Transcripts For CNBC Squawk On The Street 20131014

Its debt. We are three days from potentially hitting the debt ceiling, a move one bank ceo says would be a very rapidly spreading, fatal disease. We are on the grown in washington with the latest details. The deadlock in washington is weighing on stocks today. We are counting you down to the market open 30 minutes from now. Netflix coming to a cable box near you. A new report says the streaming Video Service is in talk with cable providers and shares of netflix are higher in the premarket. Still, no agreement on ending the Government Shutdown. Now in the 14th day. Nor on raising the debt ceiling. The biggest leaders in banking sounding the alarm at the International Institute of finan finance conference in washington. I was a moderator at that event. Jamie dimon painted a pretty bleak picture of what could happen. As you get closer, the panic will set in and something will happen. I dont know periodically when that problem starts. Deutsche bank says his company has been making contingency plans. He says you dont want to go into this. This is a very strong spreading disease. For many, the trouble could be summed up this way. People think it will be so catastrophic, there is no way they will let it happen. Im not quite sure how you factor that in if you are an investor today. I do notice because of that, a great deal of complacency almost. In speaking to investors and asking that managers out there are still, perhaps, as they should be, convinced they will reach a deal and this will not occur. That rising level of complacency leads you to question whether, in fact, this will be the time. By the way, the mechanics of how the senate and the housework, it does take time. It is not going to happen today. We are looking at tuesday and wednesday and down to the wire. We are going to go into this cone of silence as the treasury secretary is concerned. He cant comment on the day to day finances. Some say the big due date is the end of the month where big Treasury Payments are due. We wont know. Mohammed alarian was at that conference. When asked about this issue, remember, bill gross said pymco will be buying whatever federated is selling when they were talking about getting out of some of the money market funds. The bond market is not open today because of columbus day. We will have to wait at least 24 hours. The situation towards any kind of agreement does not seem to be getting better. One reason, the futures are down 100 points. Lets gets to washington and get the latest on the budget stalemate. John harwood, our chief washington correspondent, is in washington. It looks like it is up to reid and mcconnell. Two men that have no love loss between the two of them. This isnt personal. This is professional at this point. Both sides and both parties realize we are really getting right down to the Witching Hour for resolving this issue, in part because of all the warnings we are getting from not just economists within the United States but internationally as well. Here is Christine Lagarde on meet the press on the prospect of what would happen if the United States defaulted. If there is that degree of disruption, that lack of certainty, that lack of trust in the u. S. Signature, it would mean massive disruption the world over. We would be at risk of dipping yet again into recession. This is why the republicans have essentially disregarded their demand of getting rid of obama care for raising the debt limit. Bob corker said it is difficult to adjust to the new conversation. Again, it is such an expectations difference when you have moved from totally defunding the central element of the president s agenda as your goal to now just doing some things that put us in a place to solve these problems over the long haul. Thats a major expectations change we need to manage over the next several days. The two people in charge of managing it are harry reid and Mitch Mcconnell. They had a conversation yesterday that reid described as productive i talked to aides to both men last night. They seem confident they are going to be able to come up with some sort of a deal. The principal sticking points are the length of the continuing resolution to reopen the government. Republicans want longer, because that means longer sequester cuts. Democrats want shorter. The length of the debt limit height, democrats want longer, because it means for certainty and less of a leverage point for republicans. Republicans want that to be as short as possible. They are also setting the terms for the fiscal negotiations that would happen after this deal passes if it does pass. I 2think the odds favor it passing before thursday. On that subject, timing and mechanics. Bringing a bill to the senate floor and the house and getting everything passed. Lay that out for me. How many days are we talking about . Can it happen that quickly . Things can happen extremely fast in both the house and the senate if the leadership can get consensus that they have to happen fast. There are mechanical hurdles that can be raised by people who object to deals and string it out but the ability of leaders to move quickly is there if they can get a deal ond both sides say, yeah, we are going to do it. John harwood for us in washington. John, thanks so much. So now how can you prepare your portfolio for a potential default if that is looking likely . Lets bring in harry clark, and chad morganlander. Portfolio managers. Good morning. Harry, first, to you, what do you recommend clients do here . Thursday and friday, we heard the loud vindication as people in saying the victory laps for the buy the dip crowd. Where do you think that crowd stands this morning . Is. I think they are lucky to buy a dip. If this market sells off, which it will be. It will rally like crazy. The market is only down 1. 3 of an alltime high. Thats pretty good considering whae whats happening with the nut cases in washington. It is very positive. I think the market will do well through this whole mess. Chad, thats precisely the worry a lot of people have. How can you have a market which is short of its alltime highs when the risk of the u. S. If not defaulting, shutting down more service. It seems to suggest it is increasingly divorced from the underlying circumstance there cob a rude awakening . I dont think there will be a rude awakening. I think john harwood hit the head on the nail when he suggested that they are going to get a deal by thursday. The fiscal drag because of all of this uncertainty, perhaps over the period of time of budget negotiations would be a quarter to a half percent. Thats down the road. I think the investors are looking as if in the next several weeks, there will be a deal. The markets will rally on this event. In regard to what the focus is, the focus should be on the economy as well as earnings in the next several weeks. Harry, to that end, people are worried about top line growth, mean reversion on gross margins, worried about the fed policy going into the last quarter of the year. You still think 1750 yearend is a decent target. I do. I do feel that way. If you look at the flow of funds, people buying in the equity markets, they are 100 billion this year. Thats only happened seven times in history. All six of the seven times, it was up a lot. All that noise around the market is just noise. The market will climb and do very well. Were in new secular bull. It is going to go on, i think, for several years. No time now to get squeamish and get out of the market. You have to be there. Harry, just to follow up on that point, how much further do you think this market can go. Where, ultimately, is your price target in the next, what is it, 24month period that you are talking about . I would say 2000 is a slamdunk. The next year and a half, two years, just on earnings, growth, on average p. E. S over the history of the market. 2000 is a slamdunk for sometime end of next year into 15. Chad, what about you guys . Im sure were talking about a situation that you just said, you want to be exposed here. Do you see the Fourth Quarter as playing out as well as harry just described it . I dont see that. We are looking at Earnings Growth to close to 3 for the end have o tof the year. You can get a 3 by 5 pop by the end of the year perhaps if the fed continuing to be supportive as well as getting past this uncertainty. The reality is that the economy in 2014 is going to be growing around 2. 25 . Our ex ppectations is around 1. We think it is 1700, 1650 on the s p 500. Maybe you can get some multiple lift. It is going to be high to come by. You need to see the economy kick into high gear. We dont see that happening in 2014. You do point out that historically the market has tested a new fed chief and in the First Six Months of yellens term we might see some hiccups. Yes. In my opinion, we will. Carl, there is always a test for the new feds, 18 new feds. Everyone has been tested, no exceptions. 16 is the average. If we get a fraction of 16 , 18 next year, that will end this current market, which is a good thing. Next year, they go through the preelection year of 2015. The average rally next year is 48 from the low next year to the high in 15. Thats 89year record. 48 rally is average. That puts the market in by the end of 15. For the investor here who is maybe not comfortable with the idea stocks could be on a little more volatile ride for the next quarter or two, how do you recommend they get defensive specially at a time when defensive stocks are at their alltime highs in terms of valuation . Thats a good question. What you have to do is move up the quality spectrum and look for companies that are consistently growing and consistently profitable and well capitalized. Let them have very little debt and a lot of cash on their Balance Sheet. On your fixed income portfolio, if you are a retail investor, you want to ladder your bond portfolio. You want to have the maturity of no less than four years and duration of no less than four years. Thats how i would play it. On the balanced portfolio, a 60 40 split would be a good option. Chad and harry, thank you both. Big news in economists. The nobel prize goes to three americans, one of whom you have seen frequently on squawk on the street. Yale professor, robert shiler and he and eugene fama and lares peter hansen have won the award for research that that is improved the forecasting of asset prices. I told you about shiler this morning, kelly and i thought you were going to pass out. I was a lot more excited about alice monroe. What was the category he won for . Housing. In the paper that people know him best from was back in the 70s on stock prices and dividends. Sure enough, if you look at this statement, the fact that it was him and fama seemed like a bit of an unusual pairing. If you look at what the committee that awarded the prize said, it is really interesting. They say there is no way to predict the price of stocks and bonds over the next few days or weeks but it is quite possible to foresee the broad course of these prices over longer periods, such as the next 35 years. Thats why they awarded it to this trio. Some feel uncomfortable about the sense that you can forecast prices with any more reliability if you take out factors like the fomc. Thats why i was joking. They should have been the fourth recipient of the prize. That is clearly not what the committee was concerned about this year. 8 million swedish kroner split equally. Shillett shiller was contacted. Fa ma, a few people didnt realize he hadnt already gotten it. Controversial in many circles but long overdue. Netflix is going to have a big presence on your cable box. Also, an exclusive with Nouriel Roubini. You will want to hear what he has to say about the market and the dysfunction in washington. A look at futures. The best two days for all three indices since january 2nd. A lot more squawk on the street live from post 9 when we return. The ocean gets warmer. The peruvian anchovy harvest suffers. It raises the price of fishmeal, cattle feed and beef. Bny mellon turns insights like these into powerful investment strategies. For a university endowment. It funds a marine biologist. Who studies the peruvian anchovy. Invested in the world. Bny mellon. Thats a good thing, but it doesnt cover everything. Only about 80 of your part b medical expenses. The rest is up to you. So consider an aarp Medicare Supplement insurance plan, insured by unitedhealthcare insurance company. Like all standardized Medicare Supplement insurance plans, they could save you in outofpocket medical costs. Call today to request a free decision guide. With these types of plans, youll be able to visit any doctor or hospital that accepts medicare patients. Plus, there are no networks, and virtually no referrals needed. Join the millions who have already enrolled in the only Medicare Supplement insurance plans endorsed by aarp. And provided by unitedhealthcare insurance company, which has over 30 years of experience behind it. With all the good years ahead, look for the experience and commitment to go the distance with you. Call now to request your free decision guide. Netflix reportedly in talks to offer its services through settop boxes. Negotiations are said to be preliminary. No agreement expected any time soon. There is an inherent potential conflict if you were to agree to allow netflix to be part of the settop box, you are in a sense facilitating cord cutting, which we talked about often here, which is a threat in many ways to the Business Model of the cable providers. Broadband has become the main product. Nonetheless, a margin to be made on providing video as well, with the goodoldfashioned cable system. Netflix did do this with virgin media overseas. Not a lot of homes, by the way and john malone has talked often about the need to work with netflix or he kind of bemoans the fact that the Cable Companies have not worked well enough together. Why didnt they come up with perhaps something along the lines of a netflix product as everybody is trying to figure out how to allow you to have seamless tharansitions. We will watch this. It is going to help netflix shares as it did when they have