a 52-week high in france and germany. our road map this morning begins in washington where fiscal cliff negotiations according to the "times" has "collapsed." at least for now. with less than a month until the deadline, who blinks first if anyone? >> goldman takes dell from a strength to a buy. is it time to look at the stock and maybe even other players in the beat up personal computer sector? >> manufacturing data out of china. not bad. 50.6. that's the highest in seven months. although shanghai again trades lower even europe's pmi improves a touch in november. first up, we're one month away from the fiscal cliff and so far the white house and congressional republicans are still in disagreement over how to reduce the deficit and avoid a raft of tax hikes and spending cuts. yesterday our own jim cramer and maria bartiromo were on "meet the press" and cramer had a message for fellow panelists and father of the anti-tax pledge, grover norquist. >> most ceos are republican. they're on board. they're not on board with you. they're not on board with you because they fear your view. they think you do not favor going -- you favor going over the cliff. that's what they think. they think that you favor -- >> just for the record since we're on tv. that's silly if they think that they shouldn't be ceos. >> it doesn't really matter. that's what they think. >> i want you to walk me up to that moment. >> behind the record. i like that too. >> i'm stuck. like grover is stuck with this pledge he made everybody take which is that they have to go over the cliff because they obviously will not ever say the word tax. they will only say revenue. i'm stuck speaking to many more ceos than grover norquist is. he thinks it's silly. he thinks ceos are silly. i don't think they're silly. they control hiring in this country. many americans play for dinner. i don't think grover norquist cares about who is paying to dinner. he has a pledge. it's important to him and important to the people who agreed to it. i worry about dinner for people. i worry about rising above and dinner for people. he won't surprise it. ceos do. he has his principles. i went to college with him. he's a very nice man. very nice. >> you have a history. we should keep that in mind. >> sweet guy. likes the cliff. wants to jump over. favors recession. that's how i read that. recession isn't bad thing if you're a short seller. if you can go short, you can get your way. it could be big. >> it could be. >> it could be huge. you never know. >> at least for some period of time. >> yeah. >> there is a big analysis on the cover of "times" about talks as they stand right now. they say the president has been burned, scarred is the word they used by the previous negotiations and that until republicans put a new plan on the table, he will not move. he will not change what he's put on the table as of last week. is that compromise? >> i think that he's asking the republicans to say what cuts they would make. the republicans to me have not put anything forward that i see. i know that even when you say something like that, that becomes political. i think one of the things that's really important is that the republicans who do agree to raise taxes will be targeted by norquist. norquist far more powerful than karl rove and fox news. >> you do believe that? >> much more. he could destroy any republican who goes against the pledge. he's really powerful. i have known grover for years. >> even though democrats won the presidential election? doesn't that change the calculus? >> he would say these people are all safe seats if they don't get against the pledge. norquist has the division so to speak. he could destroy any republican who says the word tax increase. has he said -- he said if they're seduced by democrats in pure thoughts this is the so-called i can smell pornography when i see it. this is pornography for grover norquist. he can smell it when he sees it. he will target. he will destroy republicans who go against the pledge. he's much more powerful than any individual republican. and individual ceo. let's just face it. i've always felt he was the most powerful person in the class of '76 at harvard. enjoyed his success because he was a fellow member of the harvard crimson. i just disagree with him. terrific guy. >> with friends like that -- >> with all due respect to my ex-partner larry kudlow with all due respect. >> the treasury secretary talks about how he does not think that in the end the gop is going to prevent tax rates on the wealthiest from rising. this is what he said. >> what we're trying to do is make it more likely we come together on a good agreement for the american people that extends tax cuts for the middle class, brings our long-term deficits down. tough spending savings as part of that and invest in things that matter to the american economy. we think we can do that. we have a good chance to do it now. it's important that we do it. i think we're going to get there. >> given tough talk over the weekend, why aren't we waking up to down numbers, red arrows? >> europe is terrific. bond rates are phenomenal. a great run. china numbers are better. i think that there's a lot of people who feel like doug cast does who writes with me with a piece in "the new york times" saying that -- >> most stuff is nontaxable accounts any way. most stocks that people won't be as motivated to sell as people think. of course that doesn't necessarily deal with the increase in payroll taxes and the whole recession side of it. it does deal with the stock market side in terms of selling. >> why not say, listen, fiscal cliff, i have to cut numbers. i have to cut guidance. i think many ceos will cut guidance because of the possibility that the amt is going to -- this alternative minimum tax, people don't know they have to write a check for $3,500 at the end of the year. once you jump over the cliff, you can reverse the payroll tax. senator corker who is terrific and had good privilege of talking with him this weekend, we both know you can't reverse amt. once you go over the cliff, amt is insidious. it's hard to figure out. >> in terms of negotiations we will sit here day after day, is it more theatrics, are they really stalled, will we get down to something at the end of the day that doesn't deal with everything, doesn't deal with fundamental tax reform but in terms of taxes and spending and put other issues into 2013? don't you think a lot of it is theatrics. >> i feel that if you vote -- if you can't utter the word increase next to the word tax, which is somehow many republicans can't put that sin tax -- >> you just need enough of them to do that. >> that's a good point. grover norquist my friend from college emphasizes that if we put cspan cameras in, we would find out the negotiation. we put cspan cameras in and you could target republicans that want compromise. compromise is enemy for republicans that signed the pledge. compromise is the devil. i'm a big believer in compromise like lincoln had to do to get that emancipation proclamation thing. that's not included with grover norquist. nice guy. >> your terrific friend. you love him. i just wanted to add that for you. >> harvard crimson, forged friendship. you don't get that kind of friendship just in every day life. more of an acquaintance. maybe that's a better word. acquaintance. >> all right. let's move onto dell. shares are rising in premarket. goldman sachs upgrading to a buy from a sell. take note of that. full upgrade like that. it says dell's net cash levels provide an opportunity for a leveraged buyout or recapitalization. you hear the argument often times as a way to focus investors on something that's cheap. because it's a way for you to say, wait a second, how much cash do they have? you know, he does own 14% of the stock. what are opportunities here in terms of free cash flow and yield? i tend to think these arguments do usually focus investors on cheapness relative to free cash flow, relative to cash on hand. unlikely. highly unlikely that dell is going to be a lbo. we've had two guys over the last couple months saying we can do a 50 billion lbo and equity check is maintained at not that large a level, you never know. >> why does goldman use the term lbo in its upgrade? >> i argue it's just another way of showing how cheap it is. >> theater. >> more theater than they really believe this is going to happen. >> certainly not the top bullet on their note. top bullet is long-term concerns are now mainstream thought net cash position is decent, right? >> yes. >> they would have to get a lot of cashes from overseas by the way. you hear cash at u.s. corporations, a lot of it is overseas. repatriation tax holiday is not part of any negotiations we've been hearing about. >> not at all. >> an area that's a no go. so that is an important part of the calculation. if you can't bring that cash back and goldman says this. this is not something they think is going to happen. >> do you remember when steve brought seagate private. it was brimming with cash. raised the dividend next week. why doesn't michael dell pay out a special dividend and everyone is thrilled. >> fundamentals are still what? >> fundamentals are -- i mean, look. fundamentals depend upon a belief that the personal computer is going to be with us for a long time and is not that much in decline. ipad will not crush it. i don't know. >> why not redistrict some of that free cash flow and that cash into an area where you think you can attain real growth. try to recreate the company in some sort of significant way. >> i think that -- >> it's not easy to do that by the way. >> as rivals have discovered. >> maybe you want them to go into the pharmaceutical business. allerg allergen's weight loss business is for sale. not a lot of synergy there. you can't find growth in the personal computer business. it doesn't exist. >> maybe you could figure -- you'll carry it around on your ipad, maybe there's more synergy than you think. >> maybe he should take the cash and buy a lot of apple stock. >> i tell you why that's not going to happen. we're going to enter the new month for the markets after a mixed november that stocks saw the nasdaq and s&p finish on the plus side. dow posting second consecutive monthly loss. futures on the rise this morning helped by china pmi for november showed expansion for the first time since october of '11. wall street is waiting for ism manufacturing numbers due out in less than an hour from now. smallest change in november for the s&p, jim, since march. smallest in either direction. four points. >> you want the best december in the world, no vacation without legislation. we get legislation in december. we're going to break out. no vacation without legislation. that's my new watch word. do you like it? >> i do. maybe on a billboard even. >> december is historically strong. >> i know. that's what makes me think something has to happen. >> by when? if recent history is precedent, you would get a deal if you're going to get a deal at all around the 21st. right before the holiday. >> they're on vacation. legislate before you can vacate. a twist. >> i get it. i think it's good. >> then we have december to remember to quote an ad that we hear every year around this time. >> all right. you mentioned the special dividends. you have hca and dish and cato. cato mentioning the cliff as motive for the move. >> no way that tim geithner is ever going to let that dividend tax rate stay the same. that's a done deal. the president does not like dividends being taxed at a low level. they just have it in for dividends. not crazy about that. >> wealth disparity. things like that. mitt romney's tax rate. those come up in that argument. listen, it may be certainly they wanted to do it before the end of the year. this having been a leverage buyout, they like to keep their leverage ratio pretty high. 4.5 times. then they generate cash flow and pay it down and go to capital markets and borrow another billion dollars and they pay two more dollars to their holders who continue to be some of the lbo firms that took it private. >> that's a game plan that works. >> it has worked well. >> rates are so low. why doesn't everybody do that? >> works well. as a former fully owned by private equity they are more comfortable with leverage than others are. >> a level of comfort that i find to be -- they are insensitive to the economy and they're a winner in obama care. 2014 begins and i'm picking numbers up. hca. even with this leverage. raising numbers, hca, 2014. i'm doing that right now. cramer firm is taking up numbers. >> you did it in your head. >> i did. i'm going to ask the sales force to go out with it and i think he can get the stock moving and by the end of the day i'll let retail investors know and they'll take institutions out -- >> wait until tomorrow. >> delay is better. don't make the call yet. >> that works well. >> hedge fund cliff. >> line two for you. >> when we come back this morning, the key to averting the fiscal cliff could come from a bipartisan group of senators called gang of eight. mark warner is coming here to post 9. one more look at futures. more "squawk on the street" is back after a break. if we want e our schools... ... what should we invest in? maybe new buildings? what about updated equipment? they can help, but recent research shows... ... nothing transforms schools like investing in advanced teacher education. let's build a strong foundation. let's invest in our teachers so they can inspire our students. let's solve this. olaf gets great rewards for his small business! pizza! [ garth ] olaf's small business earns 2% cash back on every purchase, every day! helium delivery. put it on my spark card! [ pop! ] [ garth ] why settle for less? great businesses deserve great rewards! awesome!!! [ male announcer ] the spark business card from capital one. choose unlimited rewards with 2% cash back or double miles on every purchase, every day! what's in your wallet? for over 60,000 california foster children, the holidays can be an especially difficult time. everything's different now. sometimes i feel all alone. christmas used to be my favorite. i just don't expect anything. what if santa can't find me? to help, sleep train is holding a secret santa toy drive. bring your gift to any sleep train, and help keep the spirit of the holidays alive. not everyone can be a foster parent, but anyone can help a foster child. ♪ candle is burning low ♪ lots of mistletoe ♪ lots of snow and ice everywhere we go ♪ >> a bright spot for one u.s. car maker. chrysler says the u.s. sales up 14% last month. that's best month since 2007. sales were up over 32% from last year. we'll get gm at 10:00. we're talking 4 1/2 to 5-year highs for all these guys. >> you have a combination of 11 year old age of autos, destruction of -- by the way, sandy was an auto destroyer. loss of life. horrible. terrible. it also took out many more cars than people realize. you have to pump overtime to be meet the demand. >> we're still adding up sandy and figuring that out. we're far from figuring that out. hundreds of thousands of automobiles. where are we? 15 plus at the end? >> it's possible. 15. it puts people to work in the country. they don't just add in mexico. mexico is booming. fabulous moment for mexico. they will add in this country too. >> there's talk that their share of the market in the northeast, the big three, is not as high as it is in the rest of the country. we live in part of the country where incomes are higher. you may see better numbers out of bmws and mercedes. >> i don't know the percentage that's brought into the new jersey, new york area, the ones that you always see when you go over a bridge and you look down and this is new york -- i don't mean to be too centric. the foreign cars have to replenish quickly. american cars have to be put on a trailer and take them here. >> again, those numbers coming out later on and we expect them to be good. in addition to ism which comes out at 10:00, which will be a market mover for sure. when we come back this morning, get ready for a special dividend called cramer's mad dash payable to shareholders of record today. we'll hear what jim has to say and if it can pay out for you and later, jpmorgan chief u.s. economist, michael feroli. futures up 60. back in a minute. [ male announcer ] at scottrade, we believe the more you know, the better you trade. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations, where our dedicated support teams help you know more so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. our teams have the information you want when you need it. it's another reason more investors are saying... [ all ] i'm with scottrade. you can stay in and share something... ♪ ♪ ...or you can get out there with your friends and actually share something. ♪ the lexus december to remember sales event is on, offering some of our best values of the year. this is the pursuit of perfection. ♪ >> seven minutes until the bell. let's get cramer's mad dash on this monday morning. first trading day of december. jim, people are watching apple because the 50% retracement of the correction is at 605. so we might test that level. >> i think it can get there. one of the best pieces i read about apple in ages yesterday "the washington post" about apple. what is tim cook doing? here they are talking about breakout products coming. they are talking about much better sales for imac which some are assembled in the united states. ipad mini off the charts. this piece says the stock should go higher. i urge everyone to read it. it's very contrary to conventional view about what's happening under tim cook's regime. >> and they take the forecast for december up to 47.5. >> china hasn't really kicked off there. i know there's a percentage that says samsung game, set, match overseas. this piece says apple just getting started overseas particularly china. very positive. >> we remember 505. you think those days are over? >> we hit 505 and then you have one of these things. now, what i want to emphasize is i think they are having a great holiday season. a terrific piece on another network on bloomberg where i heard a major retail seller saying the apple is blowing out. this is big. europe has been weak. >> all right. finally, a call on apple and takes rimm to a sell. they say the blackberry 10 is a better user experience and will not turnaround the long-term problems. >> i thought that was interesting. carriers won't get behind it. stock has had a monster run. you know what? i agree with this call. enough is enough. >> it has been a lot that's for sure. when we come back, can the bipartisan gang of eight, the senators, flex enough muscles to strike a deal that would help avoid the cliff. we'll talk to democrat mark warner of virginia and ford will release sales for november at 9:35. can they rebound after sandy hurt demand in late october? we'll have the answer to that question plus the first trading action of the new month after the opening bell in just a moment. [ male announcer ] this is steve. he loves risk. but whether he's climbing everest, scuba diving the great barrier reef with sharks, or jumping into the market, he goes with people he trusts, which is why he trades with a company that doesn't nickel and dime him with hidden fees. so he can worry about other things, like what the market is doing and being ready, no matter what happens, which isn't rocket science. it's just common sense, from td ameritrade. you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell set to ring in just under two minutes or so. if you want to play the history game looking at the history of the month of december for the markets, some call it meaningless but it is basically the second best month of the year after april. 23 of the past 28 decembers have been up. average of 1.5%. since '90, up 2%. not an insignificant -- santa claus is for real many times. >> many of us have to commit. we're not allowed to own individual stocks but it's uniform gift to minors time. you have to make a contribution. i don't know whether you guys do it. it's a great way to put money away for your kids. that contribution is due now. there are a lot of contributions that are due that you remember to put money to work. in an environment where not people put money to work and people aren't doing anything, you get an influx of retail money. you have to commit that money to your retirement and to your kids. >> interesting. >> it's a big difference. >> btig has a note on seasonality regarding the end of the year and even december '08 was positive. how resilient the month of december is. >> funny you mention that. that was such a false tell. we thought maybe things had bottomed and then just off a cliff, not fiscal but stock right after that. it's a great note. >> meantime, as we await the opening bell this morning, we'll look at the s&p 500 at the realtime exchange on the top of your screen. big board here. >> there's the bell over at the nasdaq today, sears holdings and st. jude's children's research hospital celebrating the st. jude thanks and giving campaign. lead story involves delta and talks they say to acquire from singapore some stakes in virgin atlanta. >> we'll see what happens. they have been active. the one people are more focused on is american airlines in bankruptcy. us air negotiating with creditors. 70% ownership. we'll see. let's see where we end up on that one when it comes to consolidation. what's been interesting of course in terms of airlines and what you hear consistently from those who follow them and invest in them is they have not increased capacity therefore they have more pricing and you are seeing signs of real cash flow. can you believe it? >> it's a new thing. >> will that continue is one key question. >> read a piece this morning about people liking the dreamliner. to go back on delta for a second, i understand amr is more important. delta seems to be doing different things. is delta being creative with a group that's been the least creative sector i've ever seen? >> they may be. they are trying to take control of certain things it seems. you point out refineries. that was interesting. kate kelly reporting on that for us many times. you need to be somewhat creative. the overall theme in airlines continues to be there's not another guy coming along that cuts prices, increases capacity and sends the industry back that it's never been able to earn its cost of capital. we'll see. >> you can't get -- let's tell the truth. you can't get a seat. >> certainly at least this year they are no longer the inverse of what crude is doing. >> that's a good point. >> look, oil is not doing that well. and oil in the united states not doing that well. one reason i thought dell was brilliant to buy a refinery, oil in the united states is decoupling from the rest of the world. maybe delta will have a price advantage over the other guys. creative thinking. >> we'll keep an eye on that one. headlines out of news corp today. after all of the attention paid to this thing called the daily, they're going to kill it. bold experiment but not profitable. >> they were early there in china creating an ipad focused publication. it hasn't worked out. as for thompson, he was odds on choice to run the publishing spin. it won't happen for a while. let's not forget news corp and a large part of that move up that you see there is a result of announcement of that split which took place earlier this year. split itself will not be effective until the third quarter of it year. you will deal with slow growth perhaps dividend payer or nongrowth publishing parts of the company and then its broadcast assets with more growth. >> my charitable trust owns this trust. we saw the ford number. i don't know if that's enough to get it rolling. there's a lot of people that like ford here. >> on those ford numbers we'll go to phil lebeau who is watching all of the auto sales today. good morning, phil. >> month of november 6.5%. that's above the estimate that was out on the street of an increase of 3%. we're trying to see a breakdown in terms of trucks versus cars. remember, trucks is part of the story that we're looking at for the automakers. in the month of november coming off of october, increase in housing starts, increase of activity with contractors, construction firms, we're expecting to see trucks do better. we're waiting to see final numbers from ford. increase of 6.5% versus estimate of 3%. gm numbers top of the hour and we'll talk to the head of gm u.s. >> you can build a portfolio that had usgs and depots and some trucks, right? some autos. >> yes. look. this number is spectacular. if you had an inkling that europe was getting better a bit, ford is a $15 stock. >> funny you mention that. jim o'neil of goldman on "squawk" saying i know of investors in europe who haven't dreamt of that in years. you made a point to a large degree that's where some money is going quickly. >> a lot of money. i had bill mcdermott co-ceo of s.a.p. on "mad money" on friday. best third quarter. fourth quarter could be increedable. europe getting better. even better for them. kind of remarkable. >> merkel has given interviews saying that a debt write-off is feasible down the line. that's key coming from her. >> reached a deal last night. >> not to mention bond buyback from greece today. that's a short-term pop. >> anyone who is fearless enough to wade into greek dead a greer later -- not even a year -- feeling much, much better. even today the yield falling dramatically as a result of those headlines you just discussed, carl. >> italian bonds, spanish bonds, greek bonds, best performing assets versus dell, versus hewlett. even if you say he's right about anything, they skewer you. >> you look at the period when yields were far higher. >> yes. he would have made a killing. >> you saw a picture of him today in the post or daily news walking around east hampton, long island. >> how does his hair look? he uses the same barber as i do. >> he had a hat on. >> i lost my hat on at the cnbc party. i bought it at jcpenney. $24. terrific. trying to help jcpenney monthly sales. i did buy the hat there. mid town store, david, you want to go by with me sometime. we can get a pair of trousers and a hat for 38 bucks. >> add a cup of coffee and a hot dog. >> while we use the word trousers, bob pisani is here watching what's good morning, bob. >> happy monday, everybody. did you notice the market. nice rally here. again, the market is demonstrated that it believes a deal on the fiscal cliff is coming. i know. i didn't hear it over the weekend. headline risk was all anybody wanted to talk about on friday. if anybody says that a deal is not happening or it's going nowhere, we could wake up down 15 points on the s&p on monday. guess what? boehner said the deal is going nowhere. now, when i call the bulls on this, they say, bob, they didn't say a deal was off. they just said so far the negotiations are going nowhere. the market still believes that a deal is coming and it's going to be a substantive deal. instead and by the way, geithner insisted on tax rates issues. looks like there may be something happening eventually. we didn't fall apart on the whole thing. even futures weren't down overnight. instead we rally on a little bit overnight on the greek deal and for those that don't know and this is arcane depending on what kind of bonds you're talking about, the bonds that they are offering are priced well above what anybody was expecting. that's one of the reasons that greece is moving up and we're seeing moves up in europe overall. the greek ten-year yields dropped 9%. they're now about 14% yield. lowest since april of 2011. we saw 1% to 2% rises in europe right now. the main german market, the french stock market, they're at 52-week highs. germany is at a 52-week high. france at a 52-week high right now. euro at six or seven-week high so far. europe is moving things. not the united states. spain also by the way we didn't talk about this they officially asked for european funds to recapitalize their banking sectors. that's also a bit of good news. i want to talk about china because i got a lot of calls and questions about my comments last week on china. have you noticed we got good news on the manufacturing overnight on china. better than expected. november better than expected. the pmi numbers. guess the whole world went up. korea went up. everything went up except china. a lot of comments last week about what exactly is happening in china because china -- mainland china stock market is among of the worst performers for the whole year. we're down 11% in shanghai this year. hong kong is up 18%. how do you explain this? this was a huge debate in the last couple of weeks and of course a lot of people are@@ pointing to the fact that there's less stimulus than expected coming from the government. they haven't said anything but that's not the problem. this has been going on now for months and months on end. selling shanghai and buying into hong kong. there's a couple problems. number one, shanghai is completely domestic market. let's face it. less sophisticated investors and too many shares of shanghai stocks out there. the owners of these stocks have flooded the market, carl, in the last couple of years with too many shares. so there are way too many shares of these stocks on the market and this constant calls to buyback stocks from mainland china. the important thing here is hong kong is an international market. international investors can get in on that deal. that's why i think -- i don't know how jim feels about this. if you ask who is right shanghai or hong kong, i would go more with hong kong outlook than shanghai outlook. >> totally agree. great report. >> i want to get back to phil lebeau on ford. brought us numbers but now predictions on production next year. >> the key here is production drives revenue which drives earnings and this is important news from ford in the first quarter of next year it is now scheduling production of 750,000 vehicles. that is an 11% increase compared to the first quarter of last year about 73,000 vehicles. just for some perspective of how production is increasing, this quarter ford projects it will build 725,000 vehicles here in north america. they are increasing it by another 25,000 next quarter. and one other thing, carl, when we talked about importance of trucks. in november, ford had its best month for the f series since november of 2005 selling 56,000 f series trucks. that's an 18% increase compared to last year. you are really seeing the momentum building in terms of production in truck sales. >> yeah. up a fifth on f series. thank you very much. significant number. >> i bought my f series last year. great car. great job. f-350. not diesel. >> where do you keep that? >> it's part of our inn complex. >> got it. >> i assume we think gm might be good? 20 minute >> i think so. >> let's go to rick santelli in chicago. >> if you want to find out what's going on in the states, bob pisani is very accurately discussed, you have to look toward europe. so let's look toward europe. let's look at 24-hour charts. let's look at a 24-hour chart of the euro currency. started to do much better. you throw up the bund. many areas whether you talk italy or indeed greece, rates are moving down. that isn't a bad thing for funding but it does ehave peopl look at spain saying they'll do bank bailout, old program, not country bailout new program. the correction was small. goldman says stocks are the place to be. kind of making this trade a little more true than it was on its knee jerk. if you look at putting it together. you can see we're up several basis points. still not huge. if you open it up to a one-month chart, you can see that 160 remains the pivot. it's still about europe. don't despair. i'm sure the red herring of bashing tax policy in the u.s. will get to the front page before the end of the session. >> thank you very much. let's check out latest news in energy and medals with sharon epperson. >> it's the euro that we see in euro dollar helping commodities and risk on trade across the board in the sector. the fact that we are looking at that euro dollar and above 130 level is significant. also keep in mind that we did get improving factory activity. that pmi data out of china best in seven months. that's also helping the energy sector and technical buying is also contributing because we have nimax crude future, wti contract above that 89.80 level that traders are watching. 112 was the session high. in terms of gold prices, we are looking at new buying for the beginning of the month in gold and that is helping the gold futures contract but also the gold etf market at a record level right now. we've seen retail investors interested in gold not only in buying etfs but also in gold coins and in terms of etf market we look at highest levels we've seen for the year here as we begin the new month. back to you, carl. >> all right. thank you so much for that. i want to draw your attention to technical levels on the s&p crossing above the 50-day moving average for the first time since october 22nd. the number, if you are interested, is 1420.83. >> wow. >> no 200 but a lot of people watch it. >> it does matter. i think when i was listening to bob talking about how germany 52-week high, france 52-week high, those countries are doing far more poorly than we are and makes sense that we could go higher relative to our allies. >> all right. keep an eye on that. meantime, results of one particular study indicate bad news. later on, former gm vice chair bob lutz. we'll get reaction to sales numbers and as we go to break, look at this morning's early movers. there's dell at the top. or that printing in color had to cost a fortune. nobody said an all-in-one had to be bulky. or that you had to print from your desk. at least, nobody said it to us. introducing the business smart inkjet all-in-one series from brother. easy to use. it's the ultimate combination of speed, small size, and low-cost printing. sven gets great rewards for his small business! how does this thing work? oh, i like it! [ garth ] sven's small business earns 2% cash back on every purchase, every day! woo-hoo!!! so that's ten security gators, right? put them on my spark card! why settle for less? testing hot tar... great businesses deserve great rewards! [ male announcer ] the spark business card from capital one. choose unlimited rewards with 2% cash back or double miles on every purchase, every day! what's in your wallet? here's your invoice. >> look at the dow 30 this morning. most of the components are in green. hp may be a derivative play. >> that's a good point definitely. >> not often you see from a sell to a buy on a high profile name. >> not a good article by jim stewart in "the new york times." >> i disagree it was the worst deal of all time. >> because of aol? >> sprint/nextel, countrywide/bank of america. i can keep going. >> did you like the palm deal? >> that was well orchestrated. it was small. >> you're right. just checking. >> hp is a lot of different things that various ceos thought would help. >> this piece was about meg whitman checking off on this deal. >> amid dissension. >> meg was just a board member at the time. only member of the board who was not there was rob. we're going to talk about hp. i know consistently and i will be interested to see whether the theme that was brought a week ago when he decided to write this piece on deal book is going to start to gain currency. do you split the company? >> balance sheet is very important here. i don't know if you can. >> it's hard. it would take a long time. in these kind of things either you are for keeping the company together or then you're not. it can change quickly. you can't just say we're thinking about it. >> not to mention one last point here. anything they do strat edgicaeg from now on will be suspect. it's hard to convince people they can do anything at this point. >> you have to be a second-guessing pig here. >> second, third, fourth, fifth, it will go on. it's tough. >> banks beware. one in three americans would consider a mortgage from walmart and almost half from paypal. the problem, neither of those companies even offer mortgages brings us to this morning's squawk on the tweet. suppose walmart enters the mortgage lending business. walmart offering mortgages is like banks offering blank. tweet us and we'll get responses later this morning. you can get financing from costco. it's not unthinkable. >> i think that people -- my dad buys insurance from costco. costco has a lot of opportunities that people don't readily appear. >> i'm sticking to wells fargo. they are sticking with me. >> isn't that everybody? >> i think they own me. >> they're everybody. >> they're amazing. >> they know every transaction i do. >> where did you get your toaster? i actually got a toaster oven when i opened an account with citi in 1978. never did a stitch of business with them. still have the toaster oven. >> you bought trousers and went to -- >> in my dad's oldsmobile. >> which states are likely to feel the most pain if america falls off the cliff? up next, cramer's six stocks in 60 seconds. back in a moment. americans believe they should be in charge of their own future. how they'll live tomorrow. for more than 116 years, ameriprise financial has worked for their clients' futures. helping millions of americans retire on their terms. when they want. where they want. doing what they want. ameriprise. the strength of a leader in retirement planning. the heart of 10,000 advisors working with you one-to-one. together for your future. ♪ wanted to provide better employee benefits while balancing the company's bottom line, their very first word was... [ to the tune of "lullaby and good night" ] ♪ af-lac ♪ aflac [ male announcer ] find out more at... [ duck ] aflac! [ male announcer.forbusi. [ yawning sound ] >> let's check in with simon hobbs to see what's coming up on a monday edition at 10:00 a.m. >> one of the big questions out of the weekend is why is geithner being difficult about tax rates. and now a downgrade of estimates for g-4 and we'll also talk to a hedge fund managers making a fortune on greek dead and possibly argentina as they hold their feet to the fire. >> thank you so much. let's get six in 60 for a monday. six stocks in 60 seconds with jim. deutsche on igt. >> cheap. always where they could beat the numbers. deutsche says they can. they are talking agitation. i don't know. they think something can happen. i'm not sure about that. >> call on lululemon. >> they say a great quarter. wow. this is a gutsy call. people are betting against them. >> morgan stanley upping william sonoma. >> this is a housing play. people want to be in any housing play. the company is doing well. they are saying uggs are doing well. deutsche cutting oxidental. >> i think this is a cheap stock. i understand it will not rally by year end. >> for more on the names, go to our website. what's on "mad" tonight? >> if you think the fiscal cliff will be avoided, this is the stock to buy. we get no vacation they come up with a deal. they need more time to come up with a deal. no vacation until we get legislation. >> finally, we're going to get gms numbers in a few minutes here. >> these are big. >> you have a group of companies that have warned for the quarter. overwhelming number of guidance for the quarter has been negative. housing and autos. tail winds are here. >> it's the international companies that have been so disappointing. this will be a break if gm and ford can overcome the gravitational pull particularly of europe and with europe getting better in terms of finances, these might be a place to go. >> you said that a lot of these companies are going to be managing down in europe for years to come. that hasn't changed. >> no. when i see rates go down big, i always like stocks and now businesses have to follow. >> we'll see you tonight. 6:00 and 11:00 p.m. eastern time. when we come back, wall street getting ready for probably the breaking news of the day. ism at the top of hour alongside construction spending. we'll get you those numbers and the market reaction and then one of the lawmakers in capitol hill's gang of eight, senator mark warner is at post 9. we'll talk about the fiscal cliff in just a few minutes. ♪ ♪ [ engine revs ] ♪ [ male announcer ] oh what fun it is to ride. get the mercedes-benz on your wish list at the winter event going on now through december 31st. [ santa ] ho, ho, ho! [ male announcer ] lease a 2013 e350 for $579 a month at your local mercedes-benz dealer. with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor, right at your fingertips. [ rodger ] at scottrade, seven dollar trades are just the start. try our easy-to-use scottrader streaming quotes. it's another reason more investors are saying... [ all ] i'm with scottrade. it's another reason more investors are saying... boproductivity up, costs down, thtime to market reduced... those are good things. upstairs, they will see fantasy. not fantasy... logistics. ups came in, analyzed our supply chain, inventory systems... ups? ups. not fantasy? who would have thought? i did. we did, bob. we did. got it. welcome back to "squawk on the street." we have october sales construction spending and of course we also have the national november ism data. all hitting right now at top of the hour. up 1.4 on construction spending. boy, i'll tell you what, that's very large especially considering much smaller implications of this number in construction spending even though it's october. this is a good number especially if we're looking at the housing side which has a lot of cottage industries with regard to jobs. still don't see ism. there has been some rumblings there may be an issue with the number. we have it. 49.5. boy, i'll tell you what, the reason that's a big number, that is the lowest number for 2012. prior to this, the lowest number was 49.6 in august. high was 54.8 in april. so 49.5 now becomes the lowest level. wow. it's going to go back quite a ways. that's the lowest level since july of '09. july of '09. back to you guys. >> thank you so much, rick. estimate on that number was 51. that is as you said clearly a disappointment. let's get market reaction to that data. dow erased almost all gains for the morning. we were up 50 plus earlier on this morning. s&p as we said earlier broke above the 50-day moving average up 1422 i believe. currently at 1418. >> we also have breaking news on gm's november auto sales. >> increase of 3.4% for the month of november. that is short of what the street was expecting. street expected an increase of 5.5%. a couple of numbers in here. we'll talk with the head of u.s. sales for general motors in just a bit. a couple numbers that are troubling. one, retail sales flat compared with november of last year. fleet sales an increase of 16%. remember, you don't want fleet sales to be greater than retail sales in general and an increase of 16% versus retail at flat, that's going to be troubling. also the supply in terms of trucks. now up to 139-day supply. for a point of reference, a healthy day supply of any vehicle is in 60 to 75-day range. 139 days is troubling for some people on wall street. let's bring in kurt mcneal from gm headquarters in detroit. head of u.s. sales. we were talking. you had an increase of 3.4%. shy of street estimate of increase of 5.5%. characterize last month and really what kind of impact you noticed in terms of the truck segment and what you're seeing there. >> yeah, phil. you know, you framed it absolutely correct. our passenger car sales we feel really good about that. that was up 19%. our crossed over sales were up 9%. where we didn't, you know, have as robust a business was in full sized pickups. if you look at the incentive spend going on in that segment, we are amongst the lowest here. we've been amongst the lowest for three months. we're just trying to stay disciplined. we want to be known for our products and not for our incentives. >> that's fair enough. at the same time, you have a couple things going on. one, you have a housing and construction market that are moving. you should see greater demand for pickup trucks and you are closing out your old silverado and as a result people would say get rid of them. close them up. you have the new line coming in next year. >> we still have been saying that our inventory levels on full size trucks will end up around 200 to 220,000 units around year end. we still think we're going to be on the upper end of that range. you know, we want to be competitive. we are going to continue to be competitive whether that's marketing resources, enseincent resources. our competitors have been extremely aggressive. we are selling 13s. a lot of them have been selling down their 12s. that's put an interesting dynamic in the marketplace. the fundamentals in the economy to your point about housing, that still looks very positive. consumer sentiment and consumer confidence both at five and four-year highs. we see those good fundamentals. the fiscal cliff and all that discussion isn't helping either. >> real quick. we have to wrap this up. tell me about q-1 production. ford increasing by 11%. what's general motors doing in the first quarter with its production? >> well, we don't give guidance on production, phil. you know, we're going to continue to, you know, use whatever levers are available to us to moderate that and to have it at a healthy level to take full advantage of where the industry might go. industry is continuing to come in fairly good and we see that continuing into 2013 so we want to make sure we have the right levels of inventory. >> kurt mcneil, vp of u.s. sales for general motors joining us from the company headquarters in detroit. as we send it back to you, a couple things to keep in mind, you'll see stronger than expected numbers from a number of automakers particularly in the northeast. vw is a big business in new york and new jersey, sales up from the sandy rebound effect. that's what we're seeing. >> one vw headline 29.3. >> overall for the u.s. but in new york and new jersey up 40%. >> in that part of the country is incredible. thank you so much, phil lebeau, in chicago. back to the looming fiscal cliff. a deal to avoid the cliff remains uncertain as both sides continue to fight over tax code overhaul. we're joined at post 9 by virginia democratic senator gang of eight member senator mark warner. welcome. down to nyse. good to have you. >> thanks for having me. >> we read about dinners at your house. senators trying to work something out on the side. clearly it collides with headlines we got over the weekend. >> we all know what the frame of this deal has to be. you have to get additional revenues. you have to find a way to reform the entitlements and make additional cuts and get a net net of minimum of 4 trillion over ten years. that sounds like a big number but when you think about the size of our economy and size of government spending over a ten-year period, this is so much remarkably smaller than what's being asked of people throughout europe and people in the u.k. and throughout the world. my hope is we are going to get the deal done. >> we have three weeks or so to play with at least this year some say. is that feasible knowing what you know? >> i think what you have to realize is there has to be a down payment. president outlined what he wants for that down payment on revenue side. let's have rates go back up which was the underlying assumption that was included in the whole simpson-bowles plan. the gang of six plan embraced that as well. brought the rates back up to 39%. you could still do tax reform after that to bring them back down and eliminate the tax expenditures. that's a good starting point. will we fully get through tax reform and entitlement reform by the end of the year? obviously not. what i fear is let's not continue to negotiate this into the 11th hour. every day that we go on during this period, during retail season, you hold back consumers which we know consumer confidence is two-thirds of the economy. folks are not buying stuff because they don't know what will happen come the beginning of the year. >> is it the republicans turn at this moment to table something? >> the president laid out his down payment and they said give us more. what secretary geithner did was give them a term sheet. i don't think they are going to totally accept everything on that term sheet. in any kind of business deal i've been involved, longer in business than i've been in politics, you take that term sheet saying i like this piece, i don't like that piece. we need new ideas in this. one of the things i wish would be rather than these additional revenues being caught in the us versus them, why not recharacterize whatever revenues are collected and say we won't use these to grow government. we're going to create a debt reduction sinking fund instead of turning this into populous argument saying anyone that pays into this, well, they're patriots. they are helping get this problem solved because at the end of the day, you know, if we're going to get to the revenues we need, we'll need even more than that trillion dollars that's part of the down payment. >> how much of the white house proposal is a line in the sand from your point of view? how much can that be moved and i'm asking you because now there comparisons this morning being made between president obama and president george w. bush overplaying a mandate, one through the election but overplaying it to the point where it would backfire as it did in president bush's case. >> what the president has asked for is 1.6 trillion net of new revenue. if you're going to get the kind of major entitlement reform that i and others believe you need to do to make sure that medicare and social security and other programs exist 20 years from now, there's that relationship to making sure there's a big enough revenue number. what he's laid out in terms of the rates just gets you a trillion. you will need net additional 500 billion beyond that i don't think he's overasked. everybody knows for those of us that have been successful, we'll pay more. more semantics about what format. let's have rates go back up. if we can really exercise the kind of discipline and tax reform that simpson-bowles and gang of six talked about it, we need to do that. >> speaker boehner would argue he's put a solution on the table that he'll compromise on deductions. in that context why is the treasury secretary being belligerent. you just need total tax rate. total tax take to rise on wealthy and not marginal rates. >> look at those plans that people have talked about. the speaker has talked a lot about simpson-bowles. they assume top rates went back up and you bliuilt the tax refo off that premise that included a top rate of 39%. the actuality is when we actually get to tax reform, very supportive business leader and one of the reasons why we'll get it done this time is because the business community and campaign to fix the debt and others have stepped up. when the rubber hits the road and they say which deduction specifically? i had some say don't touch it. >> the bigger issue is that marginal tax rate as far as republican party are concerned if they go higher it will be bad for the economy. it's a blindingly obvious thing. if you raise marginal tax rates, it reduces incentives in the economy. why not give them that? >> as someone that did pretty well in the '90s as a business guy building tech companies, being a venture capitalist, i didn't see our economy being held back by what i think was a relatively fair tax code of the '90s. and, what we're saying is we have to bank that in a short-term, bank additional revenues. we've already done a trillion dollars of domestic discretionary cuts. how do we even that up a bit and move toward full-fledged tax reform? i think this is the best, smartest, quickest way if we're going to really get something done in the short-term before the end of the year. >> we hear a lot about expenditure cuts and entitlements or at least reform there. hasn't heard as much from defense. you are from a state that relies on that defense budget. it will get cut substantially. where does defense end up if we do get a deal? >> everybody wants to avoid sequestration. lots of my friends in the defense industry say don't do sequestration. do simpson-bowles indicating they have not read simpson-bowles because it was almost as high as sequestration in the top number. the numbers are roughly within the budget control act over ten years about $480 billion of defense cuts. sequestration almost doubles that. i think you'll see something north of 480 billion. substantially lower than that 950. what folks in defense industry have said is in addition to giving us a number, give us the ability to plan. one of the things that hobbles our defense industry more than anything is the absurd way we have run the federal government on three and six-month continuing resolutions. give us a window to plan and any legitimate business can plan against the budget. give us that number. >> some see that debt limit control being taken away from congress as a lack of discipline. you're not willing to adhere to that discipline. or you have dick durbin come out one day saying he wants hands off social security and medicare in the frame work. that's where people see the breakdown in compromise. >> i think about durbin who has taken more arrows than anyone as someone who has hung with simpson-bowles and gang of six and say entitlements have to be part of this mix. what i think we do need to put in place and one of the things that our plan did that simpson-bowles and others did was if you walk in a top line number, you can't unwind that in the dark of the night. any ability to break a budget cap would require a stand alone vote. a two-thirds majority in the senate. this would be unprecedented in terms of trying to put discipline back into budgeting which we have lacked from both sides. >> you think the gang of six or gang of eight to the extent we get tax reform next year will play an important role in that and will we default back to simpson-bowles with corporate tax rates going down? >> i believe and hope tax rates will go down. they all went down based upon a top rated 39%. we can get it done. the challenge, i believe, is when the rubber hits the road and you really start talking about home mortgage, charitable, state and local, health care exclusion, which are all of the big ones, that battle is going to be ferocious. let's make sure we go through it. let's also make sure we have a default mechanism not like sequestration which gives us the worst possible option but a default mechanism that you can live with whether it's a tax expenditure cap as percentage of gross income or a dollar amount or some general debt reduction surcharge that might be more broadly applied. one of the things i think we need to get into this debate is we all benefited from the $16 trillion in debt that's been run up. this really is the moral equivalent of war at this point and more we can turn the argument from who won the last election and us versus them into those of us who will now be paying more into something that will reduce the problem, the more i think we could turn this into a national cause and frankly you guys watch the markets all the time. i spend a lot of time in this business field. i believe we get a real plan that passes the market smell test that hits that $4 trillion mark, it will do more for job activity and economic growth than anything the president or governor romney talked about in their campaign. >> i noticed your pin. your rise above pin. how does that play on the hill? do people give you a hard time? >> we need all of these campaigns. one reason it will be different this time after the debt ceiling debacle and the supercommittee failure is that the business community is stepping up. trying to reinforce elected officials in both parties to do the right thing. you guys have got this effort. we need every effort possible. it's one reason i think it's good the president gets out there because we mess this up again, that $4 billion a night that keeps adding to the debt, that's what the american people are going to have to pay. they need to have their voices heard. >> need to have dinner at your house for 535 people. >> a dinner for whoever it takes and whatever it takes to get the job done. >> senator, thank you. as always. senator mark warner of virginia. >> the man who says investing in greek debt is a no-brainer. he made a fortune buying up the country's debt. he's here to explain how he did it. >> and the stock that just raised almost $14 million in new funding. you want to know the name of the company. we're back in two. ♪ [ male announcer ] 'tis the season to discover the kid in all of us. enjoy free shipping and great values on your holiday shopping from l.l. bean. can i still ship a gift in time for christmas? yeah, sure you can. great. where's your gift? uh... whew. [ male announcer ] break from the holiday stress. ship fedex express by december 22nd for christmas delivery. greece is starting a two-week process by where it will spend billions buying back its own debt at a huge discount and then canceling it. it's part of a debt reduction plan agreed by finance ministers to cut the debt burden for greece and there are a few seizing the opportunity from greece's crumbling economy and we have the ceo of graylock capital. welcome to the program. you are on record in the spring saying this was the trade of the year. going now and buy greek debt. now, you had to have body parts of steel to make those assumptions it would come through in your favor. what was the bet? >> i grew up in the emerging markets. i think the key to success in investing in greece on the debt side was recognized in the pattern. this country had too much debt. got restructured and then a forced liquidation by the banks in europe. i think, i mean, given this buyback, what really is laid in the leaf is that the political stuff in europe is actually, you know, this is an opportunity to make money for funds. and the noise actually kicks out these types of market run ups like 20% on the debt that we've seen in the last week. >> let's look at the chart of greek debt. yield is falling dramatically so the price is rising. it moves in the other direction. what sort of return have you made on the paper that you bought? >> well, it troughed out at 12 cents on the dollar. on the short end you're looking at a buyback offer of 40 in six months. >> will it succeed? >> there's a really good arbitrage opportunity presented by this. the yield curve is inverted. the trade is to tender on the long end and take proceeds and buy on the short end. what we did in the initial exchange was took the fso notes, sold and bought more greek bonds. one thing i would say is this is a great market opportunity but honestly looking at it from the restructuring side, they could have used the proceeds or the credit in a way that was more constructive for the greek economy. >> will the plan as it stands succeed? is greece going to get the cash it needs and go through this process successfully? >> they'll issue new notes to give the proceeds to buy back the debt. i think the -- i'm not sure that they're going to get the amount of debt that they would like for the buyback. they'll call it a success. >> you're not adding anymore greek debt to your portfolio and opportunity has topped out from your standpoint. have you layered into other areas of european debt? >> this is the best trade still. you're talking about a yield of 14.6% on the short end. that's a ten-year debt. and 12% on the long end. so this is still and post-restructuring, it's going to be a better investment opportunity. this is post-restructuring scenario in the country. the other countries are trading 6,000 basis points inside of this. given the fact that debt relief is irrational but from market opportunity you have a better opportunity after this than you did before. >> are you not adding anymore debt simply from a portfolio management standpoint? fully weighted in that? >> i think we'll tender on the long end, buy on short end and reverse it when the curve rationalizes. >> we must mention argentina if which you have been prom nenlt. this court ruling came through on wednesday. now the government has to decide whether to pay back your holdouts or whether to double down and face prospect of defaulting. >> there is an emergency filing over the weekend and we'll have to see what happens with that. argentina is cornered. the lesson to be taken from this is i think we're seeing a bit of a resurgence which is not bad thing from my point of view. >> congratulations on the greek trade. >> thank you. >> we're watching a tech mover in today's session. let's get over to mary thompson at headquarters. >> right now up 6.9%. the reason goldman sachs upgraded to a buy from sell, three reasons it likes dell. they say pessimism about the pc market is so depressed there's room for upside next year. in addition dell's earnings estimates have come down so far the risk reward play on this stock looks better. lastly they like the cash holdings at dell. they say that provides a nice buffer for the company in the downturn. up 6% almost 7%. back to you. >> thank you very much. remember the economist who said the iphone 5 would boost fourth quarter gdp. he slashed his estimates. jpmorgan chief u.s. economist michael feroli will tell us why. >> bob lutz, a month away from the cliff, how worried is he for the auto industry? what does he make of these numbers? back in a minute. twins. i didn't see them coming. i have obligations. cute obligations, but obligations. i need to rethink the core of my portfolio. what i really need is sleep. introducing the ishares core, building blocks for the heart of your portfolio. find out why 9 out of 10 large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus which includes investment objectives, risks, charges and expenses. read and consider it carefully before investing. risk includes possible loss of principal. with the spark cash card from capital one, olaf gets great rewards for his small business! pizza! [ garth ] olaf's small business earns 2% cash back on every purchase, every day! helium delivery. put it on my spark card! [ pop! ] [ garth ] why settle for less? great businesses deserve great rewards! awesome!!! [ male announcer ] the spark business card from capital one. choose unlimited rewards with 2% cash back or double miles on every purchase, every day! what's in your wallet? ally bank. why they have a raise your rate cd. tonight our guest, thomas sargent. nobel laureate in economics, and one of the most cited economists in the world. professor sargent, can you tell me what cd rates will be in two years? no. if he can't, no one can. that's why ally has a raise your rate cd. ally bank. your money needs an ally. ♪ talks to end a seven-day strike at the port of los angeles in long beach, california, intensifying this weekend with no resolution. jane wells is live at the port of los angeles with the very latest. jane? >> reporter: hey melissa. negotiations are expecteded to start up again this morning but that's not stopping the strike. you have 800 clerical workers that walked out after not having a contract for over two years. it's the longshoremen honor the picket line that has brought everything to a standstill. the national retail federation is asking the president to interve intervene. the work stoppage is increasing shipping costs a billion a delay. each day of the strike affects 0.1 of 1% of far east north american shipping volume. an east port strike is also looming if an agreement is not reached by december 29th. cargo airlines, china, korean air and the union is striking to make sure that jobs performed by union workers stay union jobs after these workers retire. management says they don't want to do that. they call it featherbedding and claim they offered compensation packages for senior employees worth $109,000. time off for most senior people for 11 weeks and guaranteed job security. i'm hold ttold the average sala $85,000 for the clerical workers and the mayor is enraged and wants negotiations to continue around the clock until this thing is settled. back to you. >> jane, thank you very much. in the meantime, do you remember the guy that said that growth in the united states would be half a percent higher due to the launch of iphone 5. now he's revising down q-4 predictions. he'll be with us next on cnbc. wooohooo....hahaahahaha! oh...there you go. wooohooo....hahaahahaha! i'm gonna stand up to her! no you're not. i know. you know ronny folks who save hundreds of dollars switching to geico sure are happy. how happy are they jimmy? happier than a witch in a broom factory. get happy. get geico. fifteen minutes could save you fifteen percent or more. since ameriprise financial was founded back in 1894, they've been committed to putting clients first. helping generations through tough times. good times. never taking a bailout. there when you need them. helping millions of americans over the centuries. the strength of a global financial leader. the heart of a one-to-one relationship. together for your future. ♪ welcome to the world leader in togethderivatives.future. welcome to superderivatives. here are stories we're squawking about at 7:32 on the west coast and 10:32 on wall street. nimax falling to 49.5. that's a miss. reading below 50 indicating contraction in manufacturing in the last six months. costco, lowe's and clorox hitting all-time highs and dean foods announcing sale of morning star foods division to a canadian dairy company for 1.45 billion. shares of dean are up 2% on the news. remember the economist who said the iphone 5 could boost fourth quarter gdp by half a percentage point? he's out with a new note revising downward his estimates. could one phone still impact the overall economy? michael, good to see you. >> you too. >> what happened to that iphone 5 impact? >> what we have seen in retail sales report in october and november suggest that the phone sales were good and there were a couple other things going on here that are subtracting from growth. three things in particular are hitting us. one in the third quarter we built up inventories at a too rapid pace. sandy did seem to impact things at the start of the quarter, disrupted activity. that held back things. while we may get bounceback from sandy related rebuilding efforts, i think there's a third thing which is probably some of the fiscal cliff uncertainties could weigh in on activity as we head into november and december. >> do you think that we had no iphone 5 impact or that had we not had the impact, revisions could have been lower. >> i think that's right. we don't have data in yet. iphone did give a boost for fourth quarter growth. as i said, you have to net out all of these things so you have positives and negatives. right now there are negatives that look like they are bringing growth under 2% in the fourth quarter. >> in terms of the retail sales when you look at what iphone 5 impact is, there's no clear attribution to what the iphone 5 is providing. it's only an electronics line that you're looking at. >> that's right. there are two categories, electronic stores and online sales which we did see jump in a way in september and october that's consistent with the reports we had in terms of number and dollar value of the phone sold. right now it's not a perfect read. it looks consistent with some lift in the fourth quarter from the iphone. >> one of the mysteries at the moment is why consumer confidence remains as strong as it does. is that, do you think, because in your analysis, a, most americans don't understand what the fiscal cliff is or the impact that it could bring or do you think it's because they believe that ultimately we will get a deal by december 31st? >> well, as you say, it's a bit of a mystery why confidence is so high. it may have something to do with the housing market and house prices being up around most of the country. that probably does help confidence some. i expect as you point out that most people probably don't have on their radar how large a tax hit we could have early next year if the fiscal cliff actually materializes. so it is a mystery. it does seem like right now consumers aren't too worried about the fiscal cliff. >> at what point do you get concerned? it sounds like perhaps a risk of revisions to q-4 estimates to the downside at this point because as the negotiations grind on and we approach year end, it might reach more of the forefront of consumers' mind and they may pull back. are you concerned about that impact? >> i am. right now we only have october data in hand. and fiscal cliff fears really accelerated in november. if you want to proxy that with something like google searches for fiscal cliff. so we don't really have much november data yet. or december data of course. i think that's where if you're going to see fiscal cliff uncertainty hit, that's where you feel it. i think there is a risk that we could go even lower than 1.5 on fourth quarter growth. >> michael, it's interesting that at no point during this conversation have you elected to talk about the federal reserve which is buying $85 billion of assets every month behind the scenes and on september 12th announced it would have qe-4. have you not mentioned it because you don't think it has an effect on the economy? >> i do think it has a marginal positive effect on the economy but there are other things going on as i mentioned. as you point out, next week there is a fed meeting. we do expect that they will continue with their current asset purchase program and announce that it will continue past year end. that will be modestly supported for conditions but as chairman bernanke himself pointed out, there's only so much that monetary policy can do in this environment. >> good to have you. thank you for your time. let's get a market flash back at hq. mary thompson is on the case. >> we're looking at two companies because there's a deal in the work. computer sciences selling its unit. the price tag a billion dollars. computer sciences will use the proceeds to buy back stocks and this deal will be to adjusted easte earnings next year. carl, back to you. >> thank you so much, mary. still ahead, find out why there was a $1 million bet made on las vegas. zappos ceo joins us next. the co-head of media communication and interin the at ubs will join us. [ female announcer ] if you care for someone with mild to moderate alzheimer's, you'll also care about our new offer. you get access to nurses who can help with your questions. and your loved one can get exelon patch free for 30 days. if the doctor feels it's right for them. it cannot change how the disease progresses. hospitalization and rarely death have been reported in patients who wore more than one patch at a time. the most common side effects of exelon patch are nausea, vomiting, and diarrhea. the likelihood and severity of these side effects may increase as the dose increases. patients may experience loss of appetite or weight. patients who weigh less than 110 pounds may experience more side effects. people at risk for stomach ulcers who take certain other medicines should talk to their doctor because serious stomach problems such as bleeding may worsen. patients may experience slow heart rate. thirty days of exelon patch free for your loved one. access to trained nurses for you. call 1-855-999-1399 or visit exelonpatchoffer2.com. she also likes to ride her bike. she knows the potential for making or losing money can pop up anytime. that's why she trades with the leader in mobile trading. so she's always ready to take action, no matter how wily... or weird... or wonderfully the market's behaving... which isn't rocket science. it's just common sense. from td ameritrade. but when i was in an accident... i was worried the health care system spoke a language all its own with unitedhealthcare, i got help that fit my life. so i never missed a beat. that's health in numbers. unitedhealthcare. i heard you guys can ship ground for less than the ups store. that's right. i've learned the only way to get a holiday deal is to camp out. you know we've been open all night. is this a trick to get my spot? [ male announcer ] break from the holiday stress. save on grounat fedex offi. ubs is holding its annual media conference. it's the longest running conference on wall street. we have sam powers here to tell us a bit about what's going on in that part of the world. i'm sure guests are coming in giving presentations this morning, sam. another sign of the digital age and media companies trying to grapple with it. news corp shutters the daily. something they spent money on to provide content to ipad users. as we head into next year, give me a sense as to what major themes are that you're seeing not just from m & a perspective about you from all capital allocations perspectives. >> it's a great question, david. thanks for having me. the question really ties into m & a. i think it will pertain to a lot of m&a. you alluded to challenges in the industry. ceos are more comfortable with structural changes they've seen in the industry. there are a few things coming out of key themes. they need more content. premium content that consumers want to engage with. something you didn't touch on is there's a lot of push toward international expansion with 20% to 30% of revenue coming from international and when you talk about capital allocation, the companies have extraordinarily healthy balance sheets and rate environment is as positive as it's been. a great opportunity to really drive m&a volume in 2013. >> you mention capital that they have available. when i think about one of the themes for this last year amongst many major media companies that you bank, it's buying back stock. it's not about growth as much as it's about shrinking the cap. that's fine if you're an investor. but that's not a great growth story, is it? >> no. i completely agree with you. you have seen an unbelievable focus on return capital. it was understandable when we came out of what happened in '08 with companies that had to focus on their balance sheets and wanted ironclad balance sheets. when you look at annual buybacks of 10%, most of the large cap media companies have authorizations close to 9% of their shares outstanding. those get refreshed every year. there's only so much capital you can return to shareholders before shareholders ask the question, you know, what are you doing with this capital? are there places to invest or are you a balance sheet story where you'll continue to return this cash flow? >> the advent of the internet in the '90s sparked deals of size and significance. m&a has been muted this year. we know that. what are expectations for next year? do we see bold moves from bigger media companies when it comes tom not just buying back stock but saying, okay, i'll take a shot here because the world is changing under my feet? >> it's a good question. i think you'll see more activity. i think the original point i made about people being comfortable with the environment and it's alluding to the video environment. over the top scared everybody for a long time. there's a lot of questions. what was netflix going to do to its business model? how was content going to be monetized. with the tv everywhere infrastructure coming together, companies are more comfortable about how the world looks going forward. that's one of the big things holding back m&a. ceos were worried about buying a company and then having the world shift under their feet. a lot of those outlines are in place for doing more deals. >> right. in this world regardless of whether it's just a broad band connection or not, you say they will figure out a way to get paid. >> exactly. if you look at over the top distribution, that's been another way for content providers to sell content. if anything, it's been a new customer for them. >> sam, we're going to leave it there. looking forward to seeing you later face to face. i'll interview tom rutledge who runs charter. u.s. media conference being held the first three days of this week, i believe. sam powers, thanks for joining us. >> thanks, david. it's a new week, it's a if you