see. Theres some americans that will get more time. Theres a hardship exemption to prevent them from signing up for it at all without a penalty. Catastrophic used to be available to people under 30 and then there are the people who have encountered problems with the website, the interesting statistic is going to be whether there are more people or less people that are going to be covered. How do you prove that you tried and failed . I think that they know that you were on the website. If the website is messed up like they say i cant imagine anyone who doesnt want the penalty will say i tried. I would say i tried and i failed. Did you see what the journal said about that . Thats. An exemption on oe obamacare. New tie and new shirt. Big day. I thought to honor you were right about the taper and you. So wrong. I know. I know. You didnt say that last week. You didnt cop to that. I know. I was bowing to you about i just let it happen. I didnt comment but i bu to him. I do bow to him. But you because he was right. When you had a chance to back him, you didnt believe him about december. I i was struggling with it. I was struggling with it. It all made sense. He was the guy. In fact, it even got to the point where his reporting aside he just said heres the three things that needed to be done. I didnt even need him to know that they were going to taper at that point. I have to admit, you know, you try to read the sort of tea leaves and whats going on at the fed and then you try to read the tea leaves whats going on inside steves head which is a separate issue. I thought in my own little way that he was actually backing down a little bit in the days ahead. Just at the very beginning. He looked a little anxious and therefore i got a little anxious. Therefore, thats how i got to that result. It wasnt his fault. I saw something the other day, that was him getting a bunch of hairspray in makeup. I asked you thought that was weird. It was like alice in wonderland. It was a lifetime supply. A large can. They were putting hairspray. Then i thought that was not hairspray, that was some type of wax. No . No, it was hairspray, joe, because, yeah, there is hair to spray there, joe. Okay. Joe, are you feeling inadequate or insecure this morning, you have to emphasize the differences between us. No. No. No. That you have this healthy, robust head of hair there and i am folicly challenged . That was not enough stimulation i just gave you about about the other thing. Youre right, i should have taken them in context. I struggled mightily to come up with a word without, you know, saying something bad. Steve, always remember. The reason that there isnt hair up there is because he has more testosterone. That is true. Do you know about that . No. All i know is that somebody left some rogaine on my desk, three boxes of it. No, that wont work. No, if you have it, i want it. I still have a shot at saving i think it might have been steele. I have a shot at saving what i have. We have other news this morning. The situation around target and the fallout of that data breach. The wall street journal reporting that the retailer suffered reduced customer traffic over one of the busiest shopping weekends of the year. Saying that the number of transactions at target fell 3 to 4 compared to last years final weekend before christmas. Meantime, this may be the bigger story actually over the weekend, the nations bigger banks have been monitoring the situation and responding to consumers concerns on saturday. Heres whats going on, chase, if youre a chase customer, i am a chase customer though im not affected by target, they are limiting debit card accounts to cash withdrawals to 100 a day and 300 a day using the card. The bank calls it a precaution from taking money from customer accounts. Because of target . Yes. If you had shopped at target during this period, theyre reducing the amount of cash you can take, theyre reducing the amount of money you can take. If youre outside of the country with a chase card, you cannot use it at all. I have to say citigroup is not doing this, bank of america is not doing this. Nobody else is doing this. This is not for the protection of the individual because guess whos on the hook for that, the bank anyway. This is for the protection of the bank. I know enough people and looking online, whoa, it may make sense in some regard but youre a customer. And to think if this theyre doing it to cover their butts. Yes. Cya situation. And which is fine except for the fact that if theyre going to react this way to a breach like this, what happens if something really bad happens . What do you think of that, steve . I think you make a really interesting point. It hadnt occurred to me that thats really about protecting the bank and not the individuals. This is a much larger issue. Now we know if someone did do that, you know who has to pay for it. It would have been the banks. The banks would always have to pay for it. They guarantee this. Theres a separate issue which i believe visa or other card issuers, theyre setting a new date where they may try to put the retailers and the banks hooked to the retailer on the hook. Theres a whole thing going on. Doesnt American Express guarantee everything . Visa. Used to be a 50 thing. Are they both zero now . No, its now all zero. The other thing youll see i think over the next two or three years, in europe if you ever look at a credit card, it has a little chip on it. That makes it much more secure. None of the u. S. Banks have ever wanted to could it because of the cost of putting the chip there, in all of the retailers having to change out their devices has been so high and the fraud has been so low that theres not a need to do it. I expect over the next two or three years whats your thought . Are you worried about online fraud . Im worried about online fraud. What do you do . Do you buy things online . I buy things online constantly. How do you protect yourself . I dont. I have we have a chase account is one of our accounts. I dont want to say where all the accounts are. I assume that, you know, if theres a problem, the bank will take care of it. Im hoping to be part of the great wash in terms of theres so many people out there that i never get targeted. We talked about this on friday. My atm card was skimmed at one of those my Corporate Card was. My atm card at bodega and all of the money taken out in israel. Over a month they took out a little bit of money every single day. I had a guy go and buy a bunch of gas and kids toys with my Corporate Card. Thats like a new york story for you. Youre getting cash from bodega out of an atm at bodega. Thats a business i wish i had been in, by the way. The off premises atm machine. What a business is that . We have cars and we have banks and they have like, you know, satellite offices that you can go through. Right. Its all very orderly. This is the convenience of every fruit stands. This is the convenience of every single block having an atm machine. Fairly convenient. Lets check on markets this morning. What a great santa claus rally we had last week with the strangest ignition switch. You predicted a stronger market. 300 points. And more the next day. Today, more. Another 80 points, steve. Pretty sure the fed was pleased with the market reaction. Its almost like pretty sure the fed was. The first time around almost Spring Loaded the second one. The first time they didnt do it, that friday. Initially it was okay on the thursday and then the next day it sold off. It was like, wow, why didnt you taper . Talk about glass half full, the fed will do 460 billion of qe. No, its nice. If it goes on a decline every meeting. We have that. You have both. Oil markets this morning looking 98 weve been right around 100. Its been kind of like not that interesting to watch. Its been between 90 and 100. The ten year, im not stuck. My thing was 2. 873 and then by the end of by the end of friday i wanted to do the close today. By the end of friday 2. 891. That was less than 2 basis points. Youre very close. The spirit of the law was that it didnt move. It was pretty orderly. The dollar which by davos, this better be lower even though its obviously franks are different than euros. Thats. 368424. Are you ready to predict next year the year is the euro will stop. If germany didnt keep currencies low they wouldnt be able to sell to all of the countries that theyre giving credit to. I dont know how it works over there but its all legal apparently. Now this guy is out, this russian buddy of yours. Khordofsky . Yes. Is he talking . I used to run into him at a restaurant on the way outside of moscow. Used to be hanging out there by himself. Walk up to him, talk to him and say hello. You talked to him in russian . I did. He was a really nice guy. At one point westerners were arguing to me that he hadless oil company the best oil company in the world with the best audited accounts that was better than exxon, better than bp. He became a threat to putin. Because of the profit motive, he created a westernize the oil company and they took it in one of the biggest charades of a government. And how much of putins 100 billion net worth is i think a lot of it. Now ross nef owns all of those assets and he may have to turn that around if Oil Production doesnt keep pace in the former soviet union. Over here you take advantage of someone on a better deal. Over there you put the guy in jail and take his stuff which is so much better. Easier. So much easier. So much cleaner. Theyre acting in their own selfinterest. Yeah. Yeah. Lets do global news. Chinas inner Bank Borrowing costs spiked to a sixmonth high. Equity investors appear to be shrugging off the rise of rates saying liquidity has seasonal factors. Well talk with eunice. Eunice is here. Shes right there. Im looking at her over there. Wow. Excited to see her. Eunice is here on the other side of the wall. Get a camera on her. We have eunice there. She will give us a bit of the global markets. Thats not eunice. That is time for the global markets. Thats not eunice. Carolyn roth standing by in london. Good morning to you guys. Lets take a look at the european markets. Modestly high. Continuing on the gains we saw last week. In fact, euro penal markets saw their best performance in eight months. Stocks are up 2. 1 . As we head into the holiday shortened week volumes will be quite a bit lower. Thats why we could see some choppy trading. Zet kra dax is close to 9440 points and the ftse 100 seeing some nice gains from around. 4 . If we look at the sectors, Technology Stocks are doing well. One of those is arm holdings in the u. K. You can see here up by 2. 6 . One of the best performers on the footsie 100. This company is a major supplier for apple. Theres a report out about a really good christmas elf here in the u. K. The stock move youre seeing today, this is closely related to the deal between china mobile that youre going to talk to eunice about. Swatch group up by. 6 . This is a swatch Group Winning the battle against tiffanys in the west. Tiffanys ordered by a dutch Arbitration Court to pay swatch 450 million. This is because of the failed jv, joint venture back in 2007. Swatch is saying tiffany moved too slowly to launch and promote the products. Tiffanys, as you said, cutting the guidance. Back over to you. Thank you, carolyn. Joe . Yes, steve. I wanted to make sure youre paying attention. Im not. Im going to intro eunice. Yes. Not only did we talk about seeing but we said there is eunice and it wasnt you. We mentioned apple is one of the corporate stories. The company has a long way to deal with cnbc. Eunice yoon visiting from beijing joins us on set. 700 Million People. 750 million. Possible apple customers . Thats right. Thats right. So thats why everyone says its a really big deal. People are very excited, right . Long awaited. Everybody is waiting for it. Apple went up a lot. It did. People say this might be something. Thats the thing, i wonder how much is already in the stock. I dont know. But that is huge. How many customers do have they now . Oh, 1 for iphone users . Yes. 45 million. Those are people that buy the phone unlooked. Those are unlocked for china mobile users. 23 last year . 