that virgin deal, which was only, as i said, a relatively small group. Again, provides a service even more u bic quit. Back above 300 was a milestone last week as the markets have their legs and we will see what the action brings today. That story in progress, obviously, david, as you pointed out. Its early. Well see. When we come back, wall street veteran, art cashin sets the table for the action. Dara khosrowshahi, the ce. Of expedia. Well get that in a few minutes when squawk on the street comes back. Peace of mind is important when youre running a successful business. So we provide it services you can rely on. With centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your Information Safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. announcer scottrade knows our 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. Plays a key role throughout our lives. One a day mens 50 is a complete multivitamin designed for mens Health Concerns as we age. With 7 antioxidants to support cell health. One a day mens 50 . A few minutes here before the bell. Lets bring in art cashin, the director of floor operations here. There was that suspicion that everything came together a little too neatly thursday and friday. Now, we know it was basically true. Particularly today with the semi holiday. It is going to be a game of cat and mouse. U. S. Bond markets closed, canada closed, japan is closed, some fiduciaries are closed. The markets will be extremely thin and vulnerable. The cat and mouse game will be to buy. The dipers will hang back and see how big a dip develops. This is this morning a lot more of a buyers boycott and some light selling brings us down to these levels. I think last week in that rally probably has everybody assuming that they will be some magic midnight solution before the capitol dome turns into a pumpkin and well be all right. For today, viewers should be weary. It will be a thin market. These guys will be playing real cat and mouse from the floor. Do we test any of the extremes we saw in the last five or six sessions . Well, if the weakness were to develop, you really want to keep an eye on 1685. That was kind of a springboard moving up. Naturally, the up side if they turned around and rallied. Im a bit of a history nut. Columbus day has a 65, 70 bias to the up side. It is going to be a tough run today. On the up side, somewhere around 1710, 1715 for that. How important is that . Weve mentioned this before. Sfegs specially with the clarity thats come in the last week or two. How much does the 17th matter. Are they more upset about the general direction the talks seem to be headed or that more time has expired that we reach what may be a hard or fast deadline . The primary concern is that they might stumble into it believing that the other side will blink or somebody will move. The other side is not hard and fast. If you poll the guys down here, the feeling may be they may take it right into the 17th to see how much leverage that dead lip will give you. There is this added concern that even if a deal happens, even if we get six weeks out of it, eight weeks, who knows what, that it is still another notch against business confidence. Why would someone want to make a transformational deal when you know there is going to be the possibility of this thing happening again. And we have some other things still on the board. A saloon full of fed speakers this week. With yellen coming in, everybody will be trying to get a sense of whats there. Why were they, in fact, talking about tapering, if the economy was this week. Is there something wrong with q. E. That it needs to be taken off the table. A lot of things out there, if you are running a business, very tough to do. Well see you a little bit later on. Dont go too far. A pivotal week for the country and the markets. The opening bell in 4 30. Dont go away. With my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. [ male announcer ] once, there was a man who found a magic seashell. It told him what was happening on the Trading Floor in real time. The shell brought him great fame. But then, one day, he noticed that everybody could have a magic seashell. [ indistinct talking ] [ male announcer ] right there in their Trading Platform. [ indistinct talking continues ] [ male announcer ] so the magic shell went back to being a. Shell. Get live squawks right in your Trading Platform with think or swim from td ameritrade. You are watching cnbcs squawk on the street live from the Financial Capital of the world, the opening bell in a minute and a half. We have gained 60 s p points in a couple of days. As we said earlier, the best couple of days. S p closing back above 1700 for the First Time Since september 23rd. That has gone away at least in the premarket as we see the talks over the weekend between the house and the white house, between the senate leaders, deteriorated quite a bit. People are pointing out on twitter that the government is shut down. Obviously, we are in day 14 of the shutdown. Even if there were no shutdown, the government would be shut down because of the columbus holiday. Banks are closed, some schools are closed and the bond market. We are open here. Well get some action. Cashin said it might be a little bit thin with International Markets closed. We had data open from the chinese markets. They closed not reacting. Canada, it is thanksgiving in canada today, is it not . You might see more of a reaction from some of those commodity suppliers. Maybe some of these chinese statistics, exports did fall unexpectedly. Cpr hung in there, up 31. Not too bad. That might be an added touch to what you are seeing. Up here, the ceo of Scripps Network interactive. Celebrating the Food Networks 20th birthday. Over at the nasdaq, the sylvia center, a farm to Table Program for children celebrating its annual benefit at sutherbys in new york. You might want to keep an eye on apple today. All things pointing out that the 5s is outselling the cheaper 5c about 21. There has been rumors about disappointing response in china to the c. They do not expect an ipad miniwith with the retina next week. I forgot that was looming. Meanwhile, the hct trying to come in and steal some turf by putting a fingerprint scanner on the back of its new much larger phone as well. Well see about that. You might imagine, want to keep a close eye on the financials. Last week, we heard from wells fargo and jpmorgan. If i recall, both ended down. Wells was down. Concern about the interest margin. Jpmorgan, weve talked about the years litigation reserve and the challenges a bank continues to face on that front. This is more about the looming deadline here for raising the debt ceiling. Start hearing talk about collateral change and sales of treasuries and whats going to happen. Lets call it somewhere between. 5 and 1 for Morgan Stanley. Speaking of the shutdown, can we take a quick look at xerox, which is getting more and more focus over the weekend, running into some trouble with keeping payments going when it comes to some of the food debit cards that are used here, guys, even some of the unemployment cards. Those systems struggling a little bit, for not necessarily a connected reason but not helping right now as a lot of families are hardpressed. I wonder as well if walmart shares a reacting. It was just seen as a glitch, something they would work through. Down about 1 as a response. We should add, thats pretty much in line with the market. A couple of downgrades. Canacord takes coach to a hold. They take their target from 65 to 62. Coach, one of the worst performers on the s p this morning. Expedia, Deutsche Bank takes it to a hold as well. Worries about execution, Management Changes. We are going to talk to the expedia ceo at the 11 00 a. M. Hour. That with expedia down. Looking at the percentage change here. You are looking at about a 5 move on the down side. Wow. Did want to mention a deal we knew was coming and then it was held up concerned about whether or not they needed a shareholder vote for the sale of a huge stake in Activision Blizzard. That was completed. About 5. 83 billion is what Activision Blizzard has spent to acquire the shares, both its ceo, bobby codick in an Investment Partnership and the company itself. 429 million shares that were bought back at 13. 60 a share, 5. 83 billion, the total price. Whats interesting here as well, not just, by the way, they took 4. 75 billion worth of debt at less than 5 . Which is just incredible, to help finance this enormous buyback. As well, codick and kelly, the cochair of the company, brian kelly, along with a number of other investors, bought back 172 million shares at 13. 60. 2. 34 billion for that. They only 24 . And they own 12 . The others are being retired by activision, a stock that was down. Netflix responding to the idea of the deal with the settop box providers. Up 3 . It brings its year to date appreciation to 234 . Again, if jim were here, he would call it one of the anointed ones that got sold off when the shutdown began and managed to find some tracks in the last couple of days. Looalong with tesla. Facebook is off about 1. 8, there about. We are seeing some of the higher beta names, high fliers struggling in the morning. They have helped the nasdaq move to a 25 gain thus far this year. Quite a gain there. A look at boeing briefly as the shutdown continues. We look at prospect for additional sequester moving forward. The shares are only down about 0. 4 of a percent they interview al malawi formerly of boeing. Some of the guys there gave him a hard time when he got to ford, because he was not a car guy. The car is very complicated. The trip 7 has 4 million moving parts and stays in the air. The speculation continues about who might run microsoft. They have interviewed a couple people inside and a couple outside. There are various views who should take over when he leaves. It is interesting to think about that transition, the complexity of running boeing and ford. Eloff is a name you here too who came in from the nokia deal but will be back at microsoft and credited with certain beneficial things in terms of microsoft development. Lets get to bob pisani. Happy monday, everybody. Everything is down, all ten sectors of the s p are down about 0. 5 point. Ill tell you what we are concerned about, not whats going to happen today but whats going to happen for q4 in the earning situation. As this drags on, it is starting to affect this. A lot of comments about the idea that washington, they start impacting the earnings category. The deadlock in washington will be used as a bigger than normal excuse by the heads of these companies to talk down ernlarni expectations. They are going to come down. If they go flat to down as a result of this, that will be noticed by the street immediately. Thats going to be a very bad news for washington for the stock market. Flat growth, huhuh. Costco missed, union pacific, sit tricks, yum brands, chevron, allegheny, some disappointing from gap and buckle and l brands. Q 3 are going to hit at historic records. Q3 earnings are going to increase roughly 5 . Right now, they are down by about 3 . Historically, they beat about 2 . Whats a little bit worrysome is the Fourth Quarter. That will come down in the next several weeks. Very quickly. If it goes down to 4 , everybody will be fine for that. If it goes down to flat, that will be a real alarm bell. Thats the point you want to look at. We had another warning today. Allegheny technologies, announcing a restructure. They are providing q3 Sales Guidance well below expectations. Thats why you want to resolve this thing in washington as quickly as you possibly can. I want to note, the cfo of the New York Stock Exchange announced he will be leaving once the nysi ice merger is announced. The nysi deal will be closed tentatively on november 4th. It is not expected. November 4th is the expected closing date netflix has been outperforming. We will check in with see ma moy at the nasdaq defensive seblgtors outperformed in 1995 and technology underperformed. According to thomson reuters, after a resolution was found in 1995, technology continued to move to the down side as investors still had low risk appetite. This time around, we are seeing that trade play out. Analysts say, if you are going to focus on tech, take a look at the Old School Tech names that offer a high dividend. As you point out, kelly, we continue to see a high level of volatility in momentum names that sold off hard last week and rebounding toward the end of the week. Online travel, once again trading lower. Expedia downgraded to hold. The analysts expressing concerns around Management Changes made at expediahotels. Com. The stock down better than 6 . Now, lets move over to the commodity pit where Sharon Epperson joins us from the nymex. Particularly a lot of focus on precious medals and gold is solidly higher as the budget stalemate continues. We are looking at three days left to the debt ceiling deadline and the budget as well. Negotiations continuing. Looking at the government being shut down here for going into the third week. All of these factors are ones that gold traders are watching carefully and oil traders are watching it very carefully. We got some very positive data on oil imports in china. In september, we saw the biggest growth we have seen on record. That is not enough to help u. S. Oil prices or futures. Both are lower on the section. We are continuing to watch what is happening in washington and here in the u. S. With a number of big increases in u. S. Crude supplies. Some traders are saying after all the shenanigans in washington are over, we could continue to see lower oil prices. Back to you. Sharon epper sson at the nym. The man that runs the Scripps Networks, and economist, Nouriel Roubini, launching a new oil Security Index. He will give us his take on the dysfunction in washington and economists all around the world. Squawk on the street will be right back. Just by talking to a helmet. It grabbed the patients record before we even picked him up. It found out the doctor we needed was at st. Annes. Wiggle your toes. [ driver ] and it got his okay on treatment from miles away. It even pulled strings with the stoplights. My ambulance talks with smoke alarms and pilots and stadiums. But, of course, its a good listener too. [ female announcer ] today cisco is connecting the internet of everything. So everything works like never before. [ female announcer ] today cisco is connecting the internet of everything. In a we believe outshining the competition tomorrow requires challenging your Business Inside and out today. 