month and rick santelli is champing at the bit to get on the show so we moved up his spot so he'll join us shortly pointing the finger in the blame game and with 21 days until christmas, ebay seeing large rise in mobile shopping compared to last year and so is e-commerce the future of retail? stay with us. time for santelli exchange on this monday morning on leadership and the blame game. good morning, rick. >> good morning, carl. all i hear about blaming this person, blaming that entity, blame, blame, blame. if i look at the first administration of president barack obama, there was a lot of inherentiiting of debt. i'm not saying i agree or disagree. there's many that believe blaming someone else is just a way to shirk leadership. i'll tell you what. here's the problem with the blame game. when blame becomes an issue, it takes the empathy out. it takes the civility out and it green lights sustaining dysfunctional patterns. i'll give you an example. once you start blaming for example, let's take grover norquist. he's good target. once you start blaming grover norquist for a pledge made to get elected by representatives, you are totally doing a bait and switch. all of a sudden the issue of entitlementsbowles. why? they will look straight in the camera and say the gorilla in the room, entitlements. but when the blame game happens and you basically do bait and switch, you create a red herring. in this case, the red herring, and it is red, are tax issues. or taxing the rich even though the real issue you're avoiding, the big one, are the entitlements and the spending. now ross lynn carter -- and this is so ironic, because in many ways president carter was probably one of the most dysfunctional presidents, or at least didn't have the efficacy to ever put together a record that was to be proud. but the first lady had one of my all-time favorite quotes and i've used it before. we're going to show it on the screen. a leader takes people where they want to go. a great leader takes people where they don't necessarily want to go, but ought to be. so let's go over this one more time. today we had senator warner on. and you know what, i really liked a couple things he said. because what he said was, is think outside the box. see, we need to get away from the blame game, get away from the red herring. he says, well, start a debt reduction sinking fund. i haven't heard that idea. there are many ideas, but the point is, is that the president has a legacy to protect. okay? many people, including, you know -- we had jim bianco on last week and were talking about where the leverage is, and it's unfortunate, politics is about leverage. what i said is, i think the leverage is misplaced when they want to blame the house of representatives. the blame game, sustaining dysfunctional patterns, entitlement, spending. civility out the window. so what we need to really do is have the president come down and do something very comprehensive. i'll tell you what. if i sign that grover norquist pledge, and we are given a four or five dollar to one debt reduction deal, i might break my promise. okay? because if you break your promi you did it for reasons that promoted solutions, you'll go from being vilified to being a patriot. but blaming other people, dog ate your homework, that's never going to create a legacy for this president, because in 20 years, they're not going to remember the nuances, what they're going to remember is president barack o blama. >> you suggested the discussion about marshalling tax rates or taxes on the rich was a red herring in debt reduction. the problem that you have is right or wrong, obama has just won the election on that basic pledge to raise taxes. >> wrong, wrong, wrong! you know what, that makes no sense. how many people do you know that said i'm going to vote for the president to have more debt, and in an economy that can't grow it's way out of the issues? we currently only take in about 15.5% revenues. we need to get to 2021. >> i understand that. >> it's not a tax problem, it's a growth problem. and he has no growth plan. so then they blame others, because they don't have a plan. >> but he was able to get through the election doing precisely that. >> got through the election on social issues. on the economy, i think it's pretty clear that nobody voted for four more years of the current economy. four more years to get his house in order and he's not going to get his house in order using the red herring of taxes when it's entitlemen entitlements. it just isn't going to work, simon. >> i get it. i'm just pointing out -- >> you know what, let's take jobless claims. >> i get it. >> over the last three days, jobless claims to sustain that renewal again which i think is a bad idea, that's 30 to $35 billion a year. i heard many democrats say that's a small amount, why shouldn't we do that? that's about halfway to the total amount they're talking about taxes. but whent's that, it's small. but when it's the 70 to $80 billion am toortized over ten years, all of a sudden it's big. i'm not saying don't raise taxes. if i signed the pledge, i would do it for good reasons. i haven't seen a good reason. i haven't seen a plan that promotes the big guy in the room. >> see you in the next hour, rick. rick santelli live in chicago on cnbc. it's tweet time. a new study finds one in three americans would consider a mortgage from walmart in almost half from paypal. the problem here, neither of the companies even offer mortgages. so that brings us to this morning "squawk on the tweet." suppose walmart does enter the mortgage business. complete the following sentence. walmart offering mortgages is like banks offering blank. tweet us@squawkstreet. we've got your answers coming up next. i thought we won at everything? by losing, we win. win what? business. and cdw desitechsolutions that . they set us up to win. while you... ...set us up to lose. oh, a classic win-lose-win situation. exactly. who have used androgel 1%, there's big news. presenting androgel 1.62%. both are used to treat men with low testosterone. androgel 1.62% is from the makers of the number one prescribed testosterone replacement therapy. it raises your testosterone levels, and... is concentrated, so you could use less gel. and with androgel 1.62%, you can save on your monthly prescription. [ male announcer ] dosing and application sites between these products differ. women and children should avoid contact with application sites. discontinue androgel and call your doctor if you see unexpected signs of early puberty in a child, or, signs in a woman which may include changes in body hair or a large increase in acne, possibly due to accidental exposure. men with breast cancer or who have or might have prostate cancer, and women who are, or may become pregnant or are breast feeding should not use androgel. serious side effects include worsening of an enlarged prostate, possible increased risk of prostate cancer, lower sperm count, swelling of ankles, feet, or body, enlarged or painful breasts, problems breathing during sleep, and blood clots in the legs. tell your doctor about your medical conditions and medications, especially insulin, corticosteroids, or medicines to decrease blood clotting. talk to your doctor today about androgel 1.62% so you can use less gel. log on now to androgeloffer.com and you could pay as little as ten dollars a month for androgel 1.62%. what are you waiting for? this is big news. "squawk on the tweet". a new study finds one in three americans would consider a mortgage from walmart and almost half from paypal. problem is, neither of those companies even offer mortgages, which brings us to this morning's "squawk on the tweet." suppose walmart does enter the mortgage lending business. complete this sentence. walmart offering mortgages is like banks offering what? ash writes, it's like banks offering breakfast cereal. nester writes, walmart offering mortgages is like banks offering rollbacks on fees. and owen, like banks offering ben bernanke's snuggees. i'm sure somebody makes those. >> ben bernanke snuggees? just in time for christmas. if you're ever wondering what carl quintanilla does on a friday night, here's a sneak peek at what he did this weekend. >> up down, up, down! roll and back, roll and back! >> carl's got moves, apparently. carl doing the famous dancy dance at a concert for children at madison square garden this past friday. joins the ranks of elijah wood and andy samberg, but not as well as carl. and you must -- did you practice? did you have to warm up before the show? >> i'll tell you one thing, they don't give you a chance to rehearse. you walk out while the show is going on. there is your preparation. >> that's me and shannon, the choreographer in the dressing room in the bowels of msg. we have all emceed like black ties for bankers. there is nothing like appearing before a room of 5,0 5,000 4-year-olds. >> i would assume your kids were impressed. >> yes, their jaws on the floor, we dance -- it was a great opportunity. and by the way, wild brain is the production company that produces yogava gava, a micro cap entertainment company, very nice to ask us to do this. i don't know about your kids, david, but ava and lily are up sessed or were obsessed. >> we missed the dancy dance. >> we have passed those, thankfully. we're into musical theater overall. so, you know, more likely we'll get something more established. but you had some nice moves, carl. >> thanks for airing it. >> very adept, especially going forward and back. very good. >> it was a saturday night fever with the pointing. >> denny terrio. >> we have don yaktman on. he thinks dividends will surge next year and he'll tell you why. i don't know if you caught the "new york times" saying investors are overreacting to the prospect of rising taxes. we've got him on to explain and see if he's getting deeper into tax. >> good piece. we talked about it in the 9:00 m. we'll talk europe. here's what you missed if you're just tuning in. welcome to hour three of "squawk on the street." here's what's happening so far. >> we need to recognize the short term challenge is the fiscal cliff. the structural challenge is what it's going to take to get a grand bargain. >> europe has dealt with some of its long-term issues, even though the economies are week, and given the relative returns on value and offer in markets, i detect the first signs of people shifting more towards europe from the u.s. >> this is pornography for grover norquist, just like the supreme court, he can smell it when he sees it. he will target, okay? he will destroy republicans who go and pledge. he is much more powerful than any individual -- any individual -- any individual ceo. maybe you want him to go into the pharmaceutical business. the weight loss business is for sale. not a lot of synergy there. but you can't find growth in the personal computer business. it just doesn't exist. >> no. >> there's the bell. >> let's not continue to negotiate this into the 11th hour, because every day we go on during this period, during retail season, you're holding back consumers, which we all know consumer confidence, two-thirds of the economy, folks are just not buying stuff, because they don't know what's going to happen. >> we're checking our lists, as the "squawk on the street" countdown to christmas continues. ho, ho, ho! good monday morning. live at post night of the new york stock exchange. let's get a check of the markets this monday morning. dow close to the lows of the day, 31 points. s&p negative as well. only the nasdaq hanging on to a point and a half after ism this morning was disappointing, even though auto sales haven't been too bad. deckers outdoor up sharply after getting an upgrade to buy from neutral. the firm says it sees a strong second half of 2013 based on conversations with those who have previewed the fall 2013 collection. also jcpenney, one of today's biggest losers, takes its target for the retailer down from 20 bucks to $17. the firm citing results, and says they need to reduce working capital through the holiday season. a look at the road map. chrysler and ford logging big sales in november but that could all change if we go over the cliff, right? we'll talk to gm former vice chairman bob lutz to break it down. ce zappo's investing $1 million in revitalizing las vegas. he'll tell us about that and give us an update on the holiday shopping season when he joins us live. then the state of the states, the fiscal cliff edit n edition. we'll find out how fitch thinks each state in the u.s. is prepared for the cliff, and what it means for our economic future. and what do yahoo!'s meyer and kitchener have in common? it's car share company get-around. why high profile money from tech and celebrities alike is going to the san francisco start-up when we talk to the co founder and ceo. but first up, november auto sales jumping for both ford and chrysler. if we go over the cliff, though, our next guest says we'll see new car sales plunge 20 to 40%. bob lutz is the former vice chairman of gm, as well as former president of chrysler. he's also a cnbc contributor. bob, good morning. good to have you. >> good morning. good to be here. >> let's just walk through what you thought of the sales figures from this morning. >> well, i think everybody was expecting a weak november, and informed, it turned out pretty well, despite the disruption caused by hurricane sandy and a shortage of availability and so forth. i think gm was better than they themselves expected. but -- and actually up year over year in if all the brands. but gm had a weak month in pickup trucks. they have too much 2013 inventory and not enough discounted '12 models. but that will settle out. >> ford, i'm sure you've already taken a look at it, not only f series up 18%, that raised some eyebrows at this desk and raising production 11% for q1. how much optimism can we read into that? >> well, it all depends on your inventory levels. you have to make some sort of assumption, and i think the assumption that all the companies are making is that somehow a compromise will be found, and we will avoid the draconian automatic spending cuts. and tax increases. >> yeah. speaking of which, bob, at least over the weekend, it looks like the white house has moved their piece, and they are not going to move again until the republicans table something. how do you see these things going down? we've got three weeks to play with here before everybody really does leave for the holidays. are you optimistic? >> i'm optimistic by nature. and i have a feeling that when the economic future of the country is at stake or at least the near-term economic future of the country, people are going to rise above and do the right thing. and i think the republicans, frankly, are going to have to accept some tax increases. the wealthy are going to have to accept some tax increases, even if only temporary. but on the other side, there's got to be massive spending cuts and entitlement programs, because you can't have the -- a minor revenue increase without a decrease in spending. and then again, my favorite solution would be a temporary national sales tax, and a federal fuel tax, which is kind of, you know, peanut butter across the board for everybody. and would raise massive amounts of revenue. >> right. i thought you were going to say, you know, your idea, although politically a tough sell. agreed? >> yeah. >> if a sale at all. i noticed you're wearing the pin, bob. >> yes, i am. >> i wonder if you detect intransigence, any asymmetry of intranscript jenson either side, right? are democrats holding out too hard on the tax hike increase? are republicans insisting too much on more specificity on entitlemen entitlements? >> i don't think either side is giving right now. as you know, intransigence on one side begets intransigence on the other. and i think we're going to have to get closer to the wire before somebody comes to their senses and says to the other side, look, we can't let this happen. let's work out a deal. and i'm optimistic that that's going to happen. but right now, you know, that earlier contribution on the blame game, that really resonated with me. >> yes. >> and i think pointing the finger at one party or the other at this point is just not proddive. >> it sounds like what you're saying, bob, is that stocks -- the market has to scare washington. right? i mean, somebody the other day said that stocks are sort of like those deal a meter focus groups they have during debate nights. and that you really need to see investors turn that dial before the two sides ratchet up their commitment. >> yeah. and i think, you know, as always, if you're an investor an automobile company planning first quarter sales, you can either bet on the down side and cut production and not invest or sell your stocks now or whatever. but most people don't like to do that. most people like to bet on the up side and assume that everything is going to be all right. and that is certainly what i would do, if i were still in the car business at this point. >> bob, that's the way to kick off the week. appreciate your time, as always. bob lutz wearing the rise above pin and ann arbor. netflix in the red. mary thompson. >> worst performing stock in the nasdaq, down 3.3%. there's an article in the "wall street journal" questioning the company's aim to become a premium cable channel while it louds to keep costs low, it's questioning how this is going to hurt, because it won't, of course, be able to get those lucrative syndication rights. as a result, the company basically depends on increasing subscribers as a way to increase its profits. again, the stock down just 3.3%. carl, back to you. >> thanks, mary. when we come back, the ceo of zappo's.com. sin city. and the state on retailers this season. and rick santelli working on more for the next hour. >> absolutely, carl. we'll be back with dan stesich, floor trader, and the slope everybody is talking about. what about today's ism number, the employment index, what does that say about tomorrow's adp or friday's bls jobs report? sounds like a '50s cereal. but it's important. we're going to talk about it all with dan stesich. ♪ there is perhaps no bigger champion for the revitalization of the city of las vegas than zappo's ceo tony shai, founder of the downtown project in las vegas and moving headquarters into the city by next fall. tony shea joins us this morning to announce yet another pledge. tony, good morning to you. >> hi, good morning. >> what have you got in store now? >> there's a lot of stuff going on. we are excited to be moving into the old las vegas city hall in nine months. the city literally moved out, and it's all part of our goal to actually build our campus and have it integrate with the city and really be part of a big revitalization project. >> and then you're also pledging another $1 million to venture for america. help us understand what that is. >> yes, so we started working with venture for america. they're kind of like teach for america, but for college graduates that want to become entrepreneurs, and we started working with seven of them, and have been really happy with their participation, and they've been living in the downtown area, becoming part of the community, are involved with our recruiting and helping out tech start-up companies here, working with connectivity, bike sharing, car sharing. a lot of the projects that are going on. and for downtown project, we have a $350 million budget, $50 million of that is to the investments -- small businesses to help build a sense of neighborhood and community. $50 million of that into tech start-ups, and $50 million into education, arts and cultural activities, and then $200 million to real estate and they have been great in being involved with all those different areas. so we made a pledge to them to commit to $1 million over the next five years. >> wow, tony. we read a lot about the revitalization of chicago as a tech hub. obviously silicon alley, lower manhattan in new york city. where do you think vegas fits on that map, and what's the trajectory for the city on that front? >> it's the fastest growing part of everything we have been working on. two years ago, the vegas tech start-up scene was virtually nonexistent. and we've had several companies just ones i happen to know of, there's been ten tech start-up companies that relocated from other states to downtown vegas. so, for example, one of the companies is remotive. they make iphone-powered robots and moved to downtown vegas about a year ago, originally three people from seattle. they had considered silicon valley but then we recruited them to downtown vegas and now they're at about 20 people. and recently announced $5 million in funding from sequoia capital. so it's really happening here and it's pretty exciting to be part of it. >> yeah, and the city definitely needs it. that would be great if it could catch fire and sounds like it is. talk to me about retail. how did cybermonday go? how are you feeling about the season at large? there's been some discussion about how good the numbers looked overall for black friday weekend. and then you know, the ensuing debate about, well, our consumers simply shifting around the amount of money they were going to spend anyway. >> we're having a record season so far. we had a record cybermonday, and one thing that we're finding interesting for our business is that we start out selling shoes and so that's what we're known for. we're seeing more of our consumers shopping for clothing, and also shopping on mobile. and i think part of the reason why we've been able to get so many consumers to shop on clothing from zappo's is because of our -- the way we offer free shipping both ways and our 365-day return policy. so we've seen consumers will sometimes buy ten outfits and try them on and send back the ones they don't want or don't like. and we pay for that shipping back to us. >> any -- have you seen any worrisome signs of hesitancy to spend or, i don't know, metrics on tickets that suggest maybe they are beginning to figure out the possibility of tax increases after the new year? >> we haven't really seen anything on our end, but, you know, we're really just focusing on our business and so i'm not sure what's going on in overall trends. >> yeah. well i know you've got a good eye on the consumer. finally, you mentioned free shipping. obviously, it's a competitive market space. pressure on margins? i mean, is there a breaking point when it comes to retailers having to bow to what consumers now see as their god-given right to have free shipping? >> well, for us, we actually take it one step further in that it's free return shipping, as well. and that's something that we have just built into our brand and business model, pretty much from day one. and so what we found is, yes, it does cost more. but we really view those as our marketing dollars. it's a way to get consumers to be loyal, tell their friends and family about it us, and basically our whole philosophy is to take most of the money we would have normally been spending on paid ads and instead invest in customer service and customer experience. so things like the free shipping both ways. >> yeah. it definitely is a talker. and something that consumers -- by word of mouth, one of the first things they mention. tony, keep an eye on all your good work in las vegas. thanks for the times today. >> thanks for having me. >> tony hseh from zappos. the cost of taxing the rich has been one of the central debates. find out what could happen to the 1% if we don't get a deal. we're back after a break. the holiday season is here. and that means lots and lots of photos with a certain someone. now you can display it in style. with a picture frame signed by the entire "squawk on the street" gang. if you can get friday's nonfarm jobs number, it's all yours. tweet your guess t to @squawkstreet. oh, yeah, you have to be at least 18 years of age to enter. sorry, kid. for all the official rules and details, go to sops.cnbc.com. you have until 8:29 a.m. eastern this friday morning. good luck and say cheese. [ female announcer ] if you care for someone with mild to moderate alzheimer's, you'll also care about our new offer. you get access to nurses who can help with your questions. and your loved one can get exelon patch free for 30 days. if the doctor feels it's right for them. it cannot change how the disease progresses. hospitalization and rarely death have been reported in patients who wore more than one patch at a time. the most common side effects of exelon patch are nausea, vomiting, and diarrhea. the likelihood and severity of these side effects may increase as the dose increases. patients may experience loss of appetite or weight. patients who weigh less than 110 pounds may experience more side effects. people at risk for stomach ulcers who take certain other medicines should talk to their doctor because serious stomach problems such as bleeding may worsen. patients may experience slow heart rate. thirty days of exelon patch free for your loved one. access to trained nurses for you. call 1-855-999-1399 or visit exelonpatchoffer2.com. well, having a ton of locations doesn't hurt. and a santa to boot! [ chuckles ] right, baby. oh, sir. that is a customer. oh...sorry about that. [ male announcer ] break from the holiday stress. fedex office. ♪ [ male announcer ] 'tis the season to discover the kid in all of us. enjoy free shipping and great values on your holiday shopping from l.l. bean. ♪ raising taxes on the rich is one of the most hotly debated topics. what would happen to the country's wealthiest individuals if we don't get a deal? robert frank is here with more on that. i can hear people turning the volume up all around the country, robert. >> we know the wealthy are worried about tax hikes but they should worry more about the cost of not getting a tax deal and going over the cliff. here's why. the u.s. has around 5 million millionaires with a total weather around $18.8 trillion. as for next year, there are three possible scenarios. all of them depend on the cliff. if we go over the cliff, the population of millionaires would drop by around 315,000. their fortunes would drop by $240 billion. now, if we get a deal but it's bad for the economy, the millionaire population would drop by around 26,000. but if we get a deal and here's the good news and the economy grows, the number of new millionaires would be 230,000. their fortunes would soar by $1 trillion. just to underscore the cost of the cliff. if there were no threat of a cliff at all, the number of millionaires would grow by 443,000, a 9% increase. this just looks at the impact of economic growth. the cliff deal would also raise taxes on wealthy. that could temper some of that growth. but the economy and markets are the real drivers of wealth, carl and could create more than $1 trillion in new millionaire weather if wealth if we get a deal. that should be another incentive for guys in washington to keep on talking. carl? >> as if they need another incentive. great stuff. thank you so much. >> thank you. >> robert frank back at hq. rick santelli in chicago also talking about the cliff and europe, as well. right, rick? >> absolutely. with dan stesich, didn't you love mr. frank's piece? i like tax increases on tax revenues increase because of -- >> because you get more revenue. you grow an economy. >> it's automatic. if you pay x percent and growth goes up, you at a more. that's a tax increase we could live with. what are your thoughts on the moguls and cliffs regarding what we're discussing? >> i think there is a big overplay by the democrats on this blaming the republicans if we go over the fiscal cliff. if you look back to 2010, a lot of buttons were pushed and thought it would be blamed on the republicans. short term blame on the republicans, long-term blame on the incumbent in office. >> all i can say, two years, november of 2014, is the next time for an election. 365 times 2, basically. a lot of memory loss there, you know, if both sides dig in. ultimately, president owns whatever happens at this point. >> exactly. in 2014, it's what happens then, not what happens in 2012. >> let's talk about today's ism. oh, my goodness, the low since '09 -- the employment index as you were study, give details. >> lowest in september '09, trending down since april. a lot of these numbers, obviously written off to sandy. but you really have to look. april 12th -- or april of '012, we didn't have a hurricane, it was trending down. is it because employers are nervous about what's going on, the nonsense going on in d.c. right now? and they're holding back on any decisions? i think it's more that than sandy. >> this is really fascinating, because the slow down that's at least within the index of today's ism report, we have adp tomorrow, looking for 130,000, the jobs report friday looking for 100. we're at 170 just on dls. so this combined number isn't looking too good at this point. how much is blamed on sandy when it shouldn't? >> everything blamed on sandy. that's going to work for a while. once you dig into the details, wait a minute, this isn't all sandy. because the east coast is a very big part of the -- >> obviously oh, yes. >> the economy. >> everybody who has gone through sandy. >> chicago is a big part, texas, california, they weren't affected directly by sandy. so that will come back much quicker if it's going to come back. that's where you have to look, to see what the trend was beforehand. >> okay. now europe. you know, there was a little bit of a -- a confusion this morning when spain asked for a bailout. they're talking bank bailout, country bailout, new program. rates are down. i've seen many stories, if this is really going to be a positive rates being down, we have to really draw in more global investors. do you think that will happen ultimately? >> ultimately, i do think it will. any time europe gets pushed to the background, i'm kind of pleased. as long as their banking system isn't going to affect ours, i think we can still grow internally with some of the other partners out there. china looks like it's coming back. so yeah, maybe that will help. >> in china, you bring up one final good point as we wrap this up. china, many believe that it's reaching its soft bottom. i don't dispute that. i know if we look at shanghai composit composite, it doesn't necessarily reflect that. in the end, sideways movement at these gdp levels is still a headwind considering the growth china had four years ago. somebody is going to have to make that up. i look at gdp not only domestic, but in global terms. >> one thing you have to remember, i don't completely agree with you, it has been soft. 7.5% growth is still pretty good growth. that will be made up. i think brazil is coming back and some other countries. so it won't be as rapid as we had. but if china should come back, and that's still an if, then it's going to have to be made up somewhere. >> dan stesich, thank you. carl, back to you, bud. >> thank you so much. a few minutes left in europe's trading day. we have some 52-week highs in both paris and frankfurt. we'll see how they closed out the session. talk about the impact here this afternoon in just a moment. we're going to talk about european stocks for sure. but we're also going to talk about kate middleton officially pregnant. i mean that, is the news of the day. >> oh, yes. well, for many in britain it will be. kate middleton is pregnant. markets overall today really positive tone emerging in europe. not just from the equities but the bonds and importantly the comments. let's just check out where we are at the european close. first of the week, first of the month. >> the european markets are closing now. >> in fact, we were doing much better than that on those two pieces of data coming out of china that manufacturing was improving and you had the spanish market up 1%, italians more. we have cut that because of what has happened in the united states the ability to get leverage higher. the big news in europe, apart from kate middleton's pregnancy, the fact that the greek debt buyback process is beginning, it's going to be a dutch auction, they'll work out exactly where the market stands and price it at the end of that. the indication they really want it to succeed. in a few moments time we'll take you live to the finance minister's meeting in brussels. sylvia will have more on what the greek finance minister is saying to the rest of europe. lets show what the market action is today. and it is positive. there are reports they could cut the debt by $20 billion euros. that the state-run pension funds will take part. the pricing isn't as harsh as many in the market feared, because we had on friday for example greeks at the new york stock exchange saying if you take another haircut on the 70% that those pension funds have letter already taken, they won't be able to pay the pensions now and fear the social cohesion would break down. but everybody seems happier today, certainly interestingly. the greek bond market has rallied again today so you see the yields coming into negative territory. and those greek banks have done well. of course, they're sitting on a lot of greek debt and will be strong-armed into selling that through this process we imagine. but maybe not at the sort of loss -- or maybe a larger profit, whichever way you look at it, as we might have thought. and therefore, the greek stock market, like telecom, blue chips doing well, and the arc up 1.25%. and in the last three months rallied 26%. more broadly, all of the peripheral bond markets appear to be rallying, as well. the tensions are easing in this italy and spain. let's show where we are, in spain, for example. you see the way in which the yields are down there. again, the spanish market is rallying. jpmorgan believes the rally and peripheral bond markets will continue because institutions will be forced into the core, because it's expensive not to be invested there. if you like. and at the same time, because they think that -- actually, yields at this level are still too high for the ecb. don't fight the ecb, is the message from jpmorgan. buy where we are at the moment. let's show where we are on italian debt. and you'll see again the yields have fallen in milan. there you go. and if you look at the spread, the difference between italian debt and german debt, that fell below 300 basis points today for the first time since march. into the fray, and i think this is very important. jim o'neill at goldmans on cnbc today, did you catch it, he thinks because of the fiscal cliff here in the united states, increaseingly investors are moving into europe. check out what he had to say. >> i detect more and more longer-term investors, and the cautious long-only ones, who are being influenced by this and starting to think, you know what, europe has dealt with some of its long-term issues, even though the economies are weak, and given the relative returns and value on offer in markets, i detect the first signs of people shifting more towards europe from the u.s. >> mean time, deutsche bank has out today which says the unconditional nature of the back stop we got from central banks changed the trajectory for risk assets and say equities will be the clear winnerment i point out to you, the german stock market so far this year, carl up 26%. phenomenal. >> unbelievable, begin what they have to deal with. thanks a lot, simon. and congratulations, too. >> i'm not pregnant. >> it was none of my doing, let me assure you. >> as simon mentioned, finance ministers in brussels to discuss the greek debt buyback and more. sylvia is live in brussels with the latest on that. the whole world is watching that story, as well. hi, sylvia. >> well, hi there. exactly,f looking at the markets, you wouldn't think we are in a crisis. but it's the old talk about the two ugly sisters maybe at the moment looking less ugly than you over there in the u.s. but we both have our problems. top problem, of course, still on the agenda is how well will this debt buyback program of greece run, as simon mentioned before, there is going to be a bit of arm-twisting, a bit of sweetening in there and they want to make extra super sure that this works, because let's face it, if it doesn't work, the whole debt -- the whole plan, the whole rescheduling plan and reprofiling of debt plan and the whole rescue plan for greece that's been hammered out by yet another 15 hours of talks last week here at the brussels, the whole thing will fall apart. but the hope there is that senior -- that mr. sonaras from greece will report back that he will see this problem through before december the 13th when, indeed, the eu leaders meet here again, and then hopefully they can actually hand over or sign the check for the next tranche of the greek bailout package would be a good $30 billion with another $10 billion staggered over the next three months in the new year. that's the principle hope we live on, and the markets evidently believe this can be pulled off. >> sylvia, thank you so much. we'll be coming back to you more on the story. sylvia in brussels. we want to bring in bob pisani with a look at the dow. >> you know, we did not move on worries over the fiscal cliff over the weekend, as people thought we would. but we did move on greece. got a little bit of a boost preopen. and since then, frankly, the ism numbers have just been a real disappointment. and we are moving on that. here's the dow intraday. here's where we got the ism number. and you can see we have been drifting lower ever since then. and this really is a disappointment, this number. this is the first read we get on the overall economy every month here. and let me point out what's been going on here. the sectors have been risk off by enlarge so transports are notably week. materials and industrial. there is your risk off trade here today. i would point out, technology has been an upgrade over at goex and the overall technology sector, tough time in the hardware group doing better today. so there is an outlier in tech. as for the ism, what was going on here, really there was very little good news. take a look. the overall number, the headline number, lowest since july 2009. the employment component in this, lowest since september 2009. that's probably the second-most watched component of that. so there wasn't a heck of a lot of good news in this thing. manufacturing overall, just weaker. and you can't blame it on sandy. i'm sorry. rick was mentioning this before. look at the ism chairman, what he had to say. the chair of the committee. the second half of the year continues to show a slow down in demand that's been down -- moving down since the middle of the year. the responsibilities on the fiscal cliff -- if the program put in place is more taxes and big spending cuts, which will push us toward a recession, forgive it. and that's what we're getting. more taxes and big spending cuts. so the idea here is this sort of overall concern that the fiscal cliff issue, even if it's resolved, means more austerity. and that's a problem overall for the markets here. take a look, though. we've held up reasonably well in the ism manufacturing. this goes back for the last several years. the big concern here is the trend basically has been down. we've been sideways for a couple months. and now four out of six months showing contraction. in terms of the market, we're still continuing to hold up pretty well. you notice we don't get any real panic here. that's because of the seasonal time of the year, partly. december to january. very big, strong two-month combination. a lot of people try to get in december, ahead of -- beginning of the month buying in january. the news has been manageable in europe. you heard from simon, middle east has been a bit calmer in the last week. as for the bears, they've got a good point, carl. we're two big down days from the lows back in november. and remember, the dow was at 12,500, just about two weeks ago. we're 500 points higher today. >> yeah. >> so two bad days away from going back to those lows. >> so true. thanks, bob. bob pisani. verisign getting a lift today, mary thompson is at hq. >> a turn around for the stock that fell last week. the reason, the government did renew its contract, allowing it to keep its status as the internet registry. the concern was that the government wasn't going to allow for any price increases for verisign. that's why the stock pulled back. in the wake of the number, reassessing the situation, the company on track for good revenue growth and as a result we have seen a turn-around in today's session, up more than 6%. back to you. >> ocekay, thanks mary. fitch is out with its latest ratings on u.s. states. we have a look at which ones face the biggest threat from the fiscal cliff. later, if you own a car but never drive it, you might be able to make some money off it. ashton kutcher and marissa mayer are backing the start up. the ceo of get-around is coming up. gecko (clearing throat) thank you, mr. speaker, uh, members of congress. in celebration of over 75 years of our government employees insurance company, or geico...as most of you know members it.congress. ...i propose savings for everyone! i'm talking hundreds here... and furthermore.. newscaster:breaking news. the gecko is demanding free pudding. and political parties that are actual parties!? with cake! and presents! ah, that was good. too bad nobody could hear me. geico. fifteen minutes could save you fifteen percent or more on car insurance. or that printing in color had to cost a fortune. nobody said an all-in-one had to be bulky. or that you had to print from your desk. at least, nobody said it to us. introducing the business smart inkjet all-in-one series from brother. easy to use. it's the ultimate combination of speed, small size, and low-cost printing. tdd#: 1-800-345-2550 after that, it's on to germany. tdd#: 1-800-345-2550 then tonight, i'm trading 9500 miles away in japan. tdd#: 1-800-345-2550 with the new global account from schwab, tdd#: 1-800-345-2550 i hunt down opportunities around the world tdd#: 1-800-345-2550 as if i'm right there. tdd#: 1-800-345-2550 and i'm in total control because i can trade tdd#: 1-800-345-2550 directly online in 12 markets in their local currencies. tdd#: 1-800-345-2550 i use their global research to get an edge. tdd#: 1-800-345-2550 their equity ratings show me how schwab tdd#: 1-800-345-2550 rates specific foreign stocks tdd#: 1-800-345-2550 based on things like fundamentals, momentum and risk. tdd#: 1-800-345-2550 and i also have access to independent tdd#: 1-800-345-2550 firms like ned davis research tdd#: 1-800-345-2550 and economist intelligence unit. tdd#: 1-800-345-2550 plus, i can talk to their global specialists 24/7. tdd#: 1-800-345-2550 and trade in my global account commission-free tdd#: 1-800-345-2550 through march 2013. tdd#: 1-800-345-2550 best part... no jet lag. tdd#: 1-800-345-2550 call 1-800-790-3801 tdd#: 1-800-345-2550 and a global specialist tdd#: 1-800-345-2550 will help you get started today. coming up on halftime, is innovation dead at apple, former ceo john scully here onset speaking out on america's most valuable company. a big bear makes another big call. adam parker on the markets in 2013. and dell's best day of the year. what's the right play now? two traders, one heated debate at the top of the hour. carl, see you at 12:00. >> scully and parker, good hour. can't wait. thanks, scott. 21 days until christmas and ebay seeing a huge surge in mobile shopping. question is, is mcommerce now as they call it the way of the future? steve yankovich joins us. >> thanks for having me here. >> some of the percentage increases are hard to believe. how sustainable are these numbers? are we still in early days? >> yeah, we are. the mobile growth has been phenomenal. if you think about four years back, people didn't think about mobile commerce at all. and now today we expect to do $10 billion in globally on ebay mobile and it's about the consumer. when and where do they want to shop? and the smartphone is changing the game. we're in a paradigm shift in how people are shopping these days. >> i read that the biggest mobile day for you guys was not black friday, wasn't cybermonday. it was the sunday before cybermonday. >> it started on thanksgiving where we had more than twice the amount of shopping on that thursday, and when -- so we book ended that sunday with thanksgiving and with cybermonday. and the reason is, you think about sunday, this is when we have all of the time in the world. it's a day of relaxation. but that smartphone is with us from the time we get up to the time we go to sleep. and holiday inspiration is happening during that holiday weekend when we're with family and friends, thinking about gifts. and so we put the power, right, of what i want and what i want to buy now in the hand when it's peaked interest, desire, demand, impulse is at its peak. and that is key to mobile shopping. >> interest point. on that front, steve, i'm trying to lead investors to some derivative plays here. without asking you to talk about competitors, necessarily. but is there something about shopping on a mobile device that leads you to a different category more often than another? >> no. actually, you know, our business is so big that the types of products that people are buying -- the same as they buy online on their computer or popular in the store. it's just about convenience, right? we're just allowing the consumer when and where it matters to them. it's not on the retailer's time, not on the e commerce site's time when they're at a computer. it's when does it matter to you? when do you have moments to act on impulse or your need? and so it's across the board. it's everything from small value items to, you know, six-figure cars are being bought on ebay mobile every day. >> wow. that's -- that talk about an impulse purchase. obviously, we're going to track it through the holidays steve, but appreciate your insight. good to have you. >> you bet. thanks for having me. >> steve yankovi ch for ebay. going over the fiscal cliff could cause major problems for state economies. which face the biggest threat from the potential tax hikes? joining us on the phone is laura porter, managing director at the public finance department, sector head for the state ratings group which focuses on state credits across the country. and focuses on a report, laura, looking granularly at this. good morning. >> good morning. thanks for having me. >> in general, you argue that a lot of ratings on the state front will remain unchanged no matter what. why is that? >> we feel states are fundamentally very strong credits, have strong control over their revenues and spending and the vast majority have shown the ability and willingness to adjust. so we think that the biggest and immediate threat is the fiscal cliff and what that can mean for state revenues, which quickly react to changing economy. >> you make the point -- surprise to no one, you have an unusually high degree of uncertainty in this outlook and that's because -- walk us through a scenario. we go over the cliff, and we begin seeing materially lower revenues almost immediately. >> yeah, you have personal income and sales taxes. and that shows that -- when you have the economy declining unexpectedly, you see that show up quickly. most states this year are expecting continued slow revenue growth. so to the extent revenue under perform, you see budget gaps and the three things you want to look at there, in terms most affected, how volatile are the revenues, what are their assumptions, and what potential flexibility they have in terms of reserves. >> yeah. i'm looking at a list of the ratings here. most are triple to aa. but there is your occasional illinois single a. california single a minus. i'm guessing those with lower ratings are more vulnerable than others, right? >> that's the right assessment. it's the ratings indicate a financial flexibility. so in illinois and california, they are our lowest ratings for states. >> so from your standpoint on january 31st, if it looks like this is really going to happen, and i mean that in a bad way, is the -- would we expect from you and your competitors a change in the rating outlook, or would we be looking at ratings changes outright in the near-term? >> for us, the focus would not be a specific date. it would be how the economy is reacting. and generally, you would be looking at trends generally. you would have outlooks change before ratings would change. >> right. finally, there's the issue of federal medicaid cuts. is that -- i mean, put that on the spectrum of things we need to pay attention to. >> it is -- for states in a whole birvet ballpark in terms of its importance. almost half the money from the federal government that goes to states for medicaid, also medicaid is the program states have been struggling with the most in terms of containing the rate of growth. so really, that's the thing to keep an eye on, on the federal level in terms of how it relates to the states when you're talking about spending cuts. >> yeah. everyone wants to pretend it's simply a federal story, the cliff, that is, but clearly it is a lot more to it than that. laura, thank you so much for your time. >> thank you very much. >> laura porter joining us from fitch this morning. chances are if you're watching this now, your car is sitting somewhere idle. what if i told you could be making money on that car right now? that's exactly what car sharing start-up getaround does. we'll show how they do business when we talk to the ceo in just a minute. [ male announcer ] it's that time of year again. time for citi price rewind. because your daughter really wants that pink castle thing. and you really don't want to pay more than you have to. only citi price rewind automatically searches for the lowest price. and if it finds one, you get refunded the difference. just use your citi card and register your purchase online. have a super sparkly day! ok. [ male announcer ] now all you need is a magic carriage. citi price rewind. start saving at citi.com/pricerewind. to a world of super-connected intelligence. the potential of freescale unlocked. nyse euronext. unlocking the world's potential. to investing with knowledge. the potential of td ameritrade unlocked. nyse euronext. unlocking the world's potential. ♪ do you need a car for a last-minute road trip? or are you an infrequent driver looking to rent out your road? there's an option for both with getaround. rent a car by the hour, day or week with an yul all-inclusive package that includes insurance, roadside assistance and more. it's easy to share a car anywhere. while the average car sits idle 22 hours per day, that's 20 billion car hours wasted each day. so make those wheels work for you. and hit the road with getaround. >> joining us this morning for our "squawk on the verge" series is co founder and ceo, sam zaid joining us from san francisco. sam, good morning. >> good morning, carl. great to be here. >> it's an interesting concept. the 22 idle hours a day. that will get your attention. you were -- i'm told inspired by some degree by larry page. >> yeah, that's right. a few years ago larry gave us a challenge to come up with an idea that could positively impact 1 billion people in 10 years. and in looking at the future of transportation, we realized today's model was completely unsustainable. >> yeah, talk about inefficiency, wasted time. talk me through the mechanics of how it works. and as a user, as a car owner, what am i in control of? >> right. so as a car owner, you can very quickly come to our website and list your car. and then people will begin to request it. and you have complete control over what it costs to rent your car, when it's available, and who can rent it. with every rental, we include complete insurance, backed by berkshire hathaway, 24/7 roadside assistance and support. those are all provided by getaround. >> and you handle the billing, right? you collect the money. >> we do. we collect the money, and remit 60% to the car owner. we retain 40% which goes to cover the cost of insurance, roadside assistance, as well as marketing the service. >> interesting. you've crossed the 10,000 car mark, right? >> that's correct. >> five cities now. is this an urban story, or i mean, how -- how much can you blanket the country with this model? >> well, our mission is to bring car-sharing everywhere to empower people to car share everywhere. we really think this is an opportunity to expands outside traditional boundaries, outside the urban centers. but we have seen tremendous growth inside urban centers. just this year so far, we have seen car listings increase by over 500%. >> it seems like it's a story for -- i mean, assuming the economy takes years to find real growth, either you are dealing with people who are challenged economically, right, that feeds your model. or if you simply are interested in a car, but you don't have the -- the commitment yet or the money to upgrade, you can try it out, right? or be a part of that process. >> yeah, exactly. i think it gives consumers a great way to test drive a car, to maybe right-size their purchase so they can get a car they use every day for commuting, but use getaround to rent an suv to go skiing. >> we mentioned venture capital funding, high-profile backers, ashton kutcher, marissa mayer, how much has that mattered? is what's the process been building that capital been like for you? >> well, raising capital is always a long story. for us we really felt that investors are very receptive to this. and that we were really pum hmmmm belled and proud to have great investors believing in our mission to fundamentally change car consumption as much as we do. >> and for those who might be considering can using it, rates can be as low as $3 an hour, is that right? >> yeah, we have seen people price their cars as low as $3 an hour and you can rent a prius to an suv to a tesla roadster. so for the first time ever as a consumer, you can consume a whole variety of different cars as opposed to driving the same car every day. >> i'm going to keep an eye on shares of hertz later today. sam, good to have you on the program. please come back. >> thank you very much. >> sam zaid joining us from getaround in san francisco. keep those tweets coming. a new study finds 1 in 3 americans would consider a mortgage from walmart. almost half a mortgage from paypal. but neither of those companies offers mortgages. so complete this sentences. walmart offering mortgages is like banks offering what? we'll get your answers after a short break. don't go away. a passionate belief, and the foundation on which merrill lynch has been built. today, our financial advisors lead from a new position of strength. together with bank of america, they have access to more resources than ever before. a steadfast commitment to help you achieve your financial goals in life. that's the power of the right advisor. that's merrill lynch. can i still ship a gift in time for christmas? yeah, sure you can. great. where's your gift? uh... whew. [ male announcer ] break from the holiday stress. ship fedex express by december 22nd for christmas delivery. take you to a live shot of central london. if you are anywhere near twitter this morning, you are aware now that kate middleton is pregnant. some people reporting continual in the early stages, obviously. this is of a live view of king edward vii hospital where we believe kate middleton has been for several days, according to the castle, due to early morning sickness. for more details on that, guaranteed it's coming your way. in the meantime, talk for "squawk on the tweet." we have been talking about that study by the carlisle and gallagher consulting group saying 1 in 3 americans would consider a mortgage from walmart and half from paypal. neither offer mortgages. suppose walmart does enter the business? complete this sentence. walmart offering mortgages is like banks offering what? robert writes, it's like banks offering walmart greeter as a financial adviser, free of charge. bubbles writes walmart offering mortgages is like banks opening on thanksgiving night. and kerry writes, ugly christmas sweaters, which might be a gift if you open the new -- a new checking account. dow down 9 points. dell
a.m. earnings are still coming. coca cola. after the bell, panera. >> let's get a data check. stocks, bonds, currencies, commodities. adam johnson will love a lot. -- have a lot. >the 10 year yield turns off of the weekend. . decidedly stronger euro we will talk about the yen. oh what a winter it has been in the east. nymex american crude. that get your attention. here is a good the markets have been. up foring to write that a chat on "bloomberg businessweek." out over its skis. 40.56.en up to a 1 here is japan over the weekend. there is a spike up in japanese inflation and the major thing here is that the climb that does in real wages and japan -- they blow right through zero percent inflation in japan. who would have thought? >> that is what they have been trying to accomplish for years and they're finally getting it. >> be careful what you wish for. we wished for a front page this morning. tonya chen did a wonderful job. >> she did. a lot of talk about dealmaking among potential dealmaking. -- dealmaking, potential dealmaking. this would be a very big deal. a big deal in pharmaceuticals. activists looking to buy forest labs. this would be a $25 billion deal. wise carl icahn always on the right side of trades? arty dominates the chicken business. already dominates the chicken business. that will make someone very happy with a plate of wings next year. the potential deal -- charter looking after losing out on time warner cable. what are they going to do now that they lost? >> the magnitude of comcast-time warner cable is so large that the others are like -- so what? cox thatrter boought would be -- it is something. you have to consolidate to get more, right? >> i am baffled by the pushback from washington. stocks here in the u.s. and europe are fairly quiet. you are talking about what happened in japan. the gdp number -- gdp rising a 1%. they have been trying desperately to grow the economy in japan. that is a huge session. 3.1% was the gain overnight in japan. moving on, bringing it right back to the u.s., republicans planning to put their big-ticket legislation items on the shelf. it is hard to get anything done in washington. immigration, tax reform, you name it. >> this has been a slow three-day weekend. this was the news item, wasn't it? , itot that it is new news appeared last week that speaker banner had pulled a rabbit out of -- speaker john boehner had pulled a rabbit out of his hat about immigration legislation. >> doug stamper would know. everyone cards" watched this weekend. except our guest host this hour. david plouffe. you have not seen it, have you? >> we will start season to this weekend. >> i am honored to ask this question. what does the silliness look like to you? do you lean forward, riveted? >> when i first started watching i was skeptical. i think people enjoy it. washington does not act that way. >> you mean it is not that nasty? >> people don't kill each other? >> full disclosure, i am not up to speed on this. is claire underwood in washington? >> i do not think so. i do not think frank underwood is in washington. there were elements. but that whole character, no. >> back to the gop. what is the gop going to look like over the next six months? >> their plan for corners. cornersare playing for -- four corners. they are trying to run the clock out. senator mccain, who knows better than others, said you are not going to get immigration reform done in 2015. we could be looking at years before immigration reform is done, sadly. -- as anshrunk down administrator in washington -- thister the selection -- election, you will see another run-up to immigration. it is hard to pass immigration when all the energy is in the tea party. they say, we do not want to disturb anything. >> i wasn't sure there was any energy in the republican party at all. is it just spoiler? >> when the presidential primary is going on next year and you are in iowa and south carolina, those tend to be the most conservative voters in the country. that is why will make it tough. that they changed the conversation, they kept it on obamacare. isn't that all voters are going to care about in 2014 and november? >> we have had the rollout in the rollout did not work. it did notaying, yes work, but we like it. >> people are sick and tired of the health care debate. want washington to focus on jobs, on the economy. they see this is somewhat of a distraction. even if they actually do on doing thing -- >> from your democrat party perspective, is chris christie toast? does jeb bush comeback? >> i don't think he is toast at all. up, he isry holds basically on probation right now. if there was another incident, it could really cost them. maybe he learns his lesson early. running for president is the most grueling obstacle in the world. someone is going to occupy that center right lane. are theristie, jeb bush top candidates right now. versus the tea party candidates. >> let's come back. david plus with us -- david plouffe with us. as we begin a four day workweek. new abouts at hp autonomy's accounting methods before it was exposed to practices. hb managers were alerted to autonomy's practices to selling hardware at a loss before they bought it. deal for time warner cable hits netflix. there was another competition for netflix -- comcast is focusing on increasing movie downloads and rentals with its own box platform. the website for the las vegas sands is back up and running. hackers knocked it off-line for a week. that is today's company news. hacking, we cannot seem to get away from it. >> it is the word of the moment. when we come back, and other hacking, crowd funding site. kickstart or is the latest target. -- kickstarter is the latest target. don't go anywhere. ♪ >> good morning, everyone. "bloomberg surveillance." hemndry on the olympics. on inequalityork in america. that is coming up. "bloomberg surveillance." i am tom keene with adam johnson and alix steel. you see our new data screen. i love it. thank you to our data team for working on it. boy are those readable to keep you up on the market. equities, bonds, currencies, commodities. let's look at hacking? not like snowden hacking. >> las vegas sands. kickstarter -- they have all been hacked. there is a bit of a discrepancy. david plouffe can help us understand this. when it comes to individuals, the nsa is all over us. when it comes to hacking corporations, somehow the fbi is curiously absent. why this discrepancy? >> unless you are talking to a yemeni bomb maker, you have nothing to worry about in terms of the government. there are things washington can helpful to allow more collaboration between the private sector and the government. the fbi is involved in these investigations. the companies have to take steps year. -- here. most of the private sector is years behind the hacking community. >> you are looking at companies that are unwilling to come forth with the information because it is a negative pr grab. look at target. this cooperation between the fbi and companies, aren't we all continually at risk? >> i think so. i think you will see more and more companies make the decision to be transparent. people get furious. once target got ahead of it, they were doing a pretty good job of it. >> we are showing fewer some of the companies that have been hacked. target, so crowed, -- silk road, mt. gox. >> nursing homes are also at risk of being hacked. they can still your medical information. >> you would think that getting democrats and republicans together and figuring out a cyber security bill is the one thing they can all agree on. what is hoping it up? >> this was about a year ago, there was a big push back from the private sector, saying that they were worried about the government being overly involved. it is clear that the hackers are ahead of the companies. in 2008, we were hacked in our campaign. we were completely dependent on people going on our website, volunteering, providing money. if it got out that we got hacked, we were worried what that would do. that is the companies are worried about. owehe end of the day, you it to your customers to say the reciprocal here, here is how we are dealing with it. we are behind right now. >> did you read the "new york times" article? i don't know if you sought. -- saw it. we have government experts going to him to see information. one man seems to be in the underbelly of the eastern european mafia when it comes to hacking and nobody else is. >> we talk about having a surge. we need a search year, a massive surge, a global surge. >> who should lead that surge? >> the government is going to have to play a lead role, not just your, globally. the private sector is going to have to share information. you almost want to have a 24/7 alert situation. >> one more sign that the economy is getting better is married couples can now afford to divorce. i don't know if this is depressing or a positive. >> it is liberating. >> the divorce rate has risen for the third year in a row. droppeder of divorcees by about a third during the recession. how can you afford to get divorced when you can't afford to rent a new apartment? snarlingt how tom is as you are saying that, alix. >> afford, afford, afford. now i feel better. >> in all seriousness, it does wind up creating new households. you have more demand for housing, home furnishing, you will go out on dating services. right? tom, is that what you are doing? >> thomas stuck on the word afford. is stuck on the word afford. i am not going there. hopefully, i will not be in that situation. >> coming up, the former us andn of ubs will join talk about the u.s. economy, how we can get it back on track. you are watching "bloomberg surveillance." streaming live on your tablet, phone, and bloomberg.com. here with david plouffe." ♪ >> good morning, everyone. "bloomberg surveillance." i am tom keene. steel, adam johnson. scarlet fu is off the entire week. adam johnson has our top headlines. in thailand, two people were killed. >> this was in bangkok. one of the dead, a police officer. he was shot. protesters threw grenades and fired on police. protesters are calling for political reforms. the man designated the next prime minister of italy is trying to build support. renzi is trying to build support. he forced out the former prime minister. this was last week after the current prime minister served just 10 months as prime minister. jimmy fallon making his debut as host of "the tonight show." he welcomed will smith and u2. it marked the return of the tonight show to new york, after 42 years on the west coast. the show was being taped at nbc's rockefeller center studios. >> did anybody watch it? >> i was in bed at 8:45. and that was late. >> 7:00 p.m. early bird special. swear to god. >> no. >> good early morning to all of you in los angeles. let's get to our morning must-read. >> larry summers. a great op-ed. "america risks becoming a 'down ton abbey' economy." the idea of helping income inequality is nothing new. he lays out ideas about how to reform the corporate tax code. >> sets up the polarity between the two parties. goid, this issue does not away. will this be the front and center issue as we go to november of 2016? >> for the presidential race, certainly. you have to do with getting more growth and more jobs. beyond that, the aspirational need is the right kind of jobs. this is not about redistribution. this is lifting us up who want to get into the middle class. >> and economic growth do that? >> it can. getting 3.5%. that does have economic impact. personal tax code is a mess. what about the corporate tax code? it is crazy. agreement thatad we need to do something. this is something that has to get done. if it gets done five or six years from now, we will pay a big price for that. there is no doubt the people at the upper income spectrum take advantage of the way that hurts the rest of us. >> here is a number for you. rs, average lifespan of an american. you expect to get social security? ♪ >> good morning, everyone. "bloomberg surveillance." scarlet fu demanded the week off. let's do a data check. stocks, bonds, currencies, commodities. a quiet weekend except for japan. euro-dollar stronger. yen weaker. japan with a real turn. -- churn. we will talk about that. nymex crude, 101.21. it is a nebraska kind of winter. >> unforgiving winter. unforgiving. here is something unforgivable, not playing candy crush. the very popular iphone app is potentially going to file an ipo. you've got to be in on this action, tom. if there's only one new store you focus on this morning, the ipo off of one game. why couldn't we have just created a game? >> this game is a big deal. it could be valued between $5 billion and $7 billion. >> it is hard to fathom that it generates over $1 million of revenue per day. it is brilliant. it shuts off after four games and you have to buy more. >> i am going with it. i have never played it. others have with my ipad that was completely covered with ritz crackers this weekend. how do they do that? crush the ritz crackers onto the ipad in three minutes. retirement planning in america. in 10 americans are behind the eight ball. we do not save enough. we are living longer. morning is the former governor, the former senator from nebraska. it has not worked out so well. has it? >> it has and it has not. you have seen success of individuals taking charge of their retirement systems. the decline in defined-benefit programs available at the work face -- workplace is not been met with an increase in the individual's capacity to save on their own. >> massively. massively. within your panel today i'm a your seminar on the longevity that we face, is at a tipping point or part of the continuing? news,re is a lot of good in terms of people living longer, they are healthier, more active in retirement. the retirement savings challenge has gone to being a philosophy challenge. you have people who are thinking about, what do i want to do with this longevity bonus? how do i want to spend this time? they are working to make up for that lack of security. >> none of us are going to retire. are you seeing in your statistics and planning? >> they are working longer. of boomers who are telling us that they want to continue to work. you see people doing more information worker jobs. >> i have a casket out behind "bloomberg radio." they are just going to roll me into it. you do have examples of who have ramped up their savings overlong period of time and are in relatively good faith. because it is a voluntary system, you have significant numbers of people who have not. -- reversedert itself on one of the most important pieces of the debt ceiling feel. -- deal. it was a very good fiscal policy. the insecurity people feel and retirement contributed to that reversal. as an indicator of the difficulty in solving this problem. >> how much is low interest rates the problem here? >> low interest rates are a contributor. we have not prized savings as a society, as many other societies have around the world. we have trailed most of our competitors by 700 basis points. >> we like to buy as americans. i just want to buy it. and i can do it on credit. mentalitychange the where we put a premium on savings? changen't think you can that mentality in a voluntary way, personally. look at social security. when social security passed the senate, it was a voluntary system. imagine what would've happened if it had been voluntary. if you wait until you are 50 years old and say, i have not saved enough. up the mosten important variable, the length of time you're saving. we are not even where you are automatically in the plan and you opt out of the plan if you choose. why can we get that done? -- can't we get that done? >> the politics are enormously complex. if you look at any of these issues politically, touching medicare, social security, they fared terribly. the sum is greater than its parts. if congress got together and did something to provide stability to younger workers, even though they are component parts, i think it would sell politically. benefits tothe people living longer? they might work longer, then you have more families, they can pass on their wealth to their kids. is there something positive? >> i think you can underestimate the fact that there are now several decades more of lives that people have. they live very rich lives, they are engaged with people, their friends, family much longer. as an economic force, the intellectual capital that will the workers represent that the u.s. is uniquely able to capitalize on because our companies are very flexible, that is a competitive advantage for the u.s. economy going forward. >> i have got to ask senator kerry, frank underwood? are you watching "house of cards"? there are no medal of honor winners in the show. howt is closer to washington operates than anything i have seen on television. >> we will quote you on that. >> that is her twitter question of the day. what would you rather watch the olympics or "house of cards"? >> spoiler alert! spoiler alert! plug your ears. what would you rather watch "house of cards" or the olympics? we are watching "house of cards." speed under armour's suits slowdown the u.s.? that is the conversation coming up here on "bloomberg surveillance." streaming on bloomberg.com, your tablet, your phone. ♪ >> good morning, everyone. "bloomberg surveillance. " adam has the top headlines. >> a surprise slowdown for inflation in the u.k. the droplets inflation below the bank of england's 2% target for the first time in more than four years. car sales rose in europe. 