23 last year but it was 45 Million People go to hopping congress, buy an unlocked iphone, then theyll go back and then theyll hook up with how much does that cost . That is something that everyone is wondering about. Whats your guess . Same price as the u. S. . Cheaper . They dont sell to china but china unicom can give away iphones for free but only if you buy about 1,000 worth of minutes so the pricing has to be at least as good as that. I know this is a hard question. How many people are on par with u. S. Incomes in china such that they can lets say it costs the same in the u. S. How big is that market in china . Its pretty big because it costs 850 to buy an iphone there. Its not something you would bias a middle class income person, people see it as a status symbol. They are willing to save up. Thats been going on for quite some time. People who buy their phones through china mobile will now have the opportunity to buy iphones. The difference between these are their two major carriers. You have china mobile who has a reputation for not so Reliable Data Service but very good voice service. So i7 not sure what will work better. In china people prioritize voice. Now theyre in this position where a lot of people are talking about, wow, now i can upgrade to another phone. It doesnt have to be a blackberry. It doesnt have to be an an droitd. It can be an iphone which a lot of people like. The estimates are that it could boost the number of iphones anywhere from 15 to 30 mill next year. A nice sam stung is real good but it doesnt hold the same theyre almost 3g. No 4g. That is really key. Like i said, china has this Bad Reputation for the service. China mobile doesnt have the 4g . Nobody does. Everybody is getting their licenses. The 3g for unicom is better than nor robert. Do we believe its already priced into the stock . For the past six months this was going to happen. I would assume the stock already moved on that. It was interesting. When i was checking online to see what the reaction was, there wasnt as much reaction in china among users as i would think. The last couple of weeks weve been hearing, this is going to happen. No, they denied it. Not really. Joe, do you want to ask . I have a question. A bigger question because im such a worldly guy. Im afraid. Yeah. Be afraid. Is this shoe guy usurping the other guys economic role . Now hes more powerful . Yeah, thats what a lot of people are talking about. It was the other guys cameron. He goes, no, its going to be my zblaert right. Basically everybody has been talking about it. Really . Yeah. Is that theres reports about it. You. You have to find out about things on posters, whats going on. Somethings happening here. Basically. You have to read a lot of tea leaves. What about the rise in Interest Rates there and how chinas going to stomach whats happening here in the United States with tapering . Well, its strange because people were really, really creeped out in june when we saw it happen. The level of fear isnt so big. Theres something natural about companies coming in. Theres a demand for funding, but the central bank did come in and inject liquidity relatively quickly, even though so there isnt quite as much fear as there was in june so is 14 a year when you expect more economic mobilization in china, both with the currency right. And there were some moves that were just recently made about Foreign Companies in china. I think 2014 and Going Forward just seems as though there are a lot of signals from the top that they do want performed. A lot of that is selfinterested. Now china is in a position where they actually need the reform in order to really move their economy forward. So its not as though by changing the valuation, the currency is the case in russia, too, joe, you were talking about that. Russia reformed economically when the economy went down. That was the only time. When the economys great, the state comes in and grabs everything. Theres no reason to move. Right. All of a sudden you have a dip down and that motivates economic reform from the top. Where do you live . Do you live in a high rice or something . I do. Its really expensive. Are you fluent in mandarin . No. Over there if you dont speak mandarin and canton, can you get by . Yeah. Yeah. Even you could get by. Really . Yeah. You should come over. Youll be walking around. Im clueless. Youve been there. I have, yeah. Im scared. Did you go to main land china or hong kong . Mainland chien nampt shanghai, beijing. You understand some . Yeah. What did you think . The scale of it was amazing. You could feel it. You could feel it. I was about to say its in the air. Theres Something Else in the air thats not so great either. Yeah. Theres something remarkable thats going on over there. I find it so funny because when youre reporting there youre constantly told this factory is in some little town, its really tiny farm land. You go there and then how many people live in this town . 6 million. I never go down. I had never heard of that and the first time i went there, this was eight years ago. You walk in and there are 10 Million People. How many people understand what youre saying would you say . I dont know about percentage. There are a lot of people who understands. Because its sort of a language they take . Yeah. And theres a lot of emphasis on it for education. Im just wondering you should come. I was recognized in the elevator at the hotel where. By three or four people. Ed asner. Did you know mary tyler moore. There were several analysts. Theyre watching us over there, joe. They do. They think youre ben bernanke. Thats true. I got stopped. Yeah. Yeah. No way. Way. Way. Did you think of that . Yeah. But dont say that. Are you hearing things . Im hearing things. Im scared. Were in this. Too big to fill. There you go. Eunice yoon, thank you for coming in. Great to see you live and in person. Coming up, were going to talk about how some companies are tracking every time you sneeze or complain about that nagging cough in flu season plus trouble for investors trying to cash in on the bitcoin craze. A little bit of squawk news. The denver broncos, new England Patriots and Cincinnati Bengals were crowned afc champs yesterday. All four division championshipships remain up for grabs. The eagles beat the bears 5411. Congrats to peyton manning. He set an nfl record with 51 touchdown passes in a single season reclaiming a record that he set back in 2004. Thats a good question. Tom brady, before we go to break though were going to check in on the National Weather forecast as many people travel for the holidays. Mike seidel joins from youre in milwaukee today. Good morning. Reporter good morning, andrew. Well, back east where you are its still a spring morning. Its 60 in central park. Yesterday 70 was a record or 71. Thats only the ninth day youve hit 70 in new york city since 1871. Now this cold fronts going to come through the northeast. We have rain from the northeast. Atlanta has had soaking rain since yesterday. There will be some flight delays again today. Out here in the midwest, its winter as usual. We had a record snowfall yesterday here in milwaukee of 8 inches. All of this area will have a guaranteed white christmas. Cold air comes in. Temperatures in the big cities will drop into the 40s and a late start for the entire country. The only spot that will stay relatively mild will be south florida for christmas day. Few showers in miami. Temperatures 75 to 80. Amazing highs over the weekend. Augusta, georgia, alltime december high of 83. We also had tornadoes, we had flooding and those two combined unfortunately led to at least eight fatalities so thousands without power, guys, in new england from the ice storm. Thats a look at your national forecast. More squawk box comes back at you after a break. [ male announcer ] for every late night, every weekend worked, every idea sold. You deserve a cadillac, the Fastest Growing fullline luxury brand in the United States. Including the all new 2014 cadillac cts, motor trends 2014 car of the year. Get the best offers of the season on our Award Winning products. Like a 2014 ats and srx. Hurry in, offers end january 2nd. Welcome back to squawk box. Time now for the executive edge. A Public Relations executive ignited a big online furor over the weekend after posting a message on twitter joking about aids in Africa Justine Saco was fired. She was ashamed of her comments. She made that tweet on her way to south africa. She got on the plane and then got fired when she landed. Guys . 12 hours. What do you make of that . 12 hours. We had the lieuy lemon guy. He founded that company and said something. Said its not the pants, its the shape of the body. You have duck dynasty. Im afraid in talking about these things im afraid i could be insensitive and offend someone. Im afraid to even talk about it at this point. The one thing i will say is that george will said the newest entitlement in our country, the newest entitlement is youre entitled to live your entire life without ever being offended by anyone. I feel thats mine, im entitled to that. Watch your butt, sorkin. Well, i knew her. I know her. She worked with barry dillner for many, many years. It used to be that you would become world famous by some of your comments. Shes in every newspaper by something she tweet the. This is a new world. A new scary world where there should be career insurance. That might be the next thing that we get. You better buy some. I better buy some. The opportunities to put your foot in your mouth have gone up tremendous tremendously. The fact that you can type it. She also said some other things on twitter that werent so hot previously. I saw that. If youre in the pr business, its a tough thing. I had a great experience with her. You know, it used to be that lenny bruce was sort of expanding things and it was kind of cool back then to say politically incorrect things. Now its come back. I will say like jon stewart said something about, i dont know, duck dynasty. Wow, its gotten really insane. Im not saying he was defending the duck dynasty guy. He was saying it was ignorant and i disagree, but there but for the grace of god go a lot of people that push the envelope on whether its comedy central, saturday night live, heck im saying heck now. Any seinfeld, if we could discuss the content of the episode, just discuss the episode itself are grounds for firing. Any number of things. Anything. Im wondering, when does there begin to be a push back, andrew. Thats what im wondering. We will see and we will wait. We have a couple of other stories to get to. Bitcoin apparently now one of the biggest buzz topics of 2013. A story in todays wall street journal saying lenders are sharing the enthusiasm about the Virtual Currency less. Companies that are trying to cash in on the craze having trouble getting regular Bank Accounts to start their businesses. Does that make sense to you that bitcoins are being used for illicit purposes. Why do they need Bank Accounts if theyre trading in bitcoins . Exactly. Isnt the bitcoin itself a bank account . In some ways. Everything is so volatile. If youre taking bitcoin as your payment, right, and you want to open a dollar bank account, it kind of makes sense that they would have trouble opening those accounts. I dont see theres a reason why you need them. Is bitcoin, andrew, still based on the dollar, in other words, in the sense people value the bitcoin based on the dollar . Yes, this he do. So until it creates its own basket of currency or goods it can buy or things that it can pay for and taxes it can pay, it has no intrinsic value. Its always based on the dollar . Yes. I dont know how you can run a website and make money. That was so interesting, right, because theres an issue they were arguing, i read that over the weekend that silk road is arguing because it didnt take money that if it sold illegal things, if it didnt take money, it didnt violate things. Like the ebay. Crooks say they stole 33 point 6 i didnt see that one. The lawyer was arguing because it didnt take dollars for the illegal things it allegedly sold. Big money marketing story having to do with one of the winters worst enemies. Its the flu. Wall street journal says a story today looking at how Consumer Product makers are tracking everything from whos complaining about coughs on twitter to where the flu is starting to pick up. Theyll have commercials and ads on hand and target areas where the bug is just starting to hit. Maybe that will work. We will see if thats a good indicator. Coming up, santa budweisern. And the bulls are loving it. Will the Holiday Cheer spill over into next year . Thats next. Carl icahn made his mark on 2013 with huge bets on netflix, apple and herbal life. What can this billionaire do for an oncor in 2013. Thats up next. Were back in just a moment. 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All right. Weve all been sick in the past month. It lingers. Welcome back to squawk box. John silvia, wells fargo chief economist. John, i want to start and get some clarity. Maybe you can explain. 4 of 1 . Is that really going to happen on gdp . No, i dont think so. I think this morning youll see the personal consumption numbers and income numbers really suggest, as you know, andrew was saying earlier. Christmas cheer will survive into the First Quarter so were looking at Something Like 2 plus in the fourth quarter. Yeah, i think the economy really has some wheels here and were improving Going Forward. To what . Well, i think you look at year over year and im sure steve will explain this to you. About 1. 5, 1. 7 for 2013. More like 2. 5 for 2014. So its a nice improvement in the economy. 2. 5 . Yes. So with the 4 we only went to 1. 7. I think it has to be better than that, john, doesnt it . If you do 3 in the back half of the year and i forget what you did in the first half, but were looking at 3 the last two quarters of the year, right . Yeah. What bothers me, steve, is the inventories are such a significant part of the i want to stop you right there. Finish this idea and well get to dave in a second. The inventory to sales ratio hasnt spiked up. Everybody is concerned about inventories out of whack. The relationship between the two hasnt changed. Im not on this inventory draw down theory here. Well, no, not to the extent that you get a 1 number, no, steve. Okay. The initial discussion was are you getting back to 1 and i would say, no. Youre right, the interesting point is that the inventory Sales Numbers are not that far out of line from what you would expect. I would expect, yeah, the economy still has an underlying 2 . 2. 25 final sales. I like those numbers and ill stay with them. Okay. David joy, whats all this mean for the stock market and were you surprised by the reaction to the taper . The reaction to the taper surprised me a little bit, but when you look at the language that the fed contained in their statement by saying that theyll keep the overnight rate at 0 to 25 bases points well past 6. 5 , the threshold for unemployment, i think that really calmed any jitters that wall street had and almost gave Equity Investors a green light well into 2014. I thought there would be some kind of correction in the First Quarter as we got a taper as i thought up around march. Now i think thats less likely and any sort of adjustment to, you know, higher rates or the expectation of them i think is a second half phenomenon. Watch the Unemployment Rate. 6. 5, we could get there faster than i think the street thinks or faster maybe even than the fed thinks. We could be there by the middle of next year and i think thats going to how is the market going to confound the consensus . People think its going to be up 5 to 10 . It either goes up 25 or it goes down. Which is it going to do . Well, you know, i think it probably now goes higher than 5 . Maybe goes up 10 and then corrects with the anticipation that rates are going to move at some point maybe towards the end of the year, very early part of next year. So i think for at least now you need to be long u. S. Equities. Then as you get closer to the middle. Year, you know, start to get a little bit less confident about that. Remember that. Remember you said that. Remember everything silly you said, too. Always memorable. Anyway, thanks to david joy. Thanks john sylvia. Sure. Merry christmas. Happy holidays. All that good stuff. Andrew, you must have said something. Please. Coming up next from this high profile battle to apple ceo tim cook, love him or hate him, carl icahn was a difference maker in 2013. 