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I dont think peoples perception of it is that it has been around that long. Who would have thought. A Little Network about how to boil water is now celebrating its 20th anniversary. Over the years, it has really become a pop culture icon and started so many chefs down the path of becoming celebrities. When i heard you were going to be on, we talked so much about housing and how sentiment is shifting. Has that shown up in hgtv at all . Absolutely. Hgtv and diy are enjoying their best year ever totally not only in ratings but advertising as well. Whether you s wheth when you see people enjoying their homes, that naturally allows our networks to flourish. I do think have o yof you as economic indicator. What are the most popular shows on hgtv today . Well, you know, because you watch the network, you told me during the break. Probably house hunters and House Hunters International are two of our top shows. Property brothers is doing extremely well. Kitchen cousins is doing extremely well. It is across the board. 24 7, all of our shows are doing very well. It indicates people are feeling more positive about their house in general. Im curious overall about your sense of things. We hear more often, we may be concerned about the shutdown or the debt ceiling. You have, obviously, a good view into the advertising market. Are you seeing any difference, any change . Are you concerned . We are all concerned over the long haul. Im fairly optimistic that washington will come to a successful conclusion in the shortterm. The longer it goes, the more concern we have. Homeowners and home mortgages have. Right now, i am confident this will get resolved soon. We are not really seeing any change in the advertising market. It has been pretty strong. Very strong. We set a record in the scatter market in Third Quarter. No real negative indicators to be concerned about. The overall push internationally. Is your appetite as strong as it has ever been. Appetite is the obvious word, carl. What we are finding is the food network, as were expanding it around the globe, when we get there, because of the internet, the popularity of the network, people in these other countries are already aware of the network, already aware of our pop lairity aof our chefs. International is a big push for us. It is just a natural. We only 35,000 hours of our content. We want to take as much of that off our shores. It crosses the borders as well. We have had david zazlove on from discovery. You are creating Global Brands for these chefs. Exactly. Over the long term, you can see the opportunity to do global advertising, which, you know, is not that far down the road when you think of not only taking our content to offshore but as carl said, we have Cable Networks that deliver the most upscale female audience of all Cable Networks. Thats valuable in the states and around the world. What about digital, the ability to reach people mobilely . How are you positioning scripts to take advantage of that. We are moving rapidly into the mobile market. Digitally, we are moving and expanding the country with content that is a nice mix with local content from the ground and local personalities. We talk about netflix every five minutes on this program. It is one of the leaders on the s p today. When you think about them as a disrupter in your industry, what lesson should we be learning . You have to admire what they have done. At the end of the day, it is still very much of an hbo type model. We have been very, very cautious about taking our content to other sources. We have done an amazon deal. Part of that is exploration. Were very bullish on our partnership longterm with our cable and satellite providers. We think that is still the best monetary model for us over the longterm. So, kudos to the netflix of the world. I think there will be more of those an the competition will heat up. What is the compensation model for some of the chefs on the food network . It is no different than most networks. It is a straight talent fee. They are paid to do their shows. In some cases, we have partnership deals with cookbooks. Often, when you are involved with launching a brand, which is what a lot of them turn into, do you turn around and have a stake in what they do beyond the program . In some cases, if the Partnership Works for both sides, yes. Generally, restaurants, things of that nature, their product line, that tends to be all of theirs and we share where it is a win win situation. It would be great to have a showdown between david kelly and me, my enchiladas versus davids pancakes. I can do pancakes. How about you, kelly . Microwave popcorn and boxed machado a mac and cheese. We will take you over to the food network and see what happens. Thank you, carl. Good seeing you, kelly, david. Sfrat ahead. Tea time as in the tea party. Republican congressman, mick mull vain any of south carolina, speaking out on the Government Shutdown and the talks. We are here to hear from him. Take a look at markets. The dow off 82 points. The s p off 82 points. Squawk on the street will be right back. Baron of the buildout. You need a permit. To be this awesome. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. aaron purrrfect. vo meeeow, business pro. Meeeow. Go national. Go like a pro. The pursuit of a better tomorrow is something we all share. But who can help you find your own path . Who can build you a plan, not just a pie chart . Who can help keep your investments on course, whatever lies ahead . That someone is a Morgan Stanley financial advisor. And were ready to work for you. For the time being, we are down about 78 points on the dow. Do Deutsche Banks ceo calling the very rapidly spreading of disease. Making those comments at the financial conference in washington. Our own kelly evans moderated. It does bring us to this mornings squawk on the street. We are asking you to dust off your inner poet. Fill in the blank, a u. S. Debt default would be like blank. Tweet us. Well get your responses later on. The lineup at that conference was unbelievable. Who else did you have . It was one of the first times that they got the ceos to be on the panels. We had dbs, actually, the singaporeian based bank, shed an interesting window in. Some of the nonbanks, Alan Schwartz at guggenheim, a wide range of issues. Inequality was one of the things that came up a lot, when people are talking about risk to the financial system. Income an equality . Globally specially in the west and in the u. S. I was going to ask you what themes were. That is somewhat surprising. It comes up a lot in a lot of conversations. It is a longterm issue that has risen over the last few years. Nick rotin made an interesting point. Regulation has succeeded in the sense that it has perhaps made typical universal banks safer. He says complexity, leverage, risk, a lot of this is moving to other kinds of institutions, should the regulation follow the form or the function . What is happening in more of a nonbank space. That opens up a lot of debates. Nonbanks got us in the last crisis. Private securitization markets. There is eugene fama. This goes back to the nobel. Did the criescy start in credit markets or did what happened in credit markets reflect a shift in the broader economy . Thats important. You mentioned fama. Graduated from my alma matter. Well done. We are down 75. Lets get to simon and see whats coming up next hour. Nouriel roubini will join us live. That will be a fascinating conversation. We are going to talk to one of the Senate Democrats. Also ahead on the program. Can gold bounce from here . Second hour, squawk on the street, monday morning. Well be right back. Giving us us which help us attract the industrys brightest minds who create powerful strategies for a countrys investments which are used to build new schools to build more bright minds. Invested in the world. Bny mellon. Welcome back to squawk in the street. Our road map begins with shielding your money. Day 14 of the shutdown. Still no agreement. Plus, the first time of the account of the latest positioning in washington from senator, jon tester. Dr. Doom correctly predicted the collapse of the housing market. Nouriel roubini is bringing his unique expertise to the oil market. Stocks are under pressure on concerns over d. C. Gridlock. Take a look at what the dow, s p and nasdaq are doing. Our chief washington correspondent, john harwood, has the latest details. I wanted to bring you up to date after conversations with aides on both sides about the trading between harry reid and Mitch Mcconnell as they try to strike a deal. Harry reid is asking for a t twomonth, extending bill. Mitch mcconnell wants six months. That means longer for the sequester spending levels to remain in effect. Democrats are hoping to alleviate those. Harry reid wants sixmonth in the debt limit. Democrats want it shorter. They want a shorter one because it eliminates a moment of crisis if they can get it done. I do hear from harry reids office, the democratic leadership, that if they do get a deal today, the senate goes in at 2 00, we will wait and see what they say. Ex p expedited deals could happen tonight and house would have time to consider that if Speaker Boehner chooses to put it on the floor. There is a possibility of a deal that could get done by thursday. How can they do a deal if they are expecting to expect to get a deal there . Thats what Mitch Mcconnell traded for higher prices on the wealthy. I thought they were trying to link some sort of neutralization for sec sququester. How long does it remain in effect before that happens . Republicans when they were unable to pass a transportation spending bill this summer. Recognized they didnt want to live under that. Paul ryans proposal was to eliminate or alleviate part of the sequester. How long do the lower levels remain in effect before that happens . Thank you very much. John harwood live from washington with no deal in d. C. On the debt ceiling dead lip inching closer. Markets are trading low. Down 68 points on the dow. How do you prepare your portfolio for this . Lets bring in jordan davis and brad millen. Good morning, guys. Good morning, simon. Are you scared for equities yet. I am a little squared for equities yet. We saw a recover which. I dont this i it is warranted. We dont have a deal. If we get a deal in the senate, it still has to go for house. Are you scared, jordan . I am not scared, per se. It is clearly the thing is going to matter, what progress made in washington might take away what happened last week in stocks. If there is a inkling of a deal and it goes through, you will see a pretty quick snapback. I am hopeful and expect a deal will be done, although, probably not up against the deadline. There was an article in this mornings journal saying when investors are able to drag their eyes away from washington, they are going to have a big problem with the earning season. They are saying that the earnings were meant for cost cutting for companies that cannot continue. There is a prospect that actually the equity markets could fall into yearend. Do you think thats true . I actually do think thats true. I think the art icle highlight couple of things that i have been talking about for a while. Earnings have benefited from tail winds, refinancing at lower Interest Rates. The tailwind has gone away. They have benefited from stock buybacks. That tailwind at a minimum is not going to get any better. If you look at the earnings for last quarter, pretty much all of the growth came from the financials. The big financials are facing serious head winds as weve seen. Wells fargos revenue was the lowest for two years, i believe. When we take our eyes from the washington, d. C. Situation, earnings dont actually look that pretty. Jordan, in the meantime, just to look at Market Action this morning, utilities, they are the hardest hit sector in the s p, they are down almost 1. 5 . What do you read into that . Utilities kind of have their own dynamic. It is frequently allaround Interest Rates. If there is an expectation that a deal does get done at some point, maybe rates move up. That impedes the progress of utilities. We are not particularly interested in utilities at this junction y juncture in the market. We are more interested in companies that exposure to the up cycle we see happening in the u. S. And global markets. We are more focused on companies that will par miticipate in an cycle. If investors want to be a little bit cautious and a little bit defensive, what then is the best way for them to do so . Do you think that that positioning is likely to dominate here for the next couple of weeks . The next couple of days for sure. Next couple weeks, we dont think so. We think the deal will get done. We focus on companies, if you can have a three to sixmonth who are rye z horizon, companies that are doing well internally, not necessarily on a sector basis but picking individual stocks, financial, technology, sisco and bb t. What is happening to the dollar since the july highs . Because there is no taper from the fed and the problems we have in washington. Look at this chart. We are down 5 on the dollar index in that period of time. For the worls reserve currency, that is he a huge move. What does that mean for investors as far as earnings season is concerned . It does flatter those international companies. They may look like they have 5 Earnings Growth on what they have done abroad . Im actually a bull on the u. S. Economy. There is no denying, that, for example, europe appears to have started turning around. The emerging markets are turning around. Continued downward depreciation, which is very, very possible, as people around the world become more and more concerned about the u. S. Government. I think thats damage thats already been done quite frankly. I think it makes sense to continue to allocate additional assets outside of the u. S. Into other markets, not only for dollar weakness, because thats a benefit but because thats where a lot of the growth is going to be. I dont think the declining cloeth declining growth we are going to see has been fully processed. The fiscal cliff played out for weeks and months. The damage was terrible. We have that possibility here. I suspect, in fact, we will get some kind of a deal. We are talking about a deal that lasts a month or two. We are not talking about a solution to the problem. Robert mcmillan and jordan posner. Lets take a closer look at the Government Shutdown and the effect on the gdp. Steve liesman joins us. This is a shutdown that is already happening not any exacerbation that may come from hitting the debt ceiling . Right. What economists are doing is incorporating the effects of all the uncertainty that this political high jinks is developing. The real effects of the shutdown and the possible effects with the debt ceiling. Mark zandi over at moody and goldman sachs, about. 