5.2%. volkswagen,ith ford. carrebound comes after sales fell to the lowest levels since 1995 -- that was last year. numbergo movie" kept its one movie. i saw "american hustle." movie" hase lego top spot.he a rave review. he was prepared to be disappointed. it has that whole adult thing going as well. >> also, it is the snow. it also happens to be good. >> we continue this discussion this afternoon on "streetsmarts." we will look at "american hustle" and "lego." the oscar ads are out. >> i was bored during "american hustle." >> i was exhausted. i had to concentrate to follow it. christian bale, by the way, blew me away. >> you know it is not boring? speedskating in the olympics. there are only four races left in the winter olympics and the u.s. team has come up pretty short. to blame, some are saying perhaps the new under armour suits might be slowing them down. onomberg spoke with the ceo friday. >> we have a full team that is on the ground in sochi right now it is making modifications and adjustments. it is completely typical at this type of level of high-speed performance athletics. this is part of the game. we are making tweaks right now with our team on the ground. here ishe real issue that when something like this happens and you are a professional athlete, it gets in your head. is it the suits? i don't know. it disrupts the confidence. you can see things fall off the rails, if you will. >> have you ever wondered whether it was the tie when you couldn't get a deal done? [laughter] complained that it was their shoes that did not the one the super bowl. >> i was confused over the weekend. the weather is so messed up in sochi. some great photos from olivia sterns who was there with her family. between the soggy snow and the palm trees, speedskating? >> at sea level versus altitude where the seats were tested? they did not testament competition because they did not want to get away from the competitive advantage. can of hubris there as well. -- kind of hubris there as well. >> what is olivia sterns' twitter feed? >> @oliviasterns. she will be here tomorrow. very tired him i'm sure. -- very tired, i'm sure. >> this is number three. belarus won gold for catching air in the men's aerials. >> they are so high up. aren't they empire state building tall? >> no, no. >> it appears that way. it is just the angle where they took the photo. this will blow your mind. athlete from estonia. horizontal in midair. look at that thing. >> that is incredible. nordic was during the combined, large hail -- to say the least. are you ready for number one? drumroll. drumroll, drumroll. the united states ice dancing duo. whitedavis and charlie give the u.s. its first olympic gold medal in ice dancing. , he once snucke out of the white house because the president on the first lady wanted to i stance. -- ice dance. >> you could put a curling lane in the white house. >> curling is awesome. >> did you see the cat going down the curling saying? >> why is curling olympic sport? >> i was on the eastern edge of curling country, sort of a "wayne's world" thing. after work you go and curl. >> to members of the russian punk band pussy riot have been arrested. they were accused of theft. they were hoping to perform a new song called "boudin, -- putin, we will teach you to love the motherland." apparently, they're dealing with theft. something you probably don't want to do in russia. pussyur band's name is ruiot. just saying. >> 84%. we are going to discuss the business of meat. my kind of topic. meet him a cigars -- now you have my attention. cigars. now you have my attention. "bloomberg surveillance." ♪ >> good morning, everyone. "bloomberg surveillance." i am tom keene. adam johnson and alix steel. scarlet fu, skiing. is she going on the helicopter drop? >> she's the real deal. >> they drop her into powder and she goes down 12,000 feet. scarlet fu. over sochi. doing it. >> i have some company news for you. from the files of "bloomberg west." sony topping its forecast for playstation 4 sales. sony had been forecasting sales of 5 million consoles by the end of march. the playstation4 goes on sale in japan this weekend. charter communications may go after cox after losing out on time warner cable. to plan to meet next week discuss their options in the wake of comcast's $45 million buyout of time warner cable. hewlett-packard knew about autonomy's accounting methods months before a whistleblower exposed to the practices. this is according to a report in "the financial times." they were alerted to the practice of selling the hardware at a loss before their lot the software maker. -- bought the software maker. hewlett-packard cannot get away from this bad deal they made. >> it has become almost a non-year for hewlett-packard. i do not sense them getting out of it yet. >> grocery bills are rising. one food giving us sticker shock is beef. in case you haven't noticed. according to a new book, the meat racket is on stands today. they settle competition, squeeze farmers, all while turning big profits. joining us now is the author. how much hate mail did you get on your book from the meat industry on this? >> it is starting to trickle in. we will see how it goes after talking about it this week. >> tell us more about the book. what inspired you to write it? i have been covering the meat industry for a while. >> for newspapers and for the associated press. the final conclusion of the book is not how the book started. i was just reporting on the industry, but the more learned about it, the more learned that four companies control the market today in a way that they have never controlled it at any point in history, including than 100 years ago. >> to take it back to upton theseir and "the jungle," meatpackers deliver to adam johnson that overpriced beef, kobe beef. ribeye foris wagu meat, weson or dark deliver fresh food to americans every day. >> the modern meat industry is a technological marvel. it does a fantastic job of delivering meat to u.s. cities seven days a week, 365 days he year. the industry has become highly consolidated. we opened with a story about comcast and the cable industry. it was a similar merger spree, similar wave of consolidation in the meat is mess in the 1980's and 1990's. >> what is the relationship between these businesses and local farmers? they do not actually farm themselves. they farm out the farm. >> the typical system you're going to see today is so-called contract farming. a person like me who lives in arkansas might borrow $500,000 to $2 million to build a giant factory farm and then i sign a contract with tyson foods. tyson will deliver the chickens, the feed. under these birds exact specifications of tyson foods. it is a remarkable model. >> it is like a franchise. >> exactly. like a mcdonald's franchise. >> there is nothing inherently wrong with this. this allows these companies to orchestrate their supplies. what has happened though is that you have this sort of vertical integration, if you will, coupled with horizontal immigration and the issue is, in these towns were spent months and years reporting, there is no competition. companies like tyson have monopolies where they operate because they bought up all the local chicken plants. these farmers do not have a choice if they are treated orally by the company. it happens all across rural america. can keep the profits and depressed with the pay for mates. -- meats. >> they did send us a quote, talking about your book. saying, if a competitive industry that operates under the most intensive regulatory and inspection regime in america and still produces the safest, most varied, most abundant, and most affordable food supply in the world isn't good enough, then we challenge them to point to a nation with a better system. >> well said. europe is a third more expensive for food. what are they doing wrong versus europe versus asia? >> i don't point to another nation that does it much better. that nation is the united states in 1982. the top four meatpackers controlled 26% of the market. today they control 86%. if the quality better or worse than it was versus 1982? when you industrialize meat supply, you are not shooting for high-quality and high variability, you are shooting for the middle range. i have seen that again and again. chicken, pork, or beef. they started using a growth struck a couple of years ago. >> that has been outlawed since then. >> it has. animal welfare concerns came up. they fed this drug to the animals even though it was proven to produce lower quality steak. they're driving directive is high-volume, consistent delivery, and cheap price. >> interesting. we have to leave it there. no doubt this debate will continue here on surveillance. "the meek racket" -- "the meat racket." >> the controversial book to say the least. the forex report. moves in japan. yen weaker, euro stronger. 140.55. i would also look at sterling. sterling is stronger. look at that as a trend as well. adam? >> coming up on the next hour on bloomberg television and radio, the former chairman of ubs joining us on the u.s. economy. ♪ >> this is "bloomberg surveillance." on primaryans focus politics, political battles. wait for december. the tim armstrong reversal on aol retirement plans, example of ceos overreaching. that lift ticket is the least of your worries, the ski industry prices into oblivion. this is "bloomberg surveillance," live from new york. tuesday, february 18, i am tom keene. joining me, adam johnson and alix steel. robert wolf, founder and ceo of 32 advisors. former chairman and ceo of ubs america, an advisor to the president. good morning. i have a brief for you, starting in the u.k.. inflation cooling in january, slowing to below the 2% target for the first time since november 2009. over to asia, bank of japan ning program after a week gdp report. a: 30 a.m., empire manufacturing, some earnings still struggling out before the bell, coca-cola and duke energy. looks like a beat. after the bell, herbalife and panera. a busy day. companyl go right to news, a possible megamerger in the drug business. close to buying force lavatories actavisbillion -- close to buying force laboratories. am speaking the words, this is now official. i $25 billion, every time screen for revenue growth of theseies in the s&p 500, companies show up. actavis, second largest global drug manufacturer is buying force labs. charter communications might go after cox after losing out on time warner cable. advisers plan to meet next week to discuss their options. cable the third-largest company with 4.4 million subscribers. continuing on, starwood capital ceo gets ready to sell shares, possible ipo for barry sternlicht. looking to sell a minority stake , sternlicht is reported to have been speaking to banks preparing to sell shares. moment --e >> this is very typically, two nations involved, transnational deal with dublin, ireland working out of new york and new jersey. a stock and cash deal as well. i think you are more up to speed than i am, this is an industry of mating. most activectavis, buyer of pharmaceutical companies and last three years, made almost $50 million worth of bids. generic companies trying to continue to grow and eat up market share. puthe financing has been together, bank of america and mizuho securities. >> robert wolf, there is tax treatment and ireland, people get better tax treatment. we will talk about this, this has to do with transnational investment, no borders anymore. >> foreign direct investment into the u.s. is critical to our growth. as we will talk later, we have lost 50% of our market share of the last decade. china been taken over by as the number one inbound investment. it is critically important that there is no moat around our borders. makingade is critical, sure there is no protectionist environment, immigration reform. >> this is a good thing? china wants to invest in growth and is coming here, we should be happy. sure those whoke want to come under our regulatory environment, that is a good thing. >> adam, the idea of mergers, starwood measures as well. rather, the ipo. outhere is a lot of capital there. when capital is available, you can do deals. rates are low, we are talking about a barry sternlicht ipo, talking about cox, forest labs. >> on the point that the market is recovered -- the resiliency -- be surprised by acquisitions, organic growth is slow, the best way to move forward -- >> is that the best thing, the only option you have is to throw money at the situation? >> there is still debate about or below 3%. advisers isomic under 2% for this present quarter. >> you will talk about climate change, but the weather has an impact on the first quarter. >> there has been climate change in new york? >> you couldn't tell? >> that is why you are wearing five pound boots. >> my street looks like a third world country. >> you are a park avenue guy. >> i still live in purchase. new, a shorts the newsday except in washington. the republican party has solved until marchsis 2015. joining us live in new york, he watched all of "house of cards," get me out of washington. peter cook. i was admitting that i am still about three quarters away through the first season. don't ruin everything. cameo.anna goldman has a >> collects are stars in the show. looking forward to it. former senator of nebraska said too much of it is true. what are republicans doing, they are on pause as of primaries. >> they are running for reelection across the country, some of them having a harder time than others. mitch mcconnell getting it on the chin for his debt ceiling vote. they are talking about issues they want to talk about, including the health care law, including the state of the economy. they think there is a really good shot they will not only hold the house but -- >> they will take the senate. windows reversal occur? -- when does reversal occur? >> a lot of republicans thought they were going to win the senate anyway, the odds were in their favor in the midterm election year. and a lot of things going against the president and the democrats right now. the question was could republicans blow it, another debt ceiling fight, another budget battle? john boehner made the decision we are not going to do that. that is what republicans are feeling pretty good. could they still blow it? absolutely, lots of opportunities in the primary season for a battle among republicans over the future of the party, not clear who will win. >> robert, you are a friend of president obama. who has a better golf swing? he is better than you? would you argue that president obama is more worried if opponents are more confident? -- if republicans are more confident? wayf you look at the last for hours, then attacking the jobs recovery act is the wrong angle. stimulus during that time was needed and helpful. it helped create jobs and health infrastructure in this country. -- and helped infrastructure in this country. help us stay out of a recession and a depression. over the last 24 hours, they are going down the wrong track. >> within your sphere in the talk of the gop, how is secretary clinton's nascent run for 2016 going? is there an organization yet? >> there is a buzz, her supporters are getting together? >> is there only a buzz? >> to be determined. >> they are raising serious cash. >> they are getting organized. putting people actively in place a financial structure. >> "the new york times" said she has booked up all the large donors, keeping bite into the to the keeping biden side. >> 2016 is a long way off. gop, we focus on the hillary clinton has to be the best thing that ever happened to the gop. collects they understand she would be tough to beat. you look at it both ways, she is powerful fundraising total for republicans. the same time, they understand she would be difficult to beat. >> is mitch mcconnell the same senator in washington as he is in kentucky? no, but in kentucky what he does in washington is hurting him in kentucky. his leadership is a weight around his neck. >> last week so. even though he did the right thing. inhe still has a big lead his primary, i don't think mitch mcconnell will lose his primary. it will be the hardest political fight of his life. the last major poll i fell in kentucky had hidden behind the emocrat, allison m grimes -- allison london grimes. >> we like having you in new york. oner cook with us this week bloomberg television in new york. robert wolf as well. this hour of "bloomberg surveillance." are getting into the habit of apologies after embarrassing public appearances. we will talk about it. ♪ morning, "bloomberg surveillance." this matters now to robert wolf, chief executive officer at 32 advisors and a golfing partner of the president. he says they want to buy mr. wolff suggested the rest of the world should take a further interest in foreign direct investment into the u.s. it is down in recent years, let's start with why. why is fdi down? >> since september 11, we have become more protectionist, we do not have immigration reform. some people say there is a labor arbitrage away from the u.s., some would say we are overregulated. we have little of law. >> where does foreign direct investment come from, the u.k., china? >> it is any foreign entity that uilds, buys, or invests in america. it is everyone, what we have seen over the last decade is that we have lost ground to china, now number one in the world. we have also lost ground to brazil and mexico and canada. it makes sense, we were north of 25% of all inbound investment. >> not that you would be anywhere in the vicinity of k street in washington, when lobbyists get together, what is the why? congress does not want fdi, is our culture? >> i think at 32 advisors, we barryecently hired johnson who ran select usa, companies come in and it is not easy to navigate the laws, how do you make hiring. we have a very unique environment in the u.s., which is a great thing. people do not always understand how to come here. >> why can't they buy a minority position, a 7% position? wouldy can, often they like more. it is good for america. u.s. subsidiaries of foreign companies actually have over 5 million employees, 1/5 of our exports. they spend billions and billions it is in this country, important to make sure we are allowing foreign companies into the u.s.. the u.s.ic on fdi in brazil, amongg in other nations. it is expensive to buy an iphone in rio de janeiro. we will look at that next on "bloomberg surveillance." ♪ >> good morning, "bloomberg surveillance." our twitter question of the day. would you rather watch the olympics or chew glass? you rather watch the olympics or house of cards? @bsurveillance, it is free. would you rather watch the olympics or "house of cards"? >> what about the usa-russia hockey game? >> cannot compete with frank underwood. >> the whole sensitive thing, show me the event. >> i binged on it, "house of cards." >> those are your kind of guys. >> i loved it. >> he knows the washington of kevin spacey. robert wolf, this is "bloomberg surveillance." i am tom keene, our guest host is robert wolf. starting in thailand, two people were killed as police moved in to clear a cap of protesters in bangkok, a protester was shot as adjusters threw grenades. the protests began in october. inflation slowdown of over in the u.k., consumer prices rose 1.9% in january, down from a 2% rise, putting inflation below the bank of england target for the first time in more than four years. a slowdown. making his debut as the host of "the tonight show" on nbc. he welcomed guests like will smith and u2. the return of the show to new york after 42 years on the west coast. bring it back to new york city, movies are being made here, now we have "the tonight show." >> much better on the streets of new york then la. >> you are going to get hate mail. >> i remember johnny carson playing both cities, he would make jokes. >> who am i? [laughs] >> santa? >> ed mcmahon. ceosre's a question, are making more dumb mistakes or are there mistakes just more publicized with the internet? tim armstrong is the latest ceo after his distressed baby comments forced him to reverse the company's 401(k) policy, here is harvard professor and author of "what you are really robert kaplan. what happened that may ceos get so out of touch with everybody else? >> i don't think they are. on or timith lululem armstrong or others, there have been comments people would preferred they did not make. they tend not to make these mistakes. if they reflect a lack of understanding, they have got to come back and apologize and fix the issue. that,have seen a lot of you mentioned chuck wilson, ceo of -- former founder of lulule mon. goes on. what makes a good apology? underlying reality is what matters at the end of the day, apology is fine and works if you suggest you realize you made a mistake, you admit it. issue andd fix the move on. if the apology is superficial and there is still a problem, the apology does not help. lulemon, customers understood it was a problem with the quality, that is why what the ceo said suggested he did not understand. with us, there is a difference between a screw up going after someone's retirement plan. challenges will not go away. he backtracks on a retirement plan issue. i don'tt said it well, think the ceos are out of touch, they make the stakes like all of us do but they are under the microscope 24/7. >> up at harvard, what are you doing to teach students how notches to look at numbers but think about the consequences of their -- teach students how not just to look at numbers but to think about consequences of their actions. >> saying you made a mistake sometimes can be the first step in solving a problem. i am more worried about ceos who cannot admit they made a mistake then went to do. saying you were wrong and that ill address the issue is important. a lot of ceos think it is a sign of weakness. that is wrongheaded and is going to get you in more trouble. >> what is the accountability of the board when a ceo does mess up? member, you think about is this an aberrant comment. forgive theu can ceo. if it is a pattern of being out are issues, there the board has to step in. that is what boards watch for, is this a one-off situation or a pattern of bad judgment by the ceo? if it is, the board has to decide what to do. >> in the case of mr. armstrong, these are ideas that are not properly vetted. of makingal challenge a mistake is year did not talk to enough people about the idea to begin with. case,ten, and armstrong's it was not well thought through inappropriately explained. it makes sense to back track. ♪ >> good morning, "bloomberg surveillance." i am tom keene. with me adam johnson and alix steel. futures up 3, dow futures up 30. 4 day work week. >> comcast deal for time warner cable hits netflix. stalling due to the proposed merger. under the complication for netflix, comcast focusing on movie downloads and rentals with its own platform. for the las vegas sands back up and running. hackers not the website off-line for almost all of week, criticizing ceo sheldon adelson for his comment's over iran. highng beefs up its new end galaxy, it will have a sharper display than the at aboutll be released the same time as the smart watch. a lot of asian buyers like and prefer large screen smartphones, something apple has struggled with. samsung is meeting that demand. >> i just don't agree with this analysis, apple is minting money on a unit asis, samsung is doing great. i question the profitability of this strategy. of samsung's strategy. making a bigger screen works in asia, does it work in the u.s.? >> doesn't seem like the u.s. has the same kind, perhaps samsung doesn't care. >> do you follow @boygenius on twitter? was talkingpple, he about a new iphone coming out, the iphone 6, it will still be under 5 inches, 4.95 or whatever. owns the- galazxy large screen. >> i like the large screen. my eyes are starting to go. >> why don't we walk around with ipads that happen to the phones? >> if it was that easy. >> and a bluetooth. i am crazy. justca cola earnings crossing as we speak, looks like an adjusted earnings per share was a wash, $.46 a share. volume, grew at globally about 1% for the fourth quarter. coca cola expanding productivity and reinvestment. >> what is productivity? cost cutting? >> we are still poring over the numbers, on the basis it looks like earnings-per-share just came in in line. net share repurchases of anywhere between two point $5 billion and $3 billion. >> pepsi is struggling to make it happen. it is hard tobig grow and keep penetrating. >> you are paying 17.5 times earnings for a company growing at 5 times earnings. talking about the s5 phone in pointona, i wanted to something else out, apple opening a retail store in brazil. in rio de janeiro, hope i said that correctly for those of you who speak portuguese. a little pricing problem, if you buy your phone in rio de janeiro, it will cost you a staggering amount of money. guess what it costs. >> i know. robert wolf? >> former head of ubs. >> $740. $1,100. 5th avenue,uy it on $200. some of the highest priced iphones from around the world. some of that is because of import duties. >> very quickly, betty liu with what you have today. >> i am stocking your -- i am stalking your set. on pepsi and coca-cola, look at the charts. bottled water this way, so the sales that way. that is the way people are consuming. >> getting healthier. loop"our program, "in the in half an hour, leo hindery. did anyone watch "the tonight show"? >> i went to bed at 7:00. ps, hilarious.li >> i dvr'ed it. is going to be on. they should have the "surveillance" crew on "tonight." >> data check on a mixed picture between futures and bonds. >> good morning, "bloomberg surveillance" on bloomberg television and bloomberg radio, streaming on your tablet. all things digital, including apple tv. --m tom keene, will meet with me is adam johnson and alix steel. robert wolf, founder of 32 advisors. news, actavis $25iring forest labs at billion. cristina alesci, what is your take away? >> actavis felt like they needed to get into the branded space. for growth potential, they felt they needed to be in the branded space. has an alzheimer's drug enabled pleasure -- and a blood pressure drug doing quite well. companies are done with returning capital to shareholders, increasing dividends, now they want to see growth. activity,ay more deal especially when it comes to the pharmaceutical space, pharmaceutical companies are no longer pouring money into r&d developing products organically, they are going out and trying to buy growth in the market. up,om brought this transnational aspect of the deal. what are the regulatory hurdles that might come up? anything? >> in this deal, we are not going to see too many regulatory hurdles. the thing is that the government wants to see foreign investment in the u.s. >> that's what robert wolf was saying. history ofhas a going out and doing cross-border deals, they are very well-versed in how to get these things done. >> robert wolf, repeat why it is so important to have foreign direct investment coming into the u.s. >> we were talking earlier -- it was a job creator. of the foreign companies that have u.s. subsidiaries, they spend $40 billion in r&d and have created 5 million jobs, 20% of experts. building, buying, investing in america helps us grow. >> that is the best argument i have ever heard for immigration reform and making it easier for smart people to come to america. >> the interesting thing on anavis, historically it is american company. it was called watson pharmaceuticals, they ended up buying a dublin-based company to get around us taxes. >> no territorial tax there. >> there has been discussion about fixing the corporate tax rate in america, that has to get through congress. >> carl icahn was tweeting about this, second-largest shareholder of forest labs. "great results." he has been on the right side of a lot of deals recently. this industrygest has been a train wreck for 20 years. >> the pharma industry? tina used to be in the industry, this is the detritus of 30 years of regulation. not entirely, the industry has been challenged on the innovation front. they developed all of these pretty easy to produce drugs that cured a lot of -- cholesterol problems, viagra, blockbuster products that generated revenue for a long time. now they have to go out and solve bigger problems, like cancer, that takes more time and money. now that the industry has made bank on the solvable mass problems, they have got to go out and solve the bigger and more difficult problems. ahn isx mentioned ic please. >> it is amazing, apple, netflix, one after another. >> not so great. , dow futures 2 up 30. cristina alesci, thank you so much on actavis. >> samsung unveiling a larger phone next week. talking about how this will impact the smartphone wars. samsung sells./ ♪ >> this is "bloomberg surveillance." i am adam johnson with tom keene and alix steel. snowing again. >> again, again. >> down 3rd avenue from our studio, snowing again. you have got a choice. you can get on an airplane and fly to denver while you still can, go to vail and get a season pass for $689. or get in your car and head to armont and ski at family-owned resort, you can have a wonderful day. for hours toyou get to vermont, why would you go to vail? of thesk the president okemo. do you get people to go to vermont when they could fly out to vail? what is the value proposition? >> difference between flying and driving. 4 hours from new york, 2.5 hours from hartford. three hours from boston. a lot easier to drive than it is to fly and cheaper, too. these are you proposition and the quality proposition -- these value proposition and the quality proposition is that it is closer and easier to get to. >> in a year like this when you don't have to makes no, what does that do to the profitability of a mountain like okemo. snow making, we don't need to have good conditions. we just invested and started a investedhis year, we over $1 million in technology and snowmaking. between snowmaking and the snow we have had, which has been good, we had a great snow storm this last week. skiing is great. >> you think i am expensive. >> we took the drive, we went to okemo for five years. my family was skiing. >> are people doing the drive like they used to? are people skiing 10 times a year in northern new england? >> yes, depending who they are. skiers, you have people that ski every weekend. there are second homeowners here, they come up more often. who, one or people two weekends a year, maybe for christmas or vacation and ski. year with lucky this all the snow, two years ago it was a wasteland. -- whenyour business does your business start to suffer? >> sorry? >> when does your business start to suffer because of the weather and climate change? >> the reality is, up here in northern new england, i cannot really say over the 30 years we have been in the business, that the winners are different. no winter is perfect. >> sorry, we have to leave it there. thank you for talking to us. ♪ oncoming up tomorrow "bloomberg surveillance," a ,onversation with john scully ceo of apple on technology forward in 2014. this is "bloomberg surveillance," i am tom keene. with me, adam johnson and alix steel. robert wolf, ceo of 32 advisors as well. some company news this morning. topping its forecast for playstation 4 sales, they sold more than 5.3 million of the game consoles through february 8. forecasting sales of 5 million consoles by the end of march, the playstation 4 goes on sale in japan this weekend. charter communications michael after cox after losing out on time warner cable. charter, along with liberty media as john malone and advisers plan to meet next week to discuss options. cox is the third largest cable company with 4.4 million subscribers. managers at hewlett-packard new about autonomy's accounting methods months before whistleblowers exposed the practices according to "the financial times." managers were alerted to the practice of selling hardware at a loss. more bad news for hewlett-packard when it comes to this deal. and on.es on 2014, lots of dealmaking. and when her that 13, a really did not happen. activists at forrest laboratories -- activists at laboratories.che starwood capital, barry sternlicht after this hilton transaction. is the pace picking up? >> the economy is picking up, interest rates are still low. robert wolf, you ran banking at ups, that is the perfect scenario. near all-time market highs, you have a little concern on organic growth. people want to look at the capital markets as a way to do acquisitions. it is not surprising to me. >> to dovetail and your washington experience, we might -- this is aical year where we might have fiscal drive. >> the debt ceiling debate is over -- >> no sciquest nation -- no sequestration. >> sequestration worked. of what it is 1/3 was several years ago, half of last year. up the script. robert wolf, we sell the time warner cable deal. to falla deal is it down the league table? do you say it was a bad outing in golf, not that you ever have one. is this a huge deal? >> i think goldman chose to support liberty media, they are a great firm. they are very inquisitive. be inss is they will plenty of deals by supporting that deal. >> not a lot of yelling and screaming when you go from number four to number six. >> you have time warner, comcast, you have charter-liberty, now you might have cox, those are going to the big deals and big names. because of the conflicts, you will own one of the names, goldman is sticking with liberty. it is a smart move. >> do you see a consolidation in american industry? it seems that is what we talk about, fewer players. >> bigger is better. with the ability to have synergies and cost reductions. >> in what andrew shreves -- in what industries, we are looking pharmaceuticals, can the crash. where do you see the most activity? , youch is most interesting see apple and samsung and google looking to make small bets on entrepreneurs. whether they are small $1 billion deals, they could be the next $10 billion company. industriesout just 4 -- cable, telephone, airlines, and meat. totally unrelated, yet there are either three or four players that command 80% of market share in each of those. >> it is the government blessing. >> not to know -- nice to know fail is not only in banking. >> soros has doubled his sure of the s&p. you have individual companies people are making bets on, the overall index -- >> that is what makes the market, we had the article that return on thes' equity markets. 2013. coming off of i have notto date looked. the s&p is down less than 1%. you would have thought the world was coming to an end. >> last week was a good week. we all got so accustomed to the sugar and the fed holding our hands. anytime we went down 4%, no problem, bernanke put was alive and well. that is why we all freaked out. >> we will have very choppy markets in 2014. it is not going to be one way like 2013 where we were up 20% plus, there will be a lot of winners and losers. >> time for the agenda. >> japan, early in the weekend, maybe it is old news. of thiss, the dynamics is interesting. their animal spirit is up, also up with abenomics is deflation, flipping to inflation. that changes the math for japan internationally. it really changes the math for japan domestically. they have got a brand-new thing, lower real wages. lower inflation-adjusted wages in japan, behave early for japan this is a whole new thing. the careful what you wish for. it is a classic example. >> we need to see it first, we have not seen inflation in years anywhere in the world, very interesting to see what inflation does for a country that has zero inflation for the last three decades. for europe,est tube particularly. this really bears watching. japan, the poster child for lack of inflation as you pointed out. for three decades now, turning the quarter. >> you have to lead us for radio. >> we will talk about japan. an hourreported half ago, the standout is the profit fell in the fourth quarter by over 8%. looking at a cost cutting program to boost growth. you are not seeing topline growth, companies have to continue to take cutting measures to meet estimates. earnings came in at $.46 a share, no real suprise. hoping for $1 billion in savings by 2016. 17.5 timesat earnings with 14% growth. my agenda, s5 galaxy. in barcelona at the world tech congress, samsung will debut a new phone with a 5.2 inch screen, a sharper display. going head to head with apple. samsung sells one in four smartphones in the world. what was it you said about the smartphone debate apple versus samsung? >> i have an apple. >> but you like big screen. is readirst thing i do my ipad, i like the larger screen, my fonts are very big. >> our twitter question of the day, would you rather watch the olympics or "house of cards"? "house of cards." "the way underwood manipulates the white house is more intense." " no question/" robert, you and i didn't watch -- i binged watched. >> i have to admit, hockey was incredible. hashtag #doyoubelieve. >> do "house of cards" after that. >> the one goal didn't count because the goal moved. >> it is rule of law. >> no hometown bias. what a pleasure to have you, robert will. >> thank you, i appreciate being on. "surveillance" on radio will continue. "in the loop" is up on bloomberg television. ♪ >> we are live from bloomberg world headquarters in new york. it is tuesday, february 18. getting you caught up on the top stories this morning. a huge deal in the pharmaceuticals industry. i am forest labs for $25 billion in cash and stock. the second lark -- second-largest generic drugmaker. carl icahn lobbying for change at that company for years. coca cola says fourth-quarter earnings fell and is starting -- starting a new cost-cutting program to boost profits. they have a slower growth in emerging markets. addictive maker -- the maker of the addictive game, candy crush has filed for an ipo. it will list shares on the new york stock exchange. my guest host for the hour, media investor, managing partner of private equity, in turn media area partners. all of
releases its minutes. this is ben bernanke's last meeting. >> we will see if they had champagne. >> maybe they had a party, we will find out. >> it's about the handoff. what happened inside the fed and what was the conversation as chairman bernanke he was handing off to janet yellen? >> what else do we have? >> we have earnings before the ball from carlisle and him jim resorts and six flags. after the bell, tesla along with marriott and avis. president obama is traveling to mexico for trade talks with the leaders of mexico and canada. treasury secretary jack lew will speak today on the economy in san francisco. it's a very busy day. >> let's do a data check -- we have elevated hydrocarbons. the next screen shows us foreign exchange. golub will join us with a hugely bullish call in this hour. r. on the bloomberg terminal, it's the ruble basket. the 2008 with a weaker ruble and this is good news for vladimir putin and this weakness of the ruble is really breaking out to a new level after a $2 billion transaction over the ukraine. >> what is so curious about this chart is you realize -- this is the ruble in dollar terms, you are getting more rubles for the dollar -- you look at the spike to 2009. look where we are now, we are back to the same amount of stress. never did go back down. we never exhaled. we will talk again to ian bremmer in moments. overnight, the president of the ukraine threatened to crackdown on antigovernment protests and this was the worst night of violence. at least 25 people have been killed. is a shot ofseeing the central scare in kiev where the protesters built eric hayes and let the barricades on fire to protect themselves -- built barricades and let them on fire to protect themselves. two months ago, the president today trade do with russia rather than -- >> that was four plus three equals $7 billion. billiongot a recent $2 russian purchase of ukrainian debt which brought the story forward and created the start of these protests. >> russia is a big money to the ukraine and the west does not know how to handle this as well as how to fight with russia. everybody is commenting this willng butolanda france talk about the eu response. >> the fed approves new standards for foreign banks requiring the biggest banks to hold more capital in the u.s. this is to wall off the u.s. units of those foreign bank designed to prevent taxpayers from having to bail them out and case there is another crisis. it is $50 billion in assets on the original fresh old had $10 billion of they are trying to be more -- >> they said we will give them a year to comply. >> this year is the year where we actually do something about new regulation and new laws and rules. >> they have to be stress tested. this comes with a lot of oversight. >> american oversight of non-us banks which is why you are seeing return on equity in the banks drop. let's say single digits. a new report from the congressional budget office, the cbo, says that raising the minimum wage would lead to a minimum of 500,000 job cuts in 2016. it may left 900,000 americans out of poverty. president obama by mandates said all government contractors will be a new $10.10 minimum wage and he wants to extend that to the country. be theill really hospitality industry that will be affected in a positive way. >> don't forget, "bloomberg koi'sssweek" peter fabulous article on the minimum wage. look for that article. it is just super. >> we covered a lot of ground but that is your front page summary. >> john scully is with us, the former ceo of apple. also joining us this morning is peter cook. when you look at the minimum wage and the cbo, it seems like there was something for everybody? >> much like the report they did recently on the president's health care law and the impact on employment, this is a mixed report. there is enough in here negatively that headline number about the people who would lose their jobs by late 2016 that republicans seized on immediately. if there was any chance for the president to get a minimum wage hike this year, this killed it off. there is enough in here for republicans to say hold the phone. >> how did this play in washington? when a bombshell like this comes out, how is it handled? >> the congressional budget office, we never know something is coming from them. we get a heads up that these reports -- >> frank underwood got a heads up for it >> maybe he did but this was dropped by the cbo and everybody says there's something in here for me. there is something for each side of the political debate. the cbo has become more controversial than the nsa and the fed. that is hard to do. >> almost one million people lifted out of poverty so why are theirspin and at republicans are so good? >> they did not want a repeat over the health care numbers last time and the first response i got was democrats seizing on those numbers, lifting 900,000 families out of poverty. that will not be the take away. it is harder to tell that story that gives a 500,000 people will lose their jobs. >> talking about the ukraine, what will be the response? there is only so many photo ops you can do. >> there are only so my options for the united states in the sticky situation. there was a statement from the secretary of state and there are limited options for the united states. there is pressure but when the u.s. says maximum restraint and others are saying the same thing, yanukovich is under pressure. if he goes too far, we will say this get worse fast. joe biden called the president of the ukraine and said you have to de-escalate and the exact opposite happened. john scully, long time chairman at apple who worked with steve jobs, a lot of what has happened around the world whether it's ukraine or thailand, it's all on the phone. as you are at apple and saw that, did you think it would be technology that would ultimately lead to social change? weing up on quite honestly, could not imagine that back in the 1980s. >> there were no digital cell phones in that era and we were still using snail mail. until 1994. no, we really did not know. >> in egypt, you could triangulate the bullets into tahrir square off of twitter. ukraine is a different debate because of the technology that steve jobs and others did. >> you are right, the technology today is all about communications. it's not about computations and devices. communications has dramatically changed because you can literally, in a matter of days, have hundreds of millions of people aware of things that was not possible couple of decades ago. bremmer will join us in a moment. -- itgeot gets a lifeline is being rescued by the chinese motor group and the french government will put up $1 billion in return for a 14% stakes in the company. the investments are part of a broader restructuring. the peugeot founding family will give up control of the family if the deal is approved. gm is going aluminum. the automakers ramping up efforts to have a pickup truck made mostly of aluminum by late 2018. gm is under pressure from federal fuel efficiency standards and rival ford. the automaker recently launched a contract to supply the metal. net lex shakes off the sting of its price i. the consumer satisfaction rating has soared to a three-year high. rating saw aion price hike back in 2011. it's all about "house of cards." "aren'tld not get into is the new black." >> coming up, we have been talking about 25 people killed in the ukraine and that's a live shot in the square in kiev. you have protesters on one side of the flames and police on the other. we will be joined by ian bremmer founder of the eurasia group coming up on " bloomberg surveillance," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com. ♪ up, hank greenberg, the man who ran aig is now chairman and ceo of starr international emil joined that he "in the loop" at 8:00 a.m. >> good morning, "bloomberg surveillance." let me show you that markets are on the move and you see this off the ukraine. this is the russian ruble basket. this is a weaker ruble and this is vladimir putin's headache. we have gone to new russian weakness moments ago. protests have become riots in at least 25h, killed. the people of the ukraine are split between europe and russia. mer joins us now from new york city. good morning. overstep hisputin bounds with recent meetings at the saatchi olympics with the ukraine leadership and with that $2 billion traunch to buy government bonds? did he reach too far? >> not from his perspective. many people would have believed that he would've waited to up untilessure on yanukovich after the olympics but those are people who care about the international response. that is not the case with mr. putin. he has edward snowden in moscow and has no problem with that. that she has been waiting to give that $2 billion directly to yanukovich and there were strings attached. he said to get his house in order. he did not know the next day you have the hard-line response from the ukrainian government and you have 25 and counting dead. vladimir putin is prepared to have force used on the ground to that the- to ensure ukraine is leaning in the right direction. >> he is trying to create a new bloc around the ukraine. who should respond within europe? we are in search of an institution in europe to lead the response. who is that? >> the european foreign entirelyis not that, too weak, and you don't have coherence in europe. so far, the swedish foreign minister has been the most outspoken. they don't have any influence. the german resident and the german foreign minister have recently spoken up and said more must be done. the germans have been more outspoken in saying that sanctions will need to be levied than the americans have. the americans have responded with general condemnation. i think there is a good chance that sanctions are levied by the europeans of some form led by the germans against ukraine. in theieve thatanukovich last 24 hours has gone beyond the brink. there is no returning for him. he either has to call early not seem which he does ready to do or he has to continue with some very serious bloodshed. >> let me bring in peter cook. what is your take on the administration's response? what else can they do at this point given the fact they are and syriath russia and iran. this is a difficult moment for joe biden and john kerry and the president to get more engaged. >> the russian relations are completely broken. you have probably seen the leak from victoria newland saying f---the european union. it does not help. i think the americans could have provided much more support for the imf and coordinate with the eu before we get to this point if they had wanted to create a bailout package for the ukraine. no one wanted to do that. ukraine was considered insufficiently important to put together a major package. the same conversation we are having on syria. >> why would the u.s. have vice president biden call president xch rather than president obama himself? >> maybe he was playing golf. if this was important for obama and considered a matter of a- level importance to national security, he would be on the phone. the fact that it is biden sends a clear message. it is not about american jobs. >> thank you so much. up, venture capitalistmo koisman will join us on the relentless move to online consumption. this is "bloomberg surveillance," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com. ♪ >> good morning, "bloomberg surveillance." let's get to a busy morning of top headlines. the surprise rise in unemployment in the u.k., the jobless rate rose to 7.2% in the fourth quarter. the rate was expected to have been not change and it was a first increase in almost one year. china, it cut its holdings of u.s. treasury debt in december by the most in two years per the country reduced its position in u.s. government bonds by almost or the $8 billion or 3.6% of total holdings. the reduction came as the federal reserve announced plans to reduce its bond purchases. the number of teenagers in the plunged to ae record low, one in three teens were either working or looking for work last month which is the lowest level since the labor department began tracking this back in 1948. this comes as more teenagers are focusing on getting into college and those looking for jobs are often competing with older and a skilled workers. >> thanks so much. have you played? >> candy crush? i spent like $15 on this. >> i was lectured on this. coffee --toffee, i have no idea what i'm saying. >> the idea here is that you go public when you need the money to grow. crush is already minting money so why is it going public? what do you think? >> it's called payday. the investors in the company see a chance to take caps off the table. look atfrom history, the zynga, that these games can have an amazing rise. are up to $1.8 billion. this is timing to probably take cash out the table. >> would you buy into the ipo for the short-term? >> i wouldn't. >> how do the bankers sell this ipo? what does the roadshow look like? >> it makes money. >> is very profitable and it's all about timing. can you get in and get out? >> where is the sustained ibita you mentioned? how do you sustain that? ofyou go to the history these online gaming companies and i don't know if they have a sustained revenue. zynga is a great story there. for the time being, it is hot but who knows what the next thing will be two years from now? >> candy crush. >> coming up, the fight over spectrum and we will speak to a technologist that may have found a solution. our twitter question of the day is coming right up. ♪ >> good morning, everyone. haas will join us in the next hour on kiev and the ukraine. i mentioned of the ruble has eight new weakness and you see that 10-year yield. that tension is off of what we saw overnight in the ukraine. hydrocarbons elevate. let's look at the gainers and losers. teslaant to highlight closing above $200 for the first time on speculation the company is reporting after the bell today, reportedly met with the head of apple m&a. weight watchers is getting pummeled over the last few days. it's at the lowest level since 2009 and was downgraded barclays. if you went to weight watchers, it would do well. >> that's not right. >> that was understood. after valentine's day, it just disappears. >> imagine this -- you are at a crowded starbucks and you down for a netflix movie -- no more dropped calls. wireless and telecom companies are in a head heat over spectrum but a simple transmitter could eliminate congestion and dead zones. the inventor will be demonstrating p-cell at columbia university. microsoft bought his webtv start up for half $1 billion. john scully is a believer and an investor. does this have the potential to put at&t and verizon out of business? >> um- let's give them a couple of years. >> not today. >> seriously, i'm not joking -- blackberry was too big to fail, tight? yes, i will say affirmatively to that question. if another powerful party, not necessarily a carrier, potentially a platform like the google or an apple, if they took this technology and came to new york and said you'll never have a dropped call and have high- speed rock band and you don't even -- high-speed broadband, how many people would say no? this is the toy. we are honored to have you here, the inventor. do you have a question about this? >> i have an observation. i have been hanging around silicon valley for 30 years. i saw the first moonshot when steve jobs showed me the prototype of the mac. this is a genuine moonshot. this is one of those tubes to transistor moments. it fundamentally changes the ground rules for mobile wireless. >> how does it work? >> we turn the whole thing around. since the invention of wireless, all the way back to the first things, we have been trying to avoid interference between different people transmitting. theyu take cell phones, cover several city blocks and they are trying to avoid interference. everyone is sharing the spectrum within those cells. what we do is the opposite, we create interference. way to haveut a radio signals coming together and where they intersect around your phone is synthesized. it's a personal cell just for you one centimeter in size. as you move your phone around, the cell follows you. in times where you can never get service. every person in time square can be using skype or facebook. they have a private connection. you still need to make the connection and take that little cell and get it up to a tower and onto a broader network. you still have to work with an existing infrastructure, don't you? >> i have worked with enough companies that you can come up with the best idea the world and the large incumbents can have something you rely upon. this time around, i said let's get it right. we will -- we work with existing lt phones. all, if they want to give us spectrum and let us use it, groovy. if they don't, we can use unlicensed spectrum. there are many people sharing the same spectrum. the third thing is we made it so it is very inexpensive to deploy infrastructure. we don't need towers. we have serendipitous deployment. we don't have to have our towers in a certain location as the cell system does. we can put them wherever we want so we find -- >> why wouldn't verizon or at&t or all of them say we like this technology and we will buy them and deploy them within cities? why wouldn't they do that? >> um - so i won't say that they have not. what's interesting is what we did is open up the door for non- incumbents to come in there. these guys don't move very fast. the existing wireless players -- the folks in silicon valley -- like blackberry, they could not move fast enough. physics of antennas are very complex. i took a course in college and this is a complexity issue. steve has salted and he has been working on it for 10 years. heself funded it because made money in other ventures to be able to do that. he has over 100 patents and applications around the world. this is not a science project. he has figured out the complexity of the science. you talk about unlicensed spectrum, to what extent do you need government approval for locating these devices? do you also solve the policy issue of net neutrality here? this --e fcc in braces embraces this and says this is a public resource, thou shalt use spectrum officially and you shall not have dropped calls in new york city. if they say that, this is everything the fcc said was their goal. did you just blow up the whole idea of the government spectrum options? you just solve the spectrum issue. >> we have in a way. ?hy not have spectrum we had a business meeting yesterday where we brought different phones. they did not work so we asked for a landline. he helped me through half my presentation. if you take the spectrum that is there that they have to auction, we can use them for more significant things like opening up a whole new world. did the microprocessor ruin the world? no, look at where it took us. this is that moment. >> one thing we have seen in technology is that the leader who has a monopoly in a previous era like intel and microsoft with personal computers, they are not necessarily the leaders in the next disruptive era. >> this goes to clay christiansen 101. what has been the response of at&t and verizon? do they want to embrace this? >> i cannot speak about any of them specifically. notthe major operators, just the u.s., there is a nondisclosure agreement. let me talk about them broadly. they love this. the reason they love this is because they are dieting. a good way to -- they are dying. said we cannoty serve the demands that we have in new york, chicago, san francisco, dallas. there is a physical limit. >> in terms of congestion -- >> when do i get it? when can i buy it? >> that's the smartest question i've heard. >> in one block of san francisco around our lab, there is unlimited lt capacity. we are growing out from there. it depends on who we partner with. it can be available as soon as the fourth quarter of 2014. >> thank you so much, it was a pleasure with such amazing technology. thank you so much. lambda square - this is our twitter question of the day. what is your biggest complaint about cell service? we will get thousands of responses. >> we may have solve it right there. we will take a look at the live shot in independent square in kiev, the capital of the ukraine and this is global turmoil across the world. it is also thailand and venezuela and we are talking about what is happening around the world. we will be right back. ♪ >> good morning, everyone "bloomberg surveillance." the focus today is on kiev, the ukraine. us aboutaase will join the 25 killed overnight. reserve tightens the rules on foreign banks -- they approved new standards of banks operating in the u.s. to hold more capital protecting against loan losses. the banks said this would raise the cost of doing business in the u.s. the president traveled to mexico for trade talks with mexico and canada to build stronger trade between the three countries. the trip comes as democratic party leaders on capitol hill about to oppose the president's average to negotiate trade deals. america borrowed at the highest rate in the third quarter since the recession. it was the biggest quarterly increase in debt since the third quarter of 2007. photographs onme there has been a lot of olympics. comeese three top photos from the governmental opposition in all corners of the world. number three in venezuela, fires are lazing outside the military base in the capital city of caracas following the detainment of the opposition leader. he led demonstrations against the socialist president. the violent protests are continuing their. number two, thailand, police used tear gas during clashes with antigovernment protesters in bangkok are in reportedly 60 people were injured during the crackdown. do they want a pacific pivot in the white house? >> they don't like to use that word. the new focus on asia, they are certainly -- this complicates think but it shows you that the ukraine, venezuela -- this is a time when the administration is trying to solve the problems in syria with iran and middle east peace. we had the secretary of state dealing with that issue. these other issues complicate life for this white house at a time when they have a whole host of issues out there. it does not make light easier. pivot andd the word you almost have to. where the problems have been in the middle east for decades, it seems to be quieting down and now you have these other issues. >> there is collapse of the washington and european consensus. >> are number one photo comes from kiev and the ukraine, engulfed in flames. the protests are becoming deadlier and the clashes have claimed 25 lives and the injuries are above 200. that is a live shot and you can see the smoke from the square. >> this is independent square near two of the hotels that have been the central location. this is a little bit away from the famed soccer stadium. was i noticed in davos people from europe show a massive contrast between the ukraine and russia. they are two decidedly separate worlds. vladimir putin is trying to support this president. >> it is a bridge. you look at a map of the ukraine and you see russia one side and poland on the other hand belarus in there. can see it and you is trying to get into europe. this is what mr. putin wants. he wants a new russian bloc. >> he would like it for economic purposes. he would like to show russianclout and that includes having influenced the on the russian borders. that is the challenge for all of those former eastern bloc countries that are trying to reach into europe and maintain ties with russia at the same time. >> we will talk about the markets coming up next. we will talk to one man who thinks the s&p 500 could hit over 2000 by the end of this year. we will have that conversation coming up next on "louvered surveillance," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com. ♪ >> good morning, everyone. futures are dirt carrier rating -- are deteriorating. let's get to company news. his lannettne puts emotion -- he is having ceo's at discovery communications and liberty global the right to buy stakes in his company if he decides to sell. he also said he would stay active with both companies. fonic has a bid for royal kpn. it plans to merge the german units of two companies which would reduce the mobile operators in germany from 4 to 3. the european commission is concerned how the deal would affect competition. a feud between netflix and verizon has led to a video slow down. netflix says its average primetime speeds on verizon fiber-optic service fell 14% last month. the drop comes as broadband providers battle netflix over how much streaming content they will carry without being paid additional fees. that is today's company news. >> that's a huge deal. humbled. have been most strategists are optimistic. look at the crisis we have on february 3. jonathan golub is with rbc and suggests the s&p 500 could vault to above 2000. store heels him in the amount of cash. it is great to have you here and this is a new research report. you directly link the janet yellen animal spirit and gdp into your world of equities. >> first of all, when most analysts and gdp will go up one percent this year, they think maybe earnings will go up 1.5% or so. the actual multiplier is about six times and that goes in both directions. if the economy disappoints, it is also six times worse. >> you have more of an optimistic view on the economy. that leads to your significant 17,000+ call? >> you have better earnings and the multiplier effect in the second thing you have is the issue of multiple earnings. it will be a big surprise how good they are this year. a killer single best chart. >> take a look at this -- this effectively compares the flows in and out of bond funds for stocks. you see that plunging yellow line because people were pulling their money out. >> the world is coming to an end! >> they want safety. you have seen that flow go to an extreme. this is way too complicated. get that spite down and stocks go up. it's an incredibly important observation of this relationship between one percent gdp increase and the impact it has as a multiplier on profits. think about what that would mean if the government actually got out of the way of growing the economy and the amount of cash flow that would come out to the economy and jobs that could be created. it is incredible. >> what did the bears get wrong? it was like two weeks ago before we bought roses. it was total gloom. >> what they got wrong was that emerging markets are the tail that wags the dog. it is not that way. we have the largest economy in the world and of things are it's not here, emerging markets that causes the u.s. default. >> what about margins? not peaking.eally the government that has profit data but it does not look like corporate profits. it doesn't use the same accounting. if you look at profits -- it looks more like midcycle than it does up her cycle. -- than it does up her cycle. -- upper cycle. >> you have a one percent increase in gdp and earnings go up 6.5%. mostsector is leverage? >> the biggest one is the financial sector. bank profitability goes up when people pay their loans. energy and materials and industrials are next. they have heavy infrastructures and they get the leverage effect. >> what about the tech sector? the good ands but bad of technology does not use as much capital. if you have an industrial company that has a ton of fixed costs, one extra unit makes a bigger impact but also has a downside. >> let's talk to john scully about this. your world is seeing revenue bill but also cost-cutting. everybody is rationalizing. can that be a long-term strategy? >> what's important is dissing growth. growth comes from less regulation which is hurting growth of smaller businesses. if you get the cash flow, flowing into those small businesses, the kind of insight that jonathan has, this is a wake-up call for politicians to rethink the regulations they are pressing down on small businesses. years, the last several businesses have put more labor per unit of capital than capital per unit of labor. that is a bad thing. businesses are not confident on the future. if you get that confidence back, that will launch the economy. report, we protect the copyright of all of our guests. thank you, thank you, thank you. how about a four x report? sterling is under one dollar 67 but there is a ruble basket with new weakness on unrest in kiev. fman will be, mo koy here to talk about online consumption next. ♪ >> kiev in the ukraine you reps into riot and death. -- erupts into riot and death. at least 25 dead. is it just like 1999? facebook, twitter, and huber are not turn-of-the-century. overpriced kale salads. good morning, everyone. this is "bloomberg surveillance ." is wednesday, february 19th. i am tom keene. joining me, the always trendy adam johnson. -- even trendier alix steel. our best toast is mo koyfman. .- guest host is mo koyfman >> we do have some economic data in the u.s.. mortgage applications following about 4%. at 8:30 a.m.s on those housing starts are a real thermometer of what is going on. >> we do have some earnings before the bell. after the bell, everyone is looking at tesla. is it a car company or a tech company? >> by the way, given the multiple on tesla shares, it better be a tech company. >> it trades like a tech company. >> president obama traveling to mexico with trade talks. treasury secretary jack lew will speak on the economy in san francisco. a very busy day. >> here we go. pugeot gets a lifeline. it is being rescued. these investments are part of a broader restructuring. the founding family will give up control of the company of the company if the deal is approved. gm is going to aluminum. it is ramping up efforts to have a pickup truck made of mostly aluminum by 2018. they are under pressure i federal fuel efficiency standards and rival ford. recently lost and contracts -- locked in the contracts to supply the metal. ' consumer satisfaction rating has soared to a high. that is your company news. >> futures are deteriorating through this morning. the russian ruble basket. death in kiev.d kiev unravels. you see independence square. eight hours ahead of us. haas, we have seen putin -- what-- would you expect next from him? >> what i would expect next is essentially whatever it takes. he will continue to offer economic help. the only condition he will attach is as far as you get from the imf. ,t will be to viktor yanukovych to keep control. putin sees this as the future of iraine, but in many ways, believe he sees this in some ways as the future of russia. he, in no way, once the liberal virus to infect ukraine because his fear would be that it would become a demonstration effect for his own country. >> i am fascinated by this. with the russian fleet in the black sea off of odessa and the rest of southern ukraine, how does america and how does europe respond? it has become a naval action as well. >> there is not a lot the u.s. and europe can do. normally we would provide economic help. only with strings attached. people are not going to provide $20 billion of help without certain types of political and economic condition i would a. viktor exactly what yanukovych is not going to agree to when he is under siege. we do not want to throw good money after a bad situation. we almost up to see where things come out. if he prevails, then we can introduce help with conditionality. if there is a new government, we can provide a lot of help. >> when is this move from an uprising into a civil war? when does that happen? >> that is a question of whether it grows. we had the first serious show of force by the government in 24 hours. when you're talking about syria or paris in the middle of the 19th century, it is now a battle of nerve. does the government and security forces keep its nerve? are the protesters prepared to continue to put their lives at jeopardy in the hopes of overthrowing the government? that is the dynamic. vicebassador haass, president biden called viktor yanukovych to ask for him to de-escalate. 25 people were killed overnight. what is the likely next series of events over the next 48 hours? >> i would expect he would have more of the same. the u.s. can call for restraint, but we do not have ways to .nforce it or incentivize that i think the critical dynamic is will the government and the security forces remain willing to kill the wrong people if that's what it takes? if that's what it takes, the regime is likely to survive. >> we're a long way from kissinger's classic diplomacy. i do not know what the new foreign policy is. america'sd be international relations one we feel so useless with ukraine? >> more broadly, i would say two things. you have the president going to mexico today. it is against it backdrop of no move at home on immigration and increasing questions over whether we could ever give the trade promotion authority he will need to negotiate trade accords. the biggest foreign-policy challenge begins -- continues to be the domestic one. the united states has been overly invested in the middle east. we have not been paying event -- attention to events in thailand, ukraine, venezuela. i would simply say that we need to rebalance our foreign-policy away from this over fascination and emphasis on the middle east and take into account more asia and the rest of the world. >> where should we look in europe for leadership? which institution in europe will get this done? -- europen leadership and leadership are oxymorons. the bottom line is you do not have europe as a collective entity when it comes to being a foreign-policy actor. the answer is you cannot look to europe for leadership. that is an advantage that putin has. he is a single, lone operator. >> alix? >> breaking news. sales will be buying the for $21 a share in cash. a 41% premium to the last close. jpmorgan.s advised by we should point out that zale 1%.sales of flat -- up the expectation was for a decrease in sales. struggling in the jewelry industry. >> ukraine, front and center this morning. our guest this morning is mo partner ofneral spark capital. what is the new new this year? facebook debacle. then we had twitter. when you wake up, what is the news for you? >> i have been watching two things. one on the social media side and one on the commerce side. on the social media side, a move toward anonymous or semi-anonymous networks. there has been a reaction to some of the public nature of facebook. >> the rise of snapchat. >> one example. there is a new app called secret. there was one called wut. that are of apps rebelling against the notion of putting everything out there and embracing the notion of communication in a different context. the other side is i think we are moving more and more for the bridging of off-line and online commerce and taking some of the infrastructural elements of local commerce and local delivery of goods and services and making them far more efficient. >> integration of brick-and-mortar with the internet. >> correct. >> little busy today. >> very busy. the growing investment in healthy foods. tom's favorite -- kale. you know what salad is, right, tom? ♪ >> good morning, everyone. "bloomberg surveillance." mo koyfman is with spark capital. holiday season was a game changer. the relentless move to online consumption. it will forever change retail. everybody caught up on this trend. i would say was not even predicted. it was a titanic move, wasn't it? >> people have been talking about the shift to online. it 5-10 yearll overnight success. the world wakes up and thinks this happened overnight. what do brick and mortar do? >> it is interesting. i am seeing a resurgence of local commerce. the malls is one issue. you have to pull up to a macro trend. more and more people in the united states are moving to cities as moving to urban environments. we are seeing a lot of mobile first services and web-based services that are helping enable local commerce to thrive in that environment. we just announced investment in a new company. it is effectively a local delivery service. days ofemember the old services that were going to bring you anything, on-demand in your city. those services were early for their time. today, we are seeing the emergence of companies like postmates. they will bring you what ever you want from local retailers. while the trend is moving to online and e-commerce, you are seeing services take it vantage of the mobile phone and connectedness. >> we talked about samsung and the rumble about iphone 6. does the next generation of smart phones ramp this up even further? or is it incremental? >> it will be the same thing. it will get better and better, smarter and smarter, more sophisticated. we will be having this discussion five years from now and he will ask the same question. it is a steady stream. building more and more capability of services and to the phone that allow the consumer to really be on the network at any time and that opens up all sorts of possibilities. >> i have like 14 more questions. thank you so much. the us is critically important. steve chase, the serial entrepreneur, he listened to adam johnson and he went out and found a high-priced salad called sweet green. k entire control room eats kale three times a day. kale next onabout "bloomberg surveillance." ♪ >> good morning, everyone. "bloomberg surveillance." are twitter question of the day. i got the mystery bill from davos. >> how big is that? >> i went to the bahamas for 2.5 days. my bill was $500. >> what did you do? >> apparently too much. >> 17 movies on your phone? >> adam has top headlines. >> a surprise rise in unemployment over the u.k. 7.2% iness rate rose to the fourth quarter. the rate was expected to have been unchanged. the first increase in almost a year. recent gains in the labor market have lost momentum. president obama travels to mexico for trade talks with leaders of mexico and canada in an effort to build stronger trade ties between the free countries -- three countries. the number of teenagers and the u.s. workforce plunges to a record low. just one in three teens was either working or looking for work last month. that is the lowest level since the labor department began tracking the data back in 1948. moore teenagers focus on getting into college. those looking for jobs are often competing with other skilled workers for the same positions. >> in ukraine, the situation continues to unravel. we just saw the russian ruble absolutely deteriorate. we see that with stronger yen. using foreign exchange is a litmus paper, you can see some real significant tension at this moment as we look at independence square. >> for those of us who get up at 2:30 in the u.s., it is almost lunchtime. i will take my salad with shredded kale. eating healthy is more than just a trend. it is an investment. i have to go all the way to suite greens in chelsea. -- sweet green in chelsea. now.ounder joins us for lunch.everyday for me, there is a lot of competition. how do you keep me coming to your store and not 47 other salad places? >> i think we have the best product in town. healthy, transparent, and.... you wanted to taste good. >> what made you want to invest? you are a tech guy. >> we also invest in great entrepreneurs with big ideas. the restaurant industry is ripe for disruption around healthier trends. >> competitive in the margins can be difficult. >> it is a competitive business, but if you had asked me whether a copy shop in seattle will be worth -- coffee shop in seattle would be worth as much as it is, you can build a company based on differentiated products. >> a salad is a salad. what is the single thing in your store that could differentiate? freshness? execution? planning? music? >> we're doing scratch cooking in fast food. you don't find that a lot. where we are sourcing it from. the way we use technology as part of the experience. >> what did you use -- learn from chipotle? >> we learned a lot. consistency. >> i want to jump in on the technology side. we order every monday for our partner meeting, that sweetgreens day. >> thank you for your support. [laughter] >> was that a shameless plug? >> no. >> it was a terrific log. -- plug. >> they have thought about the .nd to end experience it starts with the ingredients and it ends with the consumer. they have taken the web and the mobile experience to really new heights. >> does that mean that it is easier to order online? >> it is just a better experience. >> they launched a mobile up not too long ago that 20% of the people will not be using it. you will be able to order on it soon. that will be one of the technologies that those disrupt the restaurant industry. there is no reason to stand of mine when you know what you already want, particularly when you are busy. technology can help disrupt, but ultimately it is about taking on a huge restaurant industry and encouraging people to make healthier choices, which then implicates our health care system. ale.om, that means k keyou said that one of the things that is happening, one of the big themes in technology is the integration marrying online with brick-and-mortar seamlessly so that there is no distinction between the two. >> i did not think it was a set up. i think sweetgreen is a great example. food servicese business, but they are delivering an experience that people come to expect. >> we remember the starbucks stumble three years ago. how do you deal with labor and management? anthe focus is building incredible team. at the end of the day, it is the service. people interact with employees. building an incredible team that believes in the purpose and can create that it spearheads. -- experience. >> do you throw away a third of a head of lettuce? >> we try to have an efficient subsystem. -- prep system. kale come from? >> we get are from new jersey. >> new jersey kale. >> local farming. >> we are coming back. we will be right back. ♪ >> good morning, everyone. "bloomberg surveillance." with me this morning, alix steel and adam johnson. alix steel has a company news. broke in thehat last hour, a deal in the jewelry business. signet is buying zales. the offer represents about a 41% premium over where zales closed yesterday. golden gate capital old estate and is -- holds a stake and is backing the deal. >> the amount is double what google capital had last year. google capital is putting 40 million -- $40 million into renaissance learning and plans to do five or six more deals this year. >> the u.s. government is asking on information and 35,000 user accounts last year. e-mails, text messages. under thets fall foreign intelligence surveillance act. 35,000. staggering. >> you want to stream netflix on your smart phone? the bigger question is, who should pay for all that bandwidth? and mo koyfman join us. steve, you are the original internet guy. who pays? where to succumb from? -- does it come from? >> have you allocate some of the cost? consumers will pick up a lot of it, directly or indirectly. there will be a battle. as we have seen in a variety of different transitions. where people draw the line. the people owning the channels, telephone, broadband. they will always try to figure out ways to get as much as they can for that utility. it is going to be a few years of a battle. >> within that battle, does the consumer have any power? does the consumer, through their choice, have power in the battle? >> they do. basically consumers have chosen netflix in this case. netflix has a lot of customers and a lot of power in the industry, including getting rights. that power can be used to try to negotiate from a position of strength with the major providers. >> when you are looking at the new technology landscape when it comes to spectrum, what do you see? >> on this point, i think consumers do have the power on one level. on another level, on the spectrum landscape, it is pretty concentrated. given the way the cable business in this country has developed, i think the fear amongst folks that promote net neutrality is that consumers will lose the power. >> for the benefit of people who do not know the term, net neutrality. justify not. -- just define that. >> the cable companies not being able to charge internet service promoters or internet businesses for more to getting advantaged access to consumers. it is trying to protect consumers from having to pay more for the services that they want through the cable or broadband provider. , it isin this discussion important that we get your comment on this proposed merger of comcast with time warner cable. it is a dominant transaction. >> it is for the concentration in that sector. is that thepositive competition is intensifying. people are not as wedded to their televisions. i buy it in part. there is definitely more competition. that does not mean the merger should be approved. there is more competition. there is a generation that is rejecting the traditional way to view television and cannot imagine not doing it through the internet. they really can't more about the broadband connection than they do the package of television services that have historically been bundled with a broadband connection. this battle will heat up over the next decade. >> going back to net neutrality and the deal, if comcast does by time warner cable, the condition extend net they will neutrality in essence? >> that is not what we have been seeing from the courts and the legislature -- or the courts, really. i hope that will be the case. to the point, as you move more toward the home and luster the delivery of television services -- less toward the delivery of television services, the concentration of broadband access, it does matter. whether we are getting a cable tv or just internet services, at the end of the day, comcast owns the pipe into the home and we need to understand what that means. >> thank you so much. i will try kale. adam? findt's do a data check to out where futures and various assets are trading. the s&p down 0.25%. the 10-year yield has dropped a few bits. people are concerned about violence around the world. buying bonds for safety. >> good morning, everyone. "bloomberg surveillance." bluebird television, bloomberg radio. -- a television, bloomberg radio. i am tom keene. scarlet fu is off this week to read mo koyfman with us from spark capital. we are looking at academics. >> we are all probably happy that we do not have a kid in college because tuition costs are up 500% since 1985. >> great chart. >> unbelievable rise. some students are starting to push back. from harvard to dartmouth, freshman applications are down for the upcoming school year. world over,ons the the tuition cost at elite online -- one answer is and open, less expensive education. couch thermodynamics. wonderful to have you with us, professor. as you look at what you have learned the last couple of years, how are you going to get online, elite academics to be the same as what you get in the brick-and-mortar campuses? >> let's understand one thing. the online experience is never going to be identical to the campus experience. the two are different. there are a large number of students all over the u.s. and the world who do not have access to a quality education. online learning can traumatically improve access to education -- dramatically improve access to education and by marrying technology and online education with campus education, we can improve campus learning at the same time. online learning can be viewed like a rising tide that can lift all boats. >> the university of london has been way out in front on this over the last many number of decades. what is the best practice you can learn from london that you can bring over to the united states? a number of universities, whether in the united states or in the u.k., and so on, that have been offering education through various other means. for example, distance education. in the u.s., we have had various forms of correspondence courses. any of these have been going on for a long time. one of the challenges has been that the quality has not been the same as campus education. with technology advancing dramatically and improving the quality of education, for .org,le if you go to edx the online learning where you can get top classes, the quality of education is getting better and better. it is not the same as it used to be. the quality is beginning to approach campus education. >> there is one catch. the quality may be getting better, but it is not good enough. 