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. [ 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. Welcome back to squawk box. As we finish up 2013, were looking back on the years most important people to business and finance. Were going to start with carl icahn. Heres scott wapner. Reporter from dueling with. Dell dell. To agitating apple. A price conservative to the market. No investor has roared louder this year than carl icahn. Hes arguing for change at business after the business. Hes certainly the most vocal. He has a very big microphone and hes taking on the worlds richest and most beloved companies. Reporter but one of icahns biggest battles this year wasnt with a corporate heavy weight. You know, ive really sort of had it with this guy akman. Reporter but a rival. Akman is a liar. Reporter the billionaires brawled over nutritional company herballife and a decades worth of animosity poured out. The world watched and trading on the floor of the New York Stock Exchange stopped. I never said i wanted to be friends with you, bill. Okay, carl. You said youd like to be friends so we can invest together. Carl, do you think i want to invest with you . I wouldnt invest with you if you were the last man on earth. Reporter but one of icahns most memorable moments wasnt about a tiff but a trade. The investor placed a big bet on Video Streaming Service netflix and hit the jackpot, an 800 million profit in just 14 months. I wanted to sell it 100 points ago. I really wanted to sell it. My son threatened to leave. Reporter a big score for an investor who even as he ages shows no signs of slowing down. I think that he is an extremely persistent and aggressive guy. I wouldnt necessarily want to be on the wrong side of a deal from him, but hes a super smart guy. Hes got a lot to say and i hope investors and companies are really listening. Reporter and if they arent yet, they probably should be. Scott wapner, cnbc Business News. And tomorrow were going to be profiling marissa meyer, but first when we return, the trends shaping the ad industry. [ male announcer ] this december, experience the gift of unsurpassed craftsmanship and some of the best offers of the year at the lexus december to remember sales event. This is the pursuit of perfection. [ male announcer ] what kind of energy is so abundant, it can help provide the power for all this . Natural gas. More than ever before, americas electricity is generated by it. Exxonmobil uses advanced visualization and Drilling Technologies to produce natural gas. Powering our lives. While reducing emissions by up to 60 . Energy lives here. At bny mellon, our business is investments. Energy lives here. Managing them, moving them, making them work. We oversee 20 of the worlds financial assets. And that gives us scale and insight no one else has. Investment management combined with investment servicing. Bringing the power of investments to peoples lives. Invested in the world. Bny mellon. Sidebyside, so you get the same coverage, often for less. Thats one smart board what else does it do, reverse gravity . [ laughs ] split atoms . [ flo chuckles ] [ whirring ] hey, hows that atomsplitting thing going . Oh a smarter way to shop around now thats progressive. Call or click today. [ 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. Welcome back to squawk box. One of the Worlds Largest media agencies representing bigname clients like American Express and jaguar. It stays in the know by conducting an annual survey called the cultured investor which highlights trends shaping the advertising industry. Collin is the firms ceo. Good morning to you. Good morning. Good morning. Thanks for being here. You do do a survey every year. And theres interesting outcomes in this survey that surprised me. You look at different issues around what people are doing. The idea that more people actually i found the cooking one more interesting. More people are cooking at home than ever before. Why is that . There are a lot of people here cooking at home, but theyre not entertaining at home as they used to. The notion of bringing people over and kind of showing off your home is much lower than it used to be. And during the commercial break, we were talking about technology. Yes. And this whole realtime issue of how were all sort of dealing with life. So as an agency, were a media agency. And part of what we do is understand what the consumers are going through and try to help our clients leverage media to be a competitive advantage. So in that way its how do you get the right message to the right person at the right time. So in that context, understanding the consumer and what theyre doing makes a difference. And so it feels to me like ill talk about maybe four or five things. One is that larry was on here last week and you were talking about this notion of, you know, why dont consumers feel better at present time, jobs are doing better, the stock markets doing well, et cetera. And, in fact, they are feeling much better. We call it kind of just like a rise of optimism. It is really sweeping the country. I dont see that on social media, though. On social media, i think if you read whats going on in social media, youd think the worlds falling apart. Every day. There are different topics, obviously, social media, the big topic is the pr woman who was leading the iac, et cetera. Right. But those are anomalies and kind of what the countrys feeling overall. When you look at whats trending on twitter, its never something good. Have you ever seen anything good trending on twitter . Sure. Theres a lot of good things trending on twitter. We talk about the negatives but there are more positives, for sure, trending on twitter. We have created a room inside of mine share that we call the loop. Its with our clients watching whats happening within twitter, google feeds, et cetera, to get a sense for what people are talking about and where our brands might be able to have an impact in that conversation. Okay. So one of the other outcomes of this survey is that the average household size decreased in 2013. Yes, its getting smaller. There are a lot of different trends going on with the household size geding smaller. Therefore, that means what to you as an agency and your clients . Well, household size getting smaller, the Biggest Issue there is the usage of products. If families are getting smaller, we have to find ways to increase usage of those products. New ways to use existing products. And heres another one, 59 of brands are seen bonding, decline in the last five years, what does that mean . The connection between consumers and brands is not as strong as it has been in years past. If you look at the amount of advertising there used to be. Its like a 17 decline prerecession to post. Does that make people more fickle . Is that a function of the realtime shift in all . Or do we just no longer have any loyalty. I think we still have loyalty. But i would determine almost. I would say you could almost call it brands in crisis. And what the brands need to do is really push their game to be much more experiencedbased, much more highvalue, innovation to their products so people realize im going to go to this brand versus a generic. But the percentage of people willing to buy generics has gone from 55 to 65 over the last several years. Thank you for coming in. Happy holidays. Thank you very much. And our special guest host Jeffrey Lacker joins us to talk about last weeks decision by the fed. Also a special milestone for the Federal Reserve. Squawk reserve is next. Mine was earned orbiting the moon in 1971. 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. voseeker of the sublime. Ro. 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. Today east special guest host Jeffrey Lacker, the fed insider talks taper reaction, the nations economic growth, and the celebration. The fed turns 100. Plus, the investing edge, predictions for 2014. This hour, the next episode for the media industry. And only two days left to shop. Will there be a miracle on 34th street for macys and the other Department Stores . Squawk is the real deal, and it all begins right now. Good morning and welcome back to squawk box here on cnbc. Beckys got the day off. Were excited to spend the morning, though, with fed president lacker. But before we do that, weve got a roundup of the headlines. The big one being that apple has announced a longawaited agreement with china mobile to sell iphones through the worlds Biggest Network of mobile phone users. The deal could add billions of dollars to apples revenue. And what do they say the market size is . 750 Million People. Smartphones will be available starting on january 17th. China mobile will begin preorders on wednesday. Separately, target suffering reduced customer traffic over one of the busiest shopping weekends of the year. Wall street journal saying the number of transactions at target fell 3 to 4 this weekend compared to last years final weekend before christmas. The nations banks have been monitoring the situation, responding to consumers concerns. On saturday, chase announced it was limiting effective debit card accounts to only cash withdrawals of 100 a day and 300 a day for purchases using the card. And more on the financial industrys reaction in just a couple of minutes. Joe . Thank you, andrew. In other headlines, the wall street journal reports that paulson and company sold the mutual bank bonds last week. And this came after jpmorgan filed a lawsuit against against the fdic. Oh, i see, if i go this way funny how that works. I did not mean to. All these cameras and things. I would never get in the way of your shot or take your time from while youre reading. I would not take your time. Im doing that now. The lawsuit against the fdic, this is why theyre doing it. Seeking billions of dollars. So it doesnt seem like a good time to stay in that investment. And billionaire philanthropist, edgar bronthman has died. He transformed his familys liquor empire to an international conglomerate. Also known for fighting for jewish causes, he was 84 years old. Lets get to our special guest joining us for the next two hours, Jeffrey Lacker. Good morning, president lacker. Good morning, steve. Lets talk about last weeks decision. Are you happy that the fed did it . I am quite happy. I think the time was right, tapering was the right decision. Would you have thought the fed couldve done more, shouldve done more . More what . More tapering. I was in favor of tapering last october. But i i think given the data, given the way the committee positioned itself with the program, it identified labor Market Conditions as the key criteria. This decision was, you know, kind of a slam dunk. Were you surprised that the market was quite so surprised by this decision . A little bit. You know, the data swung one way over the summer, looked a little weaker than we thought going into the summer. And then firmed up in the fall pretty notably. I mean, that last report employment report shouldve sealed the case, i thought. We have, you know, this running argument here. The debate, discussion about is the fed at fault for the markets not hearing them . Or are the markets at fault . Where do you put the blame in this case . Thats a subtle question. We go into a meeting. We retain the discretion to do what we want. You know, if what were going to do is at variance with what markets expect, youve got to ask the threshold question. Is it because the data came in a little bit different lip than the market thought or have we failed to provide them with enough of a road map with how we react to the data. I think there were times over the summer, september where you could have raised that question. I think we did a good job coming into december. It should have been clear. The ryan murray deal, did you think that had anything to do with it . Well, it wasnt kind of the final straw, i dont think. It wasnt . But it sets a different tone. What about the decision not to . Decision not to what . In september. Decision in september not to. Did that have to do with the upcoming fiscal battle . In some peoples minds, that was a consideration. You mean people in the fed . I think so. The chairman alluded to it. It seemed like it was going to be it really was, right . Didnt do anything, right. How much was the idea that bernankes leaving have to do with it . Nothing at all. You think zero . Zero. Totally. You think yellen wouldve done it on her own, too. Yeah. Total continuity. Its a little different than saying hes probably happy to be going out on these terms. Its not a secret that he had hoped to end this during his second term and that come when he decided in december 2012 that he wanted to he was going the qe he was not going to achieve that goal. Thats funny. You get conversation like this near the end of a chairmans term. They want to accomplish this before they go to that, before they go. I think he wants Monetary Policy to be done the right way. At all the meetings hes at. And this seemed like the natural decision at this time. Whether hes leaving next month or not. Lets talk about next year, jeff. The current assumption in the market. They immediately created spread sheets on this. That theres this smooth glide path. 10 billion gets lopped off, tapered every meeting. And you end up doing about 460 billion of qe next year, no small amount no small potatoes. If you were announcing a 460 billion program from scratch, people would get excited. Is that your assumption of how things go next year . The chairman was clear at the press conference, that would be your baseline. But i think you have to consider the door open to us pausing. If the data comes in a little weaker than we thought or, you know, accelerating if the data comes in stronger. For me, if you look back over the last year or for that matter for the last three years, you see all these swings in employment growth. And you see this little bit of jaggedness in how the Unemployment Rate comes down. You dont want to overreact to the swings because youre going to get them. And for me, it would take a substantial break in the time series to get me to want to i think we ought to pause. But different people have different thresholds in mind. And the parameters are what. If things are going really hot, ten being a median point between zero and 20, is that a way to think about it . A natural way to think about it. Thats what i think about it. What are the fed going to do this time around . Talk about the funds rate, though. There was another really important part of the statement, which was this promise to keep rates lower for longer at 6. 