5 . Thats substantial when you only have about 2. 5 growth. Action economists, a little more conservative, 0. 3 . Rdq and jpm, 0 to a few tenths. Here is what mark zandi said, a shutdown lasting through the end of october would by itself reduce real growth as much as 1. 5 in the First Quarter. An interruption longer than one month would likely cause growth to stall in the quarter. Bruce writing me last week, the big uncertainty is the Collateral Damage around the crisis. We will look at the day that that wont be reported. Economists warn that these are small changes compared to breaching the debt. Government spending has to decline sharply. Some economists see a severe recession. Kelly, mark zandi calls it cataclysmic if we get there. Several economists pointing out that salaries not paid in the Fourth Quarter, you might get a bump back in the First Quarter when they are paid. We have a sense already of the damage done to you. Gold moving in concert with the situation in washington. Today, we are up about 1. 2 . It is back on the rise after hopes for a successful resolution over the weekend fizzled. The question isnt whether it is an appropriate place to protect your money. Speaking of economies, do your riel rielle Nouriel Roubini coming up on squawk on the street. M die. Like they helped millions of others. By listening. Planning. Working one on one. Thats what Ameriprise Financial does. Thats what they can do with you. Thats how ameriprise puts more within reach. Welcome back to squawk on the street. Im dominic chu. Shares of whirlpool are down big after cautious notes from Research Houses citing what could be softer demand in the lower of Third Quarter earnings estimates. The stocks are down in terms of trading volumes. We are just an hour into this trading day. Whirlpool is slated to report its earnings for the Third Quarter on october 22nd, kelly, before the opening bell. Back over to you. Mr. Dominic, thank you very much. Gold is rising. Cnbc says 83 says the price is more likely to fall this week. What does this mean . Lets bring in sterling smith for citi. And paul sax. Good morning. Sterling, first, to you. Specially with the decline in gold we have seen. A lot of people are saying, this is no safe haven. What say you . I dont think it is a safe haven. For gold to rally, we need to see inflation. To get true inflation, we are going to see economic growth. The behavior in washington is not going to spur any type of economic growth. The negative momentum in the market is its own worst enemy. I think we are going to see prices continue to decline down to the 1200 level over the near term. Is it about inflation or real Interest Rates . It would seem gold has done quite well as times in the past when there hasnt been that inflation just after the rebound from the crisis. You are exactly right. It has everything to do with inflation in particular, real inflation rates and the environment is such now that there really isnt a strong argument in favor of a near term gold rally save for a is your advise announcement coming out of washington. One of the reasons, i think, gold was rallying in the past was that a lot of people, the typical Institutional Investors that might have been in the past, were adding gold to their portfolio. If you look at flows, thats whats going on, we had about 500 tons in the etfs. That went up to 2500 tons near the highs and now has come off to about 2000 tons. There is a lot of room on the down side for positions to exit. By exit, i mean exit gold in the west. This has been a massive transfer in the east. They are buying physical gold there. You see on the news the long lines to buy coins and bars. That is not a shortterm purchase. They are not looking to sell gold if it rallies 50 next month. You have to think that the gold, they are buying it for the longterm. Right now, the forces are pointing towards lower in terms of Global Economic recovery. The over 4 rally we have had on the notaper surprise, that was very quickly given back. Sterling, isnt any significant asset over time likely to revert to a mean . If you push an asset down, it loses a quarter of its value. Isnt it likely to buoy back up again . Isnt this supposed to be a store of value or currency . I would be very careful to monitor performance. Is there volatility in the market . The dollar index, instead of trading 80 might be trading 70 or 60. Gold might be trading much higher. 2500 or 3,000. The question is, what do you do between now and then . One approaches to buy very small amounts of physical, put it in a safe and forget about it. Other people try to get in and out of the gld, a very dangerous trading proposition. It is all about your time frame. To both of you, sterling, where do you see gold in 12 times . I see it dipping down to probably about 1075. Well see how the economy behaves coming into the First Quarter. If we have continued problems, we can trade below 1,000. I agree over time, things deviate back to the norm. Gold trading where it is compared to where it was 30 or 40 years, gold is still expensive compared to itself. Unless we see economic growth, i think gold will be stuck between 900 and 1100 with maybe the potential for a rally if some inflation is induced coming into the third or Fourth Quarter of next year. I more or less echo my coguests comments. I havent seen a big capitulation selloff in gold. I think there is a chance we could go do 1180, 1100. You have to be brave and buy if that happens. In the end, gold trades at a much higher price. Right now, sentiment is very bearish across the board. Of course, im part of that chorus. Sometimes that is the trouble. But sometimes thats when gold really does surprise you and rally. There are those for whom gold is an insurance play. You have to be willing to buy insurance when it is cheap instead of after the crises when it is expensive. Might that be the case now . Its possible. Paul sax, sterling smith, guys, thank you both. Thank you. Want to show you some live pictures. Just north of miami here, out of opalocka, florida, 300 cars on fire at a scrap metal yard called trademark recycle. Not sure what caused this. Live pictures that you dont see too often coming north of miami. When we come back, bankers sounding the alarm on a potential debt default. The u. S. Is expected to hit that debt ceiling on thursday. Economist, Nouriel Roubini launching an index. He will give us the details coming up. I love having a free checked bag with my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. In order to go visit my family, which means a lot to me. In a we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Transit fares as in the 37 billion transit fares we help collect each year. No . Oh, right. Youre thinking of the 1. 6 million daily Customer Care interactions xerox handles. Or the 900 Million Health insurance claims we process. So, its no surprise to you that companies depend on todays xerox for services that simplify how work gets done. Which is. Pretty much what weve always stood for. With xerox, youre ready for real business. The dow and the s p, lost about 9 points, down to 1,694. After some of the talks in washington did not go as well as expected the biggest leaders in banking at the institute of finance conference in washington. Jamie dimon painting a pretty bleak picture of what could happen if there is no resolution. Quote, as you get closer to it, the panic will set in and something will happen. He said, i dont know personally when that problem starts. Deutsche banks ceo says he has been making plans in case of default. This would be a very ral i hadly spreading fatal disease fiscal standoff lingers on. Banks are unloading shortterm debt signaling a wild week. We are joined by girard cassidy. Well dom back. Good to see you. Thank you. To the extent the bank reports are clean on friday, are their lessons embedded in those . I think so. The lessons we are going to see is that the Capital Markets activity was quite weak, specially in the bonds trading area. Secondly, the Residential Mortgage fund was weaker than expected for jpmorgan. Should that have come as a surprise . Was it still worse than you thought . It was worse than expected. We expected bad numbers. They came in worse. It had to do with the rising Mortgage Rates and refi activity. New purchase activity at morgan. The new purchase activity actually was quite good. What does that lead you to in terms of favorite names as we await these other banks to report. We still like the risk names. Credit continues to improve. I think people will be surprised over the next 18 months how good it is going to get. So citigroup, regents financial, two riskon names we would point people to. Does that matter as when their focus is distracted by what has happened in washington right now, specially the money markets for these banks . There is nearterm volatility that we are experiencing. If you look out over the horizon, this is the time to be buying in our opinion. We will get through this crisis. This is more volatile than the ones in the past. We should get through it. Other people are reeling because jpmorgan had to wipe out a whole quarters earnings. There is an editorial in the wall street journal that pulls no punches today. It says that government lawyers are now feasting on americas largest bank such as the cost of the Obama Administration campaign to punish jamie dimon for his refusal to salute every government desire. Is it political . Part of it has to be political. It is pretty tragic what happened. That number on friday they set aside was over 9 billion. Thats the size of numbers of banks in this country in total assets. They set it aside in one quarter. It is unfortunate that this is underway. If it is personal, do you have any way to defuse it . It says you cant get rid of the government unless you go through a lot of elections, is to get rid of the ceo. I doubt that would happen. Some of it might be personal. Some of it for things that did happen. I expect jamie dimon to persevere and lead jpmorgan for a number of years to come. Let me quickly get back tower comments on credit. A lot of people expect we have leveled off and the reserve releases at jpmorgan will slow as you are kind of where you should be. Why do you feel that ed kr cred going to improve from here . Thats a very good point. We are probably in the seventh inning of that game. We are going to see continual improvement. It is going to remain unusually low. The underwriting, unusually conservative. The net chargeoffs are going to be lower than the people they expect. They will stay that way for a good 1824 months. Not opening the floodgates to a lot of borrowers means not much as profit. They have certainly slowed the loan growth. If you look at the total loans outstanding, we just surpassed the peak we had in 2010. You might remember that fast 166 when they had to move the securitizations back on to the Balance Sheet. Technically, we are above it. Realistically, we are still about 350 billion below where we were in 2010. Up next, dr. Doom or the man they call dr. Doom. An exclusive with Nouriel Roubini. He will join us with his unique perspective this time on energy. A lot more when squawk on the street returns. Your grass waters itself. Your dishes wash themselves. So why dont your floors. Clean themselves . The Irobot Braava floor mopping robot. Irobot. Do you . [ male announcer ] eeny, meeny, miny, go. More adventures await in the new sevenpassenger lexus gx. Lease the 2014 gx 460 for 499 a month for 27 months. See your lexus dealer. Welcome back. One hour into trade, here from the stories on the west coast at 7 30. 10 30 on wall street. Netflix may be moving closer to cable. Iphone 5ss are outselling the iphone 5c. If your in the market for fine art, give steve cohen a call. According to the new york times, he want to sell some art to pay for rising legal bills. He is considering selling more paintings. The man some people called dr. Doom who correctly helped predict the housing collapse in 08. Starting today, roubini economi economics. He joins us here today. Good to see you. Good to see you. What are you trying to allow investors to hedge or trade around . Well, there is an all security that is a concern this month is the anniversary of the oil embargo of opec that led to global inflation in 79. The other was following in 1990. We have had spikes in all prices coming from syria. There is still the open issue within iran, israel and the u. S. There could be another oil spike price. We have to see which are vulnerable to an oil shock. Somewhere in the middle. It is not looking very good. I would see this as number four or five. People might argue we are in the middle of a production boom. Our security ought to be getting better. There are two aspects of the u. S. That are of concern, our per capita consumption of oil is one of the highest, second only to saudi arabia. Our Energy Intensity is not very good in terms of efficiency. In spite of the production of oil rising, we are still a very significant net importer of oil as our gdp. Thats why the rank of the United States is one of the lowest among advanced economists. How does that affect your outlook for the u. S. When we talked to you in the summer, were you quite positive specially for the stock market. Has your view changed . There are external factors that affect the United States and whats going to happen in the middle east and oil crisis is going to be important. We will see whether this negotiation with iran is going to lead to successor not. Many people doubt it. They are just playing for time and eventually will have a confrontation. That is the tail risk from the euro zone. This is getting worse based on the data. I do worry about a chinese hard landing. They are going to occur slowly. I see the United States growth improving. I think q4 is going to be significantly damaged by the Government Shutdown. It has affected Government Spending and by uncertainty affecting retail sales. If we are going to reach the debt limit, there is not an agreement, economic and finance can put us into a recession. How much would it take, how much cushion is there between the u. S. Continuing to grow versus tipping back into a recession . The u. S. Is growing between 1. 