95% of people in online courses are dropping out. how do we keep those people involved? >> you're really comparing apples and oranges here. if you take a campus like m.i.t. or harvard, they admit only about five percent or 10% of the students that apply. once they are admitted, most of them graduate. with all my learning, it is a completely different ballgame. what your matter religion, geography, economic status. you can come in and take these courses. your respective of background. there is no admissions process. our courses are extremely rigorous. these are virtually of the same rigor as campus courses at m.i.t.. it is not surprising that when you pass the course, you have on the order of 5% to 10% of the learners. we are looking at a number of other ways that we can engage the students better. connect them with more materials . >> figure so much. great to have your perspective. from sparkjoining us capital. google capitol announcing $40 million to education software. >> we have made a number of investments in education. that needs toing be thought about is whether delivering the traditional, university.s., education online is the way to engage a broader audience of people. i am of the mind that we need to rethink how we are educating people and provide them with really useful tools in their day-to-day life. >> useful tools. speaking of, tesla useful tools. we will be talking about earnings coming out later. ♪ >> good morning, everyone. >>"bloomberg surveillance." futures, -7. foreign exchange shows the unrest. in the ukraine, in thailand, in venezuela, as well. a stronger yen. decidedly, a much weaker russian ruble in the last six hours. "in the loop with betty liu" 8:00 a.m. this morning >>. a lot of deals coming out in the last 24 hours. hank greenberg has, with his own deal -- come out with his own deal. despite his criticism of the obama administration is betting big on health care reform. we will talk to him about that. mosque, one of our favorite ceos , is going to be -- elon musk one of our favorite ceos, is going to be joining us exclusively. >> very good. betty liu. i looking forward particularly to mr. musk. the earnings would be -- >> the earnings are inconsequential. it is a story. where were you at $15 to say shut up and buy it? >> what do we got? >> we got to look at zales. signet is buying the company. a 41% premium from yesterday's closing price. to add toects earnings in the full first year. the deal valued sales at about 7.4%. already the largest array chain in the u.s. and the keeps on getting bigger. >> that is a fine looking ring, alix. >> i'm sure there is a man out there who needs to buy a ring. doublede -- china sales come a meanwhile sales for the company as a whole up 20%. this is a big deal. 69.69. off the all-time high, but it is up this much. bill ackman keeps being wrong on this. >> mo koyfman with us. aw two different tech deals. facebook and then a completely different process from twitter. what is the younger tech world learn from going public when they learned -- looked at twitter? >> they learned the lesson that many public companies have learned. you have to underpromise and over deliver. >> that is simply what they have done. i was stunned by the conference call. the whole digital extravaganza. everything you do, every touch point you have as a company, whether it is with the consumer, the street, investors -- it has to reflect your brand. i think the conference call is just another part of that. >> we will be talking about the ukraine coming up next. ♪ >> the morning, everyone. "bloomberg surveillance." scarlet fu is off this week. of guest host is mo koyfman spark capital. company news. >> john malone putting his plans into motion. the billionaire is getting the companys stakes in the if he decides to sell. he will stay active with both companies. may face objections by the european union. they plan to merge a german unit -- the german units of the company. the european commission is affected -- is concerned about how the deal will affect cognition. >> a video slow down. the feud between verizon and netflix. battle.d providers overnight, 25 people were killed in the ukrainian capital of kiev. is bloomberg's managing editor for eastern europe. what is happening right now? >> i went to the square just an hour ago. at the moment, the situation is relatively peaceful. the opposition groups are rebuilding their camp after this very tense night with fighting all my. -- all night. people are bringing all sorts of stuff, food. also, all kinds of supplies. they are rebuilding. the police are keeping quiet for now. the president has threatened to dissolve the camp. for now, the police is not moving any further. >> how organized are the protesters? it seems every place we go, every geography it is a different story. brazil, venezuela, thailand. our organist of the protesters in kiev? >> -- how organized are the protesters in kiev? well organized. they do have a battle plan. they are bringing in fresh people from cities outside of kiev. they seem to have a lot of support from the people who are bringing them supplies. i had one report this morning. a hospital was looking for people to donate blood. an hour later, there was a literal traffic jam in front of the hospital because so many people were trying to help. they seem to be very organized. >> president viktor yanukovych told the opposition leaders to distance themselves from the protesters. what theell us opposition leaders are saying or doing right now? >> that is quite interesting. threat fromit of a the security forces to them. they said they are looking into whether some of the opposition leaders are involved in a coup d'etat. hiding.oment, they are they are not saying where they are. >> what happens to these opposition leaders if they are caught? what is at stake? i think they might end up being detained and put in prison. it is hard to tell. what is curious to see is that the police seem to be willing to dissolve the camp, but then did not move any further. said thatukovych people have crossed the line. his advisers are telling him he should use force. he is always considering the use of force. toseems still to be willing try to find some sort of compromise. the question is really where he is getting his orders from. >> i know you are at our news bureau in kiev. we hear the images, we see the images. what is happening in the ukraine outside of kiev? is there great support for this protest? >> there certainly is in the western part of the country. we have reports now that in several cities, including in the city of leeds, close to the border of poland, they have also stormed government buildings, security forces buildings have been set on fire. the local government has said that it has declared itself independent from the viktor yanukovych government. some people, including the president of poland, are saying that we are seeing the first hours of a civil war, which may lead to a breakup of the country eventually. is that important praise. perhaps a civil war. our managing editor from eastern europe reporting from kiev this morning. >> it is time for the agenda, where we look at all of the stories and issues shaping the day. >> minus the markets. you see the move in the russian -- mine is the markets. you see the move in the russian ruble. enough about the whipsaw we have seen and sentiment over the last 15 or so days. connecting the dotted 1% change in gdp equals a 6.5% change in earnings. >> there is no buzz on that. there is no buzz on a better bullish market right now -- . >> you were going to radio. >> we will miss you. >> here is my agenda. the fed. we will get the minutes at 2:00. this was the last meeting with chairman ben bernanke was chairman. he handed off to janet yellen. i want to find out what actually happened there. what was said? was there a sense of transition? only nine voting members, versus the 12 voting members normally. we will see what they said. the forward guidance janet yellen was talking about during her testimony. on my agenda, i am looking at tesla. i don't drive. >> you don't drive? >> it is a whole thing. i have a permit. we are looking at tesla. it is going to be about gross margins and about apple. the reports that elon musk met with apple. any merger talks there? mo koyfman joining us. you mentioned that tesla is a car company that trades like a tech company. tell us more. >> fundamentally, they are making cars and they have the margin truck sure of an automobile company. have you guys ever been in a tesla? >> i have not. matt miller has. >> it will throw your head back. >> you start to see what a car should look and feel like and act like in the 21st century. i am a huge fan of tesla from a product point of view. >> should it be rated as a tech company? >> i have not followed the valuation closely enough to know whether it is overvalued or undervalued. there is a good case to be made that tesla should be falla and more highly than a traditional auto business because they are really changing the way a car looks and feels. >> should apple buy it? >> it would definitely be interesting. ceo, will be the speaking with betty liu around 6:30 later today. >> time to answer the twitter question of the day. the biggest complaint about cell service. definitely the cost of the service and the need to enter into a new contract when you upgrade your phone. totally. another answer. i can never get through to customer service to tell them that. for me, it is difficult to download webpages on my phone. much easier than a blackberry. it is hard. it takes a while. frustrating. >> what is the future of mobile communication? who is going to figure it out and get it done right? >> from a device point of view? >> to make it easier for us to download stuff fast? >> i think that is a network issue. >> it is not a hardware thing? >> it is both. hardware and software and cell towers and low, works. i think it is the cell towers in the local networks. i think the battery life on the phone. you need to make more dances so that you do not have to draw on it too heavy. >> thank you for joining us today. >> "bloomberg surveillance" continues on radio. "in the loop" is next. ♪ >> good morning. you are "in the loop." i am betty liu. the fight against raising the minimum wage. congressional budget office says boosting the minimum wage could lead to up to one million jobs. 900,000 americans could be lifted out of poverty. president obama proposed raising the minimum wage. we will ask a billionaire republican what he thinks of that later in the program. the hero the markets, they indicate stossel open lower today. just eight points away from the record set last month. in the ukraine, it was the bloodiest yet. at least 25 people were killed off night. the ukraine president warns seventh graders he will crack down if the violence does not and. for more on the rapidly degenerating situation
today. i am sorry, session highs for the s&p 500. i got excited. with that being said, you have the up arrow's. the s&p 500 up one third of 1% at the moment. let's talk about why we are seeing some of this optimism. let's take a look at ford. a new 52 week high. they came out with some good numbers. raising guidance going forward. that is good news. back to you. adam: thank you. lori: one of the contractors behind the obamacare website says the website is being fixed and will be ready in time for january 1. richardson joins us with the very latest. >> they will not say exactly when this will be fixed. they did not have enough time to test it. there is just too many people logging on to the exchange and that is the root of the problem. >> there are thousands of website that handle volume far larger than what healthcare.gov was faced with. >> surely the website was designed to handle more than 2000 users. >> they are not responsible for what i call the front door. rich: this hearing is about four hours old right now. there are a number of republicans who have signed a letter asking for kathleen sibelius resignation. lori: thank you, sir. adam: i can disclose the increased take. he reiterated his call. the letter comes as girl icon released his letter. lori: john scully did not comment on a potential bid. he says he is a longtime fan of black area. adam: janet yellen will have to wait a little bit longer. the staff is still waiting to get paperwork from the white house. president obama nominated yellin to be the next federal reserve chair two weeks ago. because of the delay, the hearing will not take place until mid-november. lori: the national pawnbrokers association estimates that there are now more than 10,000 pawnshops in the united states. our next guest says this is just another example of a lasting social change driven by the financial crisis. your interest of pawn shop trends. >> the growth that you mentioned really is dramatic. how many can you say have grown by 50%? lori: what is the statement on the broader economy? >> what are the most common pond items? it is not just things that you think. it is a lot of electronics. it is not just a classic definition. clearly, it has moved a lot higher. lori: what does that say about the middle class and the challenges they are facing? you expected to grow because of that. >> job growth is really anemic. lori: the average loan is what? >> about $150,000. lori: what is your take on the fairness? are pawn shop's being fair when they negotiate the value of that collateral item? >> they are an important part of the economy. it really is an important part of the economy. >> it can be as high as 48% a year. the typical loan only last for 30 or 35 days. they are getting access to capital that a traditional bank is not giving them. lori: people are getting their collateral back. we're talking about people needing money for a short period of time. there is a whole range of reasons why people may need a little extra cash for a short period of time. when you go into a pawn shop tampon and i don't, it does not appear on your credit report. if you do not fail to come back and get it, it is securitized. lori: do you watch the pawn shop shows? >> yes. it is an interesting place to shop. it is a retail setting. lori: it is so great to talk to you. thank you for joining us. adam: it has doubled since 2007. we will keep talking about the pawn shop economy. next, we will hear straight from the source. how the business has become a mainstream financial service. lori: the busiest day of the year for earnings reports. adam: hello chancellor merkel. it is me president obama. the white house doing its best to smooth over allegations. is it too late? ♪ (announcer) at scottrade, our clients trade and invest exactly how they want. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade-proud to be ranked "best overall client experience." ido more with less with buss energy.hp is help. soon, the world's most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. multiply that across over a thousand locations, and they'll provide the same benefit to the environment as over 60,000 trees. that's a trend we can all get behind. [ engine revs, tires squeal ] [ male announcer ] since we began, mercedes-benz has pioneered many breakthroughs. ♪ breakthroughs in design... breakthroughs in safety... in engineering... and technology. and now our latest creation breaks one more barrier. introducing the cla. starting at $29,900. ♪ life's an adventure00. when you're with her.and i. but your erectile dysfunction - it could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess with cialis. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, seek immediate medical help for an erection lasting more than 4 hours. if you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop takg cialis and get medical help right away. ask your doctor about cialis for daily use and a 30-tablet free trial. adam: we will continue talking about the pawn shop economy. banks continue to tighten up their lending procedures. robbie within joins us. 10.5% of what is called the unbent. they are turning to pawnshops for short-term loans. are you seeing that at your shops? >> yes. absolutely. the numbers i have heard are pushing 30%. they have nowhere else to turn for short-term loans. the industry has become more of the mainstream. adam: it is not as if, you are not lending money in a traditional way. there is collateral. >> it is relatively easy. there is no recourse whatsoever. it is pretty straightforward. it is kind of our niche. adam: some people criticize pawnshops because of the interest rate. it can be as high as 240%. how do you respond? >> you have a $100 water bill. they will cut your water off. you come to us and you borrow $100. adam: i think you point it out very well. your business is just booming. i love the story. you have five stores and you expect to add five more? >> we have seven at the moment. we have ten franchises. we are getting a lot of response. we are finding a lot of corporate people out of work. college educated people in the industry. that is a lot of our segment. adam: i would love to have you back on and talk about how this is booming. revenue will grow 6.3% by 2016. i think you are doing a lot better there. appreciate you being with us. >> thank you for having me. lori: let's get you updated on the markets. mark newton. is there still some noise considering the government shutdown? >> i think the market is showing increasing signs of slowing a bit. it has been one heck of a move. it was somewhat disappointing. one of the biggest negatives was 2009. equities have been somewhat resilient. still pretty strong today. lori: thank you for summing it up for us. mark newton. adam: the red flags just weeping for a much anticipated audit. lori: new reality on retirement. when they can't afford to stop working. ♪ thank you orville and wilbur... ...amelia... neil and buzz: for teaching us that you can't create the future... by clinging to the past. and with that: you're 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. we're not simply saluting history... we're making it. ♪ nothing, that's what? that's why i take prilosec otc each morning for my frequent heartburn. 'cause it gives me a big fat zero heartburn. woo hoo! [ male announcer ] prilosec otc. the number one doctor recommended frequent heartburn medicine for 8 straight years. [ larry ] you can't beat zero heartburn. and best of all, it means i can enjoy all the foods i love. oh, zero heartburn is awesome. just like zero clery. ♪ [ male announcer ] prilosec otc. one pill each morning. 24 hours. zero heartburn. >> 21 minutes past the hour right now. president obama is calling on congress to finish an immigration bill by the end of the year. that may be difficult given the strong opposition from republicans. ellis island will reopen to the public on monday, october 28 for the first time since hurricane sandy. when hurricane sandy hit new york last year, ellis island was left completely underwater. the boston red sox taking an early lead in the 2013 world series. the cardinals have a chance to tie it up. the second game takes place tonight. you can watch it on your local fox station. those are your news headlines. back to lori. lori: thank you so much. hope you are comfortable at your desk. you may be there for a while. paying the monthly bills are the highest priority. saving and paying the bills is not possible. many say they will have to work until they are at least 80 years old. adam: what would happen if the second largest economy should tank. with more on that story, we have jo ling kent. >> they have been planning a much anticipated countrywide audit. local authorities have been allowed to roll over their debt with short-term borrowing. it is up 125% in 2008. considering how chinese gdp has slowed, they are up 19% in september. we could be looking at a huge bailout situation. this situation could hurt some of your major investments. >> how you are affected by a slowdown in china really depends on where you stand relative to china. if you are feeding into china's investment boom, then any kind of slowdown towards a more consumer driven economy will hate you very hard. >> analysts say watch the interbank lending rate. it lost nearly .9% today after another rise in that rate dropped back fears. the bottom line here for american investors in china, look beyond the gdp numbers that we see. if you consider your investments, beware of what the banks are doing. lori: germany calling america's ambassador over spying allegations. adam: peter brooks is here next. ♪ [ male announcer ] once, there was a man who found a magic seashell. it told him what was happening on the tradg 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. get live squawks right in your trading platform help the gulf when we made recover and learn the gulf, bp from what happened so we could be a better, safer energy company. i can tell you - safety is at the heart of everything we do. we've added cutting-edge technology, like a new deepwater well cap and a state-of-the-art monitoring center, whe experts watch over all drilling activity twenty-four-seven. and we're sharing what we've learned, so we can all produce energy more safely. our commitment has never been stronger. adam: so we check markets for you every 15 minutes. nicole petallides is doing that for us at the floor of the new york stock exchange. nicole? >> always a pleasure to check the markets particularly for those bulls out there, right? 401(k)s, iras, you're doing well. dow jones is up 90 points. sitting right around session highs. i want to bring you over here to where goldman sachs trades here on the floor of the new york stock exchange. goldman sachs today up 1 1/2% at $160.10 a share. we're watching goldman closely on an upgrade from deutsche bank, raising goldman to a buy from a hold. they lifted their price target up to $111. despite the fact that there parts of goldman's earnings were a bit of a disappointment they say, hey, that won't last. it is 160 and they think it is heading up to 181. that is the latest on the floor of the stock exchange. back to you. lori: thanks. adam: nicole. on the latest developments on the alleged spying of angela merkel's phone. the white house is coming under pressure as the u.s. ambassador to germany was summoned to the foreign ministry this morning. >> we have direct communications through diplomatic channels at the highest level and other levels with our very close allies in germany and the united states greatly values our close cooperation with germany on a broad range of shared security challenges and as the president has said the united states is reviewing the way we gather intelligence. lori: peter brookes is former deputy assistant secretary of defense under president george w. bush and heritage foundation senior fellow for national security affairs and we are pleased to welcome him to our show this afternoon. >> thanks for having me. lori: to your understanding was the u.s. specifically spying on angela merkel for a specific purpose, or is this just part of a broader protocol how the u.s. goes about gathering its intelligence? >> well, lori, first thing we don't know this is true. the, this came out in a magazine, "der spiegel." they don't provide any sourcing. my sense it probably came from edward snowden. this is an allegation that the germans are making. i'm not saying it is base countless. it came out of a german magazine. not like we've seen power point slides that edward snowden is passing out to journalistic outfits. we don't have any prove of this. that said, countries spy on one another. now jay carney is saying, the spokesman at the white house is saying that we're not doing it and we won't do it. he is not saying he didn't do it in the past. but the fact is, even friend spy on one another. it is unseemly and germans certainly have a right to show they're upset but germans also have intelligence organizations that conduct espionage as well. adam: kind lik scene in casablanca. i'm shocked to fine gambling and you're winning sir. >> that's right. adam: we assume they're spying on us. i assume or most people would assume we also spy on our closest ally the united kingdom but the at end of the day, these kinds of stories, whether true or not, continue to diminish our reputation in places like france, germany, the united kingdom worldwide and that pose as problem going forward for intelligence-gathering, doesn't it? >> it is not very helpful to our diplomatic effort. adam it ranks right up there with wikileaks, right? perhaps even more damaging. i think the obama administration wishes they had been more assertive in trying to prevent edward snowden's escape from hong kong when he surfaced there, depending upon the russians and the chinese. if this is from him and i sense it might be even though "der spiegel" hasn't told us exactly where it came from, yeah, this is not helpful at all. lori: so how disorganized then is u.s. intelligence gathering? you have the edward snowden situation. just this week the white house had to fire that national security insider, right, for sending out the anonymous, nasty, almost misogynistic tweets, right? how do you clean it up in there? >> we, you have to hire the right sort of people. and you know, sometimes there are people who do slip through the cracks unfortunately. i mean we all make judgments and we all are prone to human frailties and misjudgments that accompany that. very critical. it shows once again how critical it is to protect your national security. and how these leaks can damage, not only your national security but your national interests. adam: peter talk about a national interests very quickly, economic interests. we saw the leader of brazil cancel a trip to the united states because of this kind of thing. germany, we're negotiating a trade agreement with them. does this really stop those kind of agreements going forward or just delay them? >> i don't think the germans are going to end their investment in the united states. i think they're one of the top five investors in the united states. they have a volkswagen plant and a steel plant here. we're, our transatlantic trade is huge. we invest a lot in germany. i don't think that's going to change and they have to show pique. that is not only for the international audience but the domestic audience. remember, that angela merkel came out of east germany a country that labored under natasi who kept files on everybody. they have sensitivity about intelligence. tough limit your hypocrisy sometimes too, right. lori: great perspective. peter brookes, thank you so much for joining us. adam: thanks, peter. >> thanks for having me. adam: morgan stanley with the upper hand over goldman? you heard that right. fox business senior correspondent charlie gasparino has the scoop you don't want to miss. lori: this is the busiest day of the year for earnings. we have david lutz up next on that. conclusions he is drawing from more than 350 companies reporting results today. ♪ stick with innovation. stick with power. stick with technology. get the flexcare platinum. new from philips sonicare. try align. it's the number one ge recommended probiotic that helps maintain digestive balance. ♪ stay in the groove with align. >> i'm dennis kneale with your fox business brief. stocks are extending gains as investors look over upbeat earnings report from some big corporate names. dow industrials up 88 points at 15,502. twitter moving ahead with the eagerly anticipated ipo. they told "the wall street journal" twitter plans to set a price range for the stock in a day or two and could price the entire deal early next month. wall street reacting to economic news. initial job countless claims came in higher than expected with the latest report showing 350,000 people filed for first-time benefits last week. that is 10,000 more than forecast, down from the prior week revised upward to 62-k. trade deficit widened to $38.8 billion. came in lower than the 39.5 estimate. that is the latest from fox biz, giving you the power to prosper. adam: so morgan stanley has achieved another important milestone in its bid to replace goldman sachs as the prime investment bank. charlie gasparino will tell us about this in one second. first you had a cameo on a very popular comedy show and about jamie dimon. >> jon stewart, i guess he likes my stuff. he watches me. i said nice things about jamie dimon and jon stewart took a little offense. i want jon to know i changed my opinion on jamie dimon he is a crook, you're absolutely right. rape and pillage jpmorgan to death. i'm on your side, jon. i agree with you 100%. jamie dimon is worse than stalin, i don't know, think of some bad guys, bernie madoff. jamie dimon is bernie madoff. adam: miley cyrus. >> after watching, what is it called, "the daily show", now i believe jamie dimon is equal to bernie madoff. so i'm not going to say anything nice. adam: we could talk maybe if there is time afterward about jpmorgan chase, the bank having serious issues. >> absolutely. adam: criminal investigations about the link to madoff. >> something you broke. adam: no statement from the bank. it was laid out in the book, that they had an idea he was involved in the ponzi scheme. >> we wrote last week how james gorman was talking around, we reported like they would be better than goldman. their earnings were better than goldman. a good call on our part, if you were an investor you made money. we reported this on thursday. james gorman is feeling pretty good these days not just earnings but a key measurement of risk management. it is called credit default swaps? ever hear of those things? they are insurance contracts on debt. lori: credit default stops? adam: ticking time bomb. lori: i'm all the way over here, charlie, feet away. >> if trade high, people are buying them. that means people think your debt, your debt has greater chance of being defaulted on. if they trade low, that means there is a less chance. since 2008 morgan stanley's credit default swaps trade ad lot higher than goldman's this week. key measurement, this week, those credit default swaps have evened up. with morgan stanley, yesterday, from what i recall from traders, what trade remembers telling us their credit default swaps are trading below goldman. what does that mean? that means two things. number one, goldman sachs is considered a riskier firm. they're taking more risk in the market. their business model is considered morris can i. number two, it means quite clearly that morgan stanley is now getting extra points. that is where they are today. morgan stanley's below goldman's yesterday. clearly means that the market is saying that gorman deserves credit for risk management, that his risk management ability, that was yesterday, about the financial crisis which was off the charts. like 1300, morgan stanley. and something like 400 goldman sachs. but it means that, that gorman is now getting credit for being a better risk manager, then, let me make this point, the premier risk management firm in the country which has always been goldman sachs. adam: but two things here. morgan stanley, this is before mr. gorman was ceo, you know they have never been held accountable for their role in the selling, securitizing of mortgage-backed securities and they were a big player. i mean at beginning of it. >> one of the things that is problematic with i think, when you know something, maybe jon stewart should talk to his brother. jon stewart's brother workers for new york stock exchange. adam: goldman sachs gets beat up for their role but morgan stanley hasn't been beaten up and they played a role. >> larry leibowitz, jon stewart's last name is leibowitz. larry leibowitz is good friend of mine works at new york stock exchange. he would tell jon this, biggest players in securitizing mortgages was not morgan. citigroup, which every democrat in the world fines, earns $8 million for three seconds work. adam: reuben never returned his investment. >> jack lew spend 30 seconds there and gets an eight million dollar payment. maybe jon should do a segment on that. when you talk about, what makes sort of jpmorgan speckel, such a speckel is that they weren't a prime player in that crummy market that ripped off the american people. adam: they bought it through bear stearns. >> that's what happened. citigroup, run by democrats, jack lew. adam: robert reuben. >> all up and down, they were major player. merrill lynch -- adam: robert reuben has never done an interview about his role as risk assessment at citi. >> i spoke with him at that time the time. he said he wasn't involved in the risk assessment. adam: why did he get paid 120 million. >> why were you a board member. that was my point to him. he couldn't answer that question. you think i will make stewart again? lori: i think you will be creamed on stewart again. >> jon, put me on the show. i will go toe-to-toe with you. lori: get to the markets. adam: rare to make her speech countless. got to tell you. >> i'm no dummy. nicole is at her post and good day for homebuilders. >> i will stick with the homebuilders, lori and adam. that may be my best bet at the moment. when you look at pulte, you can see pulte group, they talked about the current environment and gave a great outlook. this is why you see the stock up 6.3%, at $17.74 a share. they said the slowdown in new home orders would actually be short lived. and that there is a multiyear housing recovery that will be sustained and underway. and the whole group is doing so well. so pulte group is up 6%. the other names like lennar, 2%, horton, up 2%. kb home up 3%. back to you. lori: nicole, thank you. adam: making it the busiest earnings day of the year so far. of the 76% of firms that have already reported have beat earnings estimates but are next guest admits the bar was set pretty low. david lutz is a managing director and he joins us now to talk about this. david, thank you very much for joining us. very quickly, there's something in these earnings reports we've already gotten that you pointed out. i want to ask you to put it in perspective. 52% of those already reported have exceeded their sales expectations which means 48% have not. that would be troubling to me. that seems that number has been growing, revenue is being missed. >> absolutely but i think the one thing you need to recall is what you touched on right at the top, as far as where has the bar been set? last few quarters we've been watching earnings expectations bar set lower and lower. this quarter i want to say negative preannouncements were almost three to one the positive preannouncements coming into this earnings season. so expectations were quite low and i think a lot of investors were waiting for some kind of dialogue what was going on or happening in washington, d.c. a big spike-up in rates as far as good excuses for slowdowns ahead but so far a lot of the outlook seems pretty upbeat and that is why the market is reacting the way it is. adam: you point out telecom and materials doing very well, best performing sectors where utilities, forget it, not doing well at all. why is this happening, and i'm thinking about at&t, they missed on revenue? >> materials has flat-out been the hottest sector. they have been averaging 15% beat rate right now over eps projections whereas utilities is one of the worst rates. still beating by 1% but not as significant as materials. both materials and telecom are benefiting from the no taper trade much we're getting more and more projections pushed out when we could actually see tapering from the federal reserve. so that is driving yields down as far as 10-year government paper is concerned making a lot of dividend paying sectors like the telecom sector a heck of a lot more attractive and keeping investors very attuned to the weakening dollar. two year lows right now. that is great for a lot of material stocks that rely on commodity prices. adam: let me ask you real quick. no taper trade, sounds like fancy way of saying bubble. we won't talk about that yet. i want to ask you. you're looking forward. you expect consumer stocks to perform well toward the end. year. you expect consumers to pick up on the holiday shopping despite negative reports we're getting about consumers pulling back. why are you optimistic? i pulled macy's year-to-date is up 14%, 52-week up 11%. walmart up 1%. target, 58%. doesn't look so optimist take me? >> we have a very large negative bias going end of the year with a lot of hedge funds and mutual fund on the street. as far as how week they think the holiday shopping period is going to be for a variety of reasons that you mentioned. whether it is tapering, concerns out of d.c., higher rates. there are a tailwind we're sighing forming here. first of all, amazon raising their bar from free shipping from 25 to $35. that is telling you they're starting to see an acceleration of shipments. fedex came out said shipments are up 11% year-over-year this holiday season, making it their strongest holiday season ever. i think the big catalyst is gasoline prices. gasoline prices deteriorating rapidly in the united states. first oil prices are coming down. second because our ethanol policy is starting to get rejiggered. a lot of refiners were building in extra costs for u.s. consumers at pumps. so that is getting alleviated we're starting to see it. this is big tailwind for the consumer coming into the holiday season. adam: i'm glad you pointed out the fact that gasoline dropped in price. that helps people. fedex, 11% increase in shipping. ups hit a new 52-week high today. we'll get their numbers at 7:45 tomorrow. it will be interesting to see what they're predicting for the holiday. always a pleasure, david. >> thanks for having me. lori: back to obamacare. where are the hollywood celebs who were gung-ho for the legislation before they saw that rollout disaster? our next guest isn't saying silent on this one. the man, the myth, the hercules. actor kevin sorbo coming up. it's a growing trend in business: do more wi less with less energy.hp is he. soon, the world's most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. multiply that across over a thousand locations, and they'll provide the same benefit to the environment as over 60,000 trees. that's a trend we can all get behind. lori: hollywood coming out in droves to support obamacare, big names like oprah winfrey, musicians john above very and john legend, actresses amy pohler, alyssa milano all hyped the push to get covered. now that the disasterous website has launched we're not hearing too much. actor kevin sorbo, you know him from the tv show, hercules, the legendary journeys. he is not staying silent. >> thank you. lori: i saw you shooting "red eye." why are so many celebrities piling in. >> ever since the '60s big shift from hollywood, go to conservative crowd they used to be to far left. lori: that is interesting. >> i'm like dennis miller. i grew up in minnesota, with waller mondale and humphrey, that party left me. the i stayed where i was. values my dad taught me as public school teacher work hard, don't expect any handouts that came from my father. lori: you're unique in that situation. has it affected your work? >> of course it does. hollywood is tolerance only if you have tolerance what you do and say. freedom of speech, they will fight to the living end of that only once again if you agree with what they say. lori: they're shooting two new hercules movies? >> we called. maybe because i'm an independent voter and not as far left. lori: you are busy. >> i'm very busy. i have a movie came out called, "storm rider." wonderful family movie. i have a book came out from chicken soup and the soul for 7 to 12-year-olds. check it out. latest one came out. lori: this obamacare rollout, what is your overall thought on it? let's face it, look this is something that you don't necessarily need. >> that is just the thing. lori: people you work for. >> president obama has got hollywood in his back pocket. they will support anything he does. reality of hollywood, none of them are under the care. it will not affect them any way whatsoever. i don't begrudge them boeing out and voicing their opinions, voicing like that. i wish they wouldn't begrudge me voicing mine. when 31, you have 30% of the people, or around 31% thought everything was fine. who are these 31%? lori: exactly. >> doesn't make any sense to me. should be 100% people say this is fiasco and not working. >> kevin, you can't deny the fact that republicans are having hard time embracing new media and social media. >> yes. lori: outrage, mitt romney talking about binders full of woman. that could have backfired the whole campaign of itself. what do republicans need to do more. >> they need to get a spine. they need to get a spine. look at tapes of ronald reagan see what that man said. ronald reagan put this country on a great path for 20 years. bill clinton benefited from that. clinton was a great president. i voted for clinton. i vote with my head. i look at people, i don't vote with emotion or ainge other hate or kumbayah, john lennon's world, imagine. i want who will be best to run the country. that is what they need to do the republican party needs a spine. they need to grow up and start speaking with a voice. not worry about catering to getting votes. the votes will come if they stick to their guns. lori: kevin, thanks for coming in. >> kevinsorbo. net. check it out. lori: thank you, kevin. >> thanks. adam: promises that the obamacare web site will be fixed eventually and people will enroll eventually, on time. whose head should roll for all the problems? your tweet responses straight ahead with tracy byrnes and ashley webster as they take you through next hour of "markets now", eventually. [ male announcer ] how do you get your boce? i'm, like, totally not down with change. but i had to change to bounce dryer bars. one bar freshens more loads than these two bottles. i am so gonna tell everyone. [ male announcer ] how do you get your bounce? [ woman ] time for change! ashley: welcome back, everybody. i'm ashley webster. tracy: and i'm tracy byrnes. billionaire activist investor carl icahn cores apple with a new tactic to stir things up. the website pushing the company to buy back more shares. liz macdonald is here whether it is working or not. ashley: new promises that the obama website will be fixed allowing people to actually enroll on time but our twitter question to you, whose head should roll for these problems? give us a tweet. your responses are ahead. tracy: everybody knows that girl's face now, right. new battle on the government war on banks. there are rules that require them to hold more assets. we have the former chairman of wells fargo here to react. ashley: in tech minute, let there be light. sidewalks that store solar energy during the day to light your way home at night. if you had a little too much to drink it is going to help. that and zoo much more ahead on this bright hour of "markets now." tracy: i think it is brilliant. ashley: show me the way home. tracy: dow almost at session highs. up almost 90 points. nicole petallides on floor of the stock exchange. the bulls, they are a running, nicole. >> looking pretty good, tracy, ashley, as we see major market averages with up arrows. dow jones industrials up more than half of one percent. 88 points to the upside at 15,500. the s&p 500 gaining 1:00 quarter of 1% after setting records recently. news abroad from china particular, good economics there and that boosted sentiment and coupled with earnings that were very good. let's get to ford and see how ford is faring today. we know that ceo alan mulally won't deny contact with microsoft but certainly seems like he is planning to stay at the company. the stock is now up 1.6%. it hit a 52-week high of 18.02. they certainly continue to see growth here and abroad before the ford focus, f-series helps them move along. it is up this year, outpacing general motors. back to you. ashley: nicole, thank you very much. carl icahn threatening a proxy fight at apple to get the tech giant to do a bigger buyback but apple may just ignore their billionaire activist investor. liz macdonald joins us with her bottom line. okay, explain the latest in this saga. >> it's a big saga. essentially what we're seeing is he is sending a letter to tim cook and let's look at his strategy. he is saying apple is drastically undervalued when you back out its cash. he says trading nine times cash. he wants 150 billion-dollars stock buyback. that would increase immediately earnings per share by 33%. this is the same strategy david einhorn already talking about early in the year. appleby the way is borrowing, 17 billion to do the 60 billion-dollar stock buyback underway and returning 150 million in dividends. carl icahn owns 0.7% share. threatening to buy more shares. last time he threaten ad proxy fight, didn't work out with dell. mixed results at yahoo! mixed results of oshkosh. he had to back down with the proxy fight at oshkosh. ashley: what could apple do? do they ignore it? >> i think they ignore it. bill gross at pimco, really blasted carl icahn. you know what carl icahn, leave apple alone. should be more like bill gates, spend more time helping people and not yourself. tracy: lizzie, you and i both know, share buyback is accounting trickery. >> yeah it is. tracy: it is same thing at the end of the day. >> you know what the other thing that's a good point you make. apple need that money. tracy: yeah. >> it needs the cashing because it is expanding in china. it is getting blasted by critics on wall street for doing constant upgrade and doesn't really have a good, feeling on wall street, the pipeline is running a little bit dry of the we know apple tv is coming but upgrades of products into infinity you can't do forever, right? so it needs the cash. ashley: icahn's argument is if you sit on the massive pile of cash at least do something for investors and provide more buyback of the shares to give them more value. >> he is saying you could borrow in the bond market at 2.3%. i get what he is saying. tracy: if they have the cash why go there, why do it? >> already returning 100 billion to shareholders, right. he is saying what, $50 billion more on top of that? it will be a protracted battle. he could steadily increase shares and see a proxy fight he is threatening. mixed results with proxy fights with big companies. tends to win them more with little companies. tracy: he is bullying. ashley: he needs to go on vacation, doesn't he? >> or listen to bill gross. tracy: listen to bill gross, better yet. ashley: thank you very much. >> sure. tracy: so our twitter question to you today, whose head should real over the problems with the obamacare website? tweet us your responses. we'll talk about them coming up. we ask the question as congress is trying to get to the bottom of it all, apparently not so easily. rich edson joins us live from capitol hill. where does it stand, rich? >> good afternoon and we finally have some numbers from the administration here. the centers for medicare and medicaid studies say 700,000 have applied through the online exchanges. they say they're still going through that data and 1.6 million people have at very least called that 1-hundred phone -- 1-800 phone number to get health insurance. there are still major problems that congress is looking into today. four federal contractors are responsible for putting together the main federal one. for the most part they blamed one another and changing and the administration for changing aspects of the exchange 10 days. and one contractor acknowledged he was even unsuccessful using the exchange. >> mr. slavitt did you personally try to get on the system? >> yes, i did. >> to what state. >> i put in texas. i'm not but testing the system. >> did i did it work. i logged on to create an account. was able to do so. i just never received a confirmation email. >> so it didn't work. >> didn't work. >> now they asked the lead contractor how long it was going to take to fix the problems. they said they wouldn't even bother ventureing a guess on that one. this came in last couple minutes. we had a number of red state democrats especially ask the administration to delay the individual mandate, that requirement nearly everybody in the country have health insurance next year. kay hagen, senator from north carolina, she now supports a delay. she joins several other democrats in the u.s. senate who are calling for delay. one note on this, there is some skepticism out there this could be done and improve the current system, that there is actually a move now amongst some, some are suggesting that they should throw the whole website out and start from scratch. one of the contractors said, rewriting five million lines of code, that 300 of their code whiters and technicians would likely walk out if they were asked to do so. tracy: you're so right about that. thank you, sir. >> thanks. ashley: the fed unveiling a plan calling on big banks to beef up assets in case of another financial crisis, liquid assets. the new regs will be tougher than the international standards. of course this comes at a time when banks are facing more government probes and record settlements over their mortgage dealings in the run-up to the financial crisis. there is nobody better to talk about all of this than a former wells fargo chairman and ceo. dick, thank you again for joining us. we really appreciate it. let me begin there with these fed rules that are being proposed on, you know, having to beef up the liquid assets of major banks in this country. is that needed? and i kind of think of it like the tsa, it makes us feel better but does it really account for anything? what do you think? >> no, it is very, very important. if you go back to bank failures, most banks fail not because of inadequate capital but inadequate liquidity. so it is a very important element and especially with large companies who have maybe up to a trillion dollars in assets that are mostly wholesale-funded and therefore dependent on the capital markets. those companies in particular need to have adequate liquidity plans. they did not have those in 2008 when the crisis occurred. their primary regulator, the sec did not make sure they had them and that's why many of them failed and most of them nearly failed. commercial banks on other hand are funded by customer deposits. those are much more stable and have less risk of liquidity issues. ashley: do the regulations go further than basal iii, the init international standards, does it put american banks at any disadvantage? >> this is a balance, and you're correct, you can go too far. let's say you have treasury bills on your balance sheet, those are assets that have no value in terms of the economy. they're not producing jobs. they're not helping customers grow. only loans do that. so you have to have a proper balance and you can't go too far. it appears that even though these are more stringent standard international banks, that all the major banks at least today would still qualify and, and would be able to meet those requirements today. ashley: right. >> the new requirements today. so hopefully they are balanced. one other thing that is important though, there seems to be this stigma that the fed should never intervene, should never provide liquidity to the markets. that's a big mistake. the reason we created the federal reserve is that in times of crisis they must be the lender of last resort. so we should not have so much liquidity that the fed is never needed because that would be a huge tax on economic growth and it would be a very bad idea for employment. ashley: dick, i wanted to get your thoughts on all the government protection that are going on and these massive settlements. jpmorgan, bank of america, yesterday was found guilty by a jury. often in the case where the big banks took over other institutions that had all these bad mortgages on their books, with a gun at their head by the government. what is your thought on all of this? >> well, i think it's a huge mistake. not only do i think it is a mistake, two heads of the, former heads of the fdic, sheila bair, joe isaacs thinks it is a mistake. ion barney frank, a liberal democrat thinks it is a mistake. you're asking people to rescue troubled institutions and five years later you sue them for the misdeeds of the very institutions you asked them to rescue. it's a huge mistake. i don't know why anyone will buy a troubled institution in the future without assurances from the government. it will be very difficult to get those assurances because you usually want to rescue these companies over a weekend. you can't get anybody in the government to agree on anything over a weekend. it's a huge mistake. it is grandstanding. i don't understand why it is being done. ashley: we could talk so long about this. we're already out of time. thanks so much for joining us. we really appreciate it. >> my pleasure. tracy: okay. so a little dressing down for the u.s. ambassador to germany overcharges the u.s. tapped chancellor angela merkel's cell phone. we talk with an intelligence insider ahead. ashley: the sec about to loosen rules on crowd funding but one entrepreneur who financed her business that way is questioning the changes. tracy: hmmm. google in china trying to kill another competitor, spotify? we'll tell you ahead in our tech minute. this time of day look how oil is trading. this morning crude dropped below $96 a barrel for the first time since june 27th. a little happy dance going on in the car today, whoo-hoo. dow is up 87 points. we'll be right back. when we made our commitment to the gulf, bp had two big goals: help the gulf recover and learn from what happened so we could be a better, safer energy company. i can tell you - safety is at the heart of everything we do. we've added cutting-edge technology, like a new deepwater well cap and a state-of-the-art monitoring center, whe experts watch over all drilling activity twenty-four-seven. and we're sharing what we've learned, so we can all produce energy more safely. our commitment has never been stronger. ashley: it is coming up to quarter past the hour. time to check on these markets. we're flirting with highs of the day. nicole petallides on the floor of the new york stock exchange. watching xerox, nicole. >> whatever it is and we're all watching xerox right now, and xerox is down substantially, down about 11% at the moment, $9.56 a share. when you think of xerox you may think of printers and copiers but they actually in the latest earnings report showed some weakness and that is because of restructuring they have been doing. they have been trying to move into services such as i.t. outsourcing and other areas, not just printers and copiers anymore. with that move that hit their numbers to a certain extent. they forecast earnings that will be below the analyst estimates. today down 11%. this year, xerox a winner, up over 40%. back to you. ashley: nicole, thank you very much. we'll check back with you in 15 minutes. from the nyse to the nasdaq, keep it here on fox business with liz claman's exclusive interview with nasdaq ceo, robert greifeld on "after the bell" coming up at 4:00 p.m. eastern. do not miss that. tracy: okay, so as ricky would say to lucy, you have some explaining to do. i did that pretty good, right? ashley: not bad. tracy: the ambassador of germany got a dressing down from germany's foreign minister. this follows charges that the nsa tapped angela merkel's cell phone. white house spokesman jay carney would not be pinned down on whether merkel's phone may have been monitored in the past. >> we are not going to comment publicly on ever specified alleged intelligence activity. as a matter of policy we made clear that the united states gathers foreign intelligence of the type gathered by all nations. as i mentioned yesterday the president spoke with chancellor merkel, reassured her the united states is not and will not monitor the chancellor's communications. tracy: hmmm. joining us former executive director of president reagan's foreign intelligence board, gary schmidt, now with the american enterprise institute. so is he basically admitting, yeah we tapped her phone? >> certainly seems that way. they were very careful not to talk about past practices. so the promises about what is going foreward and so in all likelihood they were implicitly admitting they had in fact listened in on their conversations. tracy: yeah. what you're saying even if they did they didn't really break any laws, right? this is unfortunately what everybody does to each other? >> no, this is sort of very similar to the lines in casablanca where the french police chief says, i'm shocked at rick's. allies spy on allies. this is a common practice, so nobody's really, really surprised. tracy: you make a great point though because do the benefits of spying outweigh the consequences of getting caught? i guess in a perfect world we shouldn't have been caught, right? >> yeah. i mean look, the biggest problem is, there is always a reason to do the spying. germany's a major country. its decisions, what the changes lore thinks matters to american security interests, american economic interests. so, there's a reason why the spying is going on. on the other hand, you always have to ask yourself, look if we get caught, how embarrassing will this be? how complicated will it make relations and the like? it is really a matter of judgment. without knowing exactly what they got, one would have to sort of say, did they make the right decision or not? tracy: right because, you know, it almost seems contradictory, right, if we're allies, we're friends, i shouldn't have to spy on you. we should be sim pat co. that is not how it works. >> germans are involved in negotiations with iran about the nuclear program and probably pretty helpful to the president to know exactly what the germans are thinking. on the other hand it is not that hard to find out what the germans are thinking. certainly like in the united states the big policy issues are debated pub pickly. it is not as though there will be any huge strategic surprises. >> gary, do you worry like this maybe did damage to our relationship though with germany? they're kind of like, we had a handful of friend left out there and they're one of them? >> well, there's two levels of this one is politicians will react and so the germans and europeanss could impose new restrictions on internet use which would make it more difficult for to us collect intelligence. so that's a difficulty. and but second thing is the germans know full well the government that is, no full well that much of the intelligence they need for countering terrorism in germany comes from the united states. and so there's a little bit of don't bite the hand that feeds you. tracy: yep. >> in this regard. tracy: yep, there sure is. gary, thanks for taking the time to give us some insight, sir. >> you're welcome. take care. ashley: so we all do it basically. you know. tracy: i mean he's right. this is what you do. >> just the world we live in. tracy: yeah, unfortunately. how about this for a story? she financed her business through crowd funding. we get her thoughts on the new sec rules designed to open up the process for the little guy. we'll talk to the cofounder next, nature me. ashley: further tour me. tracy: nurture me there you go. ashley: we look at the big win for boston in your fox news minute. before we head out to break let's see how the u.s. dollar is moving generally today. these currencies are moving higher except the canadian dollar, euro, pound, peso, yen, all stronger against the dollar today. we'll be right back. it's a growing trend in business: do more with less with ss energy.hp is help. soon, the world's most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. multiply that across over a thousand locations, and they'll provide the same benefit to the environment as over 60,000 trees. that's a trend we can all get behind. your financial advisor should focus on your long-term goals, not their short-term agenda. [ woman ] if you have the nerve to believe that cookie cutters should be for cookies, not your investment strategy. if you believe in the sheer brilliance of a simple explanation. [ male announcer ] join the nearly 7 million investors who think like you do: face time and think time make a difference. join us. [ male announcer ] at edward jones, it's how we make sense of investing. >> 24 minutes past the hour right now. hi, everybody, i'm jamie colby. this is your fox news minute. president obama is calling on congress to finish an immigration bill by the end of the year and that might be difficult given strong opposition from republicans. the president said congress has enough time to finish the bill by year's end. well the new attorney for kennedy cousin michael skakel hopes to file a motion to get him out on bail now that skakel has been grant ad new trial by a connecticut judge. the reason? his old attorney failed to adequately rep send him the judge found when he was convicted in 2000 two of killing his neighbor. the boston red sox taking an early lead in the 2013 world series, beating the st. louis cardinals 8-1 in the first game but the cardinals have a chance. they may tie it up with the second game of the world series takes place tonight in boston, 8:00 p.m. eastern. you can watch it only on your local fox station. those are the news headlines on the fox business network. i'm jamie colby. back to ashley and tracy. ashley: jamie, thank you so much. chilly at fenway. breaking news by the way, keeping an eye on the dow almost, if you give it just a little, it will get 100 points. there you go, see? nudge it. up to the highs of the day, up.of a percent, up to 15,513. we're keeping an eye on the surging dow. well the business of crowd funding could see more investors getting involved thanks to rule changes by the sec the question is will it help or will it hurt the small businesses who may be faced with a lot more paperwork? joining me is lauren mack cull luck, who raised money for her food company, nuture me based on at online platform. they basically open up the field to raise money for what they call ordinary investors. what do you think about that? >> yeah, well, thank you for having me first off. really what i think about it is, it's exciting that things are opening up, however there's still a lot of burdens on proposed rules an regulations that companies of our size may not want to take part in. some good examples are, that caps raises a million dollars in 12-month period of time. if you raise more than $500,000, you would have to have a company audit. and it, it forces companies of our size to file with the sec. these are things that we don't have to do currently when working with a accredited investors. ashley: what, okay, accredited investors of course have to have a host of different factors to pass but they do offer more experience in the business world. they're pretty savvy. through your experience how helpful were the accredited investors in your >> well, we have a number of our investors are sitting on our board, so, they just have a wealth of knowledge and experience and connections. so all of the investors that we have been able to obtain have really been beneficial with their experience and their knowledge and connections. ashley: explain to me how things have gone with your company, nutureme, organic baby food company? how is it going and are you expanding? >> yeah, it is going great. we have this year at post the crowd funding we did with circle up which is the online platform, we were able to launch 10 new products and bringing toddler snacks and organic cereals for infants which is healthy alternative to the rice cereal. first-of-its-kind. so, with the fund-raising that we were able to do we were able to launch those products and bridged us to fund raise that we're currently doing. we're in the midst of our series b fund raise right now. ashley: you have great clients including target and whole foods. how easy was it to raise the money? was it an easy sell? obviously did investors like your proposal? >> we had a wonderful experience with the crowd funding platform, circle up. we were able to oversubscribe on a raise of $500,000 in a matter of six weeks. which, typically, traditional angel investing raises can take up to six months to a year to raise money. so it is a very efficient way to raise money. ashley: yeah. >> helped us launch the products we're excited to bring to market. ashley: very impressive, finally, lauren, what advice would you give to someone following your footsteps, and wanting to raise their idea, their company off the ground? what advice would you give them? >> i would say continue down the path of working with accredited investors, just, just to avoid any kind of rules and regulations. but, online platforms are fabulous outlets and, and they really bring some seasoned investors to the attention of your business. so. >> great stuff. lauren, we wish you continued success with your venture. lauren mack cull law, thank you. >> thank you. >> there you go, nutureme. tracy: how about this, ads on your mobile phone you may want to see and read? we'll have a ceo of peep, a little company. that is ahead. ashley: tech minute, sidewalks that light your way home at night. check that out. they're being used right now. don't want to miss this story. tracy: like dorothy. still want to hear from you. whose head should roll because of the obamacare website? we'll have your responses coming up. the dow is up 104 points. that is good stuff. don't go anywhere. [ male announcer ] what if a small company became big business overnight? ♪ like, really big... then expanded? ♪ or their new product tanked? ♪ or not? what if they embrace new technology instead? ♪ imagine a company's future with the future of trading. company profile. a research tool on thinkorswim. from td ameritrade. try align. it's the number one ge recommended probiotic that helps maintain digestive balance. ♪ stay in the groove with align. once wrote something on a sheet of paper and placed it in his factory for all to see. ♪ four simple words where the meaning has never been lost. the challenge always accepted. and the calling forever answered. ♪ introducing the all-new 2014 s-class. mercedes-benz. the best or nothing. >> it is right around 90 minutes until the close. take a look at the dow 30 for you. the dow up hitting session highs in the last few minutes up over 100 points, still up 98 points. boeing losing some air today but generally home depot, visa, dupont leading the way on the dow. nicole petallides on the new york stock exchange who has vacation on her mind. nicole: why not. don't we all? some names related to maybe your vacation. three names in particular hitting new 52-week highs today. looking at royal caribbean and starwood. these names are doing very well. they raised their full-year guidance, and they remain bullish. southwest airlines lower fuel cost which helps to boost their revenue despite the fact traffic sled some in the later quarter. third-quarter earnings fell slightly, but revenue beat the expectation, raised their guidance. they are very temperamental overall. carnival in particular has had some pr issues. >> that is putting it mildly. our next guest has found a way to target you add your heaviest and use those as a reward. looks like you got a hall pass to come here today. i know you are of legal age and you can have a cocktail, but you came up with this idea a while ago, right? you can't get points for playing games. >> we tap into moments in their lives. even logging a workout, in those moments we said why not instead of slapping you in the face with an ad, why not recognize what you have just done, but do it in a unique way. people don't exactly aim for them. we are there to surprise and delight you. tracy: say i am playing a game and get to the next level, you know me, what am i getting? >> we are embedded to 1500 apps. they are already popular and have been downloaded to tens of millions of smart phone devices. say you log a run. a free gatorade for your new game. we left the retailer or the brand choose redemption method they felt was best for what they are doing now. tracy: this is a great idea. you get points every time you do something so it is pretty similar. we put on some of the names were working with. pepsi, white castle. $15 million in funding right now? >> yes. some really cool brands, american express, verizon. on the method of rewarding people, we understand using points for something that was a delayed model at the end of the month are you going to a catalog, we wanted to do something that was more instant with how consumers are like today. instant gratification. how can i get what i want now in that moment rather than waiting and redeeming and accumulating points. tracy: you are right. i don't know what to do with them. it would be much better if somebody said i will buy you a coffee at starbucks across the street. how do you make money doing this? >> the brand see this as win, win, win. they are able to respect the user experience that you are a part of tapping into this stream of existing behavioral. why not be there when somebody is already working out were already feeling productive. tracy: are you getting a piece of the action? >> yes, of course. either in a campaign or something throughout the year. we help developers monetize at the same time. ashley: i have a feeling we will be talking to you many more times over the years. thank you for sharing this with us, sir. >> thank you. tracy: pretty cool. i wish i was doing something like that when i was 22. ashley: very impressive. a great deal of interest in pintrist. value $3.8 billion. fidelitthe daughter led the rouf free retell toward international expansion and 75% of users visit the site on mobile devices. video may have killed the radio star but not according to youtube. youtube set to launch a subscription music service. set to launch later this year. a free component that would offer unlimited access to a full catalog of music similar to what google has. the parent company of youtube, google, up over 52% in the last year today hitting a 50/50 two week high. forget about walking on water, how about walking on lift. applied to stone or other materials absorbs the sons uv rays during the day and releases the energy at night to light your way home. home a lot of university students in the uk. helping cities save on energy bills. very cool indeed. tracy: that is to help the drones get home and back to class, you say? ashley: very cool story. tracy: my town does not have streetlights. we could use that. in another passable hat in the ring to buy blackberry. who may want the smartphone maker ahead. ashley: jeff flock in chicago to explain. jeff: i'm up to my ears in candy corn right now. that is hollow in gold. they say it is the best candy corn in america. in just a moment. sometimes they just drop in. always obvious. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. ♪ ashley: i'm adam shapiro with your fox business brief. twitter plans to set a price range for public offering in the next day or two, and could price the deal as soon as november 6. they hope the ipo will raise $1 billion. former apple ceo john scully is exploring a joint bid for blackberry with canadian partners. the toronto globe says he has declined to comment on the matter, but told the newspaper he has been a longtime blackberry fan and user. a key decision on whether detroit is eligible for bankruptcy protection is not likely before next month. a judge is setting a november 13 deadline for lawyers to file grief for the trial that begins this week. the judg judgments aside of they is broke and whether it negotiated in faith with creditors before filing for bankruptcy protection. that is the latest from the fox business network giving you the power to prosper. ashley: a quarter on till, time for stocks. alan valadez joins us now. is this a good thing washington is so confused about this website they cannot screw anything else up and we are back trading on fundamentals? >> we will be confused for the next 10 years. keep them that way, keep them in the dark. we are up 108 points, a nice day. tracy: we are back to looking earnings, fundamentals, not listening to the noise out of washington. this is not going to last, is it? >> until they start meeting late december. again, it is all based on earnings, back to the sentimental's which are good for us. good news from china pumping the market. even though they have been a mixed bag, 61% so for the s&p s&p 500. 61% on the top line, but it is that bottom line. on the top line revenue is still pretty weak. at about 51%. tracy: we're all waiting for the top line to start growing. as long as the website is down, the market will be good. ashley: strangely you are absolutely right. could the economy be scaring up traders at the candy store this year? jeff flock at candy corn central in chicago to explain. jeff. >>jeff: always wants to see the impact on real people. they are one of the best candy corn in the world, you say. >> it is so tender and creamy. there is no other product comparison. jeff: take a look at the numbers spending on halloween not just candy, but overall. costumes, decorations, about $1 billion of spending. you are cranking out kind of gourmet packaging for your candy corn. >> it makes this beautiful standup bag with the gorgeous steel on it, it looks terrific. jeff: this is a special machine they just put in. jelly belly noted for its jellybeans, but a longer history. >> we knew they were making it very early, since 1898. jeff: a lot of people say they will spend less this year. 80%) less this year than they did last year. do you get any sense of that from the ground? >> our halloween business is strong. jeff: you are already making easter candy. >> we have to work ahead. jeff: we will be on the other far reaches of the factory in north chicago about the 4:00 hour. forget christmas, we are already on easter. ashley: great stuff, jeff flock. tracy: we're big fans of the jellybeans. i hope this time it will be for real. this time apple about to unveil a tv. dennis kneale has the scoop ahead. ashley: the last chance to get in on our twitter question today. whose heads should roll for the obamacare website? your response next. tracy: take a look at the winners and losers on the nasdaq as we head out to rake. up almost 5% today. we will be right back. it's a growing trend in business: do more with less with ss energy.hp is help. soon, the world's most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. multiply that across over a thousand locations, and they'll provide the same benefit to the environment as over 60,000 trees. that's a trend we can all get behind. help the gulf when we made recover and learn the gulf, bp from what happened so we could be a better, safer energy company. i can tell you - safety is at the heart of everything we do. we've added cutting-edge technology, like a new deepwater well cap and a state-of-the-art monitoring center, whe experts watch over all drilling activity twenty-four-seven. and we're sharing what we've learned, so we can all produce energy more safely. our commitment has never been stronger. tracy: apple tv is like the guest who never shows up. we have been waiting for it for two years now. in a report out of japan offers a new date. dennis kneale has details. dennis: apple tv is high-tech unicorn. we thought it would be out late this year. in the report out of japan says look for apple to start selling by fourth quarter of next year. but apple should tread carefully. the set-top box a rare apple failure. the business has legally thin profit margins slaying sony and humiliating rookies like dell. and apple tvs could cost $2500, laptop prices but apple upgrades laptops every year or two. an average of seven years we own them. the late and great steve jobs in the last year or so his wife told his biographer he found the solution to the next tv wave. that was like three years ago. so far not so much, tracy. tracy: like jfk said we're going vacationing on the moon. dennis: google wants in on this, amazon. the leader oddly maybe samsung. it has actually take screen tv, you can talk to it to program it. instantly linked to the internet. ashley: is the industry really wanting it? >dennis: a lot of times and thee guys do it, they do it because they can. they also do it because they need for us to upgrade. they always need the upgrade. when they do come along with a great tv at a cheap price, they will let you do it, and of course we would. tracy: you have to put the glasses on, sitting too close. like urkel glasses. dennis: a guy once told me with a seal of an adult entertainment industry, that is why it never caught on because the glasses are so stupid. ashley: on that note. thank you so much. tracy: thank you very much. ashley: earlier in the show we asked you whose heads should roll over the problems with obamacare. secretary sebelius would be a cannibal. the technology behind it. a tweet says who is to blame, obama, pelosi and finally the entire dems who are unable to think independently. you get the message. she says she is less concerned with who is to blame than the fact the implementation is this sloppy, it is a sign whole program will be as well. ashley: you have a lot of time to get it ready, champion is flawed. ashley: 20/20 hindsight. coming up on "countdown to the closing bell," gearing up for earnings from amazon and microsoft. and life without twitter. we sit down with robert gray filled, the ceo of the nasdaq to talk about letting the new ipo. and preventing another trading glitch. coming up on "after the bell," something you will see only here on fox business. [ male announcer ] imagine this cute blob is metamucil. and this park is the inside of your body. see, the special psyllium fir in metamucil actually gels to trap some carbs to help maintain healthy blood sugar levels. metamucil. 3 amazing benefits in 1 super fiber. i need a newn't. investment pn. i need to rethink the core of my portfolio. ishares core etfs are low-cost funds. so you can keep more of what you earn. get started with the new ishares core builder. design a personalized plan that can help you achieve your investment goals. ishares by blackrock. call 1-800-ishares for a prospectus, which includes investment objectives, risks, charges and expenses. read and consider it carefully before investing. risk includes possible loss of principal. liz: breaking news. it is the last hour of trading. the brain drain that apple is starting to happen. elon musk has just hired from apple the vp of vehicle at tesla motors. right now tesla jumping 5.25%. 173.21. this is a stock that has been on fire since the beginning of the year. you can see they're going to silicon valley. the auto plant is in fremont california. you can see a nice moonshot for the stock. lipid over to apple. apple has been in the big news today because of coral icon, that stock is still holding gains one.33% for apple today. coral icon saying he would like to see the bigger stock buyback. we are on the cusp of several record highs across the board from small caps to the dow jones transport. you need to watch the s&p right now. 1754 is the record. we are one point away from that record. watch it, we could see it in a minute. we are picking ford as a crucial story today. releasing strong third-quarter earnings announcing it is now profitable in all of its regions except europe. everywhere else they are doing beautifully. nondenial of