5 . How controversial is that in your mind . Are you a supporter of that . So ive been a bit skeptical about how strongly weve dialed up the forward guidance. But this is an enhancement to what we had before. We had the 6. 5 threshold in there. This provides a little bit of information about whats beyond the point in which we get 6 1 2, which could be as early as Second Quarter at the pace were going right now. This provides just the gentlest push against what Interest Rates right push past that. Thats an interesting point. You could have gone further. You could have given us another point. Said were not moving until the Unemployment Rate is 6 . Whats the rationale behind that . This is a move that ties us down a little bit less than letting out a marker in terms of numerical employment rate. The 6 1 2 is viewed as, you know, something we laid out there. And you dont want to yank it around down or up from meeting to meeting. You all decided that if were going to taper, we need to did you sit there and say, listen, lets start emphasizing the fed funds so we can do the taper . Everybody had the same message. It was almost like, i thought it was kind of, i dont know, it was so obvious, right, the way you shifted. Theres a conscious decision we are going to shift public attention away from taper to prove were not tightening by going down 10 billion. And it got to the point i thought, wow, this is kind of embarrassing. I guess i really need to be hit with it again and again to get the right message. Yeah, there was a lot of concern about the relationship in the spring between tapering talk and pulling the Interest Rate forward. A lot of people want to push back on that. I think theres limits to how hard we can push. It was a concerted pr effort. Interested in clarity about what communications is a one more question, which has to do with communications. Are you a believer in this promise that the rate will be kept low seems like through 2015. Is that your forecast for where the funds rate is . Yeah, in my submission, i put early 2015 where i think the funds rate will lift off. Thats something that could change a lot. So youre about 12 months earlier than the median on yeah, a little earlier. Im guessing you have one of those higher ones in terms of 2015. Yeah. Im the third dot from the sun. Thats what i thought. Whats your number . You want to give me your explain this i can look it up now. Now that i know youre the third dot from the sun. They give you this picture of where each fed member believes the fed forecast will be. Right. In each year. And jeff is telling me hes the third highest of all the ones that are there. Third rock from the sun. Give me a second there and ill give you the number. Lets go to break and ill tell you the number afterwards. Why at least 2 million chase customers face restrictions. 2 . There you go. Why those chase customers could not withdraw at some atms or spend at stores. Welcome back to squawk box this morning. Target offering a 10 discount over the weekend to try to lure shoppers into the stores after that massive data breach. Some banks also taking some action. And Kayla Tausche joins us with more on whats happened over the weekend. Kayla . Normally a quiet time for the banks. A lot of the executives are on holiday. A lot of their Public Relations people are taking their vacation. But banks have snapped into action responding to millions of customers whose credit and debit card data were stolen from devices at targets cash register. Some of those Customers Using target red cards. That activity has fallen over the weekend. According to chase, just under 10 of the customers were at risk. You can see the scale of these institutions and people who were actually affected. Most of which sent out statements this weekend, similar to those of citigroup which reiterated this. We want our customers to know they are not liable for any unauthorized use of their accounts. The key, let your bank know as soon as possible if you spot fraudulent activity. Theyre combing through purchases looking for things that customers may have missed. Target has said it believes very few customers were actually victims of fraud, but website that broke the news last week said the account information is already being sold on the black market. You Better Believe banks are stepping up security to limit what theyll be on the hook for. Theyve suggested customers replace any cards that could have been compromised, change your account numbers, get brand new stuff. Especially now that information in the magnetic strip like account expiration, Security Code and possibly even pins, theyre not ruling that can be bought. Banks havent ruled that out yet. Theyre also placing limit on accounts. Chase has a 100 cash limit and 300 purchase limit. If you were one of the cards used at target during that time. Citigroup has blocked some cards from being used altogether. Target has accepted responsibility. Theyll ultimately bear the cost of this breach. Discount has weakened sales and the costs, of course, from this will keep rising. Lawsuits already coming out. When you say that target is going to ultimately bear the cost. If jpmorgan if theres fraud on my card at chase, jpmorgan then sues target and target pays . It depends on what we find out about this situation. I think there could be lawsuits from some of these banks if there was found to be some internal lapse in security at target. Then why should the banks be on the hook for something that was ultimately a security lapse at target . I dont think weve seen the end of this just yet. Now, banks right now are trying to stem what theyll actually have to pay. The limits on those cards. I know youre outraged by this. I have another question. I always thought with a debit card, unlike a credit card, a debit card, you have to put in your pin number. Right. So how is it they would have the pin . Theyre now storing the pin number every time you put your card in . Target has not said anything about the pin numbers. They have said something to the effect of we dont believe those are at risk. But the banks have told me we have no guarantee they havent been at risk. Theyre recommending the customers go for the credit option because it takes a day or so to actually process that payment. So if there is any fraudulent activity you can stop it before it hits your account. No, my outrage is the idea i thought the bank was on the hook for whatevers lost on my credit card or debit card to begin with. So if my card gets stolen, theyre paying, right . They are. They are. And so the idea that on mass they are cutting off millions of consumers from being able to use their cards makes raises a lot of questions about what happens if theres something worse happens in the world. Raises the question of what theyre aware of and to what extent they have the right information to allow customers to make these purchases. Many of the executives i talked to said they found out about this about the same time the public did. For people with millions of Customers Using these cards and trying to understand the extent to which they will have to pay and working with these customers, i just dont think they even know the scope of this. How could you possibly say . Can we ask if this is a regulatory issue . You regulate with some of these issues. Is this something you Pay Attention to . Im not deeply involved in the regulation of the consumer side stuff. I know that banks routinely they have fraud detention algorithms. And when something pops up that makes it look like your card was compromised, theyll cut it off. And its a legitimate risk its absolutely legitimate. Whats less clear in this case, because theyve done it across the board, right . The problem is if im traveling within if im with a chase card and im traveling, i cant even get cash anywhere. They said you can get cash from a branch, obviously, and more than a third of their branches were open yesterday, actually helped customers in the United States. If you were traveling, youre done with. Right. Im saying, to me, if the algorithm spots your card as being a problem card, i totally would be okay with them cutting my card off calling me, telling me theres a problem with my card. But to do it across the board, it makes it complicated. If it was just your card, based on information your card got compromised. Now the information not for every single chase customer. Granted, its a large percentage of them that shopped at target during that period. Theyll be replacing those cards within a week or two. Theyre recommending everyone do it across the board. Thank you, kayla. Appreciate it. Coming up, predictions about what to expect in the Media Business in 2014. Squawk box will be right back. And this will be your premium right here. Sorry to interrupt, i just want to say, i combined home and auto with state farm, saved 760 bucks. Love this guy. Okay, does it bother anybody else that the mime is talking . Frrreeeeaky [ male announcer ] bundle home and auto and you could save 760 bucks. Alright, mama, lets get going. [ yawns ] naptime is calling my name. [ male announcer ] get to a better state. State farm. The ocean gets warmer. Get to a better state. The peruvian anchovy harvest suffers. It raises the price of fishmeal, cattle feed and beef. Bny mellon turns insights like these into powerful investment strategies. For a university endowment. It funds a marine biologist. Who studies the peruvian anchovy. Invested in the world. Bny mellon. All this week, were looking ahead to the 2014 and what you need to know to make money in the new year. Joe has already just told me during the commercial break, if i say the word get a little snap. Were kicking off our series with julia boorstins predictions for the media sector, how did julia do back in 2013 . Media giants will invest in web video as marketers look to dvr proof ads. She was correct as traditional media bet big on Digital Content this year. New partnerships were made. And hulu kept by the media giant owners. And then there will be distribution awards. She was also correct. Netflix stocks soared this year on the original content success. Microsoft continuing to invest in that space, as well. Finally, the Music Industry will get its mojo back. This was also true, apples itunes jumped. I dont know about that, radio jumped into the game to compete with pandora and spodify. What does she have to say about 2014. Media companies are heading into a year of massive change, for the cable industry, that means consolidation. Facing growing competition from satellite tv and streaming video services, Time Warner Cable comcast and charter are looking for better negotiating leverage. Thatll push mergers. Including discovery and amc. Media giants and tech titans are headed for massive convergence. The most anticipated show premieres wont just be on tv. Amazon and microsoft competing with their originals joining netflix for premium content. Media giants will embrace new technology. Those who pay for tv can watch whatever wherever whenever. At the box office, get ready for a lot more super heroes and a lot less of everything else. Therell be fewer bigbudget movies. But those that do get made, sequels and familiar brands will be bigger than ever. And aimed overseas as china and russias box office explode. At the other end of the spectrum, smaller films will find new distribution, skipping theaters and going straight to consumers on demand. Julia boorstin live from los angeles this morning. Good morning. Good morning, andrew. So what do we think the biggest deals will be this year . I think its all about cable. And i think it all comes down to john malone and liberty media. Controls 27 of charter. And so i feel like were going to definitely see some deals. I know hed like charter to take over Time Warner Cable. Whether or not he can make that happen, i think well see some john malonerelated cable deal this year. Do we think theres the possibility of a tech company partnering up or merging with an old line Media Company . You know, its possible, but i think what we saw this year really didnt play we saw intel try to move into the sort of tv distribution space. I thought it was interesting intel werent trying to break up the bundle. And at the end of the day, it didnt work. Trying to sell off all of those assets it created to sell pay tv. Im a little more skeptical about that. Certainly google, apple, they have the resources, but i dont know if it would really go through. How about the bezos buying the Washington Post type of deal. Are we going to get more of that . Where the guys after making all the money go back and now buy the content thats depressed in price because they distributed it for free . Absolutely. But i dont think bezos is necessarily looking to turn a big profit from that. We have to remember it was bezos that bought Washington Post not amazon. This was a passion play on bezos part. Seems he wanted to save the newspaper and make sure it maintained the journalistic integrity and independence. Maybe more billionaires want to help the struggling newspaper business. Very possible. Wanted to do it to deliver it with a drone, the Washington Post. Thats an idea. It would never happen. If anyone gets the paper version, itll show up at your doorstep by a drone. All right. Coming up, the stories likely to drive this holiday shortened week. Were aig. And were here. To help secure retirements and protect financial futures. To help communities recover and rebuild. For Companies Going from garage to global. On the ground, in the air, even into space. We repaid every dollar america lent us. And gave america back a profit. Were here to keep our promises. To help you realize a better tomorrow. From the families of aig, happy holidays. Welcome back to squawk box this morning. In the headlines, were about an hour away from the first economic reports of the shortened trading week. November, personal income and spending figures, theyre going to be coming out at 8 30 eastern time. Economists looking for a jump of. 4 , personal income. 