5 to 2 . If you reach that limit and you are constrained to spend only up to your revenues, suddenly, 4 gdp overnight to zero. The Economic Impact is the difference between growing 1. 5 and 2 , to growing close to zero. It is enough to tip you into recession. Nouriel, what do you invest or buy . As a longtime investor, i would say gradually over time, rising longterm Interest Rates. Therefore, you might want to start to be on your way to government bonds even if the fed is going to exit qe gradually and normalize rates slowly. I would say there is going to be a global economist recovery in the United States. How would you play that . I would play that by being overweight in equity and underweight in emerging markets. Slowing growth and rising inflation. I would say that probably the United States economic prospects unless we make a total mess out of our fiscal issue is a better outlook than the japan, United Kingdom and europe. You can be bullish about the United States stock market. I would say there is a significant down set risk in the short time coming from the political impasse in was washington. I would love to get back to this oil Security Index for a moment. I am surprised to a certain extent. We all know there is a lot of oil and gas down there. They are talking about this country being Energy Independent by 2020. You have the largest increase in production of oil since 1954. We all knows whats going on on the balkin. Why is this index seemingly not taking into account what many in the industry at least are saying about the ability to continue to increase production rapidly . The indeck x is looking at t current condition. Since 2008, a significant improvement in the ranking of the United States because of greater production of oil. There is also diversification away from oil towards other sources of energy like, for example, gas and so on. If you are looking five years ahead, i would say that the greater domestic production, we are going to eventually become energy dependant. If you are looking in terms of efficiency of the United States, our per capita consumption in the United States is one of the highest in the world. As i said, almost as the one of saudi arabia. We have done very little in terms of Energy Efficiency in production and consumption. The european tax fuel consumption significantly. In the United States, we dont have it. Over time, there has been a consensus among columnists about introducing a carbon tax and reducing the consumption of carbon fuels across the boar. We have not done it in the United States. The more they can do on the demand side. You mentioned china earlier. I see where it ranks here. It is rapidly becoming the biggest buyer of oil from the mideast as we start to produce more and more here. What about the reliance on resources for china . You mentioned earlier, you seemed to put in question as to whether they can continue to grow or grow at 7. 5 or like that. What insights can you share with us . The chinese growth has been capital intensive and resource intensive. They are realizing the growth model is unbalanced and sustainable and coordinated. Their plan is to move away from fixed investment. My fear is that the Seven Members of the committee, some of them are proreform. Others are favoring state enterprises and government and state sector, the pla and the adjustment. They are going to announce at the Central Committee in november are going to be too slow to prevent the investment from accelerating and increasing consumption while reducing the savings race. I see growth in china being less than 7 . In 2015, less than 6 . I think it will be a much more significant slowdown of china short of a too hard landing have the thats going to have effects on Commodity Prices and emerging markets in asia and the United States. As someone who made his name to a large degree on housing in 08. We have seen others like paulson who cease is on a sevenyear bull market in housing. Are you worried about Institutional Investors driving the rate . I would say that certainly, we have reached the bottom of housing. Now, there is a recovery on price. Thats going to continue over time. I would say the main risk are ones that the rising Interest Rates. Weve had tenyear treasury yields going from 1. 6 to a take of almost 3 before the fed decides not to taper. Gradually longterm Interest Rates in the u. S. Are going to go higher. They already rated the slowdown of the economy. One of the reasons they decided not to taper in september was the tightening in financial conditioning including in the mortgage market. Would you put fresh money into Residential Real Estate . It depends on the specific market. I would say new york or other markets are right now rising. In other parts of the country, still a significant excess. It is very much location dependant. It does seem, if anything, london, this is the one place getting more tracks for being in a bubble, the next bubble, in terms of real estate. Yes. In terms of commercial and Residential Real Estate, a massive flow of foreign money coming from the middle east, asia, russia. The supply is not increasing, because there are limits in terms of zoning and soandso. It looks like a big bubble. Thanks for coming in. Your tie is still a little bit loose. Nouriel roubini. Congratulations. You can see the index at oil Security Index. Org. Thanks a lot. We are almost there. Thursday is one. The government says we will hit the debt ceiling. Right now, there is still no clear end in sight. Jon tester will be with us momentarily to tell us what happens in the senate z. When you listen to politicians bicker of the shutdown, does it ever feel like you are listening to puppets on the playground. Peace of mind is important when youre running a successful business. So we provide it services you can rely on. With centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your Information Safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. [ bagpipes and drums playing over ] [ music transitions to rock ] make it happen with the allnew fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Get 200 free trades when you open an account. Welcome back. Expedia shares are getting grounded after the Online Travel company got a down grade. They are cutting the stock from a hold to a buy and cutting the price to 51 from 66. They Site Management turnover at the hotels. Com division and increased competition in the u. S. Market. Coming up, well talk to the expedia ceo of squawk box. We are staying in tune with that one. Thank you very much, dominic. All eyes orrare on the u. S. Sen after the house didnt come up with an agreement. Can a compromise be found. Senator jon tester of montana. Good morning to you. Do you think that harry reid and Mitch Mcconnell can come up with a deal . I really do. I feel more hopeful now than i have since the first of ooctobe. I this i that harry and mitch are talking. I think it is going to result in something good. The clinker is going to be, what does the house do . Is there is the speaker willing to put something on the floor that probably has enough votes to pass but may not be the most popular thing in the world . The bottom line is, and you guys know this, you have watched the markets and how business has reacted over the past couple of weeks. We are playing with fire with the Government Shutdown and we are really playing with fire with the debt limit talk domestically and internationally. Can you just clarify what the demand is from your side on the s sequester. It is very difficult for Mitch Mcconnell to agree to that sips thats a deal he did a while back in return for high taxes on the rich. By almost anybodys assessment, the sequester is not something we want to do initially and it certainly hasnt worked very well. I can give you the reasons for that if you would like. If we can address a debt in the deficit, because it is real, while continuing to push the economy forward without cutting critical programs in this country, i with which is what t sequester is doing, we can move forward. What our side wants. I can tell you what i want. I want predict ability. I want something thats going to work for this country and not do things like give our eni emies from an international standpoint to hold us hostage. The gop, according to opinion polls, has lost popularity because of what has happened. Yesterday, there were fascinating images from d. C. Where you saw hundred sz s of v taking down the barriers and piling them up at the white house. You saw sarah palin say that they were being used as a political pawn in this fight. Are you concerned, senator, that very quickly, the polls could turn and actually the tea party might steal your political clothes on this . I think since ive been here for the most part, decisions have been made based on politics, rather than policy. I could take a look back at whats happened over the last two weeks and tell you it has probably did some great things for ted cruzs fundraising. It hasnt done much for this country. I think we need to start looking at the policy. I dont need to tell you folks. We came out of the worst economics in 1930s, four or five years ago. We need to start acting responsibly in congress. These political stunts that are being done continually need to stop. Senator, would you vote for a bill that will raise the debt ceiling for a shorter period of time, not through 2014 . Im not sure it gives us that predict ability. I would have to look at any proposal thats put forth. If there is a sixmonth debt ceiling put forward that makes sense, i would take a look at it from a favorable eye. I want to get past this Government Shutdown and this talk of a government default, putting the full faith and credit of this country at risk. Im look at at any proposal out there. I have confidence the republican leader and democratic leader in the senate will do the right thing and come forth with a common sense proposal. I dont have the same confidence in the house. Hopefully well see by thursday. Senator, thank you. Joining us live from d. C. Now, well get the view from side of the aisle a little bit later on squawk on the street. Congressman mick mulvanep. Its as simple as this. At bny mellon, our business is investments. Managing them, moving them, making them work. We oversee 20 of the worlds financial assets. And that gives us scale and insight no one else has. Investment management combined with investment servicing. Bringing the power of investments to peoples lives. Invested in the world. Bny mellon. The nobel prize for economics handed out this morning and the winners were, eugene fama, Lars Peter Hansen and robert shiller, all three won for laying the foundation of the current understanding of asset prices and changing the way people invest. They all deserve our congratulations. But we did want to professionally recognize robert shiller, since hes a friend of the program. Once a month to discuss the s. E. C. Case shirl index. Congratulations to bob on his nobel prize. He was interviewed by a couple of outlets. I think he was in true disbelief that he that this actually came true. Imagine, imagine being told youre going to get it and actually the morning comes and you did get it. Hes often on the short list as well. He might have been jaded after all of this time. The dotcom bubble he predicted and the housing bubble. Talked about irrational exuberance in the 90s and the housing bubble at the top, he warned of mortgage collapse. Theres hes teaching an open course at yale. For free. You can see charts that were influential as well. Congratulations to all of them. They split 8 million swedish croner, do you know the exchange . I have to get back to you on that. Over the weekend, Deutsche Bank ceo called the fault a rapidly spreading fatal disease. We want you to come up with your own vivid metaphor or analogies. A u. S. Debt default would be like blank. Well get your best answers. Hare. Your retirement. Ameriprise advisors can help you like theyve helped millions of others. Listening, planning, working one on one. To help you retire your way. With confidence. Thats what Ameriprise Financial does. Thats what they can do with you. Ameriprise financial. More within reach. Thats what they can do maestro of project management. Baron of the buildout. You need a permit. To be this awesome. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. aaron purrrfect. vo meeeow, business pro. Meeeow. Go national. Go like a pro. Squawk on the tweet on monday morning. Calling a potential default on u. S. Debt a very rapidly spreading, fatal disease. This morning, squawk on the tweet, asking you to come up with your own vivid metaphor. Film in the bank, a u. S. Debt default would be like what . Joe writes, u. S. Default like miley cyrus at vmas, train wreck. A default is like moving back in with your parents, embarrassing, sign of failure, hard to recover from. A u. S. Default, like the rest of the world realizing they invested all of your money in Bernie Madoffs fund. Heisenbergs watching . Amazing. Market, talk about resilient, counting on something getting done. The declines not significant, given what weve done over the past couple of days. What was the last major western democracy to default . Adolf hitler in 1933. What about argentinargentina major western democracy. The argentinians beg to difficulter. Made lheadlines. Greece . A soft default. When you get reorganized that restructuring. I beg to differ. We have that conversation. All over again. I was in buenos aires in 2000, not fun, not a good time. The question is whether or not youre calling them a major western democracy, right . Youve got me on you know. Maybe i should have a good listen and come back. Questions about argentina right now, whether they will default as they continue to fight with hedge funds led by paul singer. And commonwealth unincorporated territory of puerto rico, right . Thank you. What a debate last week. For the time being the dows down 70 points. Here what happens you missed earlier on. Welcome to squawk on the street. Heres whats happened so far. For god sake, get in there get negotiations started. If we can get some people in a room and build up some trust and put ultrapolitic as side the Economic Solutions are easy. I think we have an opportunity to move something ahead on a broader bipartisan basis. The question is, how is that dealt with in the house of representatives, which has been off on a total not only a different page, a different book. How many days are we talking about . Can it happen that quickly . Things can happen extremely fast in both the house and the senate if the leadership can get consensus that they have to happen fast. Were in a new secular bull. Its going on, i think, several years. No time now to get squeamish and out of the market. Got to be there. Opening bell. Im fairly optimistic that washington will come to a successful conclusion in the short term but obviously the longer this goes, the more concern we all have, homeowners have, home mortgages. Over the medium term youing can bullish about the United States. Downsize risk in the short term. Good morning, were live on a monday at post nine at New York Stock Exchange. Lets get a check on stock markets because the bond market is closed today for columbus day. All major indexes are down about a half of a percent. Looking at a loss of 73 points now on the dow. That is a bit of a recovery from the tripledigit losses that were indicated from futures this morning. Shares of merck are slipping, as the company was downgraded to market performance. Bernstein, a week after announcing it would cut 8500 jobs and coach moving lower. Grou down graded to hold. Competition from rivals like michael kors. The clock is ticking, three days away from hitting the debt ceiling. Someone says theres a 50 50 chance it happens. So as we approach the debt deadline, how should you prepare your portfolio. Weve got the answer. How badly is the debt fight hurting Consumer Spending . Well talk to the ceo of expedia in a few moments . This isnt a healthy start. Exchanges under obama care, people still having trouble signing up for insurance. Well talk to the man who oversaw Medicare Part d to find out what it takes to get a Big Government Health Program working like its supposed to. Start in washington where three days away from hitting that debt ceiling. As of now, theres no deal in sight. John harwood joins us with latest. Is it fair to say that october 17th is the only date that matters right now, and secondly, do you think markets are right to perhaps sense a little bit of progress towards a deal this morning. Reporter i do. October 17th is not the only date that matters but if theres no deal, given what the treasury said, theres a serious market reaction. But there is some hope that harry reid and Mitch Mcconnell and the senate can strike a deal and move it quickly. Senator bob corker, republican of tennessee, earlier on squawk. I do think that theres a good chance that we will get back on the right page and right paragraph today in the senate, and i think we have an opportunity to move something ahead on a broader bipartisan basis. The question is, how is that dealt with in the house of representatives . Reporter the hope, of course, if the Senate Passes something, the house will have no choice, given how close to the deadline we are to pass it. If that happens, what about the broader bipartisan negotiations over the fate of the budget sequester, over longterm entitlement reductions. Heres erskine bowls earlier as well. The sequester was stupid, across the board cut in discretionary items. Make real substitutes in mandatory programs where theres broad agreement in place of the sequester cuts than will help us in the long term and give us funds we need to invest in research, education, and infrastructure and also make sure that our military has real readiness. Reporter the question remains, guys, whether congressional leaders in both parties can land this plane by thursday in order to give ace chance to get to longterm negotiations in which both sides clearly have an interest in a successful result. Havent been able to make it happen so far. As optimistic as corker sounded in the sound bite, the house is working not on the same page but not on the same book. Reporter thats true. And they drove this strategy, along with ted cruz, that has crashed and burned in a spectacular fashion. But i talked to Republican House member over the weekend who said the house is waiting, sitting back, waiting to see what senate does, if the senate sends something without much time, we may have not numuch time but to move it. There may be a leaf for tsenate to drop something in their lap and john boehner might feel but to put it on the floor and pass it with votes from both parties. John harwood matwatching the play by play. What are the chances we hit the debt ceiling . Our next guest says theres a 50 50 chance. Partner, director of Financial Communications at corvis joins us this morning. Good morning. I wonder if the 50 50 figure you threw out a few days ago still stands today. Absolutely. Nothing has indicated anything moved far from where it was last week. If anything, it may have deteriorated a bit. Im sticking with the 50 50 but that may be hopeful thinking. What do you make of the dynamic you want to give the house something in the final quarter to force their hand to make those who would be otherwise resistant, obviously, go along this time . Weve got to be careful of saying things like that. Just because it worked in the past doesnt mean its going to happen this time. The house has an interesting new political dynamic, 2 years old, some saying compromise is a sin, im not going to do it. The question is whether the socalled moderates, the republicans in of the house, would be convinced 10 00 p. M. On wednesday night they had to do something, that theyd go along with it. I dont think were there yet. I think we may have to go over the mini cliff just to convince people its bad enough theyve got do it. Does it mean the only real way to put pressure on washington to see some sort of large, sharp downdraft in the market . Absolutely. At this point, the impact of the shutdown is going to be limited. Political impact. The white house recalled 300,000 defense workers, that means that private sector defense folks are not furloughed, as weve been told might happen at this point. Its going to take the market to respond. At this point it looks at if the markets saying we dont believe it. I cant tell you the number of clients, market clients, who said its never happened before, it wont happen this time. I hope theyre right. But this is a very, very different situation. The past noise predictor of future performance. People quote reagan from 87 saying the government drives us right to the point before default. I mean i know there have been some things regarding the redistricting in congress and fail safe districts. Anything really different than it was 20, 30 years ago . Substantially. Overwhelmingly. The best way to think about this is, reagan would have a lot of trouble in the Republican Party today. He agreed to five tax increases, for example, things that the Tea Party Wing of the party would have been absolutely an propolitic tick. Im not sure quoting reagan is a the best to do. If theres a deal, it the last minute, 10 00 p. M. Wednesday night. Its very possible, likely, theyll go several days beyond thursday to test the waters and to get some pressure really on them to force people to do things that they wouldnt otherwise do. Stan, what wed love for them to pull a rabbit out of the hat, not only a deal but weve come together with a grand bargain on bending the cost curve 20 years into the future. A lot of people here, the fact weve been through five different intended agreements without any grand compromise coming out ovev the last couple of years. Are we ever going to get there if this pressure isnt enough to get it there . One, a grand bargain in the current environment is a fantasy. Stop even talking about it, its not going to happen, its not going to happen soon. I told my clients and put on my blog a month ago that the earliest youd see comprehensive tax reform and entitlement reform 2019, which is six years from now. Wow. So the good news is, there will be a lot to talk about. The bad news is this discussions going on for some time. I am going to take the next six years off. Well see. Maybe we wont at that point. Stan, thank you so much. Stan collender sharing his thoughts. Now the government remaining shutdown. Anxiety building. Is anxiety impacting Consumer Spending and the economy . Well put to the ceo of expoeda. U 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. Theyre the days to take care of business. When possibilities become reality. With centurylink as your trusted partner, our visionary Cloud Infrastructure and Global Broadband network free you to focus on what matters. With Custom Communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. Every day of the week. Centurylink® your link to whats next. The street. Computer chipmaker Advanced Micro Devices to the up side after analysts boosted the stock to an outperform rating from a neutral. They believe its positioned well to capitalize on increased sales of next generation video game consoles, some of which you amd chips. Now this stock should in their opinion, finish the year off strong. The sock off session highs. Keep an eye on the shares. Thanks very much. New study by travel website expedia out today finding 18 to 30yearolds take the most business trips and vacations per year than any age group. Could it be hindered by the fiscal crisis. Lets ask dara khosrowshahi. Good morning. Thanks for having me. Thank you for being here. First of all, were you surprised to see the 18 to 30yearolds are mobile and, secondly, do you see any weakening in their habits right now . Well, were not surprised to see this behavior. These 18 to 30yearolds, they have smartphones before they got their college degrees, its everyday part of their life and use these smartphones and technology actively than older counterparts. We think longterm trends play into Technology Companies like ours, especially the travel space. Were optimistic in the long term. Im getting to the long term from the short term is another matter. Lets back up for a second. Were looking at stats showing four vacations per year, four, five business trips a year for the group. Are you saying that theres mobile technology thats contributing to that or is that a separate trend . Well, we think that mobile is becoming a bigger part of the everyday travel planning for this younger generation, and they happen to be traveling more. So those are two trends that play into your hands as far as being travel provider but Technology Provider with the great mobile ap ptechnologys that both expedia. Com introducing for leisure and Business Travelers. So, those trends are beneficial to us. Having you on gives a chance to push back against the deutsche downgrade. Take you to a hold, talk about the Management Changes at hotels. Com, worried about downward guidance, pressure on estimate revisions. What way are they wrong, if they are . Listen, weve got over 25 Analysts Covering the company. If i spent my time worries about analysts upgrades and downgrades i wouldnt be running the company. We talked about second half of the year significantly stronger than the first half of the year. If we execute on that, i think well be in great shape over the long term. Any reason to be concerned about the new Management Team at hotels, what theyre calling the second major brand level overhaul this year . No, thats not a concern, and those were part of some restructurings that we made in consolidating supply functions under brand expedia. From a longterm perspective, plans are there and also the longterm trends of the company are in force. Back to the macro, for example, as well, dara. When we come into a year, shares are down for the year, but at the same time people have been late to realize how much pressure the consumers under. Certainly with everything go on in washington theres a worry there will be a hangover to the Holiday Season or into next year as well. Can you give us a bit of color on that . Weve seen the trends being strong. Last quarter, 19 growth on a global basis, double digit growth in the u. S. Our business tends to be resistant to cycles because of the technology, more and more consumers online. Were not seeing the trends that you might see on a macro level, and on a shortterm basis, we havent seen any response to whats going on in d. C. If this goes on for longer, it could be different. But were not seeing any significant trends one way or the other. We think the growth trajectory of the company remains. Im sure youve got troops in washington watching the deal come together, if one does come together. How were there lessons from the sequester the last time around that would concern you, if the sequester were extended into the springtime . I think certainly. We are seeing some increased volatility in Business Travel. I think thats where the real danger is. Businesses need to know that theres a longterm path in order for them to invest and feel comfortable to make the kind of longterm investments we need the economy to grow. We are seeing volatility in Business Travel spend and this kind of activity in washington, nonactivity in washington, certainly doesnt help that. We need our businesses to go out and invest but only invest in a safe environment. And this environment is unsafe as it gets. Well put. Dara khosrowshahi, joining us from expedia. Thank you so much for your time today. Appreciate it. Thank you. It is no secret the rollout of obama care has been rough, as technical problems plague users online. How can the program get back on the right track . Well talk to the man behind Medicare Part d, the last major Government Health program. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. So she could take her dream to the next level. So we talked about her options. Her valuable assets were staying. And selling her car wouldnt fly. We helped sydney manage her debt and prioritize her goals, so she could really turn up the volume on her dreams today. And tomorrow. So lets see what we can do about that. Remodel. Motorcycle. [ female announcer ] some questions take more than a bank. They take a banker. Make a my financial priorities appointment today. Because when people talk, great things happen. Nearly two week since the obama Care Exchange ode, amid widespread report of problems. Medicare part d what are the similarities and differences between two . Joining us, the man behind the implementation of d, dr. Mark mcclellan at brookings. He joins us from washington. Good morning. Good to be with you. So much coverage about the glitches, at least on the technical side. How much of that is deserved . How much of it is familiar . Well, the Systems Online are not working now for the federal program yet. Thats the one that most states are relying on. Some individual states have their own programs up and running. This is familiar. These programs that the government undertakes has to start nationally, you cant do beta versions on small sample groups. The challenge is can you work through the problems quickly . I think the Administration Still has some work ahead of them to do that. But they do have time. It is hard to do a test run on something of this scale. That said, would you expect glitches to be ironed out and if they are, are there more significant, more structural challenges ahead . There are still some challenge as head. The right now what the administration, i expect, is doing, identifying where at each step in the web programs they are losing people, where they data isnt going through, people are dropping off and focusing on fixing each of the problems. When you get through the first round of issues with the website, there are bigger issues behind it. Not only can people log in and enroll in the plan, but then does that information go to the plan correctly . Are the government subsidies calculated correctly . Can people use the coverage when they get there . And when people can use the plans, i know a lot of people who have been waiting for coverage are going to sign up for the program. What the Program Needs is healthier americans, people who might not think might not want to just sign up for this right away. They need to conclude its a good deal as well. All of that is still ahead. The real problem is what these glitches are doing is selfselecting people, the very people that need to be involved are likely not to get involved a young relatively healthy person might say this isnt worth the headache where the person who needs the insurance will stick through the process because they need the coverage at the end, which is a suboptimal outcome. Why not delay it for a year . People understand whats coming but want to be supersure it works, isnt the bigger risk, should the entire programs success Going Forward with it now. Right now, kelly, what id advise everyone in america who doesnt have coverage yet and is interested in the program to do is to wait a little while. Theres still plenty of time. The systems are not working perfectly by any means right now. But hopefully by november the initial glitches and problems will be sorted out, so it will be much easier to compare plans and enroll. As long as you sign up by middecember and really i would try to aim for signing up by early december, youve still got time to get coverage beginning in january. So i would not i would not sign up now. Id wait a little while. And from the administrations standpoint, theyve got a few weeks to work this out. Its going to be a problem if people are still having real difficulty with enrollment come november and december. Mark, part ds used as a bit of a poster child to defend the aca. By democrats who say look at these other programs in the past heavily criticized in the beginning, now theyre beloved. I wonder if you welcome that as an example, and if you think its actually true. Well, our problems were a little bit different, karl, in that we got our website up, in fact we had a chance do a soft launch because our open Enrollment Period didnt start until midnovember, and that gave us some time to get information about the plans out, people to look online without having to enroll, having to set up an account and things like that. That helped us at the beginning. We had a big challenge in the beginning of ja when more than 7 million americans with medicare, medicaid, and millions more getting drug coverage from elsewhere all switched over on the same day. Thats when we went into problem solution mode and worked through systematically a series of challenges getting in the way of people using their drug. Thats the same thing the administration should be doing right now with the website. They are not going to have quite so many people all enrolling on one day like we did at the beginning of january. Right. Theyre aiming for 7 Million People in the whole first year. Finally, if the white house called and said, mark, we need you to help us put out this fire, would you . Im glad to help in any way i can with solving problems that are getting in the way of a real challenge for americans, which is Affordable Health care. I think this program has further iteration as head of it, there are good ideas on the republican side, too, for making affordable coverage available, and here at brookings im spending a lot of time working on ways to get affordable Health Insurance to all americans. Were not done with this yet. This is a longerterm process. Mark mcclellan, senior fellow at brookings, thanks for your time. Great to talk with you all. A couple of minutes to go in europes trading day where stocks have been under pressure because of the budget impasse in the u. S. [ female announcer ] youre the boss of your life. In charge of long weekends and longer retirements. Ask your financial professional how lincoln financial can help you take charge of your future. Amelia. Neil and buzz for teaching us that you cant create the future. By clinging to the past. And with that youre history. Instead of looking behind. Delta is looking beyond. 80 thousand of us investing billions. In everything from the best experiences below. To the finest comforts above. Were not simply saluting history. Were making it. We were flat. The bankser are weaker at the helm of the move we saw earlier. You see weaker banks. Thank you very much. Lets be absolutely clear. If its a flight to quality here in the United States, over the debt ceiling, its a disaster, a total disaster, for europe. This is what the Bank President of the commission had to say to our colleagues in brussels a few moments ago. Its very important that United States overcome its fiscal gridlock, otherwise they would have potentially dramatic consequences into the World Economy and of course it would also have a negative ramification to the nestcessary ufrp. Europe. Its partly because of the fed pumping, pumping the cash here, the cheap cash here, it has to find yield. Where has it gone . Into the periry of the bond market in europe. If people go back into treasuries because theyre scared this could fall out of bed and the information now is that some of the top banks in europe, weaker banks, have on their Balance Sheet 10 of local cov earn debt. Of course, as you know, theres a twoday meeting of finance ministers, looking how to shore up the banks when they have souped up stress tests next year which shows how bad the holes are. Undercapitalization of potentially very big size. The imf estimated losses of the italian and Spanish Banks is 230 billion, thats just two. Thats the imf. A check on energy and commodities. Sharon epperson at nichl next for us. Good morning. We are hearing from World Economic and political leaders this will have a tremendous fallout and impact, of course, Financial Markets across the globe. And gold being the safe haven, thats where folks will turn. Looking at gold prices steady, up 1 or so for gold, as this stalemate continues. And traders are watching the debt ceiling deadline that is looming, as well as the Government Shutdown. Putting some money there. Keep in mind as well, looking at thin markets with many markets closed around the globe. Also watching whats happening in the oil market. We are seeing oil prices under pressure and the Government Shutdown raises a lot of concerns about Energy Demand as does what will happen if theres an actual default. Theres another factor at work as well, and many analysts and traders are talking about, the fact we have so much crude oil here in the United States. That could continue to Pressure Oil Prices even after washington comes to some type of agreement. And so we are watching carefully this 101 barrel level for nymex wti crude futures breaking below that level. Closing below that mark will send oil prices to the 90s. Back to you. Thank you. Lets bring in bob pisani with what happens moving. Neither the volume or volatility suggest is in panic but theres a broader concern going to the market about earnings and how washington might impact earnings, and thats a story for later in the week right now. Take a look at s p, its been fairly stead request. Were on the downside. But just in the last few minutes weve come off of the lows and popped up in the middle. No headlines but a belief that the markets going to hold up well. The issue is washington and earnings. Let me just hit on this this morning, i heard a lot about it over the weekend. Concern is companies could use the washington excuse to lower Fourth Quarter earnings estimates more than they would. Right now were expecting earnings in the s p to be up 9. 8 . Everybody knows that numbers going to come down. Its half that within the next month and a half. Heres the worry, some worry it could go down to zero. If it goes to zero, in the next few weeks on concerns about washington, youre going to see the markets react negatively to that. I dont necessarily think that will happen because i think things will be resolved this week. If it goes beyond that, pessimists could be right. The vix today, you can see whats happening at the end of last week, front end, still higher. The price still higher than these are the options going further out. But not much. These are getting close to normal right now, indicating theres no panic going out. A lot of people believe the fed is going to step in. If any of this gets worse new york taper for the rest of the year but early into next year. A lot of other things underpinning the vix that is out there now. One company to keep an eye on, walmart. Theyre going to have an investor meeting tonight, going into tomorrow. Theyll probably give initial guidance for next year. Earnings are aggressive for next year. 10 higher. If they get tepid guidance, see the stock react. It underperforming the market. Keep an eye on that. Hear headlines on walmart tomorrow morning. In terms of the markets today, the leaders are the ones lagging. You can tell day when the market doesnt have energy. Look at biotech, hmo stocks and airlines throughout the year, they tend to be flat to underperforming the markets on the down days. Whirlpool down days, analysts saying traffics softer than expected. Thats impacting the housing stock. The usual group to the downside. Utilities weak today. Not clear why. There were reports coal may be a higher end product or more widely used in the next few years than the other energy alternatives, thats probably why its hurting them. Not hurting Interest Rate Sensitive Group but was i think its specific to the industry today. We were raising this issue earlier about whats happening in utilities. Thank you, bob. Senate majority leader harry reid and Mitch Mcconnell trying to work out a deal on the debt ceiling, Republican Leaders trying to consider to move their own shortterm bill this week. Joining us, Mick Mulvaney joins us charlotte. Welcome back. Good morning. Obviously a lot of eyes on reid and mcconnell. Possible the legislation originates in the house this week . Sure. I think either possibility is on the table. Whether something starts in the house, the senate, i dont think theres any magic formula. The senate may be further along on passing something over the weekend than we are. Were going back to washington as soon as i finish the interview and expect to be meeting all night tonight. I dont think anyones got a feel whether it started in the house or the senate. What do you think Tea Party Members in the house are going to insist upon, in terms of whats attached to this . Is it a repeal of medical dev e device, how hard of a line will they run as we get closer to thursday . Keep in mine, what weve asked for all along, weve never heard from the administration why its unacceptable, one year delay in the individual mandate. We can talk about the details but from the president s perspective, it doesnt prevent people from signing up for the program, it doesnt change his legacy or delay the implementation of obama care. It levels the playing field. That was our most recent offer. We have yet to hear from the president why thats not