most of google is shut down in china ahead of a sensitive anniversary. there is the 25th anniversary of the crackdown of students in the andaman square. they have checked extensively and there are no technical problems on inside. new fusiong off a lightweight car. sedansult is a midsized of the fuel just an see of a small car. it is made with aluminum, magnesium, and carbon fiber. no word on when it will hit the market. to our lead story. many apple users go outside the apple ecosystem to edit files. apple is hoping to change all that and take aim at competitors. editing a photo feature, a new calling feature like microsoft's skype, and it features the take on dropbox. they are trying to make it easier for developers to develop on their platform introducing the swift program language. ofy are making a big portion health and home arenas. what is that mean for other companies? we are talking to john, creator of newco and a longtime apple follower. you have watched this company forever. what are your thoughts on this particular wwdc? >> i thought that apple failed to be apple. it succeeded at being the apple we all knew before expectations that apple had change the world every time they had one. >> this use to be a conference for the tiny community in the world of commuting that was david against goliath. >> everyone got super excited when they changed an sdk for their photo app. exciting because you could do new things. now everyone expects apple to unveil a world-changing thing every time they hit the stage. this felt more like the ones of old where they were fixing a lot of things they should have fixed, addressing opportunities that people felt they had not addressed and taking on competitors who might have been more nimble in the last years. >> i remember when you're writing an system six was this disaster when the macintosh as he was there. was there. se the notion of instagram has to exist at all suggest that microsoft did not get their photo stuff quite right. messaging issues have been a problem. made big newsthat were things that apple really needed to address. they can't watch a competitor like dropbox runaway. they can watch google come up to the side and have google drive that works better than their icloud solution. musicertainly can't lose and photo. >> they may have lost music already. >> we will see. >> streaming kind of ran away with it. this to me felt like an apple conference of old, where a lot of people got super excited, but i think people who are not techies are scratching their head and asking what is the big deal? >> you think there is something about apple? i was struck by the cloud. i remember it back to the failures of mobile me, but icloud, of .mac. there were so many cloud failures that it is hard for me to take seriously that they will fix it now. big "let'sthere is a wait and see" because apple has not been good at consumer software. it redefined that back in the early itunes area -- era. music wasis idea when turned into software was a big deal when apple was winning. but then all the startups in the valley and around the world started to out-innovate apple. i think they are laying a foundation, but it is a wait and see. >> is a necessary thing for a company the size, now biggest tech company in the world in terms of market cap, for them to lay groundwork in a way that they did not have to before? worse is apple sticking to their original plan? >> a bit of both. they have got to lay down groundwork and continued to be the number one place for smart developers want to develop. they also have to start recognizing that some of the things that the internet has brought us are worth embracing, that they need to open up. it is a small thing but they are allowing third-party keyboards. persnickety about controlling things like input keyboards. now there are saying maybe there are better ways to do it. >> i wonder if -- i have been seeing a lot about your company and how you address a very different world of innovation than apple historically has done. i wonder if you see connections. >> conferences tend to be vertical. this is a tech conference. it is about one vertical segment. what we realized in the conference new co. that we do is that technology is horizontal and it is affecting all businesses. all these kinds of new be new technology businesses. apple realizes its market is broadening and they need to be in all different areas and not just have this wow, tech thing that comes out. >> even when apple has been at its most screwed up, john scully was its ceo and that was not the worst. >> one could argue. focused onas so getting pcs into businesses instead of letting it grow in education and places where they were doing well. >> now it is not pcs, but the internet probably. we are seeing innovation across industries in the internet. almost every business is an internet business even if it is not about being a startup in the internet space. apple needs to embrace that innovation and extend what they are about by being more open. >> is that is why newco is so focused on going to the companies in the different cities? >> getting inside the companies, sharing information, collaborating. that happens when people connect in small settings like inside offices instead of big ballrooms where everything is a bit overly produced. >> this may not bode well for apple, but we will see. john battelle, great to have you. chief creative officer and founder of newco. to steale west develop millions of dollars but how did this guy stay under the radar? the future of cyber seeds next on "bloomberg west." ♪ welcome back to "bloomberg west." busted agents have hacking network that may have cost more than $100 million in losses in the u.s. the network is known as game over bot net. the network spread malware which hackers use to control files and demand a ransom from consumers. the justice department has charged a 30 year old russian as the mastermind. he remains at large. it raises the issue, how do hackers stay under the radar for so long and what does it tell us about other hacking groups that could be hiding? david walt joins us right now. fire eye in the cyber security business. hack,und the target infamously. changed a lot in the last year? it has. >> if you look at the last couple of years, the types of attackers out there, much like the zoos take down, we are seeing sophistication from russia. a lot of the business organizations and russia -- mafia in that market are very aggressive. high-volume, low credit card type of activities. we are seeing attacks on debit cards, much like the target examples. a lot of changes happening. >> i have had the theory for the last year that one of the reasons we see so much hacking out of eastern europe is because during the soviet union's existence, the bloc of sending the best of computers over there, the computer has to be better. michael lewis makes the case that computer time was so limited, software writers had to be good because there was very little time on computers. why do you think we see so much out of the eastern bloc? >> i think you hit on it. the talent is amazing. if you look at what is coming out of the russian market, these space -- specificity, they are very stealthy. this is different from the chinese market. it is noisy, easily discovered, with a letter finger prints on what they are. russians are very stealthy, typically. you see a 30-year-old hacker, very bright and talented. i think you hit on someone that is important. it is hard to arrest these individuals because they are sometimes protected in these markets around the world. the indictments to the chinese military will probably not have an outcome or official arrest >> . -- >> we don't want to send guys over there will to arrest him showing badges. for your company, do you have to have different types of protection for your clients when you are looking at the risks of chinese hackers as opposed to eastern european? >> you really do. the russian market is focused for crime. a lot of four-dollar -- for- dollar type of attacks. the chinese has been for espionage. >> if i were a network administrator, how do those look different? >> is a concept called advanced persistent threat. it has evolved at the china markets because it is there for persistency over a long. of time with the idea of stealing intellectual property. we see a different type of attack are focused in on what we call spearfishing, find an individual, get a persistent threat in place, and steal information out of it. different than the russian markets. it similar result. they are having success. very expensive. i am not one to predict that the stock price tells us. it tells more than i know or even care that it has declined a bit recently. when you look at the deal, does that help you fight things better because it is better technology or because it is a consulting business that will get you into places? >> it is three things. you hit on one of them. the people are amazing. the individuals are the best responders in the world. navy cyber seals if you will. those personnel are very unique and talented. >> very consulting like. >> the other pieces are technology. they advance the model into automation so they can respond and the third is intelligence. that have reports been put out are very powerful and good at understanding the attackers and the combination was a hell of a deal for our shareholders. >> and yet the losses persist and get even bigger over time. the margin structure looks like it is really rough. do you feel like you have got to build the company up to be a semantic, mcafee, to handle all threats or are there specific areas that the business will focus? >> opportunity is massive in the cyberspace. toi wonder how you try figure out which problems to solve your company. >> what we are seeing is that nearly all the companies are breached. we put a company -- a report out there. full hundred 78 companies, 900 plus breached over different countries. most of the defense architecture is not working. a new company like firei can solve these problems. it is a helen opportunity -- hell of an opportunity. if you look at the growth on the top line, 132%, feeding and raising three consecutive orders, a powerful company being built. i think we have a powerful opportunity. >> go big or home. great stuff. david dewalt, fireeye ceo. some google services like mail and calendar disrupted in china. we will find out why, next. ♪ >> welcome back to "bloomberg west." google services from gmail to google translate in china appear to be disrupted ahead of the 25th anniversary of the tiananmen square crackdown. gmail traffic was cut in half over the weekend. in a statement to "bloomberg west," google says "we have checked extensively. there are note technical problems on our side." rein,g us is shaun managing marker of chinese research group. this suggest that it is google getting shut down more, but it is our shutdown as it is. gettingyou see google shut down, it is par for the course in china and businesses and people expect it. ann you are getting to anniversary of a politically sessile time or have the government have a political spat, google is the first company whose technical services are inaccessible in china. for the last 10 days, my company has had a lot of problems using google services. our e-mail services run on google small business and we have not been able to get access to e-mail. we have had to use other e-mail servers. >> increasingly as google is woven into the fabric of the web in things like authentication, do these sorts effortstened security start to her chinese business? >> absolutely. i think the government needs to do a rethink on some of their internet policies because you're seeing lack of internet access, instability is hurting not just foreign businesses in china but domestic chinese companies as they go abroad. we have talked about it before. you see companies like shall meet -- xaoimi, $.10. it has eclipsed facebook as the largest social media site in indonesia. when they can't get access to google services, it really stifles their ability to become true global players and make money for chinese shareholders. >> i'm going to play a game where i oversimplify and you can call me a. let me oversimplify -- call me a moron. let me oversimplify and saying that this is the old guard thinking they can world out and this is the new guard opening up to the commerce in new ways losing the battle? >> that is one of the best questions i have heard in a long time. actually, the answer is no. >>? from me? when president she being became president last year, they thought it would be a reformer and what you are not seeing. xi is a major reformer but is in strengthening the communist party. he has had a far-reaching crackdown on corruption which is created support among the chinese people. he has reformed political security as well as military apparatus. he is firmly in charge of the country right now in a way that i don't think we have seen since mao zedong. he is very concerned about the technical side. i don't think he will liberalize that because he is very worried, perhaps rightly so, about infiltration from the americans. there is a lot of distrust in china for the americans right now which is why you have seen a crackdown on ibm, mckinsey, the consulting firm, and other western companies that are getting too close of state secrets of state-owned enterprise. cisco -- also seeing the ceo told me that sales of certain products in china are down significantly as a result of the revelations of the nsa and the concern that nsa has happeneding with cisco products and will hurt their sales. >> if you are an american hardware company, i would be very concerned about the next several quarters in china. in the state media, a lot of people are saying, let's buy chinese brands. let's get rid of the security threat. the government has directed the state-owned banks not to use ibm servers, while you see the chinese server companies are having soaring sales. it will be a rough time and investors need to know this for a lot of american tech companies. i think european companies will do better over the next several weeks because the chinese government likes to take away from america and get to europe or take away from europe and give to america. a balance of power issue. managing director of the china market research group. thank you very much. fidelity looking to lead uber's latest round of funding at a massive $17 billion by tuition. you can watch us from your tablet, phone, and bloomberg.com. ♪ time for "on the markets." i am jonathan ferro. look for the stake of accuracy stocks lower by literally nothing coming off literally -- off record highs. this week it is set to get busier. a role is friday. you have a busy week ahead of you. the price right now is actually subdued. ♪ >> you are watching "bloomberg west," where we cover innovation, technology, and the future. i am cory johnson. fidel he wants to -- fidelity funding lead uber's round at $817 billion valuation. that will give this app a higher valuation than companies like best buy and hurts. -- hertz. is that nuts? sarah joins me. uberot a valuation guy and is a fascinating business, but that is a big number. >> it is huge. you have to look at them in context. air bnp is a startup that was raised at $10 billion in valuation. there has been more venture capital financing in the first quarter this year since 2001. we are close to bubble levels with that. i think uber wants to stake its as the ceo put it as a record-breaking valuation company. >> you said context. i think the true concept -- context is a yield curve and where people can find a true return on their investment. said, let me offer context of companies in the s&p 500 that have similar market caps, like chipotle. edison, we're talking about businesses freehave long histories of cash flow generation and rewarding investors, even dividends, god for bid. are we in a notion were the private rounds will be bigger than a private -- a round one goes public? >> it gets into dangerous territory. can hoover be as big as those companies you just mentioned? can they be bigger? if they are getting the site wishon on the private market, can are expecting that uber make multiples on the public market. on the flipside, we talk about all the markets, we have seen a lot of tech stocks get hit this year. frothys as though this valuation in the private markets are kind of lagging the public sentiment. >> i have also said that they will not do when ipo anytime soon. is there something going on with some of the companies that decide they do not want to be public yet? >> it is unclear, but i think that from the glamour of an ipo is not as great as the glamour of really highly valued private value mark ua -- private market valuation right now. vox is delaying their ipo. they think that right now was not the right time on the market. we have seen other private companies announce that they were raising half $1 billion monthson just a few after raising at a $45 million valuation. it is getting frothy. >> i guess we will see over time if the fidelity money is smart money, getting in at such a high price. sarah frier, thank you very much. uber far from alone in the high-value wishon club. love.h valuation -- club. announcement by andreessen horowitz expects to increase this year. automatic payroll, health benefits, and the ceo parker joins us right now. i sort of don't care about by tuition but i am interested about when you were raising money. what did your potential investors want to know? i think what they wanted to look at was road, but more importantly it was a big valuation. we are going after a big problem . all of these companies have all these disconnected systems related to hr. as a result, there is all that paperwork and administrative hassle. what this does is it ties all of this together. it saves someone a ton of time and best of all, we do it all for free. >> free is a great model. you can sell a lot of things if you don't charge anything. >> it is like selling candy to a seven years old. we get revenue from various providers on our system. one of the big ones is insurance companies. we act as an insurance broker for a lot of our clients and get commissions on the policies that we have. the important thing is that it does not increase their costs. >> you listing ratio for these companies? >> but we can't take over existing policies as well and service them on behalf of the client and insurance company. we do not have to write a new policy for us to make revenue. >> few things are as private as people entering into health care forms, the information you get when you see someone's payroll, their taxes, their alimony elections -- deductions, what ever. how do you deal with generating affective leads when the people who provide information don't want the information out? >> maybe there is a misunderstanding, but we don't center information to anyone, ever. information to anyone, ever. you connect to your insurance to our system and we get paid by the insurance company. >> you're not looking at lead opportunities. ofis not like here is a list all the clients, go after them. we are presenting things to you come alike do you want a flexible spending account? >> there were notions that when byplesoft was acquired oracle, when oracle changed their business from selling databases to very differentiated from ags in software chart software -- hr software from peoplesoft. it would be integrated and people would have these periods that they were describing. what went wrong? >> i know almost nothing about what when wrong. >> is a market opportunity. >> what i understand is mostly my experience at my last company. we were about 30 employees when i left. ordid not have anyone in hr anyone like that because we were trying to conserve capital. what we found is that there is all this administrative work that floated to the top. i ended up spending a couple of hours a month setting people up in payroll and making changes here and there. --was a couple of moun hours a month that i deeply resented. we allow these companies to focus on people instead of paperwork. >> there is great excitement in the notion of software as a service. should there be? >> gosh. i don't know much about the public markets and what is going on there, but i think that we have a great business. we have a product that solves a really big problem. we get a generous but fair sort of revenue stream from benefit providers like insurance companies and it is recurring and continues over time. i think it is a good model for us. but my expertise is really on our business specifically. you seeder if opportunities that are available in business because you structured it that way. in particular, in terms of acquiring new comps rose -- new customers. >> hopefully with these customers, if you can offer a great service and you can keep them around for years, then you can spend a little more upfront to acquire them in the first place. >> in terms of customer series, is there a particular user interface that i think is -- that you think is useful to create over and over again? >> there is no particular we are trying to emulate. -- most of thew way we approach problems and build products is, what were the things i hated dealing with in my last company and how what i wanted it to work there? when you hire someone, there should be a button that says "higher." you say, i want to hire john. he starts this month. go and it is done. from there, we handle everything else. employment agreements, compliance, getting them on payroll and benefits. that is the way i always wanted it to work and that is the way we built it. >> do you find that insurance companies embrace innovation more delicately than others? in san francisco we are used to tech people. thisance companies have notion of being old-fashioned and not quick to think. >> i think the heart is willing in the flesh is weak. a lot of insurance companies are stuck in 1986. it is the age of the fax machine. nothing is online. they are very interested in making changes, and we are working with some of them to get some conductivity to their system and do things electronically instead of on paper. yeah, it is really backward in a lot of places. ceo.rker conrad, zenefits good luck on making the company even better. ford has been experimenting with lightweight materials to enhance performance and make cars more sustainable. maybe faster. imagine that. your tablet, us on phone, and at bloomberg.com. ♪ i am cory johnson. this is "bloomberg west," and yes, we are in a beautiful day in san francisco and surrounded by trains, planes, and automobiles. ford has been improving technology for 20 years. matt miller went to the world headquarters of ford to see a constant car putting lightweight to the max. ♪ >> this is the massive take-up 2013 ford entered in the so brutal,rrain is it is a victory just to finish and this vehicle that. >> we want to till -- wanted to we wanted to test the durability. we did not tell what the driver was. >> this was not an ordinary truck. instead of a standard steel body, it was made of aluminum, making it 700 pounds lighter. the company went to extreme to prove that light can also be tough. there is a lot at stake. this is a technology that will be rolled out and the all new version of its best-selling f 150. >> it helps to make it stop quicker, accelerate faster, and the customer can use that capability to carry more and told more -- toow more. out of ourtaken way vehicles consistently for 20 years. >> until recently, the technology was focused on track projects like fort's gt40. new government standards are pushing automakers to deliver more fuel-efficient cars to the masses. >> light waiting -- l ightweighting is an essential part to our strategy. >> enter the fusion concept car. >> is about 25% lighter weight. that is to car sizes smaller. >> is aluminum and carbon fiber. it is looking at how these can come together and create an optimal solution for weight. they cost more than steel. bringing down the cost may be difficult. >> the challenge is bringing it to mass production. we have not solved all challenges yet. this is where we see the future going. this is what we are working on now for our next generation of vehicles. >> matt miller is here with us. joining us as well is for executive -- ford executive. he is the global vice president in charge of engineering. you oversee these things. first of all, it has got to be exciting to be able to li ghtweight these trucks for racing purposes and speed, but also increasing their fuel efficiency and making them cheaper to operate. you are really not only doing something better for speed nuts like myself, but for the country and world. >> absolutely. it is great for the environment. it is great for our customers in terms of fuel economy. great for cost of ownership. you make them lighter, you can make them for better heart -- hauling of cargo. >> if it is lighter, you can stop faster. >> we are and the business of mobility. moving a vehicle takes energy. r the vehicle, the less it takes to excel array. >> why is this happening now? has there been a technological advance that makes it possible? >> there was all kinds of technology becoming available in terms of materials. as we have demonstrated in the going to are going to watch it next year. we have created the entire body out of aluminum. the research we did on it, we can now get really structural, really tough, strong alloys. >> that was the issue. it is fine for airplane, but not safe in a potential car. >> it was two things. it was building the ally for the strength -- alloy for the strength necessary. also having the availability of automotive-grade aluminum at the scale we needed. >> building a better truck is what gives us all of these technological advances on the f-150 side. the concept car we were looking at was the result of the department of energy contest to forward the advancement of technology. department of energy contest that we won and we have been thrilled to work with the department of energy on this along with a partner of ours. magnais a subsidiary of that has been working with us. we have put multiple materials in this vehicle. is vehicle -- lightweighting crucial for fuel economy, but it has to perform in crashes and all the other attributes of the vehicle. to pickbeen able materials that are necessary for each one of those attributes and be able to join those materials with really advanced technology and be able to take out roughly a hundred pounds out of the car. >> which is key as an engineer. the challenges are not just getting these space-age materials, like aluminum alloys or the carbon fiber, but being able to stick them to each other, being able to do it in a cheap way that is possible to manufacture the amount of cars -- the best selling car since the taurus -- and doing it in a cost-effective way. >> it has to be the right value for the customer. it has to provide a clear benefit to the customer. at the same time, it has to perform all the things we want it to perform. the rigidity of the body has to be right so you have the right handling experience. the crashworthiness has to be perfect. the noise vibration and attributes have to be perfect. this is a great research lab form for us to develop these technologies. >> as you engineer this stuff, at what point do you start to imagine cost and try to figure out where the cost issues will be? even as an engineer, you can't work out what it will cost in production or what it will look like when it is them. you have to make a decision early on to go down a certain path. >> we have a structured process. we have an advanced research organization that is always doing leading-edge work on materials, sourcing, all kinds of stuff. when you take that part of the research, when it is done, when it is physical, we bring it to an organization that looks at it. how come we implement it into a vehicle? once we have a complement -- concept ready, during that phase, we try to make sure it is affordable for our vehicles and it is the right material, for the right rise, for the right car. seemese kind of projects to help you push price down. you are working with dow jones to make cheaper carbon fiber. you're working with samsung to make lithium-ion batteries that are light and have more bad -- energy. price. lower the partnersthese supply in was good. theming them and having integrated in is good and having them scale is important. if you're going to build 5000 of them, you will not get the scale to lower the cost. but if we produce hundred's of thousands, it will be fine. we make 700,000 pickup trucks a year. >> that is a lot. >> we will look out for those as well. >> do look out. if you get hit by one, it hurts. matt miller, great to have you here. vice president of project development. "bloomberg west will be right back. ♪ >> welcome back. i am cory johnson. this is "bloomberg west," and it is time for the bwest byte. we don't wear ties outta here. >> i noticed that. i went to a press conference today. out of 30 people, i was the only person wearing a tie. the byte is 17. >> the number higher than 60. >> the new mega earth is 17 times the mass of this earth. it is about 560 but not free cae know. matt miller, thank you for being here. you can get the latest headlines at bloomberg.com and bloomberg radio as well. we will see you tomorrow on "bloomberg west." ♪ >> welcome to "money clip." we have the video and business news. i'm adam johnson. here is the rundown good edward snowden's worst nightmare. we talk about the guardians of u.s. gathered to talk about cyber protection. and for the college gm, and chrysler. sales look pretty good. the rules of the air, the
the crackdown of students in the andaman square. they have checked extensively and there are no technical problems on inside. ford showing off a new fusion lightweight car. the result is a midsized sedan of the fuel just an see of a small car. it is made with aluminum, magnesium, and carbon fiber. no word on when it will hit the market. to our lead story. many apple users go outside the apple ecosystem to edit files. apple is hoping to change all that and take aim at competitors. there is a photo editing feature, a new calling feature like microsoft's skype, and it features the take on dropbox. they are trying to make it easier for developers to develop on their platform introducing the swift program language. they are making a big portion of health and home arenas. what is that mean for other companies? we are talking to john, creator of newco and a longtime apple follower. you have watched this company forever. what are your thoughts on this particular wwdc? >> i thought that apple failed to be apple. it succeeded at being the apple we all knew before expectations were inflated that apple had change the world every time they had one. >> this use to be a conference for the tiny community in the world of computing that was david against goliath. >> everyone got super excited when they changed an sdk for their photo app. that was exciting because you could do new things. now everyone expects apple to unveil a world-changing thing every time they hit the stage. this felt more like the ones of old where they were fixing a lot of things they should have fixed, addressing opportunities that people felt they had not addressed and taking on competitors who might have been more nimble in the last 5-10 years. >> i remember when you're writing an system six was this disaster when the macintosh se was there. the notion of instagram has to exist at all suggest that microsoft did not get their photo stuff quite right. messaging issues have been a problem. >> everything that made big news were things that apple really needed to address. they can't watch a competitor like dropbox runaway. they can't watch google come up to the side and have google drive that works better than their icloud solution. they certainly can't lose music and photo. >> they may have lost music already. >> we will see. >> streaming kind of ran away with it. this to me felt like an apple conference of old, where a lot of people got super excited, but i think people who are not techies are scratching their head and asking what is the big deal? >> you think there is something about apple? i was struck by the cloud. i remember it back to the failures of mobile me, but icloud, of .mac. there were so many cloud failures that it is hard for me to take seriously that they will fix it now. >> i think there is a big "let's wait and see" because apple has not been good at consumer software. it redefined that back in the early itunes era. you had this idea when music was turned into software was a big deal when apple was winning. but then all the startups in the valley and around the world started to out-innovate apple. i think they are laying a foundation, but it is a wait and see. >> is a necessary thing for a company the size, now biggest tech company in the world in terms of market cap, for them to lay groundwork in a way that they did not have to before? worse is apple sticking to their original plan? >> a bit of both. they have got to lay down groundwork and continued to be the number one place for smart developers want to develop. they also have to start recognizing that some of the things that the internet has brought us are worth embracing, that they need to open up. it is a small thing but they are allowing third-party keyboards. apple was very persnickety about controlling things like input keyboards. now there are saying maybe there are better ways to do it. >> i wonder if -- i have been seeing a lot about your company and how you address a very different world of innovation than apple historically has done. i wonder if you see connections. >> conferences tend to be vertical. this is a tech conference. it is about one vertical segment. what we realized in the conference new co. that we do is that technology is horizontal and it is affecting all businesses. all these kinds of new businesses can be new technology businesses. apple realizes its market is broadening and they need to be in all different areas and not just have this wow, tech thing that comes out. >> even when apple has been at its most screwed up, john scully was its ceo and that was not the worst. >> one could argue. >> scully was so focused on getting pcs into businesses instead of letting it grow in education and places where they were doing well. >> now it is not pcs, but the internet probably. we are seeing innovation across industries in the internet. almost every business is an internet business even if it is not about being a startup in the internet space. apple needs to embrace that innovation and extend what they are about by being more open. >> is that is why newco is so focused on going to the companies in the different cities? >> getting inside the companies, sharing information, collaborating. that happens when people connect in small settings like inside offices instead of big ballrooms where everything is a bit overly produced. >> this may not bode well for apple, but we will see. john battelle, great to have you. chief creative officer and founder of newco. >> malware west develop to steal millions of dollars but how did this guy stay under the radar? the future of cyber seeds next on "bloomberg west." ♪ >> welcome back to "bloomberg west." federal agents have busted a hacking network that may have cost more than $100 million in losses in the u.s. the network is known as game over bot net. the network spread malware which hackers use to control files and demand a ransom from consumers. the justice department has charged a 30 year old russian as the mastermind. he remains at large. it raises the issue, how do hackers stay under the radar for so long and what does it tell us about other hacking groups that could be hiding? david walt joins us right now. fire eye in the cyber security business. you found the target hack, infamously. has the target changed a lot in the last year? it has. >> if you look at the last couple of years, the types of attackers out there, much like the zoos take down, we are seeing sophistication from russia. a lot of the business organizations and mafia in that market are very aggressive. high-volume, low credit card type of activities. we are seeing attacks on debit cards, much like the target examples. a lot of changes happening. >> i have had the theory for the last year that one of the reasons we see so much hacking out of eastern europe is because during the soviet union's existence, the bloc of sending the best of computers over there, the computer has to be better. michael lewis makes the case that computer time was so limited, software writers had to be good because there was very little time on computers. why do you think we see so much out of the eastern bloc? >> i think you hit on it. the talent is amazing. if you look at what is coming out of the russian market, the specificity, they are very stealthy. this is different from the chinese market. it is noisy, easily discovered, with a letter finger prints on what they are. russians are very stealthy, typically. you see a 30-year-old hacker, very bright and talented. i think you hit on someone that is important. it is hard to arrest these individuals because they are sometimes protected in these markets around the world. the indictments to the chinese military will probably not have an outcome or official arrest. >> we don't want to send guys over there will to arrest him showing badges. for your company, do you have to have different types of protection for your clients when you are looking at the risks of chinese hackers as opposed to eastern european? >> you really do. the russian market is focused for crime. a lot of for-dollar type of attacks. the chinese has been for espionage. >> if i were a network administrator, how do those look different? >> is a concept called advanced persistent threat. it has evolved at the china markets because it is there for persistency over a long. of time with the idea of stealing intellectual property. we see a different type of attack are focused in on what we call spearfishing, find an individual, get a persistent threat in place, and steal information out of it. different than the russian markets. it similar result. they are having success. >> it is very expensive. i am not one to predict that the stock price tells us. it tells more than i know or even care that it has declined a bit recently. when you look at the deal, does+ technology or because it is a consulting business that will get you into places? >> it is three things. you hit on one of them. the people are amazing. the individuals are the best responders in the world. navy cyber seals if you will. those personnel are very unique and talented. >> very consulting like. >> the other pieces are technology. they advance the model into automation so they can respond and the third is intelligence. mandiant's reports that have been put out are very powerful and good at understanding the attackers and the combination was a hell of a deal for our shareholders. >> and yet the losses persist and get even bigger over time. the margin structure looks like it is really rough. do you feel like you have got to build the company up to be a one-stop shop, semantic, mcafee, to handle all threats or are there specific areas that the business will focus? >> opportunity is massive in the cyberspace. >> i wonder how you try to figure out which problems to solve your company. we will find out why, next. ♪ >> welcome back to "bloomberg west." google services from gmail to google translate in china appear to be disrupted ahead of the 25th anniversary of the tiananmen square crackdown. gmail traffic was cut in half over the weekend. in a statement to "bloomberg west," google says "we have checked extensively. there are note technical problems on our side." joining us is shaun rein, managing marker of chinese research group. this suggest that it is google getting shut down more, but it is our shutdown as it is. >> when you see google getting shut down, it is par for the course in china and businesses and people expect it. when you are getting to an anniversary of a politically sessile time or have the government have a political spat, google is the first company whose technical services are inaccessible in china. for the last 10 days, my company has had a lot of problems using google services. our e-mail services run on google small business and we have not been able to get access to e-mail. we have had to use other e-mail servers. >> increasingly as google is woven into the fabric of the web in things like authentication, do these sorts of heightened security efforts start to her chinese business? >> absolutely. i think the government needs to do a rethink on some of their internet policies because you're seeing lack of internet access, instability is hurting not just foreign businesses in china but domestic chinese companies as they go abroad. we have talked about it before. you see companies like xaoimi, tencent. it has eclipsed facebook as the largest social media site in indonesia. when they can't get access to google services, it really stifles their ability to become true global players and make money for chinese shareholders. >> i'm going to play a game where i oversimplify and you can call me a moron. let me oversimplify and saying that this is the old guard thinking they can keep the world out and this is the new guard opening up to the commerce in new ways losing the battle? >> that is one of the best questions i have heard in a long time. actually, the answer is no. >> from me? >> from you. when president xi became president last year, they thought it would be a reformer and what you are not seeing. xi is a major reformer but is in strengthening the communist party. he has had a far-reaching crackdown on corruption which is created support among the chinese people. he has reformed political security as well as military apparatus. he is firmly in charge of the country right now in a way that i don't think we have seen since mao zedong. he is very concerned about the technical side. i don't think he will liberalize that because he is very worried, perhaps rightly so, about infiltration from the americans. there is a lot of distrust in china for the americans right now which is why you have seen a crackdown on ibm, mckinsey, the consulting firm, and other western companies that are getting too close of state secrets of state-owned enterprise. >> we are also seeing cisco -- the ceo told me that sales of certain products in china are down significantly as a result of the revelations of the nsa and the concern that nsa hardware hacking has happened with cisco products and will hurt their sales. >> if you are an american hardware company, i would be very concerned about the next several quarters in china. in the state media, a lot of people are saying, let's buy chinese brands. let's get rid of the security threat. the government has directed the state-owned banks not to use ibm servers, while you see the chinese server companies are having soaring sales. it will be a rough time and investors need to know this for a lot of american tech companies. i think european companies will do better over the next several weeks because the chinese government likes to take away from america and get to europe or take away from europe and give to america. a balance of power issue. >> shaun rein, managing director of the china market research group. thank you very much. fidelity looking to lead uber's latest round of funding at a massive $17 billion by tuition. you can watch us from your tablet, phone, and bloomberg.com. ♪ >> time for "on the markets." i am jonathan ferro. look for the stake of accuracy stocks lower by literally nothing coming off record highs. this week it is set to get busier. a role is friday. you have a busy week ahead of you. the price right now is actually subdued. ♪ >> you are watching "bloomberg west," where we cover innovation, technology, and the future. i am cory johnson. fidelity wants to lead uber's funding round at a $17 billion valuation. that will give this app a higher valuation than companies like best buy and hertz. is that nuts? sarah joins me. i'm not a valuation guy and uber is a fascinating business, but that is a big number. >> it is huge. you have to look at them in context. air bnp is a startup that was raised at $10 billion in valuation. there has been more venture capital financing in the first quarter this year since 2001. we are close to bubble levels with that. i think uber wants to stake its claim as the ceo put it as a record-breaking valuation company. >> you said context. i think the true context is a yield curve and where people can find a true return on their investment. that said, let me offer context of companies in the s&p 500 that have similar market caps, like alcoa, con edison, chipotle. we're talking about businesses that have long histories of free cash flow generation and rewarding investors, even dividends, god for bid. are we in a notion were the private rounds will be bigger than a round one goes public? >> it gets into dangerous territory. can hoover be as big as those companies you just mentioned? can they be bigger? if they are getting the site wishon on the private market, they are expecting that uber can make multiples on the public market. on the flipside, we talk about all the markets, we have seen a lot of tech stocks get hit this year. it seems as though this frothy valuation in the private markets are kind of lagging the public sentiment. >> i have also said that they will not do when ipo anytime soon. is there something going on with some of the companies that decide they do not want to be public yet? >> it is unclear, but i think that from the glamour of an ipo is not as great as the glamour of really highly valued private market valuation right now. vox is delaying their ipo. they think that right now was not the right time on the market. we have seen other private companies announce that they were raising half $1 billion valuation just a few months after raising at a $45 million valuation. it is getting frothy. >> i guess we will see over time if the fidelity money is smart money, getting in at such a high price. sarah frier, thank you very much. uber far from alone in the high-valuation club. a new announcement by andreessen horowitz expects to increase this year. automatic payroll, health benefits, and the ceo parker joins us right now. i sort of don't care about by tuition but i am interested about when you were raising money. what did your potential investors want to know? i think what they wanted to look at was road, but more importantly it was a big valuation. we are going after a big problem. all of these companies have all these disconnected systems related to hr. as a result, there is all that paperwork and administrative hassle. what this does is it ties all of this together. it saves someone a ton of time and best of all, we do it all for free. >> free is a great model. you can sell a lot of things if you don't charge anything. >> it is like selling candy to a seven years old. we get revenue from various providers on our system. one of the big ones is insurance companies. we act as an insurance broker for a lot of our clients and get commissions on the policies that we have. the important thing is that it does not increase their costs. >> you listing ratio for these companies? >> but we can't take over existing policies as well and service them on behalf of the client and insurance company. we do not have to write a new policy for us to make revenue. >> few things are as private as people entering into health care forms, the information you get when you see someone's payroll, their taxes, their alimony deductions, what ever. how do you deal with generating affective leads when the people who provide information don't want the information out? >> maybe there is a misunderstanding, but we don't send your information to anyone, ever. you connect to your insurance to our system and we get paid by the insurance company. >> you're not looking at lead opportunities. >> is not like here is a list of all the clients, go after them. we are presenting things to you come alike do you want a flexible spending account? >> there were notions that when peoplesoft was acquired by oracle, when oracle changed their business from selling databases to very differentiated offerings in software from hr software from peoplesoft. it would be integrated and people would have these periods that they were describing. what went wrong? >> i know almost nothing about what when wrong. >> is a market opportunity. >> what i understand is mostly my experience at my last company. we were about 30 employees when i left. we did not have anyone in hr or anyone like that because we were trying to conserve capital. what we found is that there is all this administrative work that floated to the top. i ended up spending a couple of hours a month setting people up in payroll and making changes here and there. it was a couple of hours a month that i deeply resented. we allow these companies to focus on people instead of paperwork. >> there is great excitement in the notion of software as a service. should there be? >> gosh. i don't know much about the public markets and what is going on there, but i think that we have a great business. we have a product that solves a really big problem. we get a generous but fair sort of revenue stream from benefit providers like insurance companies and it is recurring and continues over time. i think it is a good model for us. but my expertise is really on our business specifically. >> i wonder if you see opportunities that are available in business because you structured it that way. in particular, in terms of acquiring new customers. >> hopefully with these customers, if you can offer a great service and you can keep them around for years, then you can spend a little more upfront to acquire them in the first place. >> in terms of customer series, is there a particular user interface that you think is useful to create over and over again? >> there is no particular we are trying to emulate. it is mostly how -- most of the way we approach problems and build products is, what were the things i hated dealing with in my last company and how what i wanted it to work there? when you hire someone, there should be a button that says "higher." you say, i want to hire john. he starts this month. you click go and it is done. from there, we handle everything else. employment agreements, compliance, getting them on payroll and benefits. that is the way i always wanted it to work and that is the way we built it. >> do you find that insurance companies embrace innovation more delicately than others? in san francisco we are used to tech people. insurance companies have this notion of being old-fashioned and not quick to think. >> i think the heart is willing in the flesh is weak. a lot of insurance companies are stuck in 1986. it is the age of the fax machine. nothing is online. they are very interested in making changes, and we are working with some of them to get some conductivity to their system and do things electronically instead of on paper. yeah, it is really backward in a lot of places. >> parker conrad, zenefits ceo. good luck on making the company even better. ford has been experimenting with lightweight materials to enhance performance and make cars more sustainable. maybe faster. imagine that. you can watch us on your tablet, phone, and at bloomberg.com. ♪ >> i am cory johnson. this is "bloomberg west," and yes, we are in a beautiful day in san francisco and surrounded by trains, planes, and automobiles. ford has been improving technology for 20 years. matt miller went to the world headquarters of ford to see a constant car putting lightweight to the max. ♪ >> this is the massive take-up truck ford entered in the 2013 baja the terrain is so brutal, it is a victory just to finish and this vehicle that. >> we wanted to test the durability. we did not tell what the driver was. >> this was not an ordinary truck. instead of a standard steel body, it was made of aluminum, making it 700 pounds lighter. the company went to extreme to prove that light can also be tough. there is a lot at stake. this is a technology that will be rolled out and the all new version of its best-selling f-150. >> it helps to make it stop quicker, accelerate faster, and the customer can use that capability to carry more and tow more. >> we have taken way out of our vehicles consistently for 20 years. >> until recently, the technology was focused on track projects like fort's gt40. new government standards are pushing automakers to deliver more fuel-efficient cars to the masses. >> lightweighting is an essential part to our strategy. >> enter the fusion concept car. >> is about 25% lighter weight. that is to car sizes smaller. >> is aluminum and carbon fiber. it is looking at how these can come together and create an optimal solution for weight. >> they cost more than steel. bringing down the cost may be difficult. >> the challenge is bringing it to mass production. we have not solved all challenges yet. this is where we see the future going. this is what we are working on now for our next generation of vehicles. >> matt miller is here with us. joining us as well is a ford executive. he is the global vice president in charge of engineering. you oversee these things. first of all, it has got to be exciting to be able to lightweight these trucks for racing purposes and speed, but also increasing their fuel efficiency and making them cheaper to operate. you are really not only doing something better for speed nuts like myself, but for the country and world. >> absolutely. it is great for the environment. it is great for our customers in terms of fuel economy. great for cost of ownership. as you make them lighter, you can make them for better hauling of cargo. >> if it is lighter, you can stop faster. >> we are and the business of mobility. moving a vehicle takes energy. the lighter the vehicle, the less it takes to excel array. >> why is this happening now? has there been a technological advance that makes it possible? >> there was all kinds of technology becoming available in terms of materials. as we have demonstrated in the f-150, we are going to going to watch it next year. we have created the entire body out of aluminum. the research we did on it, we can now get really structural, really tough, strong alloys. >> that was the issue. it is fine for airplane, but not safe in a potential car. >> it was two things. it was building the alloy for the strength necessary. also having the availability of automotive-grade aluminum at the scale we needed. >> building a better truck is what gives us all of these technological advances on the f-150 side. the concept car we were looking at was the result of the department of energy contest to forward the advancement of technology. >> it was the department of energy contest that we won and we have been thrilled to work with the department of energy on this along with a partner of ours. cosma is a subsidiary of magna that has been working with us. we have put multiple materials in this vehicle. the vehicle -- lightweighting is crucial for fuel economy, but it has to perform in crashes and all the other attributes of the vehicle. we have been able to pick materials that are necessary for each one of those attributes and be able to join those materials with really advanced technology and be able to take out roughly a hundred pounds out of the car. >> which is key as an engineer. the challenges are not just getting these space-age materials, like aluminum alloys or the carbon fiber, but being able to stick them to each other, being able to do it in a cheap way that is possible to manufacture the amount of cars -- the best selling car since the taurus -- and doing it in a cost-effective way. >> it has to be the right value for the customer. it has to provide a clear benefit to the customer. at the same time, it has to perform all the things we want it to perform. the rigidity of the body has to be right so you have the right handling experience. the crashworthiness has to be perfect. the noise vibration and attributes have to be perfect. this is a great research lab form for us to develop these technologies. >> as you engineer this stuff, at what point do you start to imagine cost and try to figure out where the cost issues will be? even as an engineer, you can't work out what it will cost in production or what it will look like when it is them. you have to make a decision early on to go down a certain path. >> we have a structured process. we have an advanced research organization that is always doing leading-edge work on materials, sourcing, all kinds of stuff. when you take that part of the research, when it is done, when it is physical, we bring it to an organization that looks at it. how come we implement it into a vehicle? once we have a concept ready, during that phase, we try to make sure it is affordable for our vehicles and it is the right material, for the right rise, for the right car. >> these kind of projects seem to help you push price down. you are working with dow jones to make cheaper carbon fiber. you're working with samsung to make lithium-ion batteries that are light and have more energy. you can lower the price. bringing these supply partners in was good. bringing them and having them integrated in is good and having them scale is important. if you're going to build 5000 of them, you will not get the scale to lower the cost. but if we produce hundred's of thousands, it will be fine. we make 700,000 pickup trucks a year. >> that is a lot. >> we will look out for those as well. >> do look out. if you get hit by one, it hurts. matt miller, great to have you here. vice president of project development. "bloomberg west will be right back. ♪ >> welcome back. i am cory johnson. this is "bloomberg west," and it is time for the bwest byte. we don't wear ties outta here. >> i noticed that. i went to a press conference today. out of 30 people, i was the only person wearing a tie. the byte is 17. >> the number higher than 60. >> the new mega earth is 17 times the mass of this earth. it is about 560 light years away and it was too big to be classified as a super-earth. it is very heavily and i'm sure you could generate a lot of energy there. >> but not free cash flow as we know. matt miller, thank you for being here. you can get the latest headlines at bloomberg.com and bloomberg radio as well. we will see you tomorrow on "bloomberg west." ♪