5 for consumer spending. Also, longtime rumored deal between apple and china mobile is now official. Worlds largest mobile carrier will begin offering iphones to customers. That starts on january 17th. Terms of the agreement, though, were not disclosed, and Big Questions about whether the companys going to be subsidizing those phones. The latest proposed contract on january 3rd. Boeings first offer had been rejected by a 21 margin. It was designed to keep production in washington state. When it was rejected, boeing said it would look around for other locations. It is time for the holiday version of our monday morning trading block. Joining us now from new york is boris, bk Asset Management managing director. And steven shork, editor of the shork report. And that is not a stork as we always say. I thought it was a rating agency. Boris, i said im waiting until the euro is at parity of the dollar. Its really not happening. I think the conventional wisdom here is the euro shouldve come down off the taper news and it has not. I think part of the reason, end of the year portfolio flows, still a little bit of money chasing invest. And maybe skewing the flows for the time being. When you have fundamentals going one way, you have to trust price action. It has a reasonable chance to go to 1. 40 and surprise a lot of people and squeeze out a lot of shorts before it takes the innatural turn to the downside. Too many people leaning maybe youre right, maybe when it got down under 1. 35, we knew there was going to be a taper now predicting improvement in europe eventually. Thats true. Theyre also betting on the fact that the euro zone starts to recover and its going to attract some flows. But i still think longer term euro has to weaken a little bit. If nothing else, if it goes to 1. 40, its going to stifle the recovery. And the yen. Theyre never going to taper, right . Who . The japanese . If i say yen, thats usually who im talking about. Yen, why yen . The yens at 103, isnt it . Almost 1. 04. And it got a little bit came off a little bit because u. S. Yields came off a little bit. I think 1. 05 and possibly 1. 10. Theres a clear delineation. This seems to be the cleanest trade of all in the currency market for 2014. All right. Steve, im going to talk to you about oil. I hope i dont confuse by no, no, no. Comes from the ground. Ill tell you my overriding question about 2014. When do we see per btu, you can get natural gas so cheap and oil still so expensive. When does that is that always going to be like that from now on . Or will we eventually see something go down or go up and where it gets, un, more equal . Well, we are killing so much alternative energy towards natural gas. That is, we are killing the coal industry, were killing nuclear industry. And we are steering a tremendous amount of demand towards natural gas. Yes, down the road, no one can tell you realistically its going to happen, but the significant major rally in natural gas is going to now and what has been happening over the last two years is that High Oil Prices are actually bearish for natural gas. Because natural gas at 3, 4 which is where its been trading, no one wants to produce the dry natural gas. The gas thats actually in that gaseous state, the methane. What you do want to do, however, when you have oil prices so high, the liquids within that natural gas stream, the propane, natural gasoline, so far are so expensive that to a point the methane, the actual natural gas price doesnt even matter. So you still get a lot of whats called associated production, taking that natural gas out while you are drilling for a crude oil. So in the near term, no, you are not going to see parity. Right now, natural gas is trading at 30, barrel of Oil Equivalent and below. You will not see that parity. But eventually, down the road, who knows, four, five years down the road, were going to get a significant rally because we are steering so much demand towards natural gas and we are killing. When i was managing a book for utility, we had the option to run a unit off of coal, off kero, or natural gas. Now the units can only run off of natural gas. So when you steer demand only in one direction, eventually somethings going to happen to supply and somethings going to happen to demand and its not going to be a positive if you like buying cheap, natural gas, its not going to be a positive. Oil trades on its own dynamics, basically. You cant short oil because natural gas is 4 youve got to buy natural gas. How long can you go out to buy natural gas . Oh, absolutely. Im telling clients who are hedging theres active markets out in 2016, 2017. If every time natural gas, and it will get back below 4, now were in a significant rally because of the winter. Every time this mark gets below 4. If you are not hedging your longterm needs down the road and you can do four, or five years out, then you dont belong hedging and do not belong in the position youre in. Okay. Its complicated. I mean, i would think well, bottom line yeah. Bottom line is you should not be trading oil and natural gas as if they work in tandem. They do not. That is the easiest way to lose money. Theyre completely different animals. Oil is a product that you take out of the ground, you refine it. If you were like green rabid renewable guy, arent you worried about all the different stuff with so much natural gas . Oh, absolutely. And this is why whats called the birkenstock wing of the Political Parties are so antinatural gas. The Environmental Movement loved natural gas because they viewed it as a bridge fuel. Now it hurts the development of all the stuff they love so much, right . Absolutely. So now theyve turned their focus on it. Weve got one with us. Boris, speaking of birkenstock crowd. Do you want to respond . I was going to ask you have you gone to the Tesla Dealership at garden state mall . No, ive seen them around. Have you just sat it is the greatest car ever. So what . You use the natural gas to fire up the grid. As long as you get the nonselfcome combusting model. If you sit in that car, youll become a believer. It is gorgeous. The girl said to me whats that got to do with wind and solar . Nothing, nothing. Its got to do with using natural gas to fire up the grid to charge your car. Just has to do with taking us off gasoline and polluting the world. Thats it. Okay. Thats all. Have you checked out what goes into the batteries . Im sure its just as bad. Im not an expert enough to argue on both sides. It could be arsenic and uranium as long as its not co2, that poisonous gas. All right. Thank you, boris, and thank you. Its called carbon now. You cant say co2. Youve got to conflate it with carbon. Its so warm. 70 degrees. You havent seen any snow this year, andrew . I saw snow before that. I dont know. How do you explain one warm day . I dont know, it must be the carbon. I dont know. Question is where joe ranks climate scientists relative to economists. Economists. Any day. Coming up, 100 years ago today joe was born. No, president Woodrow Wilson signed the act creating a central bank in the United States for the First Time Since 1837. Up next, we celebrate with the centennial with a special guest. And top of the hour, were on washington watch a closer look at the issues facing our Nations Capital and the economy. Squawk box coming right back. announcer scottrade knows our clients trade and invest their own way. With scottrades smart text, i can quickly understand my charts, and spend more time trading. Their quick trade bar lets my account follow me online so i can react in realtime. Plus, my local scottrade office is there to help. Because they know i dont trade like everybody. I trade like me. 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[ female announcer ] today, cisco is connecting the internet of everything. So everyone goes home happy. Welcome back to squawk box. Theres a new release date for fast and furious 7. Productions were delayed due to paul walkers death. Star vin diesel shared this picture and then he wrote, the last scene we filmed together, it was a unique sense of completion of pride that we shared in the film were now completing. The magic captured and in just how far weve come. Fast and furious 7 will be released april 10th, 2015. P. S. , hed want you to know first. Other hollywood news. Ellipses. Is that what those were . Yep. The hobbit taking the top spot with 33. 5 million. Will ferrells sequel made 26. 8 million over the threeday weekend and made 40 million since opening on tuesday night. Okay. The Federal Reserve is celebrating its 100th birthday today. We dont have any what have we learned from the last 100 years. And what might fed policy look like over the next 100 years. Ive got a lot of questions. Our guest host this morning, jeff lacker. Also joining us now is charles kalomarris. Hes also the coauthor of fragile by design, the political origins of banking crises and scarce credit. And its scarce credit. And there it is. I have a question, given where we are, and i always like i get a royalty every time i say the word too big to fail on this set. Heres my question, for the past five years post this crisis weve lived through, we all talk about an effort, at least in washington to end too big to fail. I have argued that ever since the fed was created, by default, we have acknowledged that, you know what, we need a backstop for system and by default that creates unto itself institutions that may be too big to fail and that trying to somehow make too big to fail the end goal is the wrong goal. I think thats a misconception that our creation necessitated too big to fail. One of the misconceptions is what things were like before we were around that Financial Markets were all unfettered free markets and that and that things were inherently fragile and that demonstrated the necessity of the Federal Reserve as the government backstop. It was far from a free market back then. There were regulations that messed things up. And the panics we got stand in stark contrast to other countries at the time that did not have panic stricken Banking Systems. But you dont think the moral hazard created by the backstop unto itself creates this sort of larger issue . Im not saying its a problem. Im saying its the reality. It depends, of course, on how you structure the assistance. And it also depends on working backwards politically to ask the question. Will the government and the Federal Reserve allow bank to fail . When the Federal Reserve was created we didnt have big banks in the u. S. And nobody had in their mind that the Federal Reserve was in the business of preventing banks from failing. In fact, a lot of banks failed even after the Federal Reserve in the 1920s. It was very common. And the 1930s, of course, massive numbers of banks failed. The Federal Reserve conceived of itself in those early years, certainly, and i would say even today as preventing from failing. Isnt the big issue right now that what we know is the Payment System, the way that money gets around the country is effectively a public utility in a sense that the fed is desperate to make sure that people can go to the atm and get their money out or send money across the country but that public utility is effectively in private hands. And that was not the case when the fed was founded. Well, the Payment System was definitely in private hands when the fed was founded. In fact, checks clearing through the Payment System didnt even clear at par across banks within the Payment System at the time of the founding of the fed. And the Payment System, and still today, theres a part of the Payment System that the fed doesnt control, interbank clearing. It is true that the fed is very important as part of the Payment System and that the feds ultimate backstop can be extremely important for preserving that utility. Right. We saw that on 9 11, for example. But the private markets have been able to create payments through a variety of things. The essence of too big to fail. If a large bank went down, what happens to the Payment System in that situation. It can be a problem. Certainly, you know, the committee on banking regulation was actually founded as a result of an international Payment System problem. So its clear the german war reparations, right . No, i dont think it was the german war, maybe im missing something. But what was the name of that bank . Yeah. Clearly the Payment System is a crucial part of what we mean financial stability. But i would say even during the panics that jeff was talking about earlier, even during the panics that we had in the u. S. Prior to the founding of the fed, when banks had to suspend convertibility of their deposits, the Payment System was still functioning. Is your contention that the fed its overstepped its bounds here . No, im not saying that. Im saying the Payment System is more robust than you think. In 100 years from now if we were having the 200th anniversary. Look back at whats happened. Not in the past five years, in the last two years in terms of all of the money, the multiple qes, what would the next 100 years look like . Thats a tough one. Let me say this three volume history of the fed and tried to assess overall how well has the fed done and what did we learn from that over the next 100 years . The feds main objectives are price stability and financial stability. And if you look over the next 100 years, there are only about 24 years where its achieved both. Why . Well, its a combination of unfortunately political pressures exerted on the fed leadership at times and also bad models. The worst thing for the fed has been not just political interference but also errors in thinking, which we now in retro spect jim grant was on our set last week and said the problems, youve got a bunch of guys sitting around setting Interest Rates for the economy. Why not let the market set the Interest