acceptable. Thats where we are as of today. A lot of people think that vote has already boat has sailed. Grover norquist on thursday said that might have been possible before his words ted cruz crashed and burned. Why have you not given up any ground on that one year . Well, im sure theres a lot of discussions on a lot of different fronts but the point is, that was the last formal offer. I dont have to teach you to do negotiations. Our last offer is this. Weve heard nothing from the Senate Democrats in counter to that, i can speculate what the next round might be but im not going to negotiate against myself. That was the houses last offer. As far as anybody else knows, thats the only offer on the table from either side now. What are you hearing it n. Charlotte . Not much, thats north carolina, i represent south carolina. But what hearing folks are worried about obama care, still worried about spending deficits and debt, the two discussions have merged together because of the calendar. Were having a discussion about the government funding and the debt level at the same time. But mostly people back home are just they would like to see some resolution but do not want to see capitulation. I know thats where you are now. Talking to Stan Collender who thinks theres no way theres a grand bargain when it comes to doing something significant on the entitlement front until 2019. Where does that leave us for the next six years . That, i havent heard. I heard several people say theres no time for a grand bargain now and i agree, theres not enough time in the next 24 hours or the next 6 to 8 weeks to strike a grand bargain. But thats the first i heard on 2019. Id be curious what stans thinking about. Is it possible we can get there within, 6, 12 months time we get progress on this front . Absolutely. Absolutely. You talked to leading democrats, talked to folks in the house, not necessarily in their leadership. But talked to folks who have retired from the house. I talked to barney frank before he left his service. He was interested in looking at possible entitlement reform. Its something that everybody agrees has to be done. Only disagreement is how to do it. Once youre on that page, its i think i think its pessimistic to think its going to take us six years to get to that agreement to some final agreement. Im sure youre more aware of Approval Ratings for congress than even we are. Over the weekend, senator mccain said those that approve of congress were probably down to blood relatives and paid staffers. I wonder if you feel that in a district like yours. You know, im in a swing district to a certain extent. No, i dont feel it. Its always easy to hate the institution, but like your congressman. I mean we have examples of that throughout our lives. People dont like the School System but love the teacher. People dont like congress. Its easy not to line congress because most people dont relate to it, they dont have a face to it. We started at 19 and it was awful. Its only going down. Bottom line is support back home is pretty solid. Congressman, well wait to see what the week brings us. Safely travels to d. C. Thanks, yall. Congressman mulvaney from south carolina. Thanks to washington, you could see a new type of advertising soon. The most Free Research reports, customizable charts, powerful screening tools, and guaranteed 1second trades. And at the center of it all is a surprisingly low price just 7. 95. In fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. Im monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. [ passenger ] airport, please. What airline . United. [ indian accent ] which airline, sir . [ passenger ] united. Whoa taxi [ british accent ] what airline, then . [ passenger ] united. All right. [ spanish ] what airline . [ passenger ] united. [ mandarin ] which airline . 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It could have big implications to your money. Netflix could be coming to a set top box for you. Is it the thing to keep the stock on the record run . More at the top of the hour. See you then. Its a new era for Venture Capital firms looking to raise funds because under the jobs act, now vcs can advertise and seek investments. The first Venture Capital to launch a campaign, josh frankel joins us now. Welcome back. Thank you. Thanks for having me back. John, my apologies. Josh is our producer. How significant are changes coming out of washington . Incredibly significant. This is this is the first time on national television, Venture Capital fund like ours can say, were raising a fund, we can tell you about our track record, which is you can speak directly to the camera, if youd like. But, no, we can tell you, were okay, ill talk to the camera. Hey, a credit incresters out there, were raising money, weve got a track record of 30 , gross i. R. And this is an unusual day. Youve never been able to do that. Rules that restrict us to go back to 1934 mean its been 11 marketing in the past. If i wanted to raise money, id go to friends, friends of friends and friends of friends of friends, and i havent been able to reach out to investors who want to participate in this growing entrepreneurial economy. This is something any firm can do. Of course. Which is the first to step up and take advantage of the regulation. You used that word accredited. Last time you were on, how do you make sure you avoid the appearance of playing to unaccredited investors tastes. Where is that line . How does that line move . The s. E. C. Defined the line. Its incumbent upon us make sure every investor we take into our fund is accredited. So there are various tests and we make sure tests are applied. So startups, this is happening across a bunch of different parts of the financial system. Startups can now basically advertisers list funds publicly and the first day they were able to do so, there were some really interesting examples in the last couple of months where theyre able to raise thanks to popular blogs, twitter, angel list, a lot of money in a short period of time. What kind of impact will this have . The advantage of a firm over single stock investing when you look in Public Markets you get a team, institution, money manager, whose working the order for you, they earn fees for doing that, and they give you broad diversification. The same goes, if you want to invest in a Venture Capital fund as opposed to individual startups. So it is just as important for the Venture Capital industry and more importantly, whether its start ups, vc firms you brit more capital into the job growth part of the company. You can understand why that sounds like a great thing. People say the historical record whether the vcs have a positive return on investments is unclear there are people should be careful here. People should be careful generally. Which is why given our track record and given our desire to be a Disruptive Force in the industry, we thought we should take leadership position. Medium returns are not great. But its a very wide return dispersing space. Were not alone in the group. We want to encourage transparency and visibility into the companies, the funds that are performing, to spend more time working with startups and less time raising capital. We talk a lot about the jobs impact on ipos. You mentioned transparency, critics about the degree to which it allow a company to come public without disclosing everything they ordinary would. Net plus, net minus . I think transparency is the best disinfectant out there. The more information you have, net positive. I think the rules youre relating to on ipos are outside the scope of this. But i think what they were trying to do is take some regulation out to Speed Companies to the public market. Well, this is a classic case of well just have to see. Absolutely. And hope people tread carefully and do the homework and investor demand is there for more disclosure. Absolutely. From today, we can you can o go we can market on media, social media. This is a big day for media, its a big day for Venture Capital, company formation. Thank you for coming by. John frankel from, ffbc this morning. Thank you. If youre waiting for your Social Security check to come in the mail, dont hold your breath. Stick with innovation. Stick with power. Stick with technology. Get the flexcare platinum. New from philips sonicare. Pcentury link provides reliable yit Services Like multilayered Security Solution to keep your Information Safe secure. Century link. Your link with whats next. The Social Security cost living adjustment is expected to be one 0 smallist in history, 1. 5 , the final number will not be determined until septembers Inflation Report is released. It was supposed to be out last wednesday but was delayed because of the shutdown. 58 Million People receive benefits. Average Monthly Payment 1,162. This where the were getting close to where the rubber hits the road. Sure. Remember the last couple of years, there was no increase because of inflation was so low. This, the second smallest of all time. Average over the last 20 years, 4 . Not a lot to look forward if youre receiving payments. Meanwhile, thanksgiving may not be all about the turkey, cranberry sauce and annoying relatives this year. Its more than ever going to be about shopping. Macys reportedly going to open stores on thanksgiving for the first time ever. The New York Post reporting that rival lord and taylor was able to capitalize on the macys thanksgiving day parade last year opening at 10 00 a. M. Eastern in new york city. So it stole some shoppers on that day. It unclear how Many Department stores macy lps keep open and what time they will open doors but a lot decrying over what remains over thanksgiving. Black friday moving closer and closer. Ancient history. Exactly. Tweet time. Deutsches coceo called the potential default on u. S. Debt a very rapidly spreading fatal disease. So were asking you to dust off your inner poet, come up with your own vivid sim limaly. Well get your answers after the break. The dow after being down triple digits down 28. In a world thats changing faster than ever, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Bny mellon combines Investment Management investment giving us unique insights which help us attract the industrys brightest minds who create powerful strategies for a countrys investments which are used to build new schools to build more bright minds. Invested in the world. Bny mellon. Tesla opening its new palo alto showroom and showcasing the x suv. Scheduled to go into production next year. The automakers received 6,000 orders for the suvs with customers putting down 5,000 deposit for the standard version. Im sure owners of tesla stock will be watching the reception of the product carefully. A lot of people excited about this and its not even on the market yet. You might see markets reacting to headlines here. Eamon javers has breaking news. The white house is putting out word the president s going to have a meeting with the bicameral congressional leadership, all four top leaders, democrats and republicans, at the white house today at 3 00 to continue these ongoing talks here on the debt ceiling and the u. S. Government shutdown. The question is whether or not they can achieve progress today. White house official sending out a note to reporters saying the president will remind these leaders that we will not pay a ransom for congress reopening the government and raising the debt limit. The president continues to urge congress to pass a bill that raises the debt ceiling and lends certainty our businesses and the economy need. So strong words going into the 3 00 meeting here. But well see what the president says behind closed doors later this afternoon. Thank you for that. Obviously thats going to be important to watch. Interesting you heard Mick Mulvaney speak for the tea party earlier in the hour, too, saying for them the one year delay of the individual mandate, implementation remains a goal. Well see if Speaker Boehner carries that message to the white house. Interesting as well given the coverage, out of the new york times, to how deep these glitches go with some of the exchanges. So wonder if that emerges as a plank of this or as, youve indicated if that ship has sailed. We showed you a chort chart of the comp. We will turn our eyes to the likes of a netflix which had been leading. Teslas of the world, the celgenes, cramer calls those at nighted ones, those got sold when things began to look dicey and those got bought back first. We cant show the tenyear now. Thats driving you bananas. Yes, because theres more complexity in the treasury mark than with stocks on occasion. We could probably get a better feel for what was happening on the front and long end in terms of what the market thinks is likely if we had those instruments but well have to wait. Looking at vix and the forward months to see what people think of rovolatility. Deutsches coceo called potential default a rapidly spreading fatal disease. Were asking you fill in the blank. U. S. Debt default would be like somebody punching you with your own fist. Joe writes, like a root canal on a good tooth without novocaine. A u. S. Debt default would be like handing a man dying of thrift a glass of sand. Theres a seem of selfinflicted wounds. Something we heard from people over the weekend, as well. Up and down whether here on the floor or running some banks, as they see it the same way. Well see what happens this afternoon. Again, meeting between the president , Vice President and congressional leaders happens 3 00 eastern time. In the meantime, back to headquarters. Scott wapner and the halftime. What were following now on the half. Dissing the dollar what chinas tough talk about the u. S. Means to your money and how to trade the rising rhetoric. Box top is netflixs reported plan to conquer your living room to keep the stock on the record run . Our top story, no deal, day 14 of the shutdown with the markets showing only a touch of optimism on display at the end of last week. Stocks way off their lows. But the deadline gets closer, is it safe to bet on a resolution . It is halftime. Right to john harwood with the latest. The stock market, as i