markets overnight. we're off the low, down 56 points. we're following general motors. take a look at the stock. it's lower as a recall controversy grows. new reports that the government ignored warnings as early as 2007 about a potentially fatal problem with ignition switches. shares down almost 2%. we will be speaking with the parents of the young woman killed in 2010, and they want answers from the government, bill, and from the company. >> absolutely. and the mystery of that missing malaysian airliner continues. it's unbelievable. a story that's gripping much of the world. we will speak with experts as they try to grapple with how you search for a missing plane in such a vast body of water. the technology is amazing, but it's still a needle in a haystack kind of a story. stick around for the latest on that crazy, crazy story coming up. in the meantime, an important hour as we head towards the close. the dow is negative, but well off the lows. it's off about 60 points. the nasdaq down about 0.2%, about 8 points. the interesting one to watch is the s&p 500. that broad market gauge is only down by about 3.5 points right now. bill, if we turn positive at all, remember, we closed at a record high on friday. believe it or not, despite low breadth in this market and particular concerns in the financials with the downgrade from wells today, we could yet close higher. let's talk about today's market action, where we go from here as we celebrate five years of a bull market. joining our exchange, anastasia, jeff taylor, ron mullencamp. mark tepper, and our own rick santelli. and, folks, i begin our conversation quoting from today's edition of ""the financial times" which quotes seth coll sethklarman. he says any time in which the s&p 500 jumps 32% while corporate earnings barely increase should be cause for concern, not further exuberance. he says eventually buy the dips will be replaced with what was i thinking? ron mullencamp, i feel the need to go to you. you're a value investor like seth klarman. >> what seth is saying will be true eventually, but the assumption that the market going up 30% when the economy didn't do all that much assumes it was fairly priced a year ago. frankly, we think a year ago it was discounting a bit higher inflation. inflation has come in. it's about 1.7%. frankly, we think it's fairly priced for about a 2% to 2.25% inflation. there's all kinds of things out there that can hit it. you know the litany as well as i do, and the bears always have better specific arguments, but the ultimate bull argument is that this country and this economy tends to muddle through. we're no longer finding things cheap, but we're not running for the hills just yet either. >> seth has been skeptical on what's going on in markets for some time. he's called it the hostess twinkle market saying it's totally artificial ingredients. is this totally artificial or is it not? is there something fundamental whether it's on the corporate earnings side or whether it's with regard to other u.s. demographic factors, et cetera, is there something fundamental here for a reason to have exposure to this market long term? >> absolutely. i mean, we're watching corporate earnings finally starting to grow again. now, over the course of the past several years, all we've seen is really a lot of multiple expansion and no earnings growth, but we are seeing the earnings growth start to pick back up. we actually think this market has another 2 1/2 to 3 years of bull left in it. we really do think that, you know, until there's been at least a few fed interest rate hikes, we can actually maintain and overweight equity bias really on autopilot. the last two bull markets came to an end when the ten-year treasury yield began to exceed the nominal gdp growth rate. with the current yield at 2.8%, we have probably 1.5% to 2% of wiggle room to go and it looks like the fed is not going to raise interest rates until the end of 2015, probably not going to reach that problem zone until end of 2016, 2017. >> with all due respect, mark, when i hear autopilot, i get sweaty palms when it comes to investing. seth klarman says he feels investors are underplaying risk and not really prepared for the end to the central bank's reversing its five-year easy money policy. autopilot, really? >> yeah, yeah. i mean, you know, we're long-term investors. we do think -- we're making our decisions based on a three to five-year outlook. when we look out three to five years, there's some great opportunity out there. the pe ratio right now is around 15. that's within the historical average range. so we're really not overly concerned about how the market is currently priced. >> rick santelli, if mark is right, and we have 2 1/2 or 3 years to go, that means this bull market historically speaking will go down as the strongest if not second -- second strongest, maybe the strongest, longer than 1990 to 2000. how unlikely -- who would have thought we'd be here now? is it possible we're only halfway through? >> oh, i think it's possible, but i also think that it's the biggest risk in the world. yes, it will be maybe have a ways to go and it could be the biggest bull market ever, but it's the biggest bull market with the biggest ample helping from central banks, ours, a lot of central banks, and i think that really merits looking into because to me there's two areas i pay attention to now, and one is the u.s. equity markets. but now i would think when we crossed 139 in the euro versus the dollar and the euro was strengthening against a variety of currencies, that's really taking something out of the german stock market. even though all big developed economies' stock markets aren't correlating 100%, i can't imagine should the german stock market start to fall any more that we wouldn't see a sympathetic move in global equity markets. i think you really want to pay attention to the currency markets, whether it's yuan or the euro. i think this is going to come back and haunt many of the central banks, and it's no coincidence that as the german stock market goes down, all of a sudden some of the tough german finance ministers are actually thinking maybe some american-style qe would be in order. they're looking to weaken their currency. >> talking about the other options that they have. so true. >> that prescription is going around these days. anastasia, what about -- i'll go back to seth klarman's premise that we really are taking for granted the impact the fed policy over the next few years is going to have on the financial markets, and we're just expecting it to continue on until they actually begin the process of raising interest rates. are we being too complacent here do you think? >> well, i think there's some reasons to remain optimistic because that's right. as long as the fed is easy, there's a runway here for acceleration for risky assets. i wouldn't necessarily say that we're completely on autopilot because amidst the upward strength we need to be careful about picking up the dips because you never know whether it's ukraine, russia, venezuela, whether it's china that is causing the pullback and assessing the pullback. i think buying the dips approach does absolutely make sense as long as the fed is easy. so the question is now that we are almost at 6.5% unemployment rate, how long will the fed remain easy? and if you look at their expectations of how much they will actually hike that rate, there's no question of when. when is probably 2015, but there's a question of how much. there's a great dispersion there. >> there's a lot more detail we're getting courtesy of jon hilsenrath of what this exit strategy might look like. we heard from the fed in 2011 that it would be letting the current holdings of mortgage backed securities sell off. well now that may not be the case at all. jeff taylor, we're starting to get a sense instead it will be about maybe using some of these newer tools, reverse repos, trying to use the price of that interest rate that it uses to lend to banks to affect the price throughout the economy and, in other words, this won't necessarily be telegraphed as far ahead of time unless the fed wants to tell us so. >> totally agreed. if you look right now, 40% of last month's home sales were cash. that tells us we're driven in an investor market. if we look over the next 6 to 12 months, we want to get to a consumer driven market. that's going to come by jobs creation, by people being able to afford 10%, 15% down on housing, and that's going to get to a more even flow. >> i'm not obsessed with this seth klarman thing -- >> i think you are a little bit. >> i think we all ignore the profit until we don't ignore the profit anymore. one other point and this speaks to you as well since you're one of the more famous value investors out there. he's looking at the explosion of stocks like the netflixs and the teslas and the twitters and those things which while they're not the rule, they are sort of the exception now, but they do exist in this market environment and which he says is symptomatic of a market that's becoming frothy right now. >> well, they are not the rule. it is a fairly short list, and, yes, there's the outliers. the public is getting scared back into the markets, but we've seen interest rates neutralize, long interest rates are about where we think they should be given inflation. the normal thing for the economy is to grow but the economy is not growing. everybody talks about employment picking up, but as long as there's as much uncertainty on tacks and regulations, there's no incentive for companies to go out and hire. so i think we're still in this very slow growth kind of thing, 2% to 2.5% -- >> where do you see value right now? >> longer term -- if you want me to get bullish, we can talk about shale gas, talk about biotech. last year we did a seminar on shale gas and actually we put the content of that into a booklet if anybody wants, but we are setting up for predicting the future is a pretty difficult thing to do. but, manufacturing in the united states means advanced technology. we learned that technology allows us to be craft oriented. no one's losing their job. there's no beer robot that has suddenly chased them out. the technology is actually creating new jobs. siemens designed and built the right tools and resources to get the job done. we know we're not the center of your life, but we'll do our best to help you connect to what is. bold. one person called him a patriot. they said, listen, he put himself on the line. at the very least he opened up a new conversation. guys, back to you. >> josh, thanks very much. for more on how attendees reacted to edward snowden's interview, kara swisher joins us with her take. and, kara, you know, what did you think about, first of all, the premise of having snowden involved, the substance of what he had to say, and how people responded? >> i think it was great that they had him. this is south by southwest where people are supposed to speak their mind and talk about issues, and he has a lot to say and he did say a lot actually. it was sort of -- there was a book end. they julian assange who is also on the run and in the ecuadorian embassy and snowden from russia using google hangouts i might add through seven proxies or something like that. i think it was perfect for this particular festival. >> so politics aside, we want to focus on, at least i do, the technology and what they had to say about security issues and all of that. have we taken it too far with the surveillance programs out there? >> well, he thinks so. he made a very persuasive case as he often does as did julian assange that the government is conducting war on its citizens. i think assange called it a military kind of attack on its citizens and interestingly with the constitution as a backdrop, snowden was talking about here is his quote which i thought was interesting, regardless of what's happening to me, i took an oath to defend the u.s. constitution and i saw the constitution being violated on a massive scale, and i did what i had to do. that got a lot of applause. so he was trying to wrap himself up -- >> how do you reverse that kind of ability of surveillance that exists? >> you don't. >> could we can't go back? >> you don't. no, they talked a lot about encryption and increasing encryption by the public and private tech companies and increasing encryption to prevent against this and also hackers, not just the government spying but also hackers and other incursions. there was a lot of talk about n encryption and what should be happening on that level. he felt there was a lot more to happen in the encryption because of the anger that revelations that snowden revealed in these documents. >> i wonder if part of the premise of bringing snowden in front of this tech crowd isn't to keep them abreast of what exactly the nsa is up to. these revelations hit that community so hard and it took a lot of them it seemed by surprise. were there any further disclosur disclosures? have there been any further disclosures lately that you think have taken this community by surprise? >> oh, i think it's ongoing. there's more documents to come. i think that's what he was intimating when he was talking. there's more to come and there's been more every week i think as these documents dribble out. what i think is interesting is that south by southwest -- it's not silly but there's all these crazy apps and four square launched here and twitter launched here, very serious tone. there is no breakout crazy dating app. it was assange and snowden dominated the beginning and end of this interactive part. it's a much more serious tone. it was a different kind of south by southwest. >> it is south by southwest though, yeah. thanks. >> yeah, it is, they're still crazy. absolutely. thanks. >> see you later. >> we got to keep austin weird, right? that's what we hope. heading into the close, we've got about 40 minutes. the dow is off 60 points. that's half the lows of the day. the s&p 500 has weakened by five points and that shu giould givea better gauge as to whether there's broader weakness. >> some way to celebrate the fifth anniversary of the bull market which is not exactly happening today. the individual investor still hasn't totally bought back into this market. jane wells explains that part of the story coming up, and then legendary investor jack bogle will join us with his comments. also, one analyst slashing his pry target on dreamworks animation after call building peabody and sherman just another dog for the film studio. details later on that call coming up on "the closing bell." in my world, wall isn't a street... ...return on investment isn't the only return i'm looking forward to... for some, every dollar is earned with sweat, sacrifice, courage. which is why usaa is honored to help our members with everything from investing for retirement to saving for college. our commitment to current and former military members and their families is without equal. no two people have the same financial goals. pnc investments works with you to understand yours and helps plan for your retirement. talk to a pnc investments financial advisor today. ♪ stocks may be down today but check out this chart of the s&p 500 up more than 170% since the start of the bull run fi five years ago. >> are retail investors all in? jane wells is taking a look at what -- where have they been, jane? >> well, a lot of them have been looking for jobs, bill, not to make a joke out of it. to quote the chief strategist for td ameritrade, there are few people saying they have to be all in on the market. looking back, he says the percentage of cash and client accounts which usually averages 16%, shot up to 23% by march of 2009. it has since come back down but despite, as kelly pointed out, over 170% increase from the bottom of the s&p, no one can forget how scared they were five years ago. >> well, you know, i lost 50%, but, you know, you stay the course and keep investing. >> the whole thing is that nobody knew where the bottom was, you know, and every job, you go to work and people were getting laid off left and right. that was the worst part was that the stock market affected people's jobs, not just people's portfolio. >> people who loves jobs and houses often had to cash out their investments to pay bills and have not been able to enjoy the bull market and what a market it has been. look how these five stocks have improved in five years. apple, up over 500%. disney up over 400%. fidelity tells us while two out of three investors they surveyed were scared or confused five years ago, today more than half are confident and feel better prepared and 42% have both increased their contributions to retirement plans and to their emergency funds just in case. bill and kelly? >> jane, thanks very much. more now on the read of the retail investor right now. >> yes, probably no one better to ask than vanguard founder jack bogle who is often known as the godfather of those index funds and joins us now. jack, it is great to see you. >> welcome back, mr. b. >> is there any truth to the fact -- >> great to be with you both. >> -- that when retail investors start to get involved is when we should get worried or is it an important plank of any bull market? >> at the depends on the time period. in january, for example, mutual fund investors, and that's probably the best example we have of the retail investor, actually took money out of u.s. stocks. they put some in to international stocks, probably emerging markets, which i look at as being a more speculative sector of the market. so i don't see big cash flows. i haven't seen the february data yet. but i don't see big cash flows pouring into equities through mutual funds, and i think the investor maybe is better balanced than we all think he is. and, yeah, this is risky territory for the market. i'd say something very strong about seth klarman, and that is he's a heck of a lot smarter than i have. i have been around for a long time -- >> but your company -- he manages $27 billion, but vanguard's $2 trillion now. so you can match -- >> $2.5 trillion, bill. >> but who is counting. >> yeah, right, exactly. so are you saying that the little guy who has avoided this market for the last five years after a five-year bull market that has seen these stellar gains s this the wrong time to think about getting back into the market? >> i just don't think the investor has any business either getting in or getting out under almost all circumstances. they shouldn't have gotten out, some did, quite a few did when the market went low, but if you look at the fundamentals, bill, one thing that's quite striking is we had once in basically 80-year time period cut in dividends. people forget about the divid d dividend. i have always thought it was very important, as you know. and the dividend on the s&p went from $28 to $22, and now it's back to $35 i think is the number. so the dividend is up -- actually the number is correct here. the dividend is up 25%. the market is up 25%. operating earnings are up 25% from 2007. so i don't see the alarm. and the problem with men like seth and, again, a brilliant man, is if you follow his advice, you hear what he's saying and it's going to be thoughtful and wise, is will he call you and tell you when it's time to get back in? and, you know, he's a busy fellow. that's probably not likely, and so we all sit here knowing there's a bad day coming up out there somewhere when the tapering ends, the buying ends, the interest rates start to go back to normal levels and the government has depressed them seriously, and that's been a big factor in valuing the bond market and the stock market, and nobody knows when that day, great day of judgment, bill, is coming, but we all ought to be aware that holding all stocks, even now, is probably a dangerous game, and some kind of bonds, some ballast despite the lousy interest rates, forgive me, despite the depressed interest rates, should be part of every -- almost every investor's portfolio. >> your argument is basically get involved, make sure it's diversified, you're not just in equities, but it's important i think as well to reflect on this cycle. and as people are taking stock of the fact that we're now in one of the longest bull markets in history, if it does have some room to go based on, you know, when the fed begins to tighten and the fact that recession doesn't appear to be right around the corner and all of that, what would it mean to you if all of a sudden it turns out like we're in a bull market that could rival the expansion we had from the 1990-2000 period? does it speak to some of the risks building up in the system? >> i look at it in a little different way, and let me see if i can explain it this way. the stock market is often very misleading. sometimes too high, sometimes too low. it moves in fits and starts. what does not move in fits and starts is what the stock market enables you to do, which is own corporate america, let's put it in that simple way, and corporate america, we have a very good idea, will grow about as fast as nominal gnp, that's like 5%. the dividend yield is 2%. you should be looking for a long term return, long, long-term return of around 7%. that means your money will double in ten years nominally. so to try and guess when to get in and when to get out, i think honestly is a fool's errand. stay in unless the circumstances get like they were in 2000. that was a real bubble, no question about that. i don't see that now. but anybody that goes into any year without an awareness that the stock market could easily drop at any point, let me say for the fun of it, 20%, 25%, that can happen. and it can happen out of the blue, and it's better to be psychologically prepared for it, financially prepared for it than to think that the skies are going to be clear forever. they're never clear forever for heaven's sake. >> never known a period in market history when it was evident. $2.5 trillion, vanguard's now number one by far in the mutual fund business. is it too big to fail now? should the government allow a company like vanguard to manage that kind of money these days? >> well, that's a multifaceted question. no, we're not too big to fail because failure comes when you've got a lot of borrowed money, and we don't have a penny of borrowed money here. if the stock market goes down, it goes down. and if people take their money out, they get their money out. if they put it in, they get their money in. there's really not such a thing as financial failure here. however, i think it is fair to say, to concede, that the broader point that vanguard is a systematically important financial institution is just simply undeniable, and we own 5% of just about every company in america with a few of our competitors and we probably own together 20%. mutual funds as a group own 35%. so that's a systematically important financial institution because it controls corporate america and, as everybody i think knows, doesn't seem to feel like doing much about it. and to me that's more important than the financial side because if you've got no debt, you know, you have no people pounding on your front door. >> you don't invest on margin at all at vanguard? >> we once had a fund that did. our experience was such that we have never done that again. ie, it didn't work. >> burnt once and you learn the lesson right away. always good to see you, jack. >> you learn from your experience. >> yes, you do. >> it's a great teacher. >> thank you so much for your perspective this afternoon. >> always fun to be with you both. >> see you later. >> jack bogle of vanguard. >> 5% of every company? >> think about the fact -- >> that is unbelievable. >> mutual funds which is kind of dormant money owns 35% of corporate america. if you want to know where the agitation for deploying that cash or what have you may ultimately come from, watch that space. >> absolutely. that's for sure. where were we? we're heading toward the close. 30 minutes left in the trading session with the dow down 53 points right now. doesn't look like we're going to get an all-time high on the s&p today. >> not today. search crews still have found no sign of the missing malaysia airlines flight. we'll have the latest do developments. plus, we'll hear from an expert just how hard it is to locate a plane at sea. we'll be right back. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. welcome back. with stocks trying to make a bit of a comeback into the close, the dow is only off about 40 points. the s&p only about 2, bill, so we're still in record territory watch if that index moves more positive, and if you're wondering why the dow is weaker today, it is on weakness in boeing shares. a little bit of nike weighing on that index as well. >> boeing has been down 2.5% today in part because of the malaysian airlines mystery. the search intensifying for that plane that's been missing for nearly three days. we have the latest. >> reporter: really has been a difficult day here. in this room they have officials coming in to brief journalists every four hours. they haven't had anything really to update us on. every possible sighting has turned out to not be evidence of what happened to this aircraft. sighting of a potential life raft, sighting it was thought at one point of oil off the coast of vietnam. that was tested. that turned out not to be aircraft related, and so not just the journalists waiting here but the families who are -- have been here at the airport where we are waiting for news ever since this aircraft disappeared are left just waiting and hoping. they're saying this is still a search and rescue operation, and there is a coalition of nations searching the vast ocean off the coast here, including ships and aircraft and various vessels from all around the world, but so far even though they are now extending where they are looking, so far they have not found anything, any clue as to what happened here. back to you. >> in an area as vast as this search is, how do you go about it and what kind of technology is used? >> let's bring in former ntsb investigate greg five. thanks for joining us. they're employing everything they've got to try to find this thing. is it just going to be like the air france flight of a few years ago, just have to wait those whatever number of days for the things to start to surface in the ocean wherever it is? >> if that, in fact, is the case, bill, if this airplane has gone into the water, it will then take somebody, you know, either the search party or a moving vessel through that area to find the wreckage. but really because there is no wreckage, at least on the sea surface right now, it's highly probable this airplane could be inland somewhere in a jungle environment. >> greg, that's interesting. i mean, i guess you have to just look at the size of the area from which the plane disappeared which i have heard plenty of people around here saying how can it be you can't pinpoint in any given second where a jet is, where an aircraft is? why is it that there seems to be so much mystery with regard to exactly when and where this plane disappeared from the skies? >> kelly, we typically use radar to track the movement of the airplane, but there are parts of the world where radar coverage is scant, if even existing. so they require pilots to make mandatory reports to air-traffic controllers to track their progress in lieu of radar coverage. the problem is we don't have the fidelity in the radar data that is available to really pinpoint where this airplane went. >> if it went down over land though, wouldn't it be easier to track and find the ping from the jet than it would be if it's presumably at the bottom of the indian ocean somewhere where the depths mean we can't hear it right now? >> bill, there's some confusion. the pingers that are actually on the cockpit voice recorder and the flight data recorder are water activated. if the airplane crashes in the water and those boxes are relatively intact and the battery is still attached to the unit, then they will activate. there is an emergency locater transmitter which is separate from the cockpit voice recorder flight data recorder that will activate with a 5g impact or greater, but if you have a high speed impact and that box is destroyed, you will not get that elt signal. >> and, greg, going back to the point about radar technology, why is it there are these gaps? is that an issue of funding? is that an issue of different countries or regions being involved? is that something that you think after this kind of incident will be changed or addressed? >> i think that they're going to have to address this, kelly. i mean, we do have spots -- now, when you're looking at vast expanses like the pacific ocean and the atlantic ocean, you'd have to have radar sites strategically placed out in the middle of the ocean to be able to have that continuous coverage. the system has worked pretty well, but i think the debate and the discussion is going to start focusing on whether we need to have realtime gps tracking. we have that with tractor trailers and cabs. >> right. yeah, we have that with the most my nut parinute parts of our transportation system. why not for jet planes? >> it's because we live in a world, in an aviation world where we have always had airplanes in re daradar coverag. >> i have to know, you're an experience investigator. presumably you've investigated many a crash. what's your gut tell you? this is a highly reliable plane built by boeing, and it just disappeared. what happened do you think? >> well, bill, it's hard -- we don't have a lot -- >> of course, exactly. what little we know right now. >> but if you look at it, you know, you have to look at the most likely scenario, and if you look at the helios airlines 737 where the crew and the passengers became incapacitated due to hypoxia, you look at a payne stewart type accident where the airplane was still flyable and continued to fly for several hundred miles before it crashed, we could have a scenario where something happened at 35,000 feet, rendered the crew and passengers incapacitated, and the airplane flew in some direction until something either knocked it out of normal flight or the airplane ran out of gas somewhere and we just haven't found it. >> greg, thank you so much for your insight. again, a tragic story over the weekend. we really appreciate it. >> terrible. >> you're welcome. we've got about 15 minutes to go into the close. the dow is off 42 points. the s&p only 2 points. bill, i just got to say for the cost of search and recovery and how important it is to our national -- international transportation system, with not invest in gps tech following for these snashth. >> maybe they will now. it takes something like this for that to happen. goldman sachs warning that stocks with super high growth expect medicatioations may be a your portfolio. seema mody names some names. brick and mortar retailers struggling during this holiday season and after. so why is the mall of america in minnesota, the nation's second largest shopping mall, planning to get much bigger? we'll hear from one of the mall's top executives coming up on "the closing bell." tall the building is, or how ornate the halls are. it doesn't matter if there are granite statues, or big mahogany desks. when working with an investment firm, what's really important is whether the people behind the desks actually stand behind what they say. introducing the schwab accountability guarantee. if you're not happy with one of our participating investment advisory services, we'll refund your program fee from the previous quarter. it's no guarantee against loss and other fees and expenses may still apply. chuck vo: standing by your word, that's what matters the most. if yand you're talking toevere rheuyour rheumatologistike me, about a biologic... this is humira. this is humira helping to relieve my pain. this is humira helping me lay the groundwork. this is humira helping to protect my joints from further damage. doctors have been prescribing humira for ten years. humira works by targeting and helping to block a specific source of inflammation that contributes to ra symptoms. humira is proven to help relieve pain and stop further joint damage in many adults. humira can lower your ability to fight infections, including tuberculosis. serious, sometimes fatal events, such as infections, lymphoma, or other types of cancer, have happened. blood, liver and nervous system problems, serious allergic reactions, and new or worsening heart failure have occurred. before starting humira, your doctor should test you for tb. ask your doctor if you live in or have been to a region where certain fungal infections are common. tell your doctor if you have had tb, hepatitis b, are prone to infections, or have symptoms such as fever, fatigue, cough, or sores. you should not start humira if you have any kind of infection. take the next step. talk to your doctor. this is humira at work. welcome back. the s&p 500 trying to turn positive here within about a point of doing so as we have this fifth anniversary today of the bull market rally, bill. >> courtney reagan breaks down today's big movers for us. >> it's a decidedly negative day but not every stock in the component index is lower. fmc corp one of the leaders. investors are applauding the announcement to split into two separate publicly traded companies. one focused on al agricultural, health, and nutrition. biogen and amgen among the strongest movers. shares of dreamworks slipping lower. cowan issuing a report saying the studios new movie mr. peabody and sherman is turning out to be just another laug. lowering estimates not just for this film but future films and cutting the price target on shares as well. >> i didn't want to say that to jeffrey katzenberger recently but we talked about that. i didn't think that movie would do very well. who remembers mr. peabody and sherman except me? >> i said, what's peabody? >> makes me better about not understanding a reference. i take it you didn't see the movie. >> no. >> we are approaching the close and the question is whether the s&p will turn positive here. we'll keep a close eye on it for you. it's down less than a point. the dow is off 28 after being down more than 100 at the lows. >> we could be positive on the close here. might get an all-time high on the s&p. stay tuned for that. jim cramer has been skeptical about this market lately. coming up, jim tells us where he sees stocks heading next as this bull market rally celebrates its fifth anniversary. plus y is he on an oil rig right now? we'll tell us because he's coming to us live from said oil rig. back in a moment. weekdays are for rising to the challenge. they're 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 what's next. (announcer) scottrade knows our and invest their own way. with scottrade's 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 real-time. plus, my local scottrade office is there to help. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) ranked highest in investor satisfaction with self-directed services by j.d. power and associates. welcome back. about eight minutes left in the trading session here. the dow is down 26, well off the lows of the session, and, boy, the s&p, we could get an all-time high if it finishes positive. we're down a quarter point right now. joining me to talk about the markets, j.j. from ameritrade and john from oppenheimer. good to see you both. here we are five years from the low. do you think about taking profits? is it full steam ahead? >> bill, the way i look at it is we hold course. we stay the course on this market. perhaps take some profits from time to time and outsized gains, but we have enjoyed the ride, particularly since the fall of 2009. so we'll stick to the order. >> assuming you were in this market to enjoy the ride, j.j., i mean, is it a time to think about getting in now if you haven't been in this market? >> i think you can but i think john brings up something interesting. we released our investor sentiment index today, based on people who made a trade last month. it's an all time high. one thing that's interesting, people took profits in names like chipotle that had 52-week highs. and green mountain coffee. very interesting that way. if you look at the buy side, they bought names like coca-cola and ge that suffered some volatility. people aren't as afraid as they once were of volatility. >> but more disciplined likely with some rotation. people have a sense for it this time around. >> but we still have the high flighters like a tesla and netflix that has everybody's imagination. facebook hit an all time high. >> you have to have a dream. >> is that a dream or is it froth? >> i would think it's more -- still more of a dream and with facebook there's plenty of reality behind it. the mobility of facebook looks like a much longer-term thing and the commitment of many corporations to advertising on it. >> but i'd say one of the things, too, is we're seeing people buying names like chevron, procter & gamble. there's no sexiness. >> unless you believe the long-term prospects for the energy -- the role energy will play in the economy over the next ten years. >> and that's great, but, again, i think one of the differences is you're not seeing people coming in as we have seen in some of these things where the sexy name is where everybody is going. obviously some of them, as you mentioned tesla, have done very well but it's encouraging to see some of the stalwarts also doing well because thane people are being smarter about their investments. >> good to see you both. we'll come back with a closing countdown for this monday with the dow down about 30 points. after the bell, former apple ceo john scully is with us to make a big bet on the smartphone market. you may be surprised though to find out where he'll be selling those smartphones. he'll tell us about his new endeavor coming up later. is he taking on his former company, by the way? you'll find out. you're watching cnbc, first in business worldwide. ♪ for tapping into a wealth of experience. ♪ for access to one of the top wealth management firms in the country. ♪ for a team of financial professionals who provide customized solutions. for all of your wealth management and retirement goals, discover how pnc wealth management can help you achieve. visit pnc.com/wealthsolutions to find out more. ido more with less with buless energy. hp is helping ups do just that. soon, the world's most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. multiply that across over a thousand locations, and they'll provide the same benefit to the environment as over 60,000 trees. that's a trend we can all get behind. save you fifteen percent or more on car insurance.ould yep, everybody knows that. well, did you know the ancient pyramids were actually a mistake? uh-oh. geico. fifteen minutes could save you fifteen percent or more on car insurance. ♪ ♪ ♪ [ tires screech ] chewley's finds itself in a sticky situation today after recalling its new gum. [ male announcer ] stick it to the market before you get stuck. get the most extensive charting wherever you are with the mobile trader app from td ameritrade. welcome back. about 2:30 left in the trading session here. the dow at its low. here is today's trading session, down 118 points on the open this morning following the weakness in the asian markets overnight. boeing was the weakest of the links today for the dow, maker of the jet that disappeared, the malaysian airlines jet. keep that in mind. sideways the rest of the day and we have come back in the last hour, down 39 points. the s&p is down 1.5 points. needs to be positive for an all-time high. maybe not now but it looked like it could have done it ten minutes ago. by the way, not everything was negative today. some technology stocks did pretty well, twitter, new price target, at least one house saying $72 for twitter. it's up to $53.87. i mentioned facebook hitting an all-time high. it's up 3% right now, and apple, even big apple, was higher today even though the nasdaq overall was lower today, bob pisani. >> we had some battery stocks, plug was up notably. >> up 31%. that fuel cell niche is really very hot right now. >> the big story is it china. biggest drop in exports in 4 1/2 years in china. biggest trade deficit, a trade deficit. who would have thought in china you have a trade deficit? year expo they're exporting like crazy. the problem is slower china growth. if you take china out of it, global growth becomes a lot harder. that impacts stock valuations. that's why we're seeing -- >> and the german stock market is suffering right now as well and that's the growth engine for europe. >> dax is down 3% in the last two days. you can see this affect on exchange traded funds. all the commodity countries, peru, south africa, china, australia, all the etfs associated with that were weak today because those are the countries that are heavy producers of commodities. iron ore is down big, copper is down 6% in two days. that's an enormous move for copper. all this is on the global growth story. people keep writing me, all this is on china export? but it impacts the way we view stock valuations worldwide. that's the key story. >> thanks, bob. >> okay. >> see you later. so we're going out with minor declines here for the major averages. again, the dow was down 118, now down 38. what does it mean for tomorrow's trade? could we get another all-time high on the s&p at that time? let's talk about it, shall we? coming up on the second hour of "the closing bell" with kelly evans and company. i'll see you tomorrow, kelly. >> thank you, bill. welcome to "the closing bell." i'm kelly evans, and here is how we're finishing a relatively down day. i say relatively because we have to watch and see how the s&p shakes out. it looks like we lost about a point on the index putting it off friday's record highs, again just barely. what's interesting is the way the dow has snapped back from an intraday low, more than 100 points to close down by about 33. let's get more on this now from my panel. joining me now is independent tech reporter natalie morris, dan greenhouse and sheila dharmarajan and dom chu and "fast money" trader brian kelly in a moment. it's great to see all of you. the first thing we need to do is put what happened in today's market in context. we've got five years now of this rally. we've got all sorts of people talking about whether the markets are fairly valued, whether they're over valued to the points carmen was making. dan, care to weigh in? >> it's important for investors to remember here on the fifth year anniversary that in this particular instance, length really doesn't matter. what matters is valuation. what matters is perspective forward returns. so when you hear and you read all these stories about, well, the rally is five years old, it's getting mature, it's ageing in length, that really doesn't matter. what matters is what you think individual stocks and by extension the market are going to do over the next, say, three years. that is really all that matters. not this five, year, seven-year length of time. >> brian, do you agree with that? >> listen, the market had every reason in the world to say down today and it didn't. is it fairly valued? i think it's overvalued if you look at market cap to gdp, total market cap to gdp. but it doesn't matter. the market will not go down. we were down 118 points on the dow. we have china which is in some kind of a mini meltdown. we have europe rolling over. and the u.s. stocks -- >> weak data out of japan. >> but, brian, i have to disagree here. the s&p 500 to call the market just femll 6%. >> what do you mean? >> earlier this year, the s&p 500 was down related to emerging markets -- >> but it's back at new highs. >> 18 or 19 times. >> flash correction. >> i don't see how we could say the market refuses to go down. it just fell. >> okay. 6% -- >> dom? >> you know what i'm saying. down 6% a month ago. that's a normal correction in any time. >> it's not even. dom, so talk us through this. what do you think is most significant about the activity we're seeing? >> what's interesting about this is you have some ideas about what's happening with the ukraine. you think with all the tensions in the ukraine, the market would be going down. it's not really going down, not because it's not a bad situation, but because there's nothing really pressing yet. bullets have not flown. yes, there are some developments. you have some data out of china. yes, that's important, but, again, we've had umpteen numbers of times where the market has corrected at least 5% but on average according to the spoke, it's only been an 8% correction at worst on average for each of those times and every time the market has come back. the real question becomes, kelly, what takes this market down? nobody can really tell anybody, including me -- >> i don't know why everybody is waiting for a larger correction. in the last expansion from 2003 through 2007, we didn't fall 10% once the entire time. >> wow. >> we have had numerous 10% corrections this entire rally. >> this is a healthy market, dan? i think that's what everyone is trying to get at. is there something fundamentally worrisome about the activity we're seeing or not? >> and i think there's so many indicators of that. we don't know what's going to happen to interest rates. we don't know what's going to happen with quantitative easing. it's just there's so much sort of skittishness we don't all agree on what signs are pointing in which direction. >> we are starting to hear the drum beat of the bears. goldman sachs saying clients are starting to ask when is the party going to ask and seth klarman saying this is a truman show. it's going to end soon. we just don't know when. there are too many cracks in the market to keep it going farther along. >> seth klarman raises an interesting point, going back to some comments he's been making over a number of years, calling it the twinkle rally, there's nothing substantial to it. i don't know if you can really make that case for this market. who wants to make the argument there actually is a fundamental reason why stocks would have rebounded, gone on a 200% return for the s&p 500 from that low. is there a case to be made and that it continues? brian, what do you think? >> the case to be made is we're on the edge of financial armageddon and now we're not. so, yes, stocks should be higher. corporations should be higher. i think what people are just worried about in general is how sustainable it is, how much of the earnings -- jpmorgan estimates that somewhere around 60% of the earnings growth has been due to buybacks. they're using free cash flow. now corporations are up to about 70% to 80% of their free cash flow being used for buybacks. at some point that ends. again, this morning we should have been down and stayed down. the market didn't. so for right now everything looks fine. >> you could talk about credit markets as well. to quote brian reynolds on this, he said the strength in credit markets, how narrow spreads are, the involvement of most other kinds of funds in this space says -- points to an s&p that should be at 2800 and he was saying at the time we can barely get above 1850. that gives you one point of view on what kind of upward bias or pressure there might be in this space. >> whether or not you believe that there's any substance to it, whether or not you believe it's for real, whether or not you believe it's all central bank driven, if you did not participate in the last five years, you missed out on one of the biggest bull runs of maybe two generations at this point. so whether or not you think there's a fundamental case to be made for stocks, there is at least a reason to hedge your bets on the long side and at least dabble -- that's what investors are telling me. they're saying they can't afford to not be in there because the wave has been to the upside and it's been so strong for the past five years. >> if you are looking over that cliff, then these commodities could become cheaper again and that's one factor we haven't considered is demographics, and demographics, we have an aging baby boom population a skittish echo boom population. it could be that you can bide your time, right? you can make that argument. >> i think the question is what do you do now? we're at this five-year anniversary. if you didn't get in the market, you already lost out quite a bit. do you sit in cash like seth klarman is doing? >> first, what seth collar mklas is not replicatable by the average investor. totally separate story. again, in the context of this entire conversation, we're discussing the five years on, did you miss it, did you not miss it, are you right, are you wrong? all that matters is where you think equities are expected to return going forward. the rest of this conversation is really just interesting -- >> i thought jack bogle was interesting on this last hour. would you quibble with anything he said when he said long term what you're really doing is buying into corporate america. you're talking nominal gdp. you're money will double after a relatively short period of time. is that still the case for equities here or do we have to pay attention to all the valuation warnings and think about market cycles? >> on a secular basis, on a longer term framework, that's a totally reasonable and everybody expects somewhere between 5% and 10% equity appreciation over time. to be clear there are reasonas o quibble. for shorter term investors, those who may have missed out on some portion or all of this rally, the question again becomes what are equities expected to do over the next three to five years. that's a much more challenged environment. the arguments of jeremy grantham and seth klarman and warren buffett, monster investors who are making the case that perhaps the immediate returns are less than what we discussed -- >> i will say this, kelly, here is the thing. if you are allocating your assets properly for your stage in life, it will never really be an issue. so you just have to know what the risk tolerance is and understand there are going to be risks. if you invest on a regular basis, asset allocation matters. >> we'll leave it there for a moment. catch much more coming from brian kelly up on "fast money" at 5:00 p.m. brian, thanks very much. great to see you. we want to get more on the fifth anniversary of the bull market now from cnbc's very own jim cramer. yes, from the louisiana oil rig. jim, we got to talk about that. to what extent does the story you're covering right now fit into your broader view on where the market goes from here? >> well, i'll tell you it's so funny to listen to everybody all day today. i think the real story was that china didn't bring us down. we started with china bringing us down. what's interesting is behind me you will see a rig. this is a company, we talk about overvaluations. how about this? this one yields 6%. it has really gotten crushed. oil has not come down in price. i know there's more ships coming on that do this kind of drilling but there are pockets of undervaluation just like there's ballard power and fuel cell. overvaluation, undervaluation, that makes it all fine for me. >> what do you mean fine, jim? when you hear the guys like warren buffett, seth klarman, a lot ever other guys we were just talking about speak about the market in terms of being fairly valued, fully valued, what do you think? >> well, when did seth klarman turn negative? we should look into that. >> a couple years. >> did he just turn negative last week? as a former performance manager, if i said -- when i got in the business in 1979 the market was radically overvalued. '82 it was overvalued. '87 it was ridiculous. you have to look at whether they're saying the market is versus individuals. if you think ensco is overvalued, you haven't done any homework. if you think that fuel cell companies are cheap, then you obviously have lost your mind. but that's okay. what i'm say something that there are sections of the market that are overvalued and sections that are undervalued and a lot of stuff that's fairly valued. we had a o6% decline earlier. that's fine. the train never really leaves the station. >> you lived through the 1990-2000 bull market. goes down in history as one of the best runs but ends so poorly. people are so cautious thinking are we going to repeat the experience? >> world war ii they thought they were going to repeat world war i. there are always generals who say it's going to be exactly the same so, therefore, we have to avoid it. i look at what happened to facebook today and i know people just think facebook is just total wampam. it makes a lot of money. it's doing well. is it overvalued on 2017 numbers? probably not. you have a lot of cloud stocks that are very overvalued on earnings but they're not -- in revenues that's how growth managers invest. so i can justify a lot of prices. as soon as you hear the word justify, everyone says you're a big phony, greater fool. if you leave now, what are you going to go to? the five-year, the ten-year? >> right. >> 6%. >> yeah, yeah. you know, u.s. data starts to improve, china data starts to improve, maybe we're talking about a different rate environment. jim, what's coming up op mad money? >> nucor is cheap. energy 21 bought back 12% of their stock and they're a really opportunistic company. we have governor jindal who is trying to marry all the industry with the actual state's natural gas resources. it's working. come down here. there's a lot of jobs. you see billboards everywhere, come work. >> exactly. jim, thanks for drawing attention to it and reporting the market today in context. really appreciate it. next time i want to come with you, by the way. it looks like fun. >> please do. fabulous down here. >> see you, jim. much more ahead on markets, your money next. we're going to talk about watching out for hazard signs and talk about some stocks in particular that could be at risk of underperforming. seema mody has been crunching those numbers. stay with us for that information. later, the parents of a 21-year-old woman killed in a car wreck that could have been avoided if regulators had issued a recall on a potentially fatal gm ignition switch. [ bagpipes play ] make it happen with fidelity active trader pro. it's one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today. welcome back. goldman warning clients that stock was super high expectations for earnings growth tend to underperform the markets. seema mody has been doing some number crunching of her own to find out which companies could be prime candidates for burnout. >> basic concept makes sense, right? if the bar is set so high, it's even harder for these companies to actually beat street consensus. goldman sachs warning clients it's these companies with high long-term easterninrnings growt expectations that underperform on a one year, three year, and five year basis. high flying stocks like facebook, om zon, gilead sciences, other names in the energy space, chesapeake, eq2, could be bot oil. in terms of which company is expected to grow at the fastest pace in q1 year-over-year, kelly, any guesses? >> fastest -- no, go ahead. i got nothing. >> here it is. you'll get it. it's netflix thanks to, of course, a rise in subscribers as well as its investment in original content. analysts are expecting a big jump in netflix's earnings in q1. when you look at among these games, netflix trading at the highest multiple as the stock continues to rally up another 20% just this year. so what does this all mean? well, i think what it tells us is investing in high growth stocks may not be the recipe to success. in fact, there may be some red flags out there, kelly. >> seema, thanks very much. this is an important one. i want to ask the panel about it. dan, is there such a thing as a growth value distinction? >> sure. listen, we talked about seth klarman in the last segment. he's an entirely different investors than a lot of people that look at names like tesla and netflix, full disclosure we have a buy on it, a neutral now. >> on netflix. >> on netflix. two distinct styles of investment. one focuses on price to book ratio, deep value that over time will reward the investor. the other is largely speaking sort of a momentum play where you look for high pe multiples, high valuations, but also high -- >> this raises an interesting point. is it momentum people are after or is it growth? when i think about a company like amazon, it's not necessarily momentum. it's more about taking the risk on cash flows or profits that are perhaps not as reliable and a cash in that's not as typical. >> it's clearly a tucks of bofu both. when you look at a lot of these companies, fireeye and those types of companies come to mind, there's an embedded level of profit and revenue growth that you tend to, especially in an environment with low revenue and earnings growth more generally, pay up for. that's not to take away from other environments, but in the current environment, simply put, investors are choosing to pay for up for growth. >> like seema was saying, some of these companies have such high expectations, it's just shooting themselves in the foot. so can we sort of let them be? can we let them grow at a modest rate or is that just something that we shouldn't even discuss? >> no, because, i mean, investors are pricing these stocks so highly. they shouldn't be allowed a free pass if they don't produce. i think it's an argument between momentum and growth. yes, people are definitely paying up for it in this time when everyone is looking for yield but who wants to fight the tape. you don't want to stand in front of one of these stocks. what i find ironic is a lot of these ceos themselves are warning about the stock prices of their own companies. reed hastings and netflix. >> or using them to make major acquisitions. >> or buybacks. >> reed hastings has said our stock is a little high. we realize how much it's grown. >> it was interesting only because, again, dan pointed out fireeye. it was in the news because they just had a very high profile secondary stock offering. this stock has been on fire. they bought mandiant. they're going to be a premiere player in cyber security, internet security, and because the stock has gone up so high, they have taken the shot. they've taken the chance at selling some stock, both the company and the existing shareholders to take advantage of that run. so when it comes to these momentum plays, by the way, that stock is still moving higher despite the fact that there was that sharper selling. >> for the average investor out there, if you can't stand the type of volatility that are embedded in a lot of these names whether it's the ones we've discussed or others, it's very -- no matter how high they go, no matter how much you see other people making money in them, it's better just to stay away and focus on something that's a little more tolerable to your level of risk. >> and miss out on a double digit gain in some of the momentum stocks, dan? i would say there's some people who say let's take the bet, let's take the risk and perhaps come out with a good yield. >> you have to be able to sleep at night. that's the key. thank you, seema. great to see you. now, were auto regulators asleep at the wheel? i'll speak with the parents of a 21-year-old woman killed while driving a self chevrolet cobalt. the government was warned about the problem three years prior to that accident and declined to investigate. there are a lot of questions that still need to be answered in this story. we'll be right back. for tapping into a wealth of experience. ♪ for access to one of the top wealth management firms in the country. ♪ for a team of financial professionals who provide customized solutions. great to see you. that still need to be answered management can help you achieve. visit pnc.com/wealthsolutions to find out more. peace of mind is important when so we provide it services you bucan rely on. with centurylink as your trusted it partner, you'll experience reliable uptime for the network and services you depend on. multi-layered security solutions keep your information safe, and secure. and responsive dedicated support meets your needs, and eases your mind. centurylink. your link to what's next. sometimes they just drop in. always obvious. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. welcome back. the national highway traffic safety administration under fire for failing to issue a timely recall of potentially fatal general motors ignition switches. phil lebeau has the latest developments. phil? >> kelly, it's a day where general motors announced its hiring two outside law firms to oversee an internal investigation into how it handled the recall of 1.6 million vehicles. the company also launched a website today, a website telling owners of those vehicles impacted if you have questions, let us know. this is the first outreach from general motors aside from saying that it would be recalling these vehicles and sending out the recall notices last week. in the website, mary barra, the ceo of general motors, says we are completely focused on doing what's best for you, our customers. again, general motors recalling 1.6 million vehicles last month because of faulty gm ignition keys linked with 31 accidents and 13 deaths going back to 2004. yesterday "the new york times" ran a blisinger article in which it blasted nhtsa's record over the last ten years saying they failed to see a pattern of complaints of more than 240 complaints involvingg m vehicles that stalled. we reached out to nhtsa for a comment. the organization saying that nhtsa uses a variety of tools to evaluate the more than 40,000 complaints it receives each year, including special crash investigations, searches for similar complaints and comparisons to other vehicles. in this case, they're talking about the cobalt case, the data available to nhtsa at the time did not contain sufficient evidence of a possible safety detect trend that would warrant the agency opening a formal investigation. that's from nathan naylor, the spokesperson for the national highway traffic safety administration. despite this don'ts to become a major problem, they have launched their own internal investigation. for the most part investors are looking through this and saying eventually general motors will get this under control. a lot of questions not only for gm but also for nhtsa. kelly? >> certainly are, phil. thank you very much. we want to now bring in leo and mary ready. their daughter kelly was tragically killed in 2010 when her chevy cobalt suffered what the family believes was the ignition switch failure while she was driving. welcome to the program. we are so sorry for your loss. >> thank you. >> and we'd first like to know general motors in the statement referenced the 31 injuries, the 13 deaths. do you know whether your daughter was one of the 13? have you gotten any confirmation from the company or the government here? >> no, we have not. >> and that would be because when you filed the complaint, there was some question about whether it had it do with the car suddenly stopping while she was driving down the highway or not. can you briefly tell us what happened and whether this recall you think could have prevented your daughter's death? >> oh, i definitely believe that had the recall been when the first accident happened in 2014, kelly's -- our kelly's accident was in 2010, january of 2010. she never would have been driving that car. >> and you have written -- >> we never would have purchased the vehicle. >> you say you never would have purchased the chevy cobalt had you known? >> right. we bought it used. we saw the car fax. there were no recalls on the car fax or any indication there were any problems with the vehicle. if we had known, we never would have bought it. >> and, mary, you had written, i knew the minute i got the news my daughter was kill sod violently and that it did not involve another car it had to be mechanical failure. general motors sent someone to investigate, but it sounds like they never really followed up with you. to what extent do you today even know what happened? >> we have no answers. there has been no closure for our family, and in 2010 it was hard to even post anything about kelly's accident. at the time i was posting on the detroit free press, and i was banned from the detroit free press for my complaints against gm. so a lot of things have changed. fast forward to 2014, and when you go on the detroit free press site and you look under gm information, all of these different topics are coming up, and the ceo, mary t. barra, the ignition switch, when gm knew. the information is more forthcoming in that sense, but gm still has not reached out to us, and we still have not received a recall for this latest -- a recall notice for this latest recall. >> so what did you think when you heard the news and then saw the article this weekend? >> when i heard the news about the recall, this latest recall? >> yes. >> well, i thought to myself, right from the beginning initially i believed that it was mechanical failure. call it a mother's intuition, call it what you want, but i knew the way that my daughter drove, and i knew the type of, you know, daughter that we have, and then when the second recall came in 2014, i thought to myself, this is just -- this is too much. i mean, the first recall we never got answers on anything that had to do with the power steering, the whole mechanism needed to be replaced. that had been manufactured in a partially owned toyota factory. and the only reason i found out about that recall was because i followed a thread that was from the bbc. here in the united states, it wasn't even being -- it wasn't being covered. >> well, and leo, there were two different ways in which you guys might have gotten some accountability or some answers here. one, of course, from general motors itself. the other from the government. and that's what the substance of the article over the weekend largely focused on. nhtsa saying that it had 260 complaints with regard to this kind of situation that amounted to 0.018% of the vehicles under recall and that's why it wasn't more aggressive. what was your reaction to all of that? >> well, i don't feel we personally got anywhere with contact. it made me really wonder what purpose they actually serve if the regulatory agency, they don't seem to have any authority or influence over what gm does. we really didn't get much of a response whatsoever from them, which was very disappointing because i talk thought they wou perhaps help us. right after kelly's accident, i called gm, and i was, you know, surprised about it and like thought we'd get some answers because they sent out an engineer from detroit to take the black box and, you know, a couple other individuals were there -- >> an accident reconstructionist. >> they took the black box, and they -- we were led to believe we would quickly get the information and they would never disclose to us what they found. >> and that wasn't the case -- >> pardon me? >> and i know from reading about what happened that you never actually got that back or got any indication of what the issue was and i just want to circle back -- go ahead. i'm sorry. please, go ahead. >> well, they sent some kind of report that didn't state anything to our attorney, didn't give any details. and basically how he summed it up was they're telling us, if you think there was a problem, you prove it. and they made all kind of conditions and everything like for liability for themselves like not to -- you know, they won't just freely give the information. last week our attorney contacted gm, requested the black box back. this morning he formally sent out a letter, an e-mail, but at this point they haven't responded to him. >> leo, we hope with all the attention now on this case that you'll get more answers and in the meantime there are some serious questions raised about the resources being deflployed across these agencies to make sure when this happens, that it doesn't go so long next time, that it may be able to prevent another tragic accident. thank you both so much for your time and for explaining what happened this afternoon. we really appreciate it. >> thank you. >> we'll take a quick break and be right back here on "the closing bell." tein in jellyfish, impact life expectancy in the u.s., real estate in hong kong, and the optics industry in germany? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 75% of our mutual funds beat their 10-year lipper average. t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. you stand behind what you say. there's a saying around here, around here you don't make excuses. you make commitments. and when you can't live up to them, you own up, and make it right. some people think the kind of accountability that thrives on so many streets in this country has gone missing in the places where it's needed most. but i know you'll still find it when you know where to look. it's amanda. hey sweetie. what? [phones rings] okay, i'll send it. one hundred seventy-two dollars for a chemistry book, what is it, made of gold? just use citi popmoney. boom. ah, she's feeling lucky. hey sweetie...cancun, yeah no, you'll be spending spring break with your new chemistry book. with citi popmoney it's easy to send money to just about anyone, anytime. visit your local branch or citi.com/easierbanking to learn more. welcome back. think the suburban mall is over? brick and mortar stores are shutting down left and right, the mall of america in minnesota is planning to get bigger and better. with 4.2 million square feet of space, already the mall of america in minneapolis is the largeest retail and entertainmet complex in the united states. you can fit seven yankee stadiums, 258 statues of liberty inside the mall, and even so it wants to expand. here to tell us why is maureen bow, the executive vice president of business development at the mall of america. maureen, welcome. you're talking about doubling the size here, really? >> yes, eventually it will be double the size. >> what's going to go in there? >> there's so much that we don't have that we would love to have. in the first addition, which is what we're building right now, there will be an office tower and a food hall. there will be a j.w. marriott and about 75 more retail stores and an event entertainment area. >> i'd like to bring in the panel here in just a second. first of all, i have to say this to me is not a mall. it's a city with a roof over it. >> some people call it a city within a city, yes. >> which in minneapolis i can understand. >> well, we like to say we're temperature controlled. >> okay. how long before there's a geodome? what do you think of this story? has been anyone been to the mall of america because sniff. >> i have, too. >> i have. >> i have not. >> doubling in size? >> i think the bottom line is shopping these days is an experience. you want to do more things versus just buy. it's not surprising they're adding on. it's already kind of a tourist attraction. the fact they're building on doesn't surprise me. what is more interesting is what you're finding happen to a lot of unsuccessful malls. they're being converted to thing like jails or health care centers or universities. it's interesting to see the have and have nots play out. >> i notice in the notes they say they have 400 events per year and 500 weddings. who is getting married at the mall of america? it's so funny but maybe we should just take the word shopping out of shopping mall. because it's a place you go to hang out with your kids and especially this terrible winter. i would let my kids run lapse. just run them like dogs, right? >> could you give us a breakdown of local versus foreign, if you will, visitors to the mall? how much is this people in minnesota and how much is it a tourist destination? >> well, we have 40 million visits annually and 17 million of those are from outside the market. about 3 to 5 million are from the international markets. so definitely tourists are very important to us. we try to create a merchandise mix that plays to people's passions because people do travel and spend to fill their things they love. >> that's right. and what are those things? how has it shifted since the recession and since the last time that malls in this country were generally expanding? >> you know, well, first of all, we've been open for 21 years and every single week for 21 years we've built something new in that building. it is absolutely critical to our success that we stay relevant and stay new. and we know today we're adding music, music is very important. it was missing from the mall for a while and so this summer we're bringing two great music venues back, the 400 bar which is actually world renowned, and hard rock cafe. people like creativity. we have something on the boards that will really play to people's artistic sense. technology. verizon opened an experience store that's absolutely amazing, and, of course, we have apple and microsoft. we opened an exhibition center with barbie and csi and star trek coming soon. so you have to go very wide in the range of interests you have. and then complement it with retail. and let the retail and the attractions leverage each other. >> dom? >> this is not your normal mall. i have not been there, like i said, but based upon what you're telling me, you're telling me about stores, specialty outlets that are different than any mall i have near where i live or that i have ever seen gone to and that makes this much more of an experience, a one off, as' po opposed to an indicator. >> maybe you can sell admissions tickets. quick last word? >> no, i think every mall needs to work at differentiating themselves to survive, and it is about the experience. getting people away from their laptop, getting them in the mall, and having our sales associates tell them they look great. that's how you succeed. >> i know dan can't wait to make the trip. maureen, thank you so much for joining us. it is absolutely fascinating. a little window into what's happening in the economy. we appreciate it. >> thanks. >> now, remember john scully the former apple ceo? he's speaking with me exclusively next. wait until you hear the new smartphone he hopes will catch on in india. the big question is whether it's affordable in a question where a $100 phone is a huge expense for the average person. and later, $1 million at stake. the top six finalists for the compo competitive hult prize. gunderman group is a go. yes! not just a start up. an upstart. gotta get going. gotta be good. good? good. growth is the goal. how do we do that? i talked to ups. they'll help us out. new technology. smart advice. we focus on the business and they take care of the logistics. ups? good going. we get good. that's great. great. great. great. great. great. great. great. great. (all) great! i love logistics. anbe a name and not a number?tor scottrade. ron: i'm never alone with scottrade. i can always call or stop by my local office. they're nearby and ready to help. so when i have questions, i can talk to someone who knows exactly how i trade. because i don't trade like everybody. i trade like me. that's why i'm with scottrade. announcer: ranked highest in investor satisfaction with self-directed services by j.d. power and associates. welcome back. former apple ceo john scully is running a firm bearing his name and he's making a huge bet taking on india's smartphone market. hoping to sell phones to that large population. he joins us in an cnbc exclusive. john, it's great to see you. with not target the smartphone market here in the u.s.? >> well, thanks, kelly. as you know, in high-tech it's all about timing. timing is everything, and in the india market, they are one of the largest feature phone cell phone markets in the world. last year they sold 257 million such phones, but right now they're moving from 2g to 3g which means it's possible to have smartphones and fosrtunatey the technology has gotten good enough that we can deliver a very high quality experience product for under $100. compare that with samsung and apple where the high end of their product lines can be as much as $800. that's roughly two months' salary for indians, and it's out of reach as appealing as those products are. >> at the same time you have the likes of mow mozilla coming out with super cheap phones. are you aiming for a middle market? >> there's already good evidence there's a low price market that goes all the way from people selling off the street, that's not our market, to some local brands that have been quite successful. we think there's an opportunity for a really global brand because if we're successful in india, we plan to move into the rest of southeast asia, middle east. we've acquired about a billion dollar in revenue of i.t. businesses in southeast asia. if you were nokia with 19,000 people in your organization trying to sell at these price points is not an advantage. so we think you've got to be extremely lean, run a frugal asian model, and you can bring out a quality product now with the technology where it is. so it's a great time to do what we're trying to do. >> so why target india as a foothold and not china with a similar population and similar upgrades happening across its wireless network? >> i think the real answer is we know a lot about india. we have a strong management team there. we're already running businesses in india that we own. so it's better to sell to the market that you know than the market that you don't know. we just don't know enough about how to market products in china, and so we'd like to start with markets in india, then move into the asean countries, thailand, indonesia, places like that. we'll wait and see. maybe or maybe not we'll go into china. >> you're taking on the iphone. you are taking on apple here in the biggest players in this space even if you're starting small, aren't you? >> no, we're really not. obviously, people love the iphone. it's a beautiful product. but it's an expensive product for the emerging markets, and the new middle class wants the same aspirations as our middle classes had but they don't have the affordability for it. now the technology is good enough that you can have a great quality phone that can take photos. you can have bollywood music, cricket scores, and in that part of the world, in india, receiving a call is for free. to send a call is less than a penny a minute. there's a market for this very, very price conscious consumer and we're looking at the young people in that let's say late teens up until about 30 years old. >> and i suppose what i mean is when you go to these mobile world congress and these kinds of events, everyone is talking about the space. apple even introduced a 5c phone that was meant to be a little lower end. wasn't lowera anend enough. you're taking on the global smartphone market. you want to be the big player in the space that everyone is trying to go after. >> well, it's not really that challenging because, first of all, having thousands and thousands of employees only adds to your overhead costs and makes it difficult to make money at these very low price points. we can leverage the billion dollar supply chain business we have in asia and we can do it much, much frugally. the second thing is that the product we're selling is not trying to compete with high-end samsungs or high-end apple 5s. we're focused on basic things like photos, like music, cricket scores, things of this sort which are very, very appealing to people but just isn't what people are doing with the high end smartphone which may be doing mobile video, for example. >> have you run it by carl icahn yet? >> no, not yet. i think we're going to stay private for a long time. this isn't -- fortunately, we're in a position where we don't have to take a company like this public. we can build it up and own it ourselves and we've got a great operating team, a lot of experience building billion dollar businesses in india. we're pretty excited that this is a time for this type of an approach. a year ago would have been too early but the smartphone business is expected to be 120 million phones this year in india. it's up 180%. so timing is we think just right for this type of an effort. >> and we hope you will come back and let us know how it's going. thank you so much, john scully. great to see you this afternoon. good luck. >> thank you, kelly. >> so what's drawing the most clicks on the website? the hot list is coming up next. plus talk about formidable challenging. the hult prize foundation calls on students to solve global problems. the winner gets $1 million. our oil offer comes with a four-tire rotation and a 27-point inspection. and everything looked great. actually, could you leave those in? sure. want me to run him through the car wash for you, too? no, no, i can't. get a dexos 1, synthetic-blend oil change, tire rotation, and inspection for just $39.95 or less. chevy certified service. could save you fifteen percent or more on car insurance.s everybody knows that. well, did you know that when a tree falls in the forest and no one's around, it does make a sound? ohhh...ugh. geico. little help here. i need>>that's my geico digital insurance id card - gots all my pertinents on it and such. works for me. turn to the camera. >>ah, actually i think my eyes might ha... next! digital insurance id cards. just a tap away on the geico app. welcome back. it's time for "the hot list." what has team people's attention today? >> the malaysia air crash coverage, that's been the big pull all day long. we're leading with a story, one of our reporters, kelly grant, looked at passport use overseas. scary stuff going on. in the united states, we control passport checks very tightly. overseas, not so much. passenger can board aircraft about 1 billion times every year, without having their passport checked. edward snowden gave a talk to the south by southwest conference. it looks a little max headroomy up there. whether you think he's a traitor or hero, kind of interesting. and we have a quick write up on divorces. scientists looking at whether people live together before they divorce. if that was an indicator. they should have been looking at the age, not whether people were living together. >> what does it say, in terms of age? >> it says in terms of age, if you're living with someone before 23 years, you're likely to end up in splitsville, versus if you wait a little while. there you go. all of you kids out there, wait a little while. >> allen, thank you. the whole price foundation awards $1 million to students promising the most sustainable start-ups for the biggest challenges. this year's finalists will be named right here. don't go anywhere. no two people have the same financial goals. pnc investments works with you to understand yours and helps plan for your retirement. talk to a pnc investments financial advisor today. ♪ they're 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 what's next. humans -- even when we cross our "t's" and dot our "i's," we still run into problems. that's why liberty mutual insurance offers accident forgiveness with our auto policies. if you qualify, your rates won't go up due to your first accident. because making mistakes is only human, and so are we. we also offer new car replacement, so if you total your new car, we give you the money for a new one. call liberty mutual insurance at... and ask us all about our auto features, like guaranteed repairs, where if you get into an accident and use one of our certified repair shops, your repairs are guaranteed for life. so call... to talk with an insurance expert about everything that comes standard with our base auto policy. and if you switch, you could save up to $423. liberty mutual insurance. responsibility. what's your policy? welcome back. the hult prize is a start-up accelerato accelerator, bringing the brightest university students to solve the world's toughest challenges. participants from all over the world and the winners walk away with $1 million. ahmad ashkar is the ceo and founder of the whole prize. he's here, today, with the big announcement for us. can yo you briefly tell us what the hult prize is all about? >> the hult prize, sponsored by the hult international business school and the clinton global initiative. we're looking for businesses that come out of the world's business schools around the world, for hopefully creating what we think is a viable business that can end some of the world's toughest challenges. >> and today, you narrow that down considerably. go ahead and narrow it down for us. >> i just got in from dubai. and our boston regional, we had the university of pennsylvania, and in san francisco, we saw m.i.t. travel out there and win that crown in san francisco. in london, we saw hec paris come away from the title. and in dubai, we saw esade, followed with the isb, the indian school of business. and then, we had a really nice collective of teams presenting. >> and the panel here has taken a look at the finalists. >> natalie, who do you think should walk away with 1 million bucks? >> these are very interesting concepts. a lot of them are gross to talk about on television. they're icky. the theme was noncommunicable diseases. using bees or topical treatments for wounds that could fester into something life-threatening. i'm interested in what happens in the accelerators when the companies win this prize. and how do you take this into the market? >> i left out our shanghai winner, which was york university out of canada. our accelerator is a critical piece of this. we put together a seven-week program, which looks at ripping the businesses apart. we'll take our gum solution that came out of boston, which was a solution to use chewing gum to take on some of the world's toughest ncds. and through that accelerator program, we'll see pilots hit the market. and we'll innovate to see companies scale the marketplace. >> we're pretty much out of time. can you give us the clearest success case from the competition thus far? >> we launched aspire foods last year, which was to the nutritional value system and the food challenge worldwide. this was an insect-based ecosystem. >> eating bugs. i'd do it. >> ahmad, thank you. huge congratulations to all of the finalists. we'll wait and see who walks away with the big prize. "fast money" coming up in a few moments. melissa lee, over to you guys. "fast money" starts right now. live from the nasdaq market site in new york city's times square. i'm melissa lee. tim seymour, brian kelly, steve grasso and dan nathan. the correction is coming. we heard warnings from some of wall street's top money managers. but no one seems to know when it will actually hit. the market showing resiliency today, with the dow coming back from a triple-digit deficit earlier in the session. investors can't sit around and wait for the pullback. what do you do with your money until then? it seems like people don't want to miss the rally. >> seems like every rally is the reluctant rally. to your point, clients feel as if everyone thinks we shoul