Rate for the economy . Well, im not sure what he means by that because ultimately, i dont see how you get around that, jeff. You have to set the Interest Rate because, for example, the Interest Rate contains Inflation Expectation. Thats unavoidable. Hed like to go back to something commodity based like gold for the fed that did take care of things. We know the disadvantages of that system. We know the volatility in parts to the price level that maybe evens out over time. But in the short run can be just much more of a problem. Someones got to control it. On a uh couple of forms of money we have. Someones got to manage that. And since the 70s, since we went off the Gold Standard, Central Banks around the world have struggled to do it. Some really strange situations, situations we didnt anticipate. We learned sometimes weve got it right, sometimes weve got it wrong. At least the economists see the facts. They want to get it right. There are people who dont want to get models right. But you have the same thing where people get married to the previous ideas and takes a long time. But theres the argument you can go too far in setting the market rate. You are wage price controls of any kind. We got it wrong in the 70s because of the types of political pressures. Got it wrong in the 30s. Bernanke said he was most proud of not responding to political pressure, right . Well, have about six minutes, thats good for first 100 years of the fed. Thanks for joining us. Charles has written some fabulous papers. Hes going to cut back 100 years before that hell be back. Very understandable papers. Coming up, guys. Paul volcker among others has gotten behind the single mandate idea and you may see it change. I hope that we get to a single just price stability . Right. We should talk more about okay. Coming up, much more from joe kernan and Jeffrey Lacker. And later, automakers coming off a strong 2013. Phil lebeau will join us with a look ahead at the auto sector in the new year. Up next on squawk box, dont start your day without knowing the names that will make you money. Joe has your list of stocks to watch right after the break. Tdd 18003452550 trading inspires your life. Tdd 18003452550 life inspires your trading. Tdd 18003452550 where others see fads. 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. Lets take a look at stocks to watch. Darden shares are getting a boost this morning. Disclosing a 5. 6 stake in the chain. Says darden is in its words deeply undervalued and represents an attractive investment opportunity. Dardenannounced plans to spinning off red lobster. Arguing the plan falls significantly short of actions it thinks are required to maximize shareholder value. And tiffany must pay swatch 449 million in damages over a failed joint venture to produce and market watches. I could have told them, you know, early on tiffany and swatch are not compatible, are they . The order coming from a dutch Arbitration Court. Cutting the fullyear profit outlook. Wheres your watch, dude . Long story. Broke. No . Yes. We can talk about that during the commercial break. Its a long you look naked over there. I dont have a watch on. Ill im hoping to get it back. No. I know. Thats why its a longer story. The band broke . No. The actual mechanics of the watch. Weve got to go to a break. Maybe when we come back, we can tell everybody about my watch problem. Im shocked and mortified, andrew. It is a good excuse why we keep missing all the tease times. We havent in a week. Believe me. Coming up, what you can expect from washington in 2014 from the next steps in obama care to the next debt ceiling showdown. Weve got all the issues that matter to your money. And then later, when you think of miracle on 34th street, you think of macys. We take a closer look at the retailing giant. Its all coming up in the next hour of squawk box. Accounts . Thats right, no hidden fees. 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This hour on squawk box, the fed insider gives his thoughts on the taper timing. Find out what else Jeffrey Lacker has to say about the nations economic condition. Plus, the investing edge, predictions for 2014. This hour, the road ahead for the automakers. And santas coming to town. Santa oh, my god do you believe in santa claus . Were searching for the next miracle on 34th street. Will macys provide the retail magic this christmas . If the United States of america believes this man is santa claus, this court will not dispute it. Case dismissed. Squawk box begins right now. Welcome back to squawk box here on cnbc. First in business worldwide. Im joe kernan along with Andrew Ross Sorkin and Steve Liesman and richmond fed president. Its an awesome town. It is. It just made ive been there, i was at the richmond fed. You need to visit the restaurants. I have good things to say while you werent looking, richmond became cool. A lot of cool restaurants. Great restaurants, great art scene. And were celebrating the sesquescentenni sesquescentennial. Thats 150. Awesome. And i saw these big news articles written on Jeffrey Lacker. And i said, wow, oh, this guy. Anyway kidding. But we are getting a lot of hits from what people well, people care about what jeff has to say. First, though, before we talk to president lacker. Apple has signed a long anticipated deal with china mobile to sell iphones on the worlds Biggest Network of mobile phone users. Iphones will be available starting january 17th. Although the company will begin taking orders on wednesday. The deal gives apple the ability to compete for china mobiles 750 million customers. Thats twice the size of the United States. I guess, right . Or more than twice the size of the whole u. S. Population. On todays economic agenda. Spending data for november, that coming up at 8 30 eastern. Income seen rising by. 4 while spending is expected to increase by. 5 . And were watching shares of facebook today. The social Media Company added to the s p 500 after fridays close of trading. Begins trading as part of the index today, andrew. Weve got another story did you see this piece on the wall street journal. Goldman sachs real estate play is said to be skirting the volcker rule. The rule prohibits banks from owning more than 3 to hedge fund or private equity portfolio. The journal reports this. They say Goldman Sachs told the investors it would contribute up to 20 in a new fund that makes loans backed by office buildings, Hotel Shopping centers and other properties. Thats because regulators excluded real estate loans from the restrictions on investment funds. Goldman sachs reportedly raised more than 1 billion for that new fund wants to bring that total to 2 billion. Did you find are you upset with that . The story is goldmans complying with the volcker rule. Is that what youre saying . Sort of. I didnt understand the piece. Well, the question is, by providing a fund its a fund of loans effectively. So im not first of all, not close to the matters is the regulartorial issue, but the story made it sound as if theyre doing something perfectly legal. It is. But the way it was read made it sound like they were skirting. I was only reading the article. I was reading the article. I was not get a closeup of the space under andrews armpits right now for the sweat that is coming out as it you know what, lets talk some politics. Capitol hill seems to be starting 2014 on the right foot when it comes to a budget deal. Can washington compromise on the debt ceiling by february . Joining us now, michael feldman. You work for clinton but youre a democrat. Lets cut to the chase. Ill tell you, michael, i want to talk to you initially about for a minute we did feel like pretty good about patty murray. A little bit. We knew it wasnt huge. But we used the word bipartisan which id never seen before. I had to learn to pronounce it. Is it going to be a little better this year . Is it saying its going to be all executive action . Hes a slash and burner that isnt going to compromise at all with congress. I think itll be better and feels like the era of showdown politics is over because both sides were getting singed with that and saw the diminishing returns on rushing up to every deadline and forcing us into a shutdown. But i also agree that one reason why he was brought in. If we cant get congress, were going to look, he understands how the Agency Process works. He understands the full value of executive authority. And he also, theres a lot of people working on health care right now. Hes focused on the other portfolios and trying to move things. That was going to be the other part of my question, phil. All of this is going to take place the other stuff we do and none of us know we saw manchin. He may switch parties some day, do you get that feeling . Yes hes about as close as you can get to being a republican and still be a democrat at this point. But he said this, obama care, he says this this is crunch time. About whether it actually, you know, exists as it is or impl e implod implodes. Hes not alone. There are a lot of isnt the democrats who have the same exact thinking. And you see not just about their own election. Politically, manchin is from a state where were likely to see a switch in the u. S. Senate next fall. Are there liberal democrats worried . Liberal democrats probably less worried. And frankly republicans have been beating the drum saying, look, this is going to be the dea thing we hang our hats on. One of the misnomers is that the republicans should beat the democrats on obamacare all yearlong and that will result in success. We didnt see much deterioration from november to december. A deterioration in what . In attitudes about obama care. Already a 60 . It was it was on the bill. Very little change. I saw that poll. I thought it was very interesting. People still believe in the benefit, theyre highly skeptical of the plan. They dont approve of it. The question is over time to phils point. Does it work or not . Its a moot point if it doesnt work. You dont know if its going to work. I dont think anybody knows if its going to work. Theres cause for optimism, right. 1 Million People have signed up. How many have lost . A small percentage have lost and really . Yes. Therell be more people covered at the beginning of the year than we showed, joe. And if youre one of the 100 Million People who now have the cost of Preventive Care is going down, one of the 17. 1 million kids who have preexisting condition who are now either covered where they were denied coverage before or their costs are going down, then you support this. And over time as people get it, if they like the benefit, it will rise in popularity. And then taking it away completely repealing it becomes politically dangerous. For the flip side, you have a senator like coburn going on shows yesterday and basically encourage people to essentially take the backstop around the system by claiming catastrophic, you know, kind of impact. And then you have the composition of the overall pool ultimately deteriorate and i think this thing will fall apart. My message to republicans i work with 2014 from a political perspective, do no harm here. We can frankly stand back to some degree and watch this thing deteriorate and watch our tone and rhetoric and dont fall trap to the dumb things we did in 2013. We can get something for the debt ceiling, but we cant do it with rhetoric and tone thats going to impair our ability to connect electorally. They look pretty good for republicans. You just signed your name right and you win votes if youre the opposition party. President at 41 approval. Thats historically, youre seeing massive shift of political real estate. We dont have massive amounts of political real estate in the house and senate available. But we can win the senate in large part, i think, by doing no evil. Yeah. And the real question in terms of electoral success in 2014 is does the Tea Party Candidates in some of these key electoral battleground states have an impact in the general election . Or defeat some of these moderate republicans . Do we take it to extremes so they lose their seats . I agree with phil. That strategy is better than, you know, go to the barricades, repeal at all costs, make obama care the single issue im going to say that 2014 is the year where the quote, unquote establishments put down the insurrections of the right. You look at a state like mississippi. I think Mitch Mcconnell makes it through the primary, john cornyn makes it through the primary in texas. Some of the messaging that came out of the leadership in the congress was a real clarion call to a lot of us. Lets figure out how to grow this party. Back to where you started, joe, i think the single biggest dynamic, important dynamic to come out of that deal that ryan got was boehner drawing a line in the sand with the tea party right in its own caucus. Is that a line in the sand to put your hand over and itll disappear next time . If boehner does not get control of that part of his caucus, they make this an insurrection. I dont think theres no such thing as control of the house. Can we get predictions from you guys . Senate . Senate. For 14. Yeah, senate in 14, up one short. One short. What does that mean . 50, 48, 2. Itll stay in democratic hands, and by the way, it doesnt really matter. Were talking about a handful of seats you need to get anything done, democratic majority or republican majority at that gap doesnt really were leaving, but the journal opinion page, obamas misguided obsession with inequality, used statistics that ignored tactics. Robert grady, why listen to him hes a private equity firm dude for cheyenne capital fund, also the chief economic adviser to chris christie. Also, grady was the director of the omb director. And i believe the administration, a key adviser for christie. Can you promise me im not going to have to do another debt ceiling. Were going to pass that thing. No big showdown . Itll get done. Itll get done because if the shutdown didnt happen for the same political reasons, right . Nobody wants to go through that again. Theyre not going to put us through that. I dont know, i dont know. I think its not theres not going to be a clean bill. The president starts this off on the wrong foot with the ultimatum. The leadership is saying an exact different thing. Steve, i hope you have that luxury. If i have to do that story again. I think thats likely were having horse trading around that and its going to be significant around tax reform, tax extenders. A lot of taxes expiring that matter to a lot of senators. The good news is, i think the budget could probably get done at the beginning here. And after that, who knows. Thank you, guys. Ive seen you do boring stories no matter what. It never bothers you. Never turned down a boring story. The false drama of the endless fiscal cliff debate. You act like you cant do that. I will do it. Its just repeating its like bill murray in groundhog day. Ive got you baby every morning. Coming up this is not going to be boring. Jeffrey lacker on the state of the economy and much more. And later, miracle on 34th street. Joining us to talk Holiday Retail and macys in particular. Whats ahead for the Department Store in 2014 . Should the stock be in your portfolio . And as we head to break, check out the squawk box market indicators. Clients are always learning more to make their money do more. ann to help me plan my next move, i take scottrades free, inbranch seminars. Plus, their live webinars. I use daily market commentary to improve my strategy. And my local scottrade Office Guides my learning every step of the way. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. Welcome back, the imf raising the forecast citing positive Economic Data and signs of compromise in congress. Imf managing director on nbcs meet the press. Most people who invest who hire will tell you that they are uncertain. They were uncertain because seeing a budget deal, seeing tapering by the fed, which is a sign of confidence in the real economy should lead them to invest to hire and to be more confident into the future of the u. S. Economy. Also praised the decisions of last week, described scaling back the massive monetary stimulus, andrew. Lets get back to the guest host, jeff lacker. Good morning. Heres the thing i wanted to talk to you about. And weve sort of skirted around it. We were talking before the break, before you walked on to the set which is bitcoin. Bitcoin. I want to know what you think of bitcoin. Its private money. Theyre going to have trouble gaining market share if its values going to fluctuate so much. But itll be interesting to watch. But what is the position of the fed from a policy perspective if there is one . Or what do you think the position of the u. S. Government should be on bitcoin. Or other Virtual Currencies. Thats for what theyre doing, its a free market and i dont see why they have an interest in stopping it. At this point. I want to get to what you always do with fed guys. And you love their forecasts for gdp. Well, yeah. Because it tells you what they think about policy. I want to frame it in a different way. Okay. So we got this deal. We got two years of budget. Thats out of the way. But there are those that say, you know, Health Care Reform was a question mark, tax reforms a question mark. Weve had all this uncertainty that supposedly explains to some extent why this has been more tepid than past recoveries. People say its because of the depth of the problems we have. The demand has not been there. What are we going to be able to do . What can this economy do knowing that obamacares still around, regulations not going anywhere any time fast. What are we capable of doing just with the bare minimum. Can we do three . I do think uncertainty about marginal tax rates and Government Spending programs to vendors, you know, who supply to the government has been a dampening effect on growth in the last couple of years. And i do think that resolving some of that uncertainty will have a positive effect. But the effect might be minor. When i think about whats Holding Back Growth right now. And we were talking before. Im looking for 2. 25 . If you look back for four years, weve had 2 , 2. 25 . Thats not ratcheting up at all, joe. Youve got to start with households. Theyve been through the worst recession since the 80s. Before that, theyd seen, you know, steady growth two really mild recessions, not widespread job loss in those two minor recessions. And growth in their stock portfolios, growth in home equity and alike. Now theyve learned that the worlds a riskier place than they thought. Thats going to have a lasting effect on their willingness to spend. Plus, you add on top of that the increase from the 80s through the 2000s in the availability of credit. That may be overshot a little. And i think were in equal librium. 2015, 2016, you fed guys can go out years at a time. Ive seen you make your fed fund thing. Really what youre asking is what is the long run potential growth of the economy. Sounds to me, jeff, youve brought it down. You dont think three is a natural state, you think 2. 25 s a natural state. Participation, now i think its being driven by demographic factors, its the aging of the baby boom and others what happened to. 75 of growth . Well, youve just got a lot of things in the way of growth. I was planning on fixing all of our entitlement issues with 3 growth. No. I was hoping income disparity would come down because of 3 growth. None of this is going to get fixed at 2. 25 . And theyre going to make it worse. Weve had stretches of time, five, ten years at a run with below par could be 10 or 15 years. Not from now. We cant wait for this. Youve already got five in the bank. Five. So weve got ten more . And then you get on top of that, you have regulatory changes that came about over the course of the last five or six years that are still playing out and still do you think theyve done too much, jeff . In terms of like im not going to render a judgment on whether they were good or bad, but the changes take a while to play out. Theres litigation. Are they pressing too much on the Banking System such that the economy cannot perform as well because of regulation in the Banking System. Thats a good question. I tend to think the credit finds a way to worthy borrowers, and that seems to be what were seeing in the Banking System. Banks are falling all over themselves to lend to the ones that are credit worthy that are good Balance Sheet and good prospects. I dont see the Regulatory Burden thats seriously constraining credit availability. But it is incredibly costly. And it is a layer of overhead and it is driving, you know, a wedge in net interest. If you leave the fed and we sign you as a cnbc contributor, can we pay you in bitcoin . Ill decline. That was a great question. Can i ask you one quick question . I know youve got to go, but you saw the certain banks are not doing business with bitcoin related companies because theyre worried theyre being used for an account. Well, my guess is, you know your customer and the type of, you know, regulations has to do with that. Hes from the fed. The fed does the dollar. Its like asking a guy at macys if shops at bloomingdales. Ben bernanke wrote a letter, i believe to the sec or somebody publicly and said that Virtual Currencies are the future and we want to look into them. I know hes leaving okay. Coming up, breaking news at 8 30 a. M. Eastern, were going to get personal income spending data. But first a special Holiday Edition of squawk booze news. A way to get home safely if you had a little bit too much eggnog in new york city. Coming right back in a sec. G fot spark your curiosity tdd 18003452550 can take you in many directions. Tdd 18003452550 you read this. Watch that. Tdd 18003452550 you look for whats next. 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Two taxi drivers will pick up passengers who have been drinking. One will drive the passengers car home, the other will follow in a taxi. To pick up the other driver upon arrival. The service is available anywhere in the five boroughs. The price is double whatever the normal cab fare would be. The Pilot Program could be extended beyond january 1st if successful. To participate, heres the number to call, folks, 2129261111 and tell them you want to do operation red nose. Do we have this . Which is . Which is rejecting. Different than your normal daily routine, operation brownnose. Very clever. Weve got to go, breaking economic news. [ tires screech ] chewleys finds itself in a sticky situation today after recalling its new gum. [ male announcer ] stick it to the market before you get stuck. Get the most extensive charting wherever you are with the mobile trader app from td ameritrade. Welcome back to squawk box. November income and spending on the income were up. 2 , on the spending, were up. 5 . I bet you the retailers like that one. I would actually rather see the income do better. The spendings close to expectations. The income definitely is, you know, money light. Were looking for pretty much a synonymous read. There isnt any revisions to report. And i can look at the deflators month over month yearoveryear. But really, i dont see anything glittering in there thats going to make you the viewer any better of a trader unchanged on the deflator month to month. 9 on a yearoveryear basis. Markets, end of the year. Lets see, equities are up and rates are firm. Wow. Lots changed in the last half a year, huh . So i fully suspect well see this stencil in place for a while. And, of course, everybodys talking about the representative at the imf on our channel talking over the weekend. You know, theres another organization where you bet the ranch on their forecast, well, youre probably shoveling your neighbors driveway these days. Back to you. Thanks, rick. Weve got jeff lacker, you didnt want to do qe3 at all. So you got you want to throw a question at president lackers way, rick, or no . No, no, im impressed he looks as good as he does after hitching his wagon to that unique group of individuals. And i totally am impressed with all his dissension over the years. I think history will treat those dissensions pretty well. Thanks. Sort of. Thank you, sir. All right. And let me ask you, while, you know, since we are going to talk to president lacker now. Do you think theres any way that when history is written that we look back and we dont know how this is going to work from here on out. And youve heard people about messy exits and youd have a loss on the Balance Sheet, et cetera. You think youll be right in the end . That qe3 caused more harm than good or more good than harm. For me, its a matter of benefit and costs. And the costs are risks and its the risk that we move too late and the risk that inflation pressures built more rapidly than they otherwise would if the Balance Sheet was too small. And do you still wish which makes me wonder if you dont think it help it had housing industry. Did it help the Housing Market . Qe3. Marginally. But i think the effect on yields. My sense is that, you know, the estimates are bracket of fairly wide range. But my sense is that theyre pretty small. Would we ever know how much of the stock market advance was not based on would you have a feeling now about how much of it was justified and how much was easy money . Its hard to tell. Id put my first since the first low yields is going to help in any event. And whether were bringing about low yields or low yields are coming about for some other reason. The secular decline in real Interest Rates is something i think economists are going to be if we stay at 2 , its going to continue, too. Were never going to get Interest Rates will never go up again. We might need to prevent inflation. Do you think any of the income disparity has been exacerbated by quantitative easing . Its hard to say. I dont know of any serious evidence. These guys think the qe helps the wealthy. You think . Yeah. How does that work . The people that own assets get benefit from the asset bubble. And the people that dont get left further behind. They got 50,000 to put in cds and get interests on the cds. Theres going to be distributional effects. Like the effective Interest Rates. Even when facts and data. I have to ask speaking of facts and data, ive got a question for you. Proponents of qe on the committee,. 2, interestingly enough, the way the market reacted to being surprised in june by the tapers schedule and then in september by the fact that the market that the fed did not taper. These big reaction in stocks and in bonds that said to them, wait a second, qe has been pretty effective at lifting up stock prices and keeping yields down. How do you respond to that . Those reactions are way larger than any reasonable estimate of that ive seen given what asset purchases on yield. It might have been at stake in the tapering talk over the summer. It seems outsized. I think Something Else was going on. Yield got ahead of itself first half of the year. And just reverse course. Moves in the stock market were minuscule and reversed within days. And, you know they did. But when economists like guys at the fed they look in the first two hours one other thing, inflation came in this morning. 1. 1 on the, 0. 