are you going to say boo to steve when he talks about the forecast? >> i am happy. >> okay. >> this one is good. rather cold. 30s and 40s, no frost advisories, patchy fog north bay, 38 santa ross, a 37 napa, 41 half moon bay, 46 san jose, low 40s as well, san francisco 49 degrees, go for a high of 61 after yesterday's 60. 59, 60, 61, last three days. slowly warming up, 25, 2 bits in tahoe and those are your temperatures, that is splitting part, i know it is cold, but high temperatures warming up a little bit which means 60s, here is tara. >> thanks, steve, we do have a 5 car crash in berkeley this morning on 80 westbound at the university avenue exit, let's take a live look at the east shore freeway, see the headlights where it is bunched up, you can see people have their flashers on there so hopefully this accident will clear soon but it is causing delays. at the bay bridge toll plaza no delays yet so that is good news, still early obviously, those lights should be going on in the next 45 minutes or so if monday or tuesday are any indicator of what is to come. all right, near fremont, 680 at the sanol grade traffic is looking good in both directions, 5:02, back to the desk. >> a roadway re-opened after being shut down for hours after a crash. christien kafton live out there with the details. this may be alcohol related. >> reporter: yeah, that's right, that is what the chp are tell inch us, it happened after 7:00 and killed one person and sent three others to the hospital. investigators say 25-year-old dammadisar chandra was driving and passed some other cars and that is when it happened, it crossed into oncoming traffic and a toyota coming that way hit it. a passenger in the car was killed, the people in the other car were flown to a hospital and he was taken to a hospital as well and they do believe or are investigating at this time whether or not he was intoxicated at the time of the accident. >> the driver of the jaguar is being investigated for potentially driving under the influence of drugs or alcohol at this time. >> law enforcement received grants to enforce, that the bulk of the money will go to petaluma police who will manage the campaign here and that is certainly good news, especially coming up on the holiday when there will be a lot of people and a lot of children out trick or treating out on those streets, for now live here, christien kafton, ktvu channel 2 news. >> there is a new development in the case of the shooting there. janine de la vega is there this morning where police have released video of the suspects. janine. >> reporter: pam, cameras here at the spot nightclub captured video of all four suspects entering, before this shooting took place, one of them opened fire here before all of them sped off in cars. now, here is the video, right after the man in the cowboy hat enters you see a man with dark hair and a goatee enterand look around the club, he is in the center of the screen, then the second suspect walks in and looks down at his wallet then starts talking to the first suspect. the third suspect is a man who walks in wearing camouflage pants and tatoos covering his arms and the back of his right hand, the 4th suspect is the asian female next to him. police say on saturday morning just before 2:00 a male bouncer was shot by one of the suspects when the security guard asked the group to turn down loud music coming from their car in the parking lot. a security guard not related to this club gave us his reaction this morning. >> i am not shocked you know it is a part of the job just to expect the unexpected. i mean you know crazier things have happened you know all the time. i mean you just have to be prepared for anything. >> the victim is 33 years old and is recovering from a single gunshot wound in the hospital. the suspects fled in two cars, one is a dark colored 1990s chevrolet camaro and the other a light colored car, let seen heading there. if you recognize the suspects police would like to hear from you. janine de la vega, ktvu channel 2news. >> police have made an arrest after a shooting last night at a motel. police rushed there last night. a woman was shot in the face, we are told she is in serious but stable condition, no details about the person arrested but police will say the suspect is an adult. oakland police searching for a car and the people inside linked to a carjacking. police say a woman was kidnapped at 46th and gad and adline and forced to drive there and take out money, then let out there and they took off in her car, now police say the car, a 1999 ford winder star, the license plate there 4-v-0-u- 399 i-if you have information call police. >> new information about the shooting death of andy lopez in santa rosa, he was shot to death by a sheriff's department while he was holding a bb gun that resembled an assault weapon, investigators say the teenager was already mortarrally wounded by the time a second deputy got into position, the office says that explains why only one deputy fired shots at the teenager, that has been one of the big questions surrounding this case, meantime last night hundreds went to his funeral. family members were overcome with grief as they prayed there. they had the support. >> it was sad, my mom didn't know him and started crying and my lady, even if you knew him or not. >> i guess they are safe with these cops around they are supposed too be out here protecting the servant -- >> last night's funeral followed another day of protest there. earlier in the day a thousand people marched to the sheriff's office protesting the lopez shooting, deputies stood guard behind barricades and even on the roof. the rally started at noon and grew larger every hour. police say the huge crowds remained peaceful throughout the entire demonstration. yet another protest and rally is scheduled in santa rosa this evening. tonight he will hold a town hall meeting to talk about that, he wants to hear about the shooting there. police say they were forced to open fire on him after he beat and shot another person at chestnut and pierce streets. now at last check the suspect is in critical condition. this evening's town meeting starts at 6:15. it will be at the marina middle school on philmore street. >> a man who disappeared while talking a walk has been found dead three miles from his home. police found the body of scottie morris near skyline boulevard and 280 in hillsborough yesterday afternoon. they say the 79-year-old man apparently collapsed during his daily walk, one day earlier. now there are no signs of foul play. morris was a successful businessman who was occasional mentioned in herb cane's number column in the 1990s. a state senate committee is launching an investigation into cost overruns and delays in building the new bay bridge. the contra costa times reports lawmakers want to know why it took 11 years to build the bridge at a cost of 6.4 billion dollars. engineers originally estimated crux would cost 1 phone pour billion and take 4 years, the state senate plans to use subpoena powers if necessary to complete the investigation. >> 5:09, new this morning authorities have found two huge pieces of construction equipment recently stolen. we received this photo shortly after the two excavators were found in the city of byron, returned to the construction company last night. someone stole that equipment last week from a construction site on marsh creek road in contra costa county, they cost more than 100,000 dollars apiece. now the chp is expected to tell us more about how they were found later on this morning. police in san jose searching now for the thieves who stole 70,000 dollars worth of laptop computers and ipads from an elementary school, officials at river glen elementary school discovered the break in monday, 31 laptops and ipads were stolen, teachers say losing that equipment will make it hard to give standardized tests, which are supposed to be performed on computers this year. >> add facebook to the growing list of silicon valley companies interested in buying blackberry, according to the wall street journal they met to discuss a possible bid. other parties interested include sysco, google and john scully. >> 5:11, a bizarre tragedy, one that has stunned the nation, the new twist in the case of a patient found dead in a stairwell at san francisco general hospital. >> plus what health and human services secretary kathleen sebelius will tell republicans who are calling for her resignation at a hearing this morning. >> and we have a five car crash in berkeley along the -- this is a look at it here, see pretty tied up on the east shore freeway near university off-ramp, more straight ahead. >> well temperatures are cold although the frost advisory has been cancelled, sunny today but not much warmer, we will have your forecast coming -- i want you to know stuff i want you to be kind. i want you to be smart. super smart. i want one thing in a doctor. i want you to be handsome. i want you to be awesome. i don't want you to look at the chart before you say hi...david. i want you to return my emails. i want you to keep me doing this for another sixty years. at kaiser permanente, we want you to choose the doctor that's right for you. find your perfect match at kp.org and thrive. welcome back to the ktvu channel 2 morning news, time now is 5:14, police say six people were shot to death at a home in greenwood county south carolina after a domestic dispute, swat teams found the bodies of four adults and two children after entering the home last night, the shooter is believed to be one of the people who are dead. police say the gunman called 911 to say he was thinking about hurting himself before that shooting. >> time is now 5:15, a lot of republicans want her to resign and in just about an hour from now health and human services secretary kathleen sebelius will face some pretty tough questions about a government's website healthcare.com. kyla campbell is there to tell us what to expect the hearing. >> reporter: dave this is a copy of her prepared testimony, the majority of it focuses on the benefits of the act, only two pages address the problems people have been having. lawmakers get their chance next hour to ask her when she knew it was in trouble and if she knew before the launch why the administration told congress and americans that everything was ready to go. she has apologized for the rocky rock out of health care.gov, they say they are working and the clock and improving. some have demanded that but republicans have gone further, demanding she step down, both sides will take advantage of the spotlight today. >> some of it will be legitimate points of view, questions being asked, but there is going to be a lot of political theater there too. >> even more trouble for the web site last night, maintenance kept customers from submitting new applications, this afternoon the president is heading to boston where he will promote the website but again that hearing for her gets underway in 45 minutes i will by watching live and check back in with with you with the latest developments at 6:15, live in washington, kyla campbell, ktvu channel 2 news. >> today if you get social security benefits you will find out how much your payments will go up next year, the annual cost of living adjustment is expected to be 1.5%, that would make it one of the smallest increases since automatic adjustments were adopted in 1975, the cost of living announcement had been scheduled for two weeks ago but was delayed by the government shut down. >> a los angeles sheriff's deputy says her phone charger saved her life. a charger in a deputy's pocket deflected a bullet during a shootout yesterday morning in englewood, two other deputies were hurt in that gun battle. >> she had the charging wire that you would charge a cell phone with, the tab that inserts into the phone, the bullet struck that. >> deputies say shots were fired during a traffic stop and they returned fire, killing the suspect. now, this is the second story like this, if you missed our story yesterday, a gas station clerk in florida says his cell phone saved his life after he was shot in the chest during a robbery monday morning, the clerk had no idea he was shot until he felt pain in his chest, when police removed the phone they found the bullet lodged inside. the clerk has some bruceing but is expected to fully recover. >> 5:17, chp and a south bay car dealership teaming up to make halloween safer for them. they say kids are twice as likely to be involved in an accident on halloween. so they are handing out tips and treats for kids and their parents starting at 3:00 this afternoon. they also remind children use the sidewalks, walk in groups and pay attention to the traffic rules when you go out trick or treating. you would second that wouldn't you? >> yes. you are reminding me what i typically go out and do and tara does the same, get the glow necklaces or sticks. >> already targeted them. they are great and these little wrist things and put them around their necks and that is a good idea with traffic and speaking of that an accident in berkeley in the clearing stages, most of the cars moved over here but still a fall out from this 5 car crash you can if we pan kind of back a little bit we are pulling out here and you can see kind of looks like a parking lot, these cars are just sort of inching past the scene here so hopefully everything will be cleared soon but one lane right now is blocked so the repercussions of that are -- it is backed up for a quarter of a mile. the golden gate bridge looking great, south bay 280 at the 880 split, still dark but those are headlights, over to steve. >> thank you very much and mostly clear out there. let me get ahead of myself here. i will tell you the 10 or 15 day outlooks for november are wet, wet, wet, so we will see if this materializes but things could be going very dry to very wet if these forecast projects are right and remarkably in sync three days in a row so let's see if that holds for those of you who e-mail me say what is going on, that is what is going on, today it is cold and patchy, mostly clear and warmer today but we are running out of day late. fog santa rosa, by that i mean the lengths are colder and hard to rebound, santa rosa 66 for a high, fog there and clear skies and clearing out there although still cloud around reno, maybe light sprinkles but the low moved into the rockies giving them snow as well, 37 napa, santa rosa, low 40s, half moon bay, 50 oakland, 46 there and a chill, otherwise sunshine today, temperatures bumping up and cold out there, sun, though, patchy fog north bay, cool to mild on the high temperatures. again i mean it is tough to warm up now. we will get 60s here, again these are soft 68s, vacaville and clear lake, petaluma 63, centerfield 65, walnut creek 67, same for those everyone really close, low 60s alabama immediate da, berkeley, 67 san jose, morgan hill, sara saratoga, and those places have your temperatures, bc and pacific at 59 and half moon bay at 68, it looks great for halloween but again once that sun sets that temperature will head right on down, warmer thursday into friday, top it off friday, saturday will be okay then cooler and breezy on sunday. >> later the federal reserve will announce if it will continue its economic stimulus plan, most economists say they won't scale back their 85 billion dollar a month bond buying prom. there will be one change this month, he will not hold a news conference after the meeting but the fed will issue a statement at 11:00 a.m. our time. international gin visiter confidence is up as they also anticipate for change from the fed. hong kong's hang seng closed up 2%, japan and china gained more than 1% overnight, all the european markets are starting with agains as well, taking a look at our futures and what they indicate, after a pretty good day yesterday dow jones gaining 100 points nasdaq and s s&p up as well, the futures indicate a good opening as well. >> a storm caused a car crashings that was bad enough but wait until you hear what they saw. >> it was amazing. i gave up all hope of seeing it. >> a stolen super bowl ring back with its owner, how it was recovered more than 20 years later. use chase freedom at amazon.com and get 5% cash back this quarter. so you can find the perfect gift for everyone. including you. activate your 5% cash back at chase.com/freedom chase. so you can. welcome back, 5:25, a can of soda may cost you more money in san francisco. san francisco supervisor scott wiener wants to put a two cent were ounce tax on sodas and sugary drinkings he says they are linked to a rice in obesity and diabetes, eric mar will introduce a similar measure in two weeks. >> a hall of fame football player just got back one of his profit prized possessions a- super bowl ring, wide receiver lance alworth won the super bowl with the cowboys but it was stolen, a woman called him while offering to sell the ring back to him, he called the sheriff's department tracked the ring to an auction next month. >> all of a sudden i had the ring back and it is like wow, you know you don't know how to react to be honest other than to say thank you for the work they did to to get it. >> the people claimed they got it from someone unable to pay back a loan, the district attorney has the case and will decide whether to pursue charges against them. >> 5:27, cheating at the toll bridge, a story you will only see here, more than a million people are going through not paying a dime, how they are doing it and why it is so hard to catch them. >> a deadly accident in sonoma county, we will tell you why investigators believe alcohol may have been involved. >> and we will give you an update on the accident in the berkeley emeryville area, still impacting traffic. good morning, welcome back, this is ktvu channel 2 morning news, this is live pictures from campbell, the camera zooming in there, we have new information about a shooting that took place there, the police investigation. we have a reporter there, you will get a live report in moments. welcome back, the the middle of the week, wednesday, october 30th, i am dave clark. >> i am pam cook, chilly, let's see if it gets warmer. >> pam, dave a little bit, yeah, it is getting late, days much much shorter but warmer today with more sunshine for sure, patchy low clouds around but 30s napa, santa rosa, a lot of low 40s and i am sure they will cool off more because of clear skies, san francisco two days ago 59, yesterday 60, so today, 61, yes, after a 49 cool low, i have seen 40s on part, of the coast under clear skies, ukia 41, checking in with a 39, 25 in tahoe, clears out there, cold morning, for us it is cold but we are soft, patchy fog, cool there, 60s, here is tara. >> all right, well someone fell asleep at the wheel according to chp, looks like the driver of a pickup truck in milpitas, he hit the guardrail and they are trying to clear that. here is 880, head lights are southbound cars driving by the coliseum, in lafayette, highway 24 the traffic on the right- hand-side westbound forward the caldecott tunnel, typically sluggish, 5:31, back to the desk. >> a deadly crash in sonoma county, the chp says the driver may have been under the influence. christien kafton joins us now, highway 121 with more on the crash that also injured a child and there is a county wide crack down on drink driving there. >> reporter: yeah, that is the good news out of this, is that there will be a crack down on drunk driving, they just got new funds here, the bad news of course this terrible deadly accident along 121, 1 person killed three injured, one of those a 5-year-old girl, the highway patrol says he was driving a 1997 jaguar south along 121 and witnesses say he crotioned crossed the center line and that is when the collision occurred, a toyota coming in the opposite direction hit it head on, a passenger was killed, no word on his identity, a man and girl in the toyota also injured, that 5-year-old girl flown to oakland children's hospital with what are being called major injuries. he was taken to an area hospital as well, chp investigators say they are looking into whether or not he was intoxicated at the time of the accident. they say he again veered into oncoming lanes. >> this collision occurred as the jaguar lost control traveled from the shoulder of the southbound lane across the north bound lane. >> now law enforcement received a series of grants to step up driving enforcement, the bulk will go to petaluma police who will manage the anti-drunk driving campaign here. this just in time for halloween. last week a highway patrol officer told me it ranks up there as one of the major parties of the year and that can be a dangerous combination, we will continue to monitor this and look into the background of the driver of that car, we are doing research right now trying to find out what we can about past criminal history, for now live in sonoma county, christien kafton, ktvu channel 2 news. >> a ktvu investigation founds more than a million people every year pay no money as they go through tot booths and 1 way is to use temporary cardboard license plates, they are stolen off car cars and can't by traced, every month they go through and that is millions in lost revenue. >> those folks that are using the toll bridges and not paying for that crossing put a greater onus on those of us who do pay tolls. >> the transportation commission wants to change the state law to require all cars to have license plates before they leave the car dealer's lot. a proposal under consideration would require car dealers to print and install them with numbers that would be entered into the database. >> police in campbell need your help to solve a shooting at a nightclub and hope video from that night will help track down the suspects. a security guard was wounded and janine de la vega joins us now from campbell to tell us about the case and show us the video. >> reporter: pam, the shooting happened here at the spot nightclub on orchard city drive around the corner from the main drag in popular downtown campbell, cameras here captured the suspects walking in. here it is, him walk in and look around, he is in the center, then the second walks in and looks down at that and starts talking to the first suspect. the third suspect is a man who walks in wearing camouflage pants and tatoos. this 4th suspect is the asian female next to him. police say on saturday morning just before 2:00 a male security guard was shot by one of the suspects when he asked the group to turn down loud music coming from their car in the parking lot. we spoke to a security guard unrelated to the club this morning who told us he feels campbell is known as being a safe family friendly city. >> i lived here for you all 24 years of my life and it is a great place to live in you know nice, friendly, people always saying hi to each other walking down the street. >> for this to happen -- >> it is a little bit surprising in temperatures of that, yeah. >> the victim is 33 years old and that bouncer is recovering from a single gunshot wound at the hospital. the suspects fled in two cars, one a dark colored camaro, the other was a later model sedan light in color, last seen heading east on orchard city drive, police would like you to call them if you recognize any of the four suspects in that video that we showed you, reporting live from campbell, janine de la vega, ktvu channel 2 news. >> in marin county today jurors will resume deliberations in the trial of a man accuse of attempted murder in the theft of a sports car. he is prosecuted as an adult even though he was arrested when he was 17, charged with shooting at a girl and her boyfriend last year, prosecutors say he propelled into a car dealer and stole a 200,000 dollar lamborghini owned by a television chef. >> officials at the 49ers's new stadium want to hire current and retired law enforcement officers for part-time jobs 120 people will be hired for the security team at home games for concerts and super bowl 50, working with santa clara police officers assigned to big events. by the way they pay 55 dollars an hour, officers hired will have to go through a background check. the san jose city council is concerning two proposals to try to keep new officers from leaving the police department. the one plan will require them to pay back part of the train in costs if they leave within 5 years, a second proposal calls for the academy to charge tuition and offer recruits a zero interest loan, they would pay back the loans of recruits who stay with the department. >> the truth is we need more office evers and no matter how hard they work there is no substitute for having more officers on the street. >> the police departments in oakland, hayward and los angeles already have these. council members say it can cost 170,000 dollars to recruit and train each one. >> an accident happened there, they report he was playing on a balcony but fell and had injuries. there is a new twist in that case. the body of lynn spaulding was found earlier this month nearly three weeks after she disappeared from her hospital room. now police say they can't find the man who reported seeing her body several days before it was found. that man was apparently wearing a hospital badge. he informed a supervisor who contacted hospital security, but it apparently took four more days then for spalding's body to be recovered. the man police are looking for is described as asian, 5'8," with a medium build between 30 and 40, wearing a blue dress shirt, hospital identification and possibly a tie. according to the san francisco chronicle the sheriff's deputies assigned to the hospital earned some of the highest amounts of overtime in the city. deputies say a quarter of the deputies and officers assigned on the 24 hour basis at the hospital are on overtime, in some cases overtime is adding about 80,000 dollars to their annual salary. >> time is now 5:40. we have new details about the owners of an assisted living home in castro valley. it was shut down by the state because of charges of unsafe and unsanitary conditions. the owners, the manuel family, also have a care facility in modesto. the california department of social services has brought in independent investigators to examine that nursing home for and possible mistreatment of patients. >> -- contractors to come in and assess the residents and also to determine if there is adequate levels of care and supervision being provided. >> officials say if the state finds violations they can file a temporary suspension order at any time against that facility in modesto. later this afternoon the alameda county sheriff's office and fire officials will hold a news conference and talk about their investigation into the care facility in castro valley. the state is examining how 19 patients were abandoned for more than two days last week. the state is blaming that facility for not transferring the patients after the nursing home was ordered to close. an organization for senior citizens is suing the state of california, the foundation adding the elderly is accusing state regulators of endangering nursing home patients by taking months if not years to investigate complaints against care facilities, this group says the nursing home industry is not afrayed of regulators because they are lax in their responsibilities. the state says it cannot comment on any pending litigation. >> new this morning the government just released how much social security will increase next year. the annual cost of living adjustment is 1.5%, that makes it one of the smallest increases since automatic adjustments were adopted back in 1975. cost of living announcement was scheduled for two weeks ago but was delayed because of the government shut down. >> all right, pat, time now 5:42, bold thieves stole huge pieces of construction equipment, how the search to get that equipment back ended in the east bay. >> plus the steps one community bank is taking to make its neighborhood safer. >> we do have traffic out there, things starting to pick up at the toll plaza and along the east shore freeway. this earlier accident still causing a nightmare. >> little cold for some out there. 30s and 40s, it will be sunny and warmer today, how much warmer plus can we hold that into the weekend. on my right is the new dodge durango with up to 360 horsepower. on my left is one horse with one horsepower. that makes you feel pretty dumb doesn't it? [ laughs ] this is literally 360 times more powerful than you. look at you. you're worthless. there you have it -- 360 times better than a horse. staring contest -- go. i win. ♪ would you look at this, a killer dust storm in arizona left three people dead, 12 others hurt in a chain reaction crash? this happened monday north over tucson? at least 19 cars were involved, one person was pinned between two big rigs, others say they were wedged under big rigs. police say this is the worst chain reaction crash they have seen in the past 7 years. meantime a search goes on to morning in the gold country looking for a miss in miner from san jose, here is his photo, 65-year-old walter steveer disappeared a week ago, rescuers are worried because the terrain is rugged and greating colder too. search teams have been searching near nevada city. they found his car monday but there have been no other signs of him, 100 people and police dogs and horses are searching for him. >> we have been on the brink of rain, it is getting cold, that is a huge concern. >> there is one thing he does know the area and owns a mining claim to a 120 acre property. >> a delegation will meet with white house officials today to discuss the recent revelations the u.s. spied on european leaders. the european parliament civil liberties committee has in washington since monday and already met with officials from the state department and various intelligence agencies, president obama has ordered a review of intelligence gathering programs following the reports of data collection and eve dropping on allies by the national security agency. lawmakers also meeting on capitol hill today to discuss ways to ease the effects of automatic spending cuts on the military, democrats want to lessen the effects on schools but republicans are focusing on the pentagon. >> 5:47, oakland's chinatown area may feel safer after a local businessman signed a contract to bringing private patrols for at least a year. henry cang says he didn't want to wait for the city or police to make his part of oakland feel safer. he won't say what it is costing him but he says it is a necessary step. >> there is certainly a perception that oakland is not as safe as it could be or should be, and china town is located in oakland. >> the city's records show crime increases after 5:00 p.m. so the private security company will be out on the streets at various times but will increase patrols during the early evening hours. >> 5:48 is the time. the morning commute has certainly had a lot of problems, starting to get busy out there. >> for the past two days we have seen lights at the bay bridge go on around this time and that is kind of early. i will predict it happens again. let's take a look, see the back up here getting into san francisco so maybe get a jump start here. the worse congestion is behind the toll plaza approaching the macarthur maze, an earlier five car crash, looks like they just cleared one of the lanes they had been blocking. you can see how far these headlights go back, definitely a nightmare on the east shore freeway. right around the university and arby exits in emeryville and berkeley. in the south bay traffic not too bad. usually brake lights here on 237 westbound towards sunnyvale but not too bad at this hour, 5:49, let's check in with my man steve. >> thank you. all right, good morning, everybody, cold out there, frost advisory cancelled though, too much moisture, patchy fog, not enough dry air, sunny today after we get cranked up here but it is cold for some, 30s, 40s, fog, cold, mostly clear, sunny, warmer today, not a lot, patchy fog, santa rosa, 30s, go for a high of 66 after a low of 37, so i mean again days shorter, angle of sun lower, tough to warm up unless we get a wind and that is not happening. san jose not 676 degrees yesterday, now yesterday they were 686 so today cooler, it will by 66 there after a cool 46. all right. here we government that woke you up i am sure. mostly clear skies, sierra nevada clearing over after snow, cloudies around reno and that snow is moving there giving snow to the rockies and points north, 30s and 40s there, couple of 30s there, 45 in san jose and that is livermore, clear skies for most, cool to mild on the high temperatures, sun not bad, shade cool, so one of those patterns, 60s on the temperatures, low, mid to upper, not that big of a spread, alameda 61, antioch 67, livermore in that, castro valley, walnut creek, you get the idea every within close, 50s, 60s, mid-60s peninsula, halloween looks great, night warmer by the way but the nights temperatures drops fast, warmer thursday and friday, mostly sunny saturday, we is the our clocks back, my michigan coming out, our back, you set your clocks back on sunday so you get another hour's sleep. >> fall back, another hour, we will take it, a new report shows this morning private sector employment slowed, payroll processor says employers added 130,000 jobs in october, most analysts expecting 20,000 new jobs, many use the report as a guideline for the u.s. labor department's monthly report on public and private sector jobs, the government's october monthly report comes out next week. adobe systems says the security breach it reported was bigger than it said. they report hackers obtained information on 38 million customer accounts, the cyber attackers stole part of the source code to its edit software used by professional photographers. barnes and noble shifting focus from tablets to a new e book reader, the nook glow light will be available there. that is the same but is lighter, it comes without ads on that and the company admits it tablets have not sold well. >> time now 5:52, as bay area kids get ready to go trick or treating how to keep them safe as they go door to door, what police are doing to keep sex offends away from those kids but why some complain the police tactics are not fair to sex offenders. >> a sad story, the police search for the man who stole a san jose woman's heart and then stole all her money. ♪ imagine a place created all around family. where everyone, can relax or play.. ♪ now imagine that place in hawaii. welcome to aulani.... ...a family paradise... with just a touch of disney magic. for special offers, visit disneyaulani.com like the enticing aroma and distinctive taste of nespresso. elegant capsules meet masterfully crafted machines, and one touch creates the perfect coffee, cappuccino, and latte. ♪ tempt all your senses with one extraordinary coffee. [ penélope cruz ] nespresso. what else? [ male announcer ] available at these fine retailers and nespresso-us.com. san francisco police warning drivers to keep their valuables out of sight after a wave of break-ins, police say they are up 34%, thieves are looking for electronics,. >> they just don't break into one car a day, they break into like 10 cars at a time, so you know there may be a whole block where cars are broke in. >> parking garages are popular targets for them and stowing valuables in the trunk may not always help, they sometimes pose as attendants and watch. new cameras are helping them fight their reputation, they can scan license plates and if it comes up stolen they can alert police and crime is down since then. >> police are searching for a man who stole a victim's heart and her money. in january a woman named cat met a man who -- and she fell in love with him and within three weeks they were married, what she doesn't know is her new husband james mcintosh, jr. was on the web side under several names, including michael reid, the said she gave him money and her checking account, within two weeks al of her life savings were gone. >> he got married to me and stole 5 43,000 dollars and i have no idea where he is at. >> well you have heard her story, if you have any information about him get in contact with san jose police. >> we have new information butte now coming up next in our 6:00 hour on that deadly overnight crash in sonoma that also injured a child, where the crash happened and what police are telling us about who may have caused it. >> plus has facebook put a bull's eye on blackberry? could a financial merger be in the future. >> traffic looking okay there. more coming up. 30s and 40s, sunny today but not much warmer plus can we hold sunshine and clear conditions into the weekend? take a look at it. [ male announcer ] it is more than just a new car... more than a new interior lighting system. ♪ it is more than a hot stone massage. and more than your favorite scent infused into the cabin. it is a completely new era of innovation. and the highest expression of mercedes-benz. introducing the 2014 s-class. the best or nothing. a suspected deadly drunk driving accident here in sonoma county, we will tell you what law enforcement is doing to combat drunk driving. >> live in san francisco where police are looking for a key witness who may have seen her days before her body was found in a stairwell, we will tell you how the public can help coming up. new information on a deadly shooting, the answers to one of the big
>> plus the cabinet member getting ready for tough questions, questioning about to start in a couple of minutes, we continue. >> complete bay area news coverage starts right now. >> welcome back, we want to take you to san francisco this morning, san francisco general hospital, new information coming in about that case that seems to still be a mystery of exactly what happened, a body of a woman found in a locked stairwell, she was a patient at san francisco general, brian flores is out there this morning with the new information. we will check in with him in just a moment. it is wednesday, october 30th, almost the end of the month. i am pam cook. >> good morning, i am dave clark, let's check weather, steve it is cold. >> it is indeed but will warm up, 34 graden, 38 windsor, 39 oxdental there and you can tweet me there, clear skies temperatures 36 napa airport, livermore 43, 41 not far away from there, so fairfield now down to 41 so it is cool, no frost advisories, still too much moisture, san francisco will go for 61, each day bumping the high up one degree, 24 now in tahoe, 39 ukia, i am sure there are 30s or 20s there but have not heard from anybody, this system falling apart and diving south, sunny today, fog, cool to mild on high temperatures, everyone is within a couple of degrees, 60s and 50s near the coast, here is tara. >> we are seeing massive delays in the east bay and an earlier 5 car crash on the east shore freeway cleared a half an hour ago but the damage is done, you can see that things are really congested, back to past golden gatefield so obviously folks are not getting through the maze and on to the bay bridge toll plaza as they normally would, so definitely give yourself extra time coming from the east bay heading into san francisco or further down toward the hayward area. a live look here at the bay bridge toll plaza, those lights have not yet gone on, i predicted they would but because of this back up we will see them go on later. a live look at 680 near the sunol grade, a back up there but not too bad at this hour, still moving. 6:03. back to the desk. >> the chp has re-opened a sonoma county roadway shut down for hours following a fatal two car collision. christien kafton has been along 121 all morning and christian investigators say alcohol likely a factor in this crash. >> reporter: yeah, that is one of the things they are certainly looking into, they believe it is a likely factor in this accident that happened after 7:00 on this stretch of road here, 121, killing one person, sending three others to the hospital, one of them a 5- year-old girl. investigators say the driver was driving a jaguar south along 121 and witnesses say he crossed the center line to pass other cars and that is when the collision happened, again it crossed into traffic and a toyota hit that jaguar head on. a 26-year-old man in his jaguar was killed in the intact. the driver of the toyota and a 5-year-old girl in that car was also injured, that girl we are hearing again with major injuries flown to children's hospital in oakland. chondrayedas was taken to a hospital as well, no word on how serious his injuries are, they are looking to see if he was intoxicated when they say he veered into oncoming lanes. >> the driver of the jaguar is being investigated for potentially driving under the influence of drugs or alcohol at this time. >> sonoma county law enforcement received grants to help step up impaired driving enforcement. the bulk of the money going to petaluma police who will manage the anti-drunk driving campaign here, again this great news coming just in time for halloween. last week i was speaking with an officer who told me it ranked up there as one of the major holiday parties of the years with people drinking and hitting the roads afterwards of course, that can be a dangerous mix with kits trick or treating. again we will continue to monitor the situation and trying to look more into the background of the driver of the car, again the suspected drunk driver, chandradsas and if we found out we will bring it to you, for now christien kafton, ktvu channel 2 news. >> the arraignment of a woman accuse of killing two people in a driving accident is expected to happen today after being postponed twice. the san mateo district attorney says 53-year-old marjorie wright cell had a blood alcohol level well above the limit. she has been hospitalized and not yet cleared to appear in court, police say she hit them from behind while they were walking their dog. she is facing charges of gross vehicular manslaughter and drunk driving and held on 2 million dollars bail. >> 6:06, a new development in the case of a hospital patient whose body was found in a stairwell of san francisco general hospital more than two weeks after she was reported miss inch. brian flores is outside the hospital to tell us how the investigation is leading to a person of interest. >> reporter: good morning, san francisco police asking for the public's help in finding and identifying a hospital worker who may have seen her days before her body was found. a memo went out yesterday asking again for anyone who has soon the man who first reported seeing her in the stairwell, according to police he was wearing a hospital badge and admitted on the emergency stairwell when spaulding was first reported missing. it says he saw a woman lying on the stairwell and told a worker whose called the sheriff's department and when they followed up apparently nobody was found. as the story goes now eventually took four more days for her body to be recovered. this morning again police are looking to talk with him again possibly to gather more information, described as asian, 30 to 40 and 5'8" with medium build and shirt and tie. they are investigating and we have called them but have not heard back but hope to have updates later,. >> there is new information about the shooting death of andy lopez there. he was shot to death by a sheriff's deputy while holding a bb gun that looked like an assault weapon, investigators say he was already mortarrally wounded by the time a second deputy got into position, they say this explains why only one fired shots at the teen. that has been one of the big questions surrounding this case. also last night hundreds of people went to andy lopez's funeral in santa rosa. some family members were obviously overcome with grief. they prayed around his casket. the family had support and sympathy of the people. >> it was sad, my mom didn't know him and started crying and my lady and even if you knew him or not. >> i guess they are safe, they are supposed to be out here protecting the servant. >> last night's funeral followed another day of protest. this is what it was like earlier in the day, a thousand people marching to the sheriff's office to protest the shooting and deputies there stood guard behind barricades and on the roof of the sheriff's headquarters. the rally started at noon and got bigger every hour. police say the crowd stayed peaceful during the entire demonstration. now another protest and rally is scheduled in santa rosa this evening. tonight san francisco police chief will hold a town hall meeting talking about san francisco's latest police shooting. he wants to hear about the shoot sing in the marina district. police say they were forced to open fire on the man after he beat and shot another person at chestnut and pierce streets, he was in critical condition at last check, the meeting starts at 6:15 at the marina middle school on fillmore street. >> we have developing news about a fire there, we want to take you there near pacific street, the first call at 5:15 this morning, crews are concerned about the contents inside the building and whether or not that will fuel the fire but again this is a live picture of union city, the fire there in an industrial area, we will bring you more information as soon as it becomes available. state lawmakers will hold a special hearing into worker safety at bart following an accident that killed two workers, they were working on the tracks on october 19th and hit and killed by a train. lawmakers say a policy that makes track workers responsible for their own safety may have contributed to the accident bart discontinued that policy after the deaths 10 day ago. a committee plans to hold a hearing there. >> police searching to the thieves who stole laptops and ipads from a school. it happened at river glen elementary discovered monday. 31 laptops and ipads were stolen. teachers said losing that equipment will make it hard to give tests, which are supposed to be done on computers this year. also new this morning authorities have now found two giant pieces of construction equipment stolen in the east bay. ktvu news receiveed this photo you are looking at shortly after the two excavators were found in byron. they were returned to the construction company last night. someone stole the equipment from the construction site on march creek road last week, they cost more than 100,000 dollars each. investigators are expected to tell us more about how they were found later this morning. >> well you can add facebook to the growing list of companies interested in buying blackberry, according to the wall street journal they met to discuss a bid. other parties interested in acquiring it include sysco, google and john scully. >> all right, pam, time now 6:12, health and human services secretary kathleen sebelius getting a grilling right now on capitol hill, changes to the healthcare.gov website is the focus and while the smiling woman, she has disappeared. >> we have quite a bit of traffic in the east bay this morning on the east shore freeway. this is san mateo, more traffic ahead. >> mostly clear skies, not warm, 30s, afternoon highs will warm up a little bit. emphasis on a little bit, we will show you coming up. i love watching tv outside. and why can you move the tv out here? the wireless receiver. i got that when i switched to u-verse. but why? because it's so much better than cable. it's got more hd channels, more dvr space. yeah, but i mean, how did you know? i researched. no, i-i told you. no. yeah! no. the important part is that you're happy now. and i got you this visor. you made a visor! yes! that i'll never wear. ohh. [ male announcer ] get u-verse tv for just $19 a month for two years with qualifying bundles. rethink possible. with qualifying bundles. time now 6:15, happening right for you health and human services secretary kathleen sebelius is on the hot seat, there are questions about that. khyle campbell is there where house members just wrapped up their opening remarks. what did they say? >> reporter: he said they either didn't know or didn't disclose it. the top democrat said these will soon be for gotten because it is working. lawmakers get which than to ask her when she knew the website was in trouble and if she knew before the launch why they said everything was ready to go. she has apologized for the rookie roll out and she says they are working around the clock and it is improving every day, last week they blamed the last minute changes leading to a host of problem and this morning analysts expect her to point the finger back at them, i will watch it and have the latest testimony at 7:15, the president does want to make sure it gets positive coverage today, he will promote the website from boston, kyla campbell, ktvu channel 2 news. >> last night more trouble for the healthcare.gov website, maintenance kept customers from submitting new applications, horizon says government officials asked them to provide extra computing and storage capability. the website appears to be back up and running this morning. then the face of the healthcare.gov website it has changed. sorry, it no longer shows the face of this smiling woman anymore, she was taken off the website after the weekend and replaced with these icons of the 4 ways to sign up. that photo of the smiling woman came from a stock photo library, the are reports it was removed when people started trying to figure out who she is. >> a burlingame man who disappeared while taking a walk has been found dead three miles from his home. police found the body of the man known as scottie morris near skyline boulevard and 280 in hillsboro yesterday afternoon and say he apparently collapsed during his daily walk one day earlier and there are no signs of foul play. morris was a successful businessman who was occasionally mentioned in herb cane's newspaper column in the 1990s. a judge has ordered a 16- year-old boy to stand trial in the shooting death of a paramedic, he is tried as an adult accused of shooting him last april, they contend it happened during a carjacking, his attorney calls it an accident and the teen has pled not guilty to the charges. if convicted though he could spend the rest of his life in prison. >> 6:18, this halloween police will be out looking for sex offenders violating parole. they are required to follow a curfew on halloween and banned from putting up decorations. in alameda county deputies will collect homeless sex offenders and take them to curfew centers for 5 hours. >> if you are on the megan's law list don't bother, we don't want your kids around you. >> the restrictions only apply to sex offenders on parole, you can find out if they are in your neighborhood by going to the meghan's law website, we put a link on our website, look under the hot topics tab. >> a good time to remind people look for the trick or treaters. we know they get excited and go running across the street. >> you got to keep them on a leash. >> we would like to. >> my three-year-old i am thinking about it. we have traffic on the bridge, lights on and a broken down car not helping the situation. here is the live look at the toll plaza and the gridlock is worse than usual because of an accident on thest shore freeway, you can see it is more congested than usual. 280 at the 880 split traffic -- actually this is 280, traffic is looking good, let's head over to steve. >> good morning, we have mostly clear skies, cold here, i will show you 30s. a lot, a bunch there, so we will take a look at that, clear, fog, most of the country is cloudy, we are one of the few sunny, there is moisture from mexico going there so we are one of the few that will get sunshine today, some fog, cold, clear, sunny, warmer today, current temperatures scotts valley 33, mountains great there 36, felt don back there 36, windsor 38 and stanford 40, there are locations i saw blackhawk at 41 so some close, temperatures 36 santa rosa 37, napa and there are 40s there. i have seen some there, looks good today, all that cloud cover has pushed off into the rocky sosa would could morning but sunny-side up today, fog north bay, pockets of it, 60s, 60s and 60s, upper 50s for a few but just i mean anywhere from about 65, 67, 68 inland, 59 to 63 or 4 those closer -- halloween looks good, sunny, nice during the day then of course at night that temperature drops fast but will not be raining, warmer thursday- friday, saturday sunny, set your clocks back sunday and it will be cooler. >> all right, fall back, thank you, steve. new economic data in this morning, u.s. consumer prices increased slightly in september. the federal government reports the consumer price index rose slightly, food prices though held steady, that helped offset an increase for gas, electricity and other energy costs, consumer prices up just 1.2% in the last 12 months, that is well below the federal reserve's 2% inflation target. >> 6:22, how would you like a part-time job that pays more than 50 bucks an hour? the city of santa clara has them. we will tell you who they want to hire and why some people would pay a lot of money to be in this location. >> i had given up all hope of every seeing that ring again. >> a stolen super bowl ring back with its hall of fame owner today. how it was recovered more than 20 years later. welcome back to the ktvu channel 2 morning news, cute like picture of kittens there, uber considering bringing that back, anyone would use the ride app yesterday was offered that option. there was a 20 dollar charge for a snuggle session, the money went to local shelters but many people complained they could not get at delivery. >> hall of fame profootball player just got back one of his most prized possessions. >> he was with the cowboys but the ring was stolen as part of a display, a woman called him, offered to sell it back to him for 40,000 dollars, he called the sheriff's department, they tracked that ring to an auction next month. >> all of a sudden i had the ring back and it is like wow york u know you don't know how to react other than say thank you for the work. >> the people claimed they got it from someone unable to pay back a loan, the district attorney has the case, they will decide whether to seek stolen property charges against three people. >> the st. louis cardinals hope it is not a bad omen, they landed in boston for tonight's world series but that is after spending about six hours last night on the tarmac of the airport. their plane was grounded due to mechanical problems. despite the long wait though the players said everyone had a pretty good attitude, they were well-fed and able to walk around. the boston red sox of course lead the series three-2, they can win the championship with a victory tonight, coverage of game six begins at 4:30, a special edition of ktvu channel 2 news is at 4:00. it is a story you will see only on 2, driving on toll bridges without paying. how scammers are cheating the system and why it is so difficult to be caught. >> live in campbell where police just released video of four suspects in a nightclub shooting. we will show you the video and tell you what sparked the violence. welcome back to the ktvu channel 2 morning news, they are ringing the bell there this morning in new york and a bit of a -- looks like a bit of a celebration, oh on the -- i think they are ringing this remotely there from, yes, i thought it looked different, so they are having a web summit and looks like a good day, all the markets up as well mostly because of the fed's meeting and thinking they will keep that intact. >> okay, we will smile, say good morning to you, thank you for joining us here on ktvu channel 2 morning news, middle of the week, wednesday, october 30th, dave clark. >> i am pam cook. 6:30. let's check in with steve paulson, a cold morning. >> that's correct, mostly clear skies and a sunny day, temperatures warmer but starting off remember the nights much longer, days shorter angle of the sun lower so 37 napa and santa ross and 30s there as well and locations close to 40, san francisco upper 40s, cooler readings officially than that, go for 61 for a high today but again each day we bump it up one degree, 24 tahoe and those temperatures in those areas so cool, higher clouds thinning out so cold morning, sunny today, patchy fog, santa rosa, napa airport, cool to mild on the highs, again in the sun not bad, the second you are in the shade, upper 60s inland and 60s there, here is tara. >> we have a nightmare in the east bay at this hour, our worst traffic is along the east shore freeway, it is sluggish because of an earlier accident so slow going approaching the macarthur maze. once you get to the bay bridge toll plaza, the metering lights are on and back up, so give yourself an extra 25 to 30 minutes this morning. up next a look at our maps 580 westbound through livermore not looking too good, pretty normal, south bay things are looking pretty good. on the peninsula same story, so we do have night areas to drive in this morning. 6:32, let's check in with the desk. >> tara, thank you. happening right now we have an update on that industrial fire in union city we first told you about 20 minutes ago. these are live pictures, this is western avenue in union city, fire crews have put out the flames now just checking making sure there are not flare- ups. we do know several people were in the building at the time of the fire but everybody got out safely but that is the very latest from union city and we will bring you more details if there are any. the chp re-opened a sonoma county roadway closed for hours after a fatal two car crash. ktvu's christien kafton is live there along 121 with the latest on this crash and they are saying the investigators saying alcohol may have been a factor. >> reporter: yeah, dave we have been out here since 4:30 looking into the background of the suspected drunk driver in this case. again this drunk driving accident happened last night, 7:00, one person killed three injured, one of them a 5 year old girl injured in that. investigators say 25-year-old dammadare chanddrayedas was driving that and that happened, again crossing into oncoming traffic and a toyota hit it head on, a 26-year-old man in the jaguar was killed as a result off that accident. the 26-year-old driver of the toyota and a 5-year-old girl in the back of that car were also injured, again that 5-year-old girl flown to children's hospital oakland with what are called major injuries, he was taken to a hospital, no word on how badly injured, they say he could have been intoxicated at the time of the accident. >> drugs and alcohol are suspected in this collision and it is again too early to release any other information but we are investigating that as a -- as being involved. >> sonoma county law enforcement received grants to step up impaired driving enforcement, the bulk of the money will go to pet a petaluma police who will manage the campaign. again this coming just in time, last week i talked with an officer who told me it is stepping up as one of the bigger party holidays and that missed together can prove to be a dangerous situation, we will continue trying to follow up on information about this looking for updates on the condition of the people as well as looking into the criminal background of the driver who could possibly have been drunk driving in this incident. we will try to bring that information to you throughout the morning as we gather that information, for now live in 121, christien kafton, ktvu channel 2 news. >> 6:35. an investigation finds more than a million people a year pay no money as they go through tollbooths, one way is to use temporary license plates, they are stolen off cars and can't be traced. every month an average of 100,000 cars go across the bridges with no license plates. that is millions of dollars in lost revenue. >> when a plate can't be read, in this case because the plate is not there, we peg those losses at about 4 million dollars a year. >> now the transportation commission wants to change the state law to require all cars to have license plates before they can leave a car lot. a proposal under consideration would require car dealers to print and install plates with numbers on them then put into the database. >> four suspects in a nightclub shooting in the south bay remain at large this morning. the gunfire injured one of the bounces at the club and police are now turning to the public for help. janine de la vega is there as they release video. >> reporter: i just learned from police the security guard hit by a bullet has been released from the hospital. the shooting happened here in the parking lot of the spot nightclub and managers here gave police video in hopes of catching those responsible. here is the video. you can see a man enter and look around, he is in the center, a second man walks in and looks down and starts talking to the first suspect, the third suspect is a man who wears camouflage and has tatoos. the 4th suspect is the asian female next to him. police say on saturday morning just before 2:00 a male bouncer was shot by one of the suspects when he asked the group to turn down loud music from the car in the parking lot. this morning we spoke to a guard unrelated to the club about his concerns on the job. >> i am not shocked you know it is part of the job just to expect in the expected. you know crazier things have happened you know all the time. i mean you just have to be prepared for anything. >> the victim is 33 years old and is recovering from a single gunshot wound. the suspects fled in two cars, one a dark colored camaro, and the other a later model 4 door sedan light in color, they were last heading east on orchard city drive, the same street the night club is located on, police say if you have information or recognize any of the suspects you just saw in that video they would like to hear from you, from campbell, janine de la vega, ktvu channel 2 news. >> in marin county today jurors will resume deliberations in the trial of a man accused of attempted murder in the theft of a sports car belonging to a celebrity chef. max wade is being prosecuted as an adult even though he was arrested when he was 17, he is charged with shooting at them. prosecutors say he rappeled into a car dealership and stole a 200,000 dollar lamborghini owned by television chef. the city of santa clara is putting together a team for the stadium. they will hire 120 current and former officers to work at home games and other high profile events, they report they will be paid 55 dollars an hour and have to pass the same background check as officers on the police force. >> 6:39, we have new details about the owners of an assisted living home closed by the state because of charges of unsafe and unsanitary condition, they also have one in modesto, they brought in investigators to examine that one looking for mistreatment of patients. >> we brought in outside contractors to assess the residents and also to determine if there is adequate levels of care and supervision provide. >> if the state finds violations it can file a temporary suspension order at any time against that facility in modesto. later this afternoon the alameda county sheriff's office and the fire department will hold a news conference and talk about their investigation into their scare facility in castro valley. the state is investigate patients were abandoned two days last week, the state blames that facility for not transferring all of the patients after that home was ordered to close. >> 6:40, social security benefits increase. the government just announced how much the monthly payments will go up by next year. >> also another mystery in the case of a woman's body found there, the witness police are looking for right now. >> some bad traffic on the east shore freeway this morning and at the toll plaza. here is 101. more traffic ahead. >> nothing bad about the weather unless you don't like temperatures in the 30s, plenty of those in the santa cruz mountain and the north bay but warmer today. what about will it hold into the weekend? welcome back to the ktvu channel 2 morning news, new this morning the gift just released how much social security will increase next year, the annual cost of living adjust is 1.5%, now that makes it one of the smallest since they were adopted in 1975, the announcement was scheduled for two weeks ago but delayed by the shut down. another question surrounding the discovery of a woman's body found in a locked stairwell at san francisco general hospital. brian flores has morton the witness police looking for, the mystery continues. >> reporter: no question about that, the mystery continues, police asking for help identifying this man who may have been the first to see her after she was reported missing, according to police he may have been a hospital employee, described as asian, 30 to 40 years old and 5'8" medium build and possibly wearing a blue shirt and tie, back then he was admitted there and goes on to say he saw a woman lying 0 n the stairwell and told a worker about it who called the sheriff's department and when they followed up nobody was found and as the story goes it took 4 more days for her body to be recovered. again they are looking for him, they have ruled out foul play but are continuing to investigate, we have called into the hospital as well as police this morning but have yet to hear back, we hope to have updates later on. live here in san francisco, brian flores, ktvu channel 2 news. >> according to the chronicle, the deputy assigned there earn some of the highest amounts of overtime in the city. sheriff's deputies say a quarter of the 28 deputies and officers assigned there assigned and a 24 hour basis are on overtime. in some cases it adds 80,000 dollars to their salary. >> the city council is considering two proposals to keep them from leaving, one w require them to pay it back, a second idea calls for the academy to charge tuition and offer recruits a zero interest loan, the city would pay back the loans of the recruits who stay with the department. >> the truth is we need more officers and no matter how hard they work there is no substitute for having more on the street. >> police departments in oakland, hayward and los angeles already have repayment requirements, council members say it can cost 170,000 dollars to recruit and train each new officer. police are searching for the thieves who stole copper wire from the lights desplay, the chronicle reports it could take a long time to fix the damage. the work has started near ferryland, the repairs may cost at least 40,000 dollars. >> all right, time now 6:47, which means it is time to check with in tori campbell for a look at what is coming up. good morning. >> good morning. in minutes a troubling report that reveals a major failure in california to keep guns away from the mentally ill. we will let you know who is to blame for this problem. a second mystery barge has been cited on the san francisco bay, why speculation is rampant that google is involved with the structures and how the company's reaction is adding to this belief. this could be devastating news for some. we are learning there is a wine shortage. the reason behind the situation and why it could only be getting worse. those stories and more new at mornings on 2, now back to you. >> thank you. time now 6:48, let's go to tara moriarty, let's get you out the door but what is happen on the east shore freeway. >> taking a beating, an earlier accident messed things up because they had a lane blocked, we will head to our maps and show you the antioch area, you can see traffic there westbound sluggish as usual, the east shore freeway see from hercules through berkeley that congestion and in marin slow going southbound on 101. finally a look at the bay bridge toll plaza. see that really definitely give yourself extra time because it is bumper to bumper, coming from the northern part of the east bay you will definitely need some extra time. and 680 at the sanol grade traffic on the right side sluggish a little bit. 6:49 let's check in with steve. >> under mostly clear skies cold out there, getting to that time of the year where we have 30s, santa cruz mountains, north bay, few of those, scott's valley 33, 34, russian river 36, 39 near there, felton 36, windsor 38, stanford right there, holding on to 40, a couple of locations there, woodside as well, santa rosa, sonoma county airport, fog, 36, 58, go for a high of 66, san jose 43, san jose starting off there, it will be sunny, the low has moved off and towards the rockies there were clouds and sprinkles there now it is clear, so moving off, look at the moisture there, almost the entire country covered by clouds except for us, look at that, 30s, 40s and low 50s, but walnut creek 40 and farefield 41, clear skies except for patchy fog so a cold morning, but sunny today, patchy fog, fort bay, maybe a puff of a breeze but cool and mild on the high temperatures again these high temperatures don't last long so low 60s, mid-60s, upper 60s, clear lake 68, vacaville, pittsburgh as well and those low 60s and alameda 61, and those places have those temperatures, right close same for those places. cooler but still not bad, san mateo then 50s and 60s, halloween looks dry and once sun sets the temperature tumbles, and those are your temperatures then and do fall back on the clocks. >> we do. >> yes. >> 6:51 is the time, police cutting down on the number of car thefts in the city, all thanks to a new tool mounted on their cars. >> plus how a phone charger may have saved a deputy's life. welcome back, taking you live to the big board, dow jones up, nasdaq and s&p as well, disappointing news on consumer confidence, lower than expected in october, that could not -- could be bad news as we head into the shopping season. halloween is not until tomorrow but one website is suggesting people make their end of the year holiday travel plans now. travelocity is suggesting people should book their flights in the next two weeks, now the average fair is 314 dollars, expected to jump though to 352 dollars by the middle of the next month, prices already up from last year, domestic air fares up 7.5% with hotel rooms costing 15% more. southwest airlines will loan ipads to them, travelerring traveling between there may check out an ipad to use during the flight it is part of their promotion. >> time now 6:55, san francisco police captured one of the most wanted bicycle thieves. police arrested shawn sixtay on friday. he was last arrested april, arrested by police investigating bike thefts, they say he had stolen property and the tools bike thieves used, last year more than 4000 were reported stolen. a new tool is helping police in richmond fight their reputation as the car theft capitol of the nation. cameras mounted on the top of patrol cars scan traffic and can take photos of 44,000 license plates a day, if a car pops up stolen police get an alert and say thefts are down by 23% since these cameras were installed in may. >> san jose police are trying to find the man who is accused of using his victim's heart to get to her money, she met a man and fell in love with him, within three weeks they were married, what she didn't know is he was on the website under multiple ail eses including then, she gave him money and added him to her checking account and within three weeks her money was gone. >> she stole money from me and i don't know where he is at. >> you are asked to call police if you know anything. >> that deflected a bullet. they fired back and killed a suspect. >> an incredible story. coming up next a crash in sonoma county we have been following all morning long, a child among the injured, find out who is blamed for it. >> plus live pictures from washington, the member in charge now testifying taking tough questions there. life reports live reports just ahead, stay with us. >> -- tell -- >> -- did not -- >> -27-year-old -- >> reporter: we're at the scene of a deadly accident in sonoma county. we'll tell you how authorities believe this accident happened. new hope for catching the suspects connected to a shooting at a nightclub. why officers believe this video could help them crack the case. happening right now in washington, d.c -- live pictures. a top government official getting grilled about the president aide healthcare act -- president's healthcare act.