9 on the headline pricing index. One of the things you warned about was cost, and its here. Is that a mistake you made in terms of calculating . Well, if youd told me in early 2009 about how much we buy. What our Balance Sheet would look like, they would approach 4 trillion. I would have thought it would have induced some erosion of credibility. That the fed still has credibility. To convince people we were going to stick with it. And our statement in early 2012 where we said, look, 2 inflations what we want. If you look, Inflation Expectation measures has been pretty steady, consistent with 2 . This deflection, this time we spent below 2 is smaller and shorter than the time we spent above 2 in the middle of 2003. And that time from 03 through 04, 05, 06, you know, through 07, like 04 to 07, we had 3 inflation. And it didnt deflect us. Didnt push us off the monetary path. Would you do it would y you if you were king, would you make it a single mandate . At this price stability . I think theres serious advantages to that. I think the thing to keep in mind, it probably wouldnt make a big difference in the way we set Interest Rates. You picture a world where inflations constant at 2 . Real Interest Rates are going to have to change and so no, maam gn nominal Interest Rates. In the latest round, if all you were worried about was price stability, you could have justified the action the fed took anyway because there was no inflation. But just the notion that every single job and every single bit of economic good news is orchestrated by the fed is such a huge burden to put on people that we dont really have and it also we didnt let a lot of things maybe clear, and maybe they would have cleared quicker if there was a little more pain when it happened instead of bernanke. I saw the look on his face. He just felt every bit of economic pain. And like he had to do something about it. Thats too much for you to have to do. I think one of the drawbacks of a dual mandate is it detracts attention from the notion. And i think its pretty well established that our effect on unemployment and labor market is transitory. But you still feel guilty when it doesnt work. Right . Theres philosophical economic differences that are out there that you can the concept is you can pick an inflation rate and all you can do is nudge the economy back towards the already chosen Unemployment Rate. You love the fed orchestrates the entire i think europe has worse outcomes because it followed religiously the price stability mandate. Thats what i think when i look at the performance of japan, europe versus the United States, i think the outcome was worse because of the single mandate. So, now, thats an interesting question, joe. If you go back and if europe has the right inflation forecast, does it come up with a better policy . What do you think about that . If who has . They were paranoid about inflation, ended up not happening, had they had a better forecast, would they have a better policy . In what sense would it have been better . Ease quicker. Ease quicker, i think they were tight for too long is my opinion. Thats hard case to make. Im not sure i see that you dont want to talk about europes Monetary Policy, is what youre saying . Im not saying that either. Okay. Weve gotten a lot out of you. Yeah, we have. Youre still going to be offered that cnbc contributor job i talked about. You know, if youre going to pay me bit coins going to pay you bitcoins. Well have more from jeff in just a moment. Do you follow him every day . Probably 400, 500. You didnt look . Not today. We have deal news for you this morning, just happened crossing the wire. Joseph a. Bank, youre going to like the way you look no, thats the other one. Theyve rejected the acquisition proposal for mens wearhouse. Joseph a a. Banks board said it significantly undervalues the company and the near and longterm potential. But i would suggest to you, dont hold your breath on this one. Actually, hold your breath because you will be able to breathe again, these two companies will merge at some point very soon. Mens wearhouse tried to buy joseph a. Bank and theyre not happy about the price. Its called negotiation. Phil lebeau goes under the hood of the auto industry. Check out the futures right now. Another santa claus is coming again today, up 83 points. Why . Why not . In todays markets, a lot can happen in a second. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. At bny mellon, our business is investments. Managing them, moving them, making them work. We oversee 20 of the worlds financial assets. And that gives us scale and insight no one else has. Investment management combined with investment servicing. Bringing the power of investments to peoples lives. Invested in the world. Bny mellon. This years been a strong one for the auto sector with the s p auto index up more than 28 to date. Weve got phil lebeau with a look under the hood at 2014. Reporter 2014 in the Airline Business will be the year transcontinental flights become a big battleground between carriers. Look for more flights to be added between major cities on the east and west coast like los angeles and new york. The planes on those routes will feature more amenities geared toward business travellers. Speaking of inflight amenities, look for airlines to push new technology and new services that will let you stay in touch with others while you soar at 30,000 feet. Anywhere from a few bucks to perhaps as much as 9 to text or email in flight. What about making phone calls inflight, dont look for that to happen in 2014. Feenlly, you may hate the fees youre paying when youre flying. Whether its for checking bags or rebooking a flight. Next year, they wont go away. But there is a feeling the airlines may be hitting a limit for how much they charge for certain services. So while you will be still paying for certain things inflight like snack boxes, perhaps at the rate in which they charge you extra fees will slow down in 2014. Phil lebeau, cnbc Business News chicago. Make sure to tune in throughout the week with more predictions and on the web at predictions. Cnbc. Com. Coming up, retailers preparing to close out the Holiday Season. Can macys pull off a miracle on 34th street . Were going to ask when we return. Stop that. What do you mean by drinking . Its not allowed . A mans got to do something to keep warm. announcer scottrade knows our clients trade and invest their own way. With scottrades smart text, i can quickly understand my charts, and spend more time trading. Their quick trade bar lets my account follow me online so i can react in realtime. Plus, my local scottrade office is there to help. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. Afghanistan in 2009. On the u. S. S. Saratoga in 1982. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation because it offers a superior level of protection and because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Welcome back to squawk box. Will there be a miracle on 34th street for Department Store sales this Holiday Season . Joining us now to talk macys and more. Also our guru on all things retail, the weather has not been helpful, dana. Not this weekend. This weekend overall it was very warm. But if you had to have a warm weekend, its better for it to be this weekend than last weekend when cold weather items like outerwear and boots were selling strong. So big winner . Can we call it before christmas here . I think you could have macys big a big winner, i think tjx was a big winner. I think the promotions of gap led them to be effective in driving traffic. And these Fast Fashion Companies like h m were also strong. Where are you on target . Given this breach with the credit cards and the fact that apparently sales were down 3 , 4 over the weekend. Thats not a good thing. It basically gives the push to walmart who is making everything big and bigger this year with whether its more opening hours, staying open later or being more competitive on price, had to give walmart an advantage. Whats the longterm impact on target . I think weve had this happen to tjx back in 2007. So certainly when you see items like this happen, theres a penalty thats paid. Theres a time period where you get consultants in there to fix up the security measures of the business and then theyll be okay. But does it measures. They will be okay. Does it take a little time and a hit for a little bit . It happens, yes. Where do you come down on the Holiday Season when it comes to jcpenney and this effort at coming back . I think they are doing better. They are bringing back the brands their customers are familiar with, whether it is st. Johns bay or worthington and adjusting the home area where the prices are in sync with the jc penney customer. Is it the turnaround story . It is going to be that keeps sequentially showing signs of improvement. You said you liked the gap and thought they were doing a great job on the promotion side. I dont understand the gap. I dont know who is shopping at the gap anymore . I was in there store on 34th street last night right at around 10 30, watching everybody close up. You have the tourist there, the mom there and the daughter there. I think they have the fashion more right today than in the past. Well take that to the back. Happy holidays dana. Thank you so much. Coming up, what janet yellen brings to the table in the new year. More from our guest host. For next year, the 100year anniversary for the fed and coming up on squawk on the street, the holiday p shoing season is coming to an end. The retail roundup. The latest on amazon and the tech trade. The energy in one gs is also enough to keep your smartphone running for how long . 30 days . 300 days . 3,000 days . The answer is. 3,000 days. Because of gasolines high energy density, your car doesnt have to carry as much fuel compared to other energy sources. Take the energy quiz. Energy lives here. Tdd 18003452550 life inspires your trading. Take the energy quiz. Tdd 18003452550 where others see fads. 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. [ female announcer ] what if the next big thing, isnt a thing at all . Its lots of things. All waking up. Connecting to the global phenomenon we call the internet of everything. Its going to be amazing. And exciting. And maybe, most remarkably, not that far away. Were going to wake the world up. And watch, with eyes wide, as it gets to work. Cisco. Tomorrow starts here. Youd do that for me . Really . Yeah, id like that. Who are you talking to . Uh, its jake from state farm. Sounds like a really good deal. Jake from state farm at three in the morning. Who is this . Its jake from state farm. What are you wearing, jake from state farm . [ jake ] uh. Khakis. She sounds hideous. Well shes a guy, so. [ male announcer ] another reason more people stay with state farm. Get to a better state. Lets get back to our special guest host. Today is the day. 100 years ago, president Woodrow Wilson signed the act. Congress passed it. It was his signature legislation, first year in office. You were saying you could kind of divide fed policy or cycles up at the 30year buckets. 30 years, right. There were some definite periods, right. We are sort of feeling our way, world war ii broke out. We helped finance the war, reception immediately after the war. We learned a lot. 20s, a time of stability, price stability. But the Gold Standard was sort of coming unglued. The 30s, we really blue it and exacerbated the great c contraction. We sent the economy into a Great Depression. There was a lot of other stuff going on. We got restructured in the 30s. Then, that centralized power in washington took it, pulled it away, tended to pull it away from the reserve. We were under the treasurys thumb through the late 30s and into the 40s. We pegged Interest Rates. Because of the war. And then we had this conflict that stretched out into the beginning of the korean war to get our independence. A fed chairman called president truman a liar. Kind of. Not kind of, really, right . It was mr. Maddox. It was incredibly tram mack tick. The korean war breaks out. Inflation goes up. Truman wants to hold the rates down. He repeats his case. F1c says nothing. He writes a memo for files. We talked to the president. We gave him nothing. He said this. Next day, truman claims the fed agrees we should keep interest low and maintain the peg. He canals leaks the memo to the times and Washington Post. We can blow by the 70s. Give us your sense of how history looks back on this era, unprecedented use of powers by the fed . The last five years . Yes, how do we rewrite history . It is going to take a while. It took 30 years to figure out where the bodies were buried in the Great Depression and what we did wrong, 1963, as you know. I think it is going to take a lot of years and scholarship to sort of cause and effect for what we have just been through. There are those that will say it was fed policy leading up to the crisis. Too big to fail and the expectations in credit markets, that creditors were likely to get official Sector Support had to figure into how that whole episode played out. What about Monetary Policy being too lax in the years leading up to it . Good question. I dont think you look at the Housing Market to judge that. I think you look at inflation. As we said earlier, inflation was 3 from 04 to 07. Were those transitory shots. Are you more rethinking your assumptions going in . Inflations expectations are wellcontained now. It is a matter of risks. When the time comes when loan demand is out there and banks have all these reserves, they have the capability of generating increases in the money supply that generate inflation pressures, very, very rapidly in a short amount of time. That makes the consequences of being behind the curve that much greater. Do you think the fed ought to enable that would make better Monetary Policy . I think Monetary Policy is something we have to keep wrestling with, keep communicating about very clearly. I dont see a Silver Bullet thats going to help. Monetary policy is hard. If you look at the lessons of the feds history, what comes shining through, i think, is that weve had to deal with very differe different external circumstances. Gold standard, treasury pegs, money going off the Gold Standard. We have had to learn as we go. We have learned. We have adapted and we have improved. It is hard to say it has gotten better, given what we have just been through. Compared to the depression, yes. When is yellens first day . February 1. I have a tie. You get a tie . I did get a tie. You have it . It has janet yellen and a donkey and an elephant fighting. Those havent been distributed yet. Where do you put the safety of banks over the past 100 years, today versus throughout the whole period . Thats a good question. So there is inherent fragility and there is have you mitigated the risk. We do a lot to mitigate the risk. The inherent risk is bigger than it would have if we had run a different regime. Jeffrey lacquer, thker. Thanks for joining us on the 100 anniversary. Make sure you join us. Squawk on the street begins right now. Good monday morning. Welcome to squawk on the street. Im carl quintanilla, simon hobbs, sarah eisen, cramer and faber are off today. You might think the news was light. Nod today. Futures are higher on a flurry of corporate news, including that long awaited apple china mobile deal. Tenyear, steady around 2. 9. Personal spending was the best since june. Europe is almost uniformly green coming off of their best week i