of europe is hanging to some green arrows. apple disappoints and revenue guidance is short of expectation. meantime, the overall market set for a missed open after a big mix on durable goods orders and another big driver of today's market is earnings, ford, comcast, pfizer some of the names making moves in trading and we'll break them down. first up, we'll talk about apple and shares taking hits after better-than-expected quarterly profits they sold a record 51 million iphones in the quarter but below expectations, the current quarter guidance short of consensus and an hour from now we'll get information from john scully who will join us at post nine. we said how easy it would be to set a new record which they did on phones, but no one expected phones to come in quite this low. >> no. i think there's a big schism developing, the analysts have really turned on apple now. this has become an unruly conference call. and you'll see in a moment, but the analysts are still talking about are you still a growth company? these are questions you don't expect to be asked on an actual apple call. and another one asking whether this has just been peaked and we're kind of done and, you know, obviously cook arguing no and there's some good pushback. there is a question of mobile payments, for instance. that's not dismissed, but the fact is they didn't bring it out. there's a lot in here that i think people are going to say it's over. i urge people to look at the initial question from katie huberty about what they expect in the future about iphone and oppenheimer, the cfo, has some interesting points about channel and inventory. no one is going want to listen to anythings on positive on apple today and i think the most damning thing when you come to carl icahn is the interchange about the buyback, carl, where basically there's a question about when is the company going to be buying back stock and the answer is we buy back stock all the time. that's not the answer that carl icahn wants to hear. he wants to hear, well, wait a second, we've got a real price break here and perhaps you should be buying right now. ben righteous, again, saying is this a good level? your stock's going to be trading around 500. tim cook right back, listen, if it doesn't change today whether the stock goes up or down. no, carl icahn's going to say this is when you should be in there buying. lots of missed opportunities by apple to say the right thing but, still, a question is -- maybe just all smartphones slowing down. >> yeah. well, the market for phones is growing at a multiple of apple's growth. >> right. >> 7% year over year. a bunch of questions. >> that's really out there, they are talking at, hey, listen, your mac is a dominant product and so why isn't your cell phone a dominant product. >> people will argue that it's over. >> yes. >> do you believe any part of it? >> no, i don't think it's over. the problem is the presentation. >> you said yesterday the conference calls are a work of art. >> the arc was very bad because, you know, you start out with concept of people at home might really not understand this, but you start out with the -- anytime you start out with the following, which is, you know, thank you, i'm sorry to be so granular but sometimes this really does control. we are pleased to report the result of apple's first quarter of 2015, and establish new quarterly sales for iphone and ipad sales, that's not what anyone wants to hear, but if you work at apple, they report the expectations, but we live in an expectations game and tim cook knows that and so does oppenheimer and what they are saying is we don't care about your expectations, analyst, we're doing this for the average person who owns the stock of apple and the average person who owns the stock of apple totally takes their cue from how the stock is doing which is horribly right now. >> what is the reason to own it? is it the iphone 6, is it promise of some curved screen down the road? >> i mobile payments issue will come up. >> which he hinted at last night. >> you look at the netflix runs his call and it's conversational and it's certainly not antagonistic. it's an uncomfortable call to listen to and you are crawling in your skin saying they don't like tim cook. if you think tim cook is good or bad, they just don't like him. you end up with this kind of feeling, wow, they're a great company, they're not good enough, how about google, how about microsoft? the reason you would own it is nine times earnings and if they have something special it will happen but it's not because of a -- compare this to a seagate, a company most people don't put in the same category, buying back stock aggressively, a man of the stock, they're not managing the stock, it's the game we're in. >> yeah. one last question, at the very least are we in a period now where they are destined to be ala microsoft more cyclical, more the stock will trade around product announcements the way mature companies often do. >> my real worry is that they are secular, and there's a piece talking about the slowing of the whole cell phone group and the subset is they're not even keeping up with the slowing. they don't have the right product. there's a lot in here. there's this very crucial moment where they're talking about supply constraints but also talking about having too much supply. i would like to think i'm a smart reader of conference calls, i did not understand that. we need more clarity. we're not going to get it. >> obviously apple will open down 7% today along with the markets poised to open mixed today. the dow is looking to end a five-session losing streak and the nasdaq, of course, being dragged down by apple and today the fed begins a two-day policy meeting with the last one with bernanke as chairman and in the meantime the president will deliver his state of the union address tonight. he's expected to renew his call to raise the federal minimum wage in an effort to tackle income inequality. later in the program we'll talk with former congressman barney frank about what he wants to hear about the president and be sure to watch our live coverage of the address tonight 9:00 p.m. eastern time right here on cnbc. >> and it will be you and kelly kevens and it will be fabulous and i think that people have to listen and why they have to listen is because there are so many crosscurrents in america, obamacare, no one is signaling that's any good at all for the economy, cold weather a lot of the people i speak to say cold weather is a real problem. we had the unemployment cutoff that matters, food stamp production these are all federal issues and finally the absolute wrangling of the shutdown of the government was horrendous for our economy. which do we blame obamacare for durable goods, do we blame weather, do we blame the cutoff in unemployment benefits, but the one thing we can't do is saying the government is doing anything to help. >> that's absolutely right. >> that's why i want to hear what you have to say. >> it may not be the occupy wall street kind of speech that some are predicting. >> the old pecora commission is what i call it. there was a investigation in the great depression about the five families that were so wealthy, if you go back and read the transcripts you'll realize what class warfare is really. we're not in a class warfare mode. we have a president who will not address any of the topics i just mentioned because those are sore points. they -- sore points don't come up. >> yeah. you said last night about the market. the things that were working so well last year, cars, housing. >> right. >> retail have essentially if they haven't fallen out of bed they're certainly off of their highs. >> rth is hanging by a thread. >> and you have a lot of words in your words who are out of position. >> yes. this was a moment when you suddenly had to say, do you know what, i needed to be back into dominion, back in con ed, take a look at kimberly which has held up incredibly well with a good quarter. i think people were kind of leaning towards the industrials and those stocks were up the whole day and finished very strong. when you go over the ford quarter, north american is extraordinary. europe's still bad. autos at least going into the quarter were still good. housing, i don't know. do people really go out and buy houses in the freezing cold? i don't think so. >> d.r. horton would suggest the sales pace for january is not terrible. >> no. but then i've got ethan allen saying you can't get traffic to the stores when it's this cold and when you look at chicago. i said, i trump you, i look at florida and california, and why aren't they strong? he said, no, they are strong. where it's warm ethan allen did great amount of business. that would lead us to think that the weather theory is not all wrong. but, then, howard schultz comes back and says, no, no, no, it's a secular trend. i guess what i'm saying, carl, this is one of the harder moments i've seen in my career to really make sense of things, but the president could help by saying, look, the federal government's got to get back in the game. not the fed, but the federal government has to get back in the game of helping, the states are, as the states' coffers burgeon we're seeing the states do good things, but i look what's coming out and i say to myself, do you know what, we had a bad fourth quarter. it was bad. >> yeah. we're going to get an advance read on it on thursday when we get a number. maybe with a three handle but we'll see. >> the employment number is bad. >> today if we're down six on the dow we haven't done that since august, the middle of august, do you feel like this breather that we appear to be looking at is real today? >> when you come in and dupont reports a really good number, it is, someone will probably say, wait a second, gmos, genetic weapons, i love this contrast. genetic weapons versus insects raises hopes and fear it's dupont and monsanto and on the back it's a facetious piece about chipotle saying the industrial food image bureau is against mon santa and dupont. dupont is doing the right thing. pfizer delivered a number that is quite good. we got more price tag rises for gilead and celgene. >> we'll walk through a bunch of the numbers when we come back. we'll talk dupont and pfizer and ford as well among the companies getting a boost from earnings news and later on nobel laureate robert shiller will break down the case-shiller home price number and he'll talk about the recent jitters in the stock market and housing. one more look at futures dow's down five for the first time since november. welcome back. how is everything? there's nothing like being your own boss! and my customers are really liking your flat rate shipping. fedex one rate. really makes my life easier. maybe a promotion is in order. good news. i got a new title. and a raise? management couldn't make that happen. [ male announcer ] introducing fedex one rate. simple, flat rate shipping with the reliability of fedex. [ male announcer ] introducing fedex one rate. some brokerage firms are but way too many aren't. why? because selling their funds makes them more money. which makes you wonder. isn't that a conflict? search "proprietary mutual funds". yikes!! then go to e*trade. we've got over 8,000 mutual funds and not one of them has our name on it. we're in the business of finding the right investments for you. e*trade. less for us, more for you. the fund's prospectus contains its investment objectives, risks, charges, expenses and other important information and should be read and considered carefully before investing. for a current prospectus visit www.etrade.com/mutualfunds. ♪ another big morning for earnings. dupont beat the street with its fourth quarter results and announced a new $5 billion share buyback and pfizer also beat forecasts with their q-4 numbers, ford and comcast, the parent of this network, seeing their shares rise in reaction to their quarterly results. ford beats by three cents makes money in north america and losses in europe are smaller and, again, reiterating the claim that 2014 pretax probably lower than 2013. >> you go to slide nine in the deck and it's really important because you see the fourth quarter pretax results. here you got $1.7 billion in north america, minus $571 million in europe. here's interesting brazil weakening so badly next to argentina and argentina going the way of venezuela. this seems to be without a doubt a sign of the times. europe getting a little better. south america not helping and united states on fire. congratulations to ford and to the team there because they're brimming with cash. >> record market share for them in china at least. >> yes. and china, you know, china needs to be a bigger driver for them. it's not there yet. a lot of people are worried about china. if you are audi you are certainly not. selling a lot of cars there. >> dupont beats by four cents. another $5 billion buyback, but it's raining $5 billion buybacks. >> yes, it is and coleman has done a remarkable job in reconfiguring that company more into the ppg mode and we're all in these revolutions away from boring chemicals to high value. dupont is a food company. it's feed the world and health and safety. these are working. it's the regenesis of a company and kullman has got it going. she is about as she would tell you enzymes. >> pfizer 56 beats by 4 cents, again, though, the loss of exclusivity. we saw what happened with lipitor a few years ago. now it's vyiie viagra down. >> it was up nicely last year. america's become the stock that people want to own because it's done, you know, it hasn't done much at all. bristol-myers reinventing itself, people don't like right now. if i had to put the panoply of pfizer at 30 and merck at 53 and bristol-myers at 50 it's definitely bristol i want to put the money on. >> comcast 66 cent and misses on two cents on a higher tax rate, and nbcu up and broadcast tv and ocf up 55. >> it's the way we have to measure ourselves, the dividend boost, this is a company that quite recently said things are great at a grnce and they put out another number and things are really great again. i want people to look at comcast, during the period we started worrying about argentina, turkey, south africa and china, comcast went down. what should you have done? how about bought comcast? >> at $136 billion the market cap's now bigger than disney. >> do we have to worry about china with comcast? south africa? argentina, comcast, i mean, this is what people have to think about. >> right. >> they have to think a little broader. stop thinking about the fed. stop thinking about the s&p. start thinking about brian roberts and, again, you can say jim's a house man. have i ever been a house man for anyone? not even my own house for that matter people that know me well. >> that doesn't mean you won't pay attention to the emergency meeting in turkey today. >> if you are going to go nonsecular, you're not going to get a lot of money. look at the way egypt was at one point a great gateway to africa. if turkey wants to get serious for those of us who remember the initial turkey away from the army running the country and going to a less secular, that's what caused deval after deval after deval, if turkey wants to go the wrong way, do you know what, you don't need to own yapi credit, but we have people come on our network and they say don't worry about emerging markets, they must be rich to say that because if we have individuals who are not worried about emerging markets, i feel bad for them. they should. they're reaching for yield the way people started reaching for subprime mortgage. we could reach for yield and be stupid. but i got to tell you are as dumb as plywood, no offense to louisiana pacific for making a remarkable turnaround if you invest in emerging markets. you saw the ads, is that what it is? you think you know what you're doing. i invested hundreds of millions of dollars and i did not know what i was doing and i was up for every hour except for three! trading into panic at night, trading into south africa, trading in finland, and you couldn't beat me? you couldn't beat me and now you're coming in and trying to make money, please. >> no cry babies today on the emerging markets. >> you want to reach for yield, go to mars. they got big field. 5% on the mars bots. >> we'll run out of things to throw on the set. >> i get angry, if you want to lose money i got a million ways. take the seahawks and not the points! there, that's good. even up! when we come back -- >> richard sherman. >> cramer's "mad dash" if that were not mad enough as we count down to the opening bell. look at futures here and we'll walk you through the other news especially in retail, jcpenney and abercrombie. >> a good split, a new chairman and ceo split. how about sales! >> more "squawk" in just a moment. afghanistan, in 2009. orbiting the moon in 1971. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection. and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve. (vo) you are a business pro. seeker of the sublime. you can separate runway ridiculousness... from fashion that flies off the shelves. and you...rent from national. because only national lets you choose any car in the aisle... and go. and only national is ranked highest in car rental customer satisfaction by j.d. power. (natalie) ooooh, i like your style. (vo) so do we, business pro. so do we. go national. go like a pro. her long day of pick ups and drop offs begins with arthritis pain... and a choice. take up to 6 tylenol in a day or just 2 aleve for all day relief. all aboard. ♪ ♪ oh, yeah ♪ a few minutes before the bell on a tuesday morning, let's get cramer's "mad dash" ahead of the market open, you got a couple of different things to look at. >> i find companies that do things this is my andy dufraim theme, get busy living or get busy dying. martin marietta is adding cement to their arsenal of aggregate which is stones and why do you do that because housing is coming back. you need to build roads, they've got the materials and they are adding cement. i like cx2. >> is it a residential, commercial, infrastructure? >> all three, frankly all three. i've regarded it a little less residential than bulk in materials. this is a very good sign. these are companies saying things are getting better in this country they obviously haven't been watching us. >> durables, what explains durables? do you think it's weather? >> i think there's a lot of weather, the government shutdown if you listen to lockheed martin, things aren't that great, and alcoa they'll say aircraft is lumpy, but united technologies say it's a pause and they'll catch up this quarter. >> you were looking at cliffs briefly, casablanca taking a 5.2% stake. >> i thought they had very little value and iron ore had very little value because it's china, but a company said you ought to split foreign from domestic and you ought to do a dividend boost and a national limited partnership. and do you know what, i want to grow hair. come on, anything can happen, but, no. >> is this activism or suggestivism? >> i think it's in the suggestivism. do you know what, remember that scene where judy garland just, like, says she hopes she can get back oz and all you got to do this is a ruby slipper play right back to kansas. you got to have some substance before you say listen, the old cliffs natural is worth a lot more. >> right. >> i mean, maybe cliffs naturals should buy a beer company because those companies are on fire. it's, like, cliffs natural, you know, brewed on the shores of iron filings in minnesota! >> cold filtered. we mentioned abercrombie & fitch, arthur martinez becoming nonexecutive chairman over mike jeffries who is still on the wall of shame. >> jeffries, good that they separated those. i mean, abercrombie did report a good quarter, but if you completely -- guide down, guide down, guide down, guide down, you will eventually beat your quarter although even jcpenney has found that a hard way to do things. they need to separate if only because they had really bad gave nance. are you allowed to say someone didn't do that job of a company? >> i remember having covered him in chicago in the '90s, it was not a -- not a hall of fame. >> you are never allowed to say someone's mediocre because that would be saying, like, for instance, the cleveland browns are mediocre if you live in cleveland, it's all you got. >> the opening bell about four minutes away. "squawk on the street" will be right back. don't wait for presidents' day to save on a new mattress. sleep train's presidents' day sale is on now. save up to $500 on beautyrest and posturepedic. get a sealy queen set for just $399. even get 3 years interest-free financing on tempur-pedic. plus, free delivery, set-up, and removal of your old set. keep more presidents in your wallet. sleep train's presidents' day sale is on now. superior service, best selection, lowest price, guaranteed. ♪ sleep train ♪ your ticket to a better night's sleep ♪ [ bell ringing, applause ] five tech stocks with more than a 10%... change in after-market trading. ♪ all the tech stocks with a market cap... of at least 50 billion... are up on the day. 12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up. [ male announcer ] now the world is your trading floor. get real-time market scanning wherever you are with the mobile trader app. from td ameritrade. you're watching cnbc "squawk on the street." live from the financial capital of the world. the opening bell's in about a minute. a lot going on. the final bernanke fed meeting today. we're going to get at&t and yahoo! tonight. a lot of earnings are already out. it's media day for super bowl xlviii. >> yeah. i have my -- my -- my friend eric grubman on the show tonight he's the operations guy. he's the guy when the power went down last year, let's just say he was the guy that had to scramble. >> let's hope something that exciting happens again. by the way, the yen back under 103 per the u.s. dollar which has given people a little bit more strength in terms of equities. we're seeing futures higher. europe is hanging on to some green arrows, people are wondering if this is the end of the five-day selloff. >> you mentioned the yen and that's important and many of the companies that talk are victimized by the yen, anything that stabilizes the yen is good. >> a little bit more green than red today. down at the big board, norway's marine harvest producer of farm salmon celebrating its listing on the nyse. >> and they are hoping it will take a run at the oil companies. stat oil is very interested in the balkan. they've been clubbed. stat oil, listen to me. instead of paying high, pay low. >> at the nasdaq, net app the official data storage provider of the nfl and super bowl xlviii. you mentioned seagate earlier on, jim, we are seeing some tech companies with some numbers. >> seagate basically is telling you not to worry. there's a great lot on this conference call where someone says are pcs bottoming and they go, do you know what, this could be the fifth bottom of pcs and company returns a lot of capital. company buys back a lot of capital. they've got a very good acquisition in the pipe, do you buy seagate right here, unequivocally. >> a couple of industrial manufacturers, danahur and air products are out and they guide below consensus. >> they are shrewd companies and know how to play the game. that's why danaher is not down. when i talk about a company that knows how to play the game, what i mean is illinois tool works. they'll report quarters and basically tell you, we'll underpromise and overdeliver. apple is doing oput, underpromising and overdelivering and that's how a stock goes down versus a stock going up. is it a game? i always debate with my friend herb greenberg thestreet.com and it's what the analysts want and if you don't care what the analysts want and you are warren buffett, you don't play it but everyone else is exception to it with the exception of amazon, solar city and tesla and hopefully for the people at twitter. >> housing is going to get some attention today. d.r. horton up almost 6%, new orders up 4% despite higher rates and backlog up 20%, closings up 19 and average selling price up ten and they say the weekly sales pace in january's okay. we're seeing things like sherwin-williams getting some green today. >> yeah, i mean, look, one of the things about housing is that the companies themselves are doing fairly well. toll brothers got downgraded, you know, it was just a glancing blow. i'm noticing that k.b. -- it is k.b. financial, i thought it was k.b. home. what i see in this group is people believing, do you know what, this game isn't over yet, whirlpool, sherwin-williams and rota rotate. but i have to tell you home depot and lowe's if you are buying them, you are buying them, frijs i got a note from my daughter's school, tulane. they are closed, why, polar vortex meaning snow. >> it's going to be cold in the south. >> we get snow there and shovels are moving if i saw lowe's up yesterday, the weather, hey, listen, we got to go to the weather channel, i don't know what they're doing. how are they playing stocks at that directv? because the weather is wreaking havoc or making money for depending upon companies. polar vortex. >> corning is the biggest loser. 29 cents beat by two cents but revenue is down almost 9%. they see more price declines, downturn in optical fiber sales, too. >> darn it. because they're trying to bring out some value there, you know, doing some changes and making big changes to the company but those are disappointing. that's just disappointing. >> some of apple suppliers, today. the qualcomms, the jabillss, micron, sandisk. >> qualcomm is a tef flown stock. but qualcomm will come right back because they always do because the company really knows how to guide low and then beat. when i look at some of the players here, micron that will be down for a few minutes. apple has been -- sky works, let's see how sky works is doing, down a buck. you know, the apple breakdown game it's a legitimate game, but what you really should be thinking about here is other forms of tech that are doing quite well. telco equipment suppliers, cisco, microsoft doing quite well. microsoft might be a buy on the way down. it's interesting. it did quite well. micron a glancing blow, not bad. >> you mentioned how the analysts had turned on apple. oppenheimer, raymond james cuts, colin gillis said apple is lagging. are expectations now in line with guidance? >> i think the problem is that people are waiting for carl icahn to get angry. i mean, you know, this is -- all those analysts together, it's kind of like when stalin was challenging the pope, how many divisions does the pope have. you're allowed to say that, that's a historical analogy. stalin said it, there were, like, 500 million people, he said it to people. but what i think's important here is carl icahn has the divisions, if carl icahn is unhappy and it's ridiculous, they should be buying big and then he goes on wapner's show, the whole dialogue changes as much as i like the analysts, they're not -- they have no divisions. >> right. >> icahn's got the divisions because he's got the firepower. >> you think this quarter gave icahn more ammunition? >> yes, especially when tim cook says we're in every day, we buy. no. that's one of the things -- i take a lot of executives to task in "get rich carefully", you know, when the stock is really down, go do what holmes does at wyndham, no one knows holmes, they ought to, he's in there buying the heck out of it when it's down because he recognizes that the market's down a lot and nothing to do with the hotel chain. this is when cook should be saying, look, if i were cook, i know he's got a lot of people, i would tell my guy, cfo, 5 million shares and they'd hit and then 508 for 5 and they'd hit you and suddenly they'd be taking the stock. because they'd say, do you know what, the hold is a stone wall. >> yeah. does it make you -- does it make you nervous that the big leaders tend to be names that are restructuring, that are being called for change by activists, i'm looking at cliffs natural at the top of the business. >> get busy living or get busy dying. there are a lot of companies that are fed up with where their stocks are. there was a real good piece about companies standing there and buying back stock and getting aggressive when stocks goes down. cliffs natural has done nothing for ages. maybe you make noise and you get the stock up. there's a lot of companies like martin marietta materials, a really fine company and no one really wanted to own them and suddenly they've becomes-to-nut maker of what you need when you build a note. look at caterpillar, a note by wells said cat's topped out and they are doing all the financial engintoering and they cost the number and they got busy living because they are tired of dying. they are fed up. >> up for a second day. >> yeah. >> basically helping support what we did have to work with yesterday to a large degree. >> do you know what is interesting about apple versus google. they wanted apple to do an acquisition, google does a lot of acquisitions and they don't nearly necessarily make any money per share, but we all like it. we all clap, oh, man they bought a smoke detector company, yes! that's what we need a better smoke detector and they buy google glass and an insurance company is going to reimburse you for google glass, oh, mime buying google! one company is loved and the other despised. >> you saw the new frames? >> i'm going to get them because i want the frames. >> the frames called the bold, the curved, does that ring a bell, the thin and the split, at least two of those names are right out of blackberry. they cost $225 on top of the $1,500 you spend if you are invited to make a purchase. >> and himax technology downgraded by someone they make the key component for the glass. it's been a hot stock and it will probably get hot again. >> with the dow up 52 let's get over to courtney reagan who is on the floor for us today. >> what a difference a day makes, right? earlier this morning we saw the durable goods numbers come down 4.4% down. and we recovered and look at this we're opening up higher. the dow up by about 63 points here. the s&p 500 also creeping higher. traders watching a couple different points. on the low side, the technical level that we're watching is 1776, on the high side it's 1791. right now we're right at about 1785. we'll see where we go here today. on a macro-focus what we are looking for is positioning of portfolios ahead of the state of the union address and the fed meeting. starts today. bernanke's last meeting as fed chairman. a lot of focus in the u.s. and around the world. if we look at these earnings reports, we've got good ones but look at the volatility index before we can get to that, again, what a difference a day makes as we turn things around volatility down as we see the market move higher. if we can move on to home builders the case-shiller index up 14% those prices. not bad. also d.r. horton putting out a really good report there. they're saying prices are up, closings are up. lots of good news out of the home builders as you can see here today, almost higher across the board for the entire sector and d.r. horton up more than 6%. autos, too, fundamental tenents of the economy, homes and autos, ford record profits and north american sales turning up strong, giving profit sharing to employees $8,800 for 47,000 hourly employees for ford. we know the gm ceo will be the guest tonight at the state of the union, something we're all going to be focused throughout the day and toyota higher and they are shutting down some factories in japan. stabilization overseas overnight, both in china as they listen to what's going to happen here with the fed meeting and also brazil. stocks rebounding. the central markets around the world sort of calming fears as well in turkey and in argentina. things looking up. we'll keep things in focus and they've been mentioned in earnings reports. all of the currencies continue to be in fluctuating modes so that, of course, is going to impact outlooks going forward companies keeping an eye on it and investors should be, too. carl, back to you. >> let's check in with rick santelli at the cme group in chicago. morning, rick. >> good morning, carl. a day made a difference in a logical fashion, you know, yesterday we actually saw yields go up after a 7% drop in new home sales but today the disappointing durable goods and revisions as you could see on the intraday chart for tens. but it wasn't only tens. bunds looked the same and gilds looked the same. i want to caution i always like to point out the nonseasonally adjusted as well as the numbers released which are seasonally adjusted and normally with durable goods it's, you know, yin and yang. if the numbers are good the nonceasally adjusted is usually not. today the headline number wasn't very good and the internals weren't very good but if you looked at nonseasonally adjusted, much better. just to put that out there. if we want to open a chart up for tens i think it's important to keep scores i don't think it's possible for the price to taper, because we've got stimulus from various central banks but nonetheless, go back to may 1st the score's basically up 115 basis points from the roughly 160 low to current levels at 2 3/4 and on the downside of the score, well, the high yield's basically close to 3%, up 115, down 25. so, no matter how you slice it, many traders saying it's not acting like maybe we're going to get an increased taper, it's hard to get a gps but rates are significantly higher before it was a topic. foreign exchange, everybody wants to continue to monitor what is simply referred to as the carry trade, so the yen, of course, plays into that. let's look at the yen in various forms. if we look at the dollar yen, you can see starting on this chart starting in november there has been some reversal but from very lofty levels in favor of the dollar, but what i find fascinating is let's take a not so good currency, okay? first look at the euro/yen and the not so good currencies the canadian dollar, i could have picked the aussie dollar, but canadian dollar versus the yen, you can see it is really getting drilled so we want to pay attention to all the intracurrency relationshipships because it gives you insights into the costs of funding various swaps. carl, back to you. >> all right, rick, thank you very much, rick santelli. when we come back former congressman barney frank what does he want to hear from the president in tonight's state of the union? "squawk on the street" will be right back. [ male announcer ] here at optionsxpress, our clients really seem to appreciate our powerful, easy-to-use platform. no, thank you. we know you're always looking for the best fill price. and walk limit automatically tries to find it for you. just set your start and end price. and let it do its thing. wow, more fan mail. hey ray, my uncle wanted to say thanks for idea hub. o well tell him i said you're welcome. he loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. yea, and these ideas are across the board -- bullish, bearish and neutral. i think you need a bigger desk, pal. another one? traders love our trading patterns, now with options patterns. what's not to love? they see what others are trading -- like the day's top 10 options trades by volume -- and get ideas! yea i have an idea: how about trading that in for a salad? [ male announcer ] so come trade at the place that's all about options and futures. optionsxpress. open an account today and get a $150 amazon.com gift card when you call 1-888-280-0154 now. optionsxpress by charles schwab. welcome back to "squawk on the street," i'm reporting from the nymex we are seeing strength in the energy complex today, u.s. crude futures and the brent contract are trading both higher. on the brent side we are seeing strength in the european and chinese equity markets this morning helping further those gains but on the u.s. side, of course, it's these cold temperatures outside that's all anybody can talk about. we are watching west texas intermediate trading above $97 a barrel. in the meantime, speaking of those cold temps sending nat gas to $5.15 in the session overnight, of course, we are back below the $5 level right now but traders are saying they expect prices to remain high as long as demand continues to be strong and that will continue as long as the cold tonight as well. a quick touch on gold we are seeing it trade a little bit lower today but traders saying it's holding the 1255 support level and it's a wait-and-see mode right now and all eyes on fed chairman ben bernanke as he kicks off his last meeting today, carl, back to you. >> all right, jackie, thank you so much. jim, it's going to be the coldest it's been in chicago in five years today and you mentioned the weather around the country. this time it's the south's turn. they're going to get snow all across the south, in deep south texas, georgia, the carolinas. it's always a factor, but it has been more of a factor arguably now. >> the real shortage is not natural gas or the storage issues it's actually propane which is amerigas partners, apu, it has a nice yield, i think it will have a real good quarter, it's not been the place to be propane, the country has been long propane for many years. now there's a shortage and that's the play. >> retail is the one thing they never run out of are excuses but when we get the next quarter's results they'll be saying january was cold, too. >> somebody downgraded vf corp the other day, eric wiseman's remarkable company north face the one thing people have to understand the order thing after you order cold coats you're supposed to start bringing in spring weather gear but there's probably been reorders for vf corp, does that mean you buy vf corp? i'm saying that over the last decade has been the fabulous play and it doesn't hurt that it's cold for them. >> one thing unnoticed today jcpenney aamending their shareholder rights plan and lowering the trigger extending it down to 2017. >> sold to you. >> have a good time. >> knock yourself out. i would like to own jcpenney, you know, for a couple minutes, you know, sears a s and jcpenne and these -- >> constructive darwinism is what some say. tonight we'll get at&t and yahoo! along with the president speaking. a lot of the headlines all say that yahoo! that the hon moeymo is about to own. >> this is alibaba and 5.5 is the dividend yield and you won't get decline in at&t to speak of. >> you think the alibaba value may be pulled in here by china? >> no, by the time it happens it will be $200 billion and animal spirits will be back and you buy yahoo!. in it's down on the quarter it's meant absolutely nothing. goog was down 35 points at one point. i check around, why is that? because people are checking around. there's nothing. yesterday was a total fear game. i like fear because that comes at the tail end. but google is coming back up and yahoo! will be a function of, yeah, i really want to own alibaba and it's the way to play it. the stock is down a quick five points is probably a buy here. >> you know, we're up 74 on the dow. s&p 1788. we saw an open like this yesterday that faded very quickly. is today any different? >> it's case by case. i'm hearing why is dupont not doing better, it's natural gas. i want to go back to apple. you would have thought -- there was a time when apple down 44 two have destroyed things. maybe the market's a little stronger than we think. apple is being ignored. this is one of the largest companies in the world. >> and still, i mean, up until this morning up 25% since september. >> that's a good point. >> had a nice run, right? >> it's had a good run. yesterday there was a big raid on facebook because of worries about twitter. that's come right back. the market doesn't have a lot of memory day to day and i think people ascribe on a given day, a given day is a skirmish and a longer battle is are people going toward the bond market equivalents and recession, and is the recession fears begins, and you look at the federal government pulling back stimulus, it would be interesting to see -- a minimum wage is not the government. that's the government mandating. all the great companies that i follow, costco, starbucks, they pay much more than the minimum wage. chipotle. >> that's one reason that the president will be appearing at a costco after the address. >> it wouldn't have been so wrong to start at a costco and work your way out, that would be a great thing to do if i wanted to be retail like my parents and the next generation i would love to work at costco if i decided to repeat their good work. >> look for the president to mention things like that when he goes to merrill lynch. >> the president's there. are they in that kind of mode? >> let's -- we'll find out. we'll see what happens tomorrow. in the meantime here's what's coming up next on "squawk on the street" -- coming up, forget about the polar vortex. how about a polar plunge? wait, that sounds just as bad. let's stick with jim cramer and his 6 stocks in 60 seconds. that will keep your portfolio hot. "squawk on the street" will be right back. i always say be the man with the plan but with less energy, moodiness, and a low sex drive, i had to do something. i saw my doctor. a blood test showed it was low testosterone, not age. we talked about axiron the only underarm low t treatment that can restore t levels to normal in about two weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women, especially those who are or who may become pregnant, and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. report these symptoms to your doctor. tell your doctor about all medical conditions and medications. serious side effects could include increased risk of prostate cancer, worsening prostate symptoms, decreased sperm count, ankle, feet or body swelling, enlarged or painful breasts, problems breathing while sleeping and blood clots in the legs. common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. ask your doctor about axiron. nwas the most watchedage otelevision event ever.s so, what's next? the upcoming winter games from sochi. where every second of nbc universal's coverage will be available on every device. on tv, online or streaming on the nbc sports live extra app. beginning february 6th, experience the winter games everywhere. welcome to what's next. comcast nbcuniversal time for six in 60, six stocks in 60 seconds with jim. we'll start with tesla. >> i feel bad for tim cook they are about to sell millions of iphones, it doesn't matter, tesla sold a couple of cars in beijing. buy a tesla. >> under armour. >> panel running for the nfl and i think he's doing a great thing. it's a very cheap stock when it comes to long-term growth. >> pacific crest likes sales force. >> the selling stops and you come out and you recommend gilead and you recommend sales force, this is an examples. >> whole foods. >> this is setting up for disappointment for whole foods. i think mackey and mr. robb are doing a great job but there's a lot of competition in that business. could be a right level here. >> take-two could beat. >> i think the stock goes to 20. >> and finally we got to get used to the ticket aal. >> american airline, this is the beginning of the next leg of the growth of american air. i want people owning this stock. >> what's coming up tonight on "mad dash"? >> i'll watch you on the state of the union. i'm not going to miss it, i may have to watch it after tending bar. i've been tending bar at night. can you imagine that? and the modelo is selling like hotcakes. i'll bring in cliffs natural. >> cold filtered. >> brewed on the shores of iron filings. scott wine, polaris is a remarkable company and they are selling stuff you don't need and they are doing well. eric grubman, naval submariner, partner at goldman, the man who saved constellation at baltimore gas and electric, eric grubman who was the operations guy at the nfl, let's hear about the big game. >> i'll break of your seahawks bias before sunday. >> it will be hard. i wont do my richard sherman imitation as much as he likes, coleman is my hero he's spiked duracell's orders. >> we'll see you tonight, jim. >> thank you. breaking news on consumer confidence at the top of the hour and apple ceo john scully on those numbers. back in a minute. you can separate runway ridiculousness... from fashion that flies off the shelves. and you...rent from national. because only national lets you choose any car in the aisle... and go. and only national is ranked highest in car rental customer satisfaction by j.d. power. (natalie) ooooh, i like your style. (vo) so do we, business pro. so do we. go national. go like a pro. [ male announcer ] when seconds count, the experience of adt matters. the alarm initially went off at 12:06. after a few seconds, adt called me, and the guys were caught by 12:29. adt called, and she said, "mrs. white, your carbon-monoxide detector's going off." within a minute, the fire department was there. the extra seconds that adt saved me let me save my son and my daughter. [ male announcer ] when it's your family, trust adt fast response monitoring to help protect against burglary, fire, and high levels of carbon monoxide. now get adt starting at just $49, with 24/7 protection just over $1 a day plus a money-back guarantee. [ martin ] that makes me feel awesome, knowing that adt was that quick. i still cannot believe how fast adt was able to relay the information to the officers. i love adt. they came through for me. they saved my life. [ male announcer ] get adt for as little as $49, and save a lot more than money. call or click today. go! [ male announcer ] it's chaos out there. but the m-class sees in your blind spot... ♪ pulls you back into your lane... ♪ even brakes all by itself. it's almost like it couldn't crash... even if it tried. the 2014 m-class. see your authorized dealer for exceptional offers through mercedes-benz financial services. see your authorized dealer for exceptional offers what'swithout the thinking capitathat makes it real?? what's a vision without the expertise to execute it... and the financing to make it grow? whatever your goal, it can change more than your business. it can change the future. that's why, at barclays, our ambition is to always realize yours. welcome back to "squawk on the street." january read on consumer confidence surprises to the upside 80.7. 80.7. give you some context, 80.7 would be the best number going back to august when we had 81.8. also january read on richmond fed manufacturing index. comes in at 12. the last two reads have been at 13. nothing surprising there. sara, back to you. >> all right, rick, some mixed data today on the economy. markets may be struggling a bit into 2014 but some of wall street's top experts are getting more optimistic with stocks. our senior economics reporter steve liesman is here with the results of the new cnbc fed survey, what does it show? >> it says they expect to taper and a $10 billion taper and they expect the fed to taper throughout the year. let's look at the outlook for stocks and what you can see they've upped their forecast. here is the june 2014 forecast. it was in our last survey 1814. now it's up to 1844. how about by the end of the year? they're up to 1857, they were at 1857 and now they're up if you can zoom in on the new number for the end of the year it is 1913. a pretty substantial increase for this group which you can see has been very downbeat on stocks throughout for 2014. i want to show you how bad this group has been. 45 economists, strategists, fund managers, these with their predictions for 2013 for the end of the year so in our january survey, they predicted it would end the year at 1547. in july they thought we'd end the year at 1691. in december, finally getting a little bit of religion about a massive increase in the stock market. they predict the 1773, but look where we ended up and we end up at 1848. right now they're a little closer to here, but this group does a pretty good job forecasting the economy, the fed and interest rates. not so good when it comes to predicting the stock market which, of course, they have to do that as part of their prediction of the economy. on the ten-year yield what they looked at, 275 and in june 2014 look for 308 and 337 by the end of the year. moving on and looking at the fed funds rate forecast, do we have that there? ending the year at 72 basis points. there you go, guys. thank you very much. the next screen we'll look at is, ta-dah, the fed's expected impact of tapering on bonds and stocks. look at bonds first, 56% think tapering will result in higher bond yields. 35% say no effect. 7% say lower. moving on, look at the effect of stocks, 7% say higher stock values. 54% say no effect. and 35% say it will move lower. later in the day in "power lunch" we'll have what this group looks for economic growth and despite the numbers we've had the last couple days which have kind of been on the weak side, this group i'll tell you is looking for stronger growth in the year ahead. back to you. >> thank you very much, steve liesman back at hq. apple is trading sharply lower as you probably know by now despite a first quarter earnings beat, the company's outlook disappointed and the number of iphones fell short of estimates. first on cnbc is former apple ceo john sculley. it's great to see you, thank you for coming by. >> thank you, carl. >> are you disappointed? >> well, i'm just scrice edsurpt the stock reacted the way it did. it way overreacted. the cause was pretty much explained by tim cook and that is in north america the carriers changed their policy and you couldn't turn your phone in before the two-year contract was up. it hurt samsung as well. the real story in my mind is tim cook still confirmed that they're going to have some big product announcements this year and the one i'm watching for is in mobile payments because i think that's where apple could get a huge strategic advantage over paypal, even amazon, paypal, for example, has about 140 registered users. amazon has about 215 million. well, there's almost 600 million registered users on passbook. you add in touch i.d. and beacon the new technology in stores that enables you to build a complete end-to-end system this is really apple's sweet spot. >> you think it will do for payment what itunes did for music and media? >> it has that potential. >> can they do it organically or does it involve buying somebody else? >> well, you know, if you'd asked me that question about six months ago, i would have said, why doesn't apple take all that cash and buy ebay, but as you look at it, and by the way i still think it's a good idea but i don't think they'll do it. but you look at what they have and they've got the best user experience, this will be a mobile play and if you add in beacon and passbook's registered users, they have a real chance to have a blowout opportunity. >> but they need a new ipad and when was the last time, 2010, the last time it introduced a new category, a new product category? one of the analysts asked about this on the call yesterday the innovation cycle at apple. tim cook said it's never been better. john sculley, is it what it used to be? >> i think it's realistic to expect and i don't have any inside information, sara, but i think they'll probably have a wearables product, maybe an iwatch in the september time frame. people have been speculating about it for a long time. it was a hot category at ces this year. but i'm far more interested in the opportunity for them in mobile payments because i look at that as much of a product innovation as anything they could do in hardware. >> i got to disagree with you on the quarter in the sense that, of course, it wasn't a bad quarter. biggest revenue from a tech company ever. and enormously profitable, about the it was an awful quarter if you are trying to look at apple as a growth stock. nothing is growing except the ipad and it's not growing that much by historical standards. about 14%, 15% and also emerging markets were pretty good but the domestic market was not good. and when you look at what that probably means, we were expecting china mobile to be this big catalyst, but that's going to take a ramp and at the same time apple's main base in north america appears to be, well, we don't know if it's exactly contracting long term but we know the carriers are able to push back on subsidies not by paying less but by pushing out their need to pay them. so, for me, i've got a lot of questions about apple. from an investment perspective, not from a company health perspective or from how it's managed perspective but from an investment perspective. new products probably aren't going to be the cure-all a lot of people are saying because if it's a new category, it will take a long time to ramp. if it's tv, low volume, high profit. will any of that move the needle in even the medium term? >> well, those are all really good observations, but apple doesn't trade like a growth stock. it trades eight times cash. and if you look at -- >> exactly. >> that's what a lot of people are asking. >> they were saying you should group it with general mills. >> china mobile is still a story yet to unfold. china mobile's moving into, you know, lte which means 4g capability. they're only in 16 cities. they're going to go to 300 this year. so, we haven't even begun to see the impact. look at india, apple wasn't even a player in the market in india a year ago, now that india's rolled out 3g, not 4g, apple's the number two selling brand there with the iphone. i think there's still a good story. but apple's not a high-growth company. it's so large. how can you be a true growth stock all the time? but you can have breakout products. and i'll bet you that apple recovers and then i'll bet you it goes way beyond where it's been once the end of 2014 is here. i think -- >> that's a pretty safe bet. people's expectations on the investment side are what -- >> and speaking of expectations, i wonder if you think there's any work they have to do just on the cosmetics of dealing with the street. you've read parts of the transcript from last night, it was at times openly hostile and there's a degree of skill in managing analysts, done you think? >> probably. but it's never something that, you know, in my era we didn't have cable television so we didn't have a lot of things so it was a lot easier. so, i can't really comment on that. but i do think that apple is so much in the spotlight, carl, that they have to watch every word they say because any misstatement and it gets -- has huge ramifications. >> not to mention managing activist investors like carl icahn. the amount of cash they are sitting on is mind-boggling. >> no one has cash like apple does and carl is pushing, they've said they're going to, what, buy $60 billion worth of stock back. he'd like to see them buy higher numbers. we'll just have to see. >> thanks for coming in. it's certainly interesting that the dow is hanging on to almost a triple digit gain even though apple is down 44. we'll see you later. let's get a market flash. >> polapolaris they were helped strong sales of its motorcycles and its offered vehicles but that's not what investors are focusing on. instead they are pocusing on the fact that the company guided 2014 sales and profits below street forecasts. and a quick programming note scott wine will be jim cramer's guest on "mad money" 6:00 p.m. right here on cnbc. sara? >> all right, sheila, thanks very much. up next on "squawk on the street," bitcoin facing new york regulators today a day after the arrest of one of the currency's chief advocates. will bitcoin be able to prove itself? we'll talk to one of new york's top financial regulators when "squawk on the street" returns. can you start tomorrow? yes sir. alright. let's share the news tomorrow. today we failrly busy. tomorrow we're booked solid. we close on the house tomorrow. i want one of these opened up. because tomorow we go live... it's a day full of promise. and often, that day arrives by train. big day today? even bigger one tomorrow. when csx trains move forward, so does the rest of the economy. csx. how tomorrow moves. in today's market, a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price, maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today. in a we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. a bet of a black eye for bitcoin the currency suffered a setback when u.s. prosecutors charged two bitcoin exchange operators with money laundering before today's public hearing of bitcoin by new york regulators and mary thompson has more. >> one of those charged in the $1 million money laundering scheme is 24-year-old charlie shrem who was arrested at new york's jfk airport is a bitcoin entrepreneur, ceo of the bitcoin exchange bit interest and vice chairman of the advocacy group the bitcoin foundation. cnbc interviewed him last april at a nightclub that he'd investing in that was accepted bitcoin. >> with bitcoin appointments are irreversible, they are instant, they are private. the fee is less than 1% to accept it as opposed to 5% on credit card fee and we get their money the next day in our bank account in dollars. no currency risk at all. it's cash with wings. >> now, according to charges filed by u.s. attorneys, he knowingly helped an underground bitcoin exchange operated by 52-year-old richard fahaaea, he funneled bitcoins to people looking to buy drugs on the now closed website silk road, which only accepted bitcoin for the drug and other illicit services it sold online. through his company bit interest he sold the bitcoins who sold them to bitcoin customers and shrem allegedly bought drugs on silk road and failed to alert the feds. and now offline bit interest had two high-probackers, and in a statement issued yesterday the winklevoss twins said when we invested in bitcoin they would abide by all laws and we'll be there about any comments about shrem. >> all right, mary, thanks. talking first to cnbc here is new york stop's financial regulator benjamin laska, he's launching the bitcoin earnings today. the two high profile arrests come just in time for your hearings. i take it, it wasn't planned. >> we don't coordinate those things. >> but it increases attention and it's the sort of thing you'll look into today. >> these are obviously very serious charges and we don't want to minimize them being involved in narco trafficking and money laundering is really serious stuff and people need to know that if they get involved in it with bitcoin or otherwise, law enforcement's going to come down on them. the other side of that is can bitcoin become and evolve something that's not just a place for drug transactions and money laundering and bitcoin i think as we have continued to study it potentially holds a lot of promise and you could see a lot of changes in technology, maybe more evolution of bitcoin or other virtual currencies and you could see some real improvements in our payment systems. >> as i talked to you a number of times over the last few months and i think this is the most, i don't know, bullish i want to say or at least this is the strongest you've come out and said this could be a legitimate, mainstream form of payments. >> look, i think the jury's out and that's the point of our hearings. we're keeping an open mind. at the same time the charges yesterday i think do hang a cloud over bitcoin and virtual currencies and we take it obviously very seriously. if this is a place that just makes money laundering easy and is a place where people can do things in the dark, that's a huge problem. at the same time, look, drug dealers use cell phones, too and we don't say, we shouldn't have cell phones. >> they use cash, too. >> terrorists look computers. we don't say all computers are bad. i think the question is, how is bitcoin, how are virtual currencies evolving. can they improve our payment systems. can they improve a lot of different things down the road without -- and can we at the same time put in the right kind of guardrails to prevent serious money laundering from going on without anyone knowing. >> interesting the panel and the witnesses here, barry silberg from second market and the winklevoss twins will be there. what do they need to say? >> i've read their written testimony in preparation for today and i think they're all saying they need real regulation. and so they're embracing regulation. they don't want to it be overbearing like most industries we regulate. at the same time i think they need to step up and say we need to have these guidelines in place. we have regulators looking at us. we're no longer going to be this fledgling technology where no one was watching, everyone is watching, the department of financial services is watching, treasury is watching, and if we can get to that system where the technology's allowed to continue to flourish, companies are allowed, we want them here in new york, at the same time, we want to make sure that we have protections in place to prevent the bad stuff. >> marc andreessen came out with an interesting op-ed in "the new york times" recently in support of bitcoin. one thing i found interesting he said it protects against credit card fraud. is that true? especially givenving we've been seeing lately with target and some of the other breaches. >> again, as things develop that is potentially true. because there's not a third party intermediary sitting on someone's personal information that could then be stolen. the way bitcoin works is it's peer to peer and the transactions don't take your personal data, there's an algorithm and a key that allows you to make those transactions peer to peer without giving up your personal data and it's secure in that way. again, the technology's go to continue to develop. it's got to become more ubiquitous, people have to use it more and we'll have to see if that happens. but it has repo ten shall, at the same time, we do have to crack down on the money laundering. >> he said it's safer than diamonds and gold, too, in terms of tracking it. ben lawski, good look with the hearings. we'll check in with you and mary thompson there as well, ben lawsky holding bitcoin hearings starting today. the company known for its risque super bowl ads doing something different, godaddy is revealing its commercial right after the break, our break, and we'll talk to the company ceo in a moment. hi, i'm terry and i have diabetic nerve pain. i worked a patrol unit for 17 years in the city of baltimore. when i first started experiencing the pain, it's, it's hard to describe because you have a numbness... but yet you have the pain like thousands of needles sticking in your foot. it was progressively getting worse, and at that point i knew i had to do something. when i went back to my healthcare professional... that's when she suggested the lyrica. once i started taking the lyrica, the pain started subsiding. [ male announcer ] it's known that diabetes damages nerves. lyrica is fda approved to treat diabetic nerve pain. lyrica is not for everyone. it may cause serious allergic reactions or suicidal thoughts or actions. tell your doctor right away if you have these, new, or worsening depression, or unusual changes in mood or behavior. or swelling, trouble breathing, rash, hives, blisters, changes in eyesight including blurry vision, muscle pain with fever, tired feeling, or skin sores from diabetes. common side effects are dizziness, sleepiness, weight gain and swelling of hands, legs and feet. don't drink alcohol while taking lyrica. don't drive or use machinery until you know how lyrica affects you. those who have had a drug or alcohol problem may be more likely to misuse lyrica. ask your doctor about lyrica today. it's specific treatment for diabetic nerve pain. to hear more of terry's story, visit lyrica.com. web hosting giant godaddy is usually known for its more risque super bowl ads but they're doing something a little bit different this year. have a look. >> good morning! ♪ it's a wondersous day the flowers bloom and the animals play the sun peeks out and i need to shout in a happen happen happy way ♪ ♪ it's a wondersous simply wondrous day ♪ >> it's go time. ♪ it's a beautious wonderful day ♪ >> for more on this campaign this year let's bring in blake irving, the ceo of godaddy, it's still provocative, we saw shirtless men running around but it wasn't the nerd kiss that lasted 20 minutes or another sexual ad that godaddy has done in the past. >> no. it's a very different ad for us. you know, i was just listening to it, i couldn't see it while you were playing it and just made me smile. it represents the customer that we represent. the small business, it's trying to figure out how to be successful. our vision at the company is to help little guys easily start confidently grow and successfully run their venture regardless of what that venture is and we get an opportunity to show that in a funny and edgy and entertaining way. and it's different than what we've done in the past. but honestly, when you have 80% brand recognition, you really need to describe what you do to our customers. we don't need to get attention anymore. we need to have folks understand what we do and who we do it for. >> blake, it's funny you say that, obviously you're so connected to the super bowl and you've leveraged that platform for so many years. >> yeah. >> is there anything just from a media standpoint that could do to shake your enthusiasm for that particular game? >> you know, the size of the audience, carl, is so darn big that there's really no better opportunity certainly in the united states where you can get a message in front of an audience that's captive, i mean, a lot of people watch the super bowl at halftime just for the commercials. i know folks that watch it just for the commercials, you know, if you're alienated because your team didn't make it, you might be watching and be entertained by the commercials more than you're entertained by the game itself. it does a good job for us and we track our metrics very, very carefully and frankly it continues to pay off. it's our tenth year in the super bowl and danica's 13th appearance and it's a big deal for us. >> how do you define success? can you measure the sales you get? with this sort of ad with the strategy toward small business what exactly are you hoping to accomplish? >> we're hoping that folks understand what we do and who we do it for. we do have a lot of measurement and metrics that we use to determine whether we're successful or not. it's not a direct ad where we expect sales to go up the next day. we expect this to have a great brand reflection and we know throughout the year that folks refer to the super bowl as the thing that made them aware that godaddy was there for them to get a domain name, to get an online presence to help their business get found and we track them very carefully. now, this year is a departure from the years past where we've talked a lot about domains and getting a domain. this year we've introduced the concept of get found which we actually launched yesterday. that enables a business to get information about their business on the godaddy website and find out where they're listed across the internet regardless of whether it's google or yahoo! or yelp or open table. it's a fantastic service that helps that little person that's in a spray tanning business or a restaurant get found online which is really what they want to do. >> you mentioned, blake, obviously your clientele are very small business owners. not to change the subject, but we do have a state of the union address tonight where they're going to talk about things a hike in the minimum wage, health care costs, increased regulation, increased taxes. does your client base feel that and where do they all think we're going? >> look, the very small business in america and, you know, really if you took a demographic profile of businesses, 85% of businesses in the u.s. are five people or less and 75% of businesses are sole proprietorships, and because of that 75% are working for themselves and not employing folks. for the other very small businesses, it's a meaningful difference. they want their employees to have a successful and great life. i have not heard a lot of pushback from our customers on raising the minimum wage federally. and frankly, you know, anything that affects their economics they take very, very seriously. and the folks that i've talked to in the business are those that think that, you know, regulation in any way that slows their ability to grow their business is bad for them. generally i think there's been pretty broad support for a hike in the minimum wage that's reasonable, that enables them to continue to grow their business and get quality employees. >> all right, well, a lot of the states have been going at it alone. thanks for joining us on small business on the super bowl. good luck with the new ad rollout, blake. thanks for joining us on "squawk on the street." >> going straight to the gym after this. >> not to the spray tan booth. when we come back, former congressman barney franks weigh in on tonight's state of the union and let's find out what he wants to hear from president. the dow now up 58. she loves a lot of the same things you do. it's what you love about her. but your erectile dysfunction - that could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess with cialis. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, seek immediate medical help for an erection lasting more than 4 hours. if you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a 30-tablet frrial. and one hour into trading here are the stories we're talking about, 7:30 on the west coast and 10:30 on wall street. the conference boards consumer confidence coming in better than expected to 80.7 and that's a five-month high. pfizer is the biggest gainer on the dow up almost 3%. the drugmaker beating street forecasts with its fourth quarter results helped by sales of new treatments for cancer, nerve pain and arthritis. and seagate technology the biggest loser on the s&p 500 right now down 11%. the maker of hard disk drives posting weaker-than-expected quarterly results hurt by slowing sales in its cloud business. the president will speak to the nation tonight to set the year's agenda for his administration but as last year's goals remain stymied by a divided capital, what can we expect from the state of the union address? let's bring in barney frank a cnbc contributor. congressman, good morning, good to see you again. >> thank you. >> a lot of discussion about what he's going to talk about. raising the minimum wage, early childhood education but there's also some reports that say he's going to try to focus less on academic terms like income inequality, that that's not really what's enticing voters right now. what do you expect? >> well, i haven't been there for a while, so my expectations are really second hand. my expectations depend on what people in your business do a very good job of telling us. i'm sure he's going to talk again about immigration especially since it is clear now that the republicans, the mainstream republicans, the responsible ones, are feeling a lot of pressure from the business community but also because of concern about not ever getting any significant hispanic vote to move for some legal status for people who are here without legal status, so i'm sure he's going to follow up on that. i doubt that he's going to talk about gun control. frankly those colorado special elections were pretty grim news. i hope he's going to talk about economic inequality and as you say correctly not in academic terms but in real terms. but here's what i'm afraid we'll hear is half of a good argument. the good argument is for mobilizing national policy to reduce inequality. you need inequality in a capitalist system but you can get too much of it frankly even allen green pan and ben bernanke have acknowledged republican appointees to head the fed, it can depress overall consumption in the economy and you get to the point that it's so locked in that mobility is restricted for people. but the problem is this, doing a good job of reducing inequality to a functional level -- >> right. >> -- is going to require some federal resources. here's what i want the president to say. i'm going to try to mobilize policy to reduce inequality and i'm going to pay for it by reducing america's substantially excessive worldwide military intervention, you know, we just lost unemployment benefit extensions because we couldn't pay for it. well, we're going to pay for it many times over if we stay in afghanistan for ten more years doing very little more than what we've done in the last few. >> there's been a big discussion today about the degree to which he'll work and will not work with congress. finally get a ryan spending plan and finally getting movement on a farm bill and now is the time when you'll go an tag gones in tick and executive order on congress, does that make sense to you? >> there's nothing antagonistic about executive orders. i'm very proud of one thing when each party was asked to vote about members of the other, i was in the top five as a bipartisan and a partisan. there's some issues where it's legitimate in a democracy to draw the line and take it to the voters to decide and others where you're compromised. you have to do both. if you cannot arguably strongly without it becoming personal and embittering and work with them on another. using executive orders, you know, what's paradoxical to me for a long time the republicans because they had done better with the presidency than the congress were the advocates of strong executive order, the unified presidency they talked about. i think it's entirely legitimate for the president to use his authority where he has and then also work with congress where he doesn't. again, the key is not to let the disputes become so vitriolic that they interfere with the cooperation. >> how does he reenergize himself, his presidency and the party? more than half of americans according to the latest poll, nbc/"wall street journal" disapprove of the president's job performance. they say midterm elections for the democrats later this year. how does he excite people again? >> well, i don't know, frankly, i'll be honest with you, identify was always a better inside politician than outside. i think events are going to affect that. look, the problem was, and i guess i'll give you this answer. clearly he was doing very well. democrats were doing very well until the screwups with the health care bill. >> right. >> i think a lot, you know, people exaggerate the extent to which we who are politicians can affect things. one of my favorite quotes is from harold mcmillan the former prime minister of england and as he was leaving someone asked him, well, in your judgment, in your experience, prime minister, as he then was called, what are the most important things that shape the political opinion? and he said, events, dear boy, events. i think the actual working of the health care bill will have a major effect. plus the economy. the economy does appear to be getting better. you just reported the good news in the confidence index. and i think that that's probably what's going to shape public opinion more than strategies. strategies rarely work. here's one other issue that could be bad for the country and bad for the democrats and that's the republican threat to kind of hold up on the debt limit. i want to make one thing very clear about the debt limit. john boehner voted to put more on the debt on there when we were both in congress than i did. the notion that people that voted for the war in iraq and the war in afghanistan and the big tax cuts that somehow we're doing them a favor by voting to pay the debts that those incurred is crazy. so, i think one of the dangers for the republicans is that their more extreme wing will start monkeying with the debt limit again and put them back into the position of irresponsible. otherwise how the health care plan works out and what happens in the economy are going to determine that. >> yeah, obviously that's something we're trying to track as closely as we can and something the president i'm sure you'll agree will have to answer for tonight. congressman, we'll see what he says. thanks very much for your time. >> you're welcome. >> congressman barney frank joining us to talk aboutn't tonight's coverage. the coverage begins 9:00 p.m. eastern time with kelly evans and myself and be sure to tune in. >> it will be a late night for you, mr. carl. coming up on "squawk on the street" we'll get the republican view on tonight's state of the union and bob corker will talk to us later and we'll talk later with robert shiller about this morning's results, what's really ahead for the housing market. find out when "squawk on the street" comes back. mine was earned in korea in 1953. afghanistan, in 2009. orbiting the moon in 1971. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection. and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve. became big business overnight? ♪ like, really big... then expanded? ♪ or their new product tanked? ♪ or not? what if they embrace new technology instead? ♪ imagine a company's future with the future of trading. company profile. a research tool on thinkorswim. from td ameritrade. [ male announcer ] legalzoom has helped start over 1 million businesses. if you have a business idea, we have a personalized legal solution that's right for you. with easy step-by-step guidance, we're here to help you turn your dream into a reality. start your business today with legalzoom. we're here to help you turn your dream into a reality. (voseeker of the sublime.ro. you can separate runway ridiculousness... from fashion that flies off the shelves. and you...rent from national. because only national lets you choose any car in the aisle... and go. and only national is ranked highest in car rental customer satisfaction by j.d. power. (natalie) ooooh, i like your style. (vo) so do we, business pro. so do we. go national. go like a pro. welcome back to "squawk on the street," the market flash on cliffs natural resources. check out the stock is moving higher on news that hedge fund capital casa blanca capital has taken a stake in the iron ore producer and calling on the company to double its dividend and convert usa assets to a national partnership and spin off assets and the chairman and founder donald drapkin will be live on "fast money halftime report" at noon eastern on cnbc. the rise of the activist investor. the latest case-shiller report showing double digit gains in the 10 and 20-city composites year over year but for november the two composite posts month over month declines for the first time since november 2012 and first on nbc is robert shiller, nobel laureate and professor of economics at yale university. good to see you, first of all on home prices overall we've seen substantial gains in home prices across the united states. is that going to be set to continue into this year? >> i think it will continue. but likely attenuated. if you look at the cme futures market they're predicting only a little over 20% increase out to 2018. i think that's a reasonable forecast. it also corresponds to the forecast i got from a survey of home buyers who said, that was last may, and it said that they were expecting 4% a year for the next 10 years. so, those are reasonable forecasts i think right now. >> so, let's talk about the knock-on effects. we've seen household equity home prices go up. how much is that going to do to consumer spending, to consumer confidence, and the overall economy? >> well, you know, in our research on the wealth effect from housing, we find that the housing wealth effect is even stronger than the stock market wealth effect. that's because it's dispersed among so many people, a large population of the people own a house. it should have a positive impact on the economy. >> what about the federal reserve that the fed is set to taper or scale back the massive stimulus? will that have an impact on the recovering housing market that we've seen and specifically on the gain in home prices? >> yeah. i think it substantially already had its impact. when they first announced qe-3 we saw a jump in interest rates. mortgage rates have gone up a lot since a year ago. and that's another reason to think that there will likely be a slowing in home price increases in the coming year. but i still think they'll be up in the coming year. >> what about the stock market? i know you've done a lot of work on this idea of bubbles and what the stock market has been doing. how does it look to you in terms of valuations right now? we're not too far off from record highs. >> well, i have a ratio called the k-ratio which is real price divided by ten-year average real earnings and that has been quite high, but not anything like a record high. so, overpricing of the market would be priced relative to earnings. but earnings have gone up a lot. so, the market is high, but not record high. so, i still think that one could hang in there with a stock market investment right now. it still has a positive potential. >> hey, robert, back to the index, i can't help but notice you're in phoenix which looks like it's doing pretty good if you read the release but, of course, these are november numbers. there's a lot more talk now about sales coming in. inventory going up. prices lagging. how much of that are you seeing anecdotally and is phoenix, for instance, a canary for where we're all headed? >> well, i've been in phoenix for about eight hours. >> so, you have a complete handle on the situation? >> i remember, though, when i was in phoenix in 2006, i -- my cabdriver wanted to talk about housing. i could listen in, everyone was talking about housing. so, we're not there yet -- well, maybe we're getting back. >> yeah, it's a concern. i mean, as is the concern about cash buyers, robert, and the degree to which they're holding up the market and once the market gets to a certain level do they pull the rug out from under us, we continue to talk about it every month, but where do you see the dynamic right now? >> that's the real puzzle there's no statistical answer because we've never seen this kind of surge in investor interest in housing. even during the peak months of the boom, it wasn't this strong. but there are other things happening. the nar and the 2013 home buyer survey found that a large fraction of home buyers in 2013 were married couples. it was a higher fraction than before. so, there are other elements of demand for homes that might be stable. >> all right, bob schiller, always good to check in with you. thanks for joining us on today's housing numbers on the case-shiller report and also on the stock market. when we come back ford having what the company calls one of its best years ever reporting a $3 billion quarterly profit, we'll talk to the ford cfo about the automaker's results and what's ahead for the year later on. the dow's up 89. and we're back after a break. i need proof of insurance. that's my geico digital insurance id card - gots all my pertinents on it and such. works for me. turn to the camera. ah, actually i think my eyes might ha... next! digital insurance id cards. just a tap away on the geico app. could save you fifteen percent or more on car insurance. everybody knows that. well, did you know that when a tree falls in the forest and no one's around, it does make a sound? ohhh...ugh. geico. little help here. customizable charts, powerful screening tools, and guaranteed one-second 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 e-trade. i'm monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. call or click to open your fidelity account today. [woman]ask me... [announcer]...if you think the best bed for one of you might be a compromise for the other one... [woman]ask me about our tempur-pedic. [announcer] they're sleeping on the newest tempur-pedic bed... the new tempur choice... [man]two people.two remotes. [announcer] firmness settings for the head,legs,and back... and with tempur on top,that famous tempur-pedic comfort comes any way you like it! [woman]ask me about the lumbar button. [man]she's got her side...and i've got my side. [announcer] tempur-pedic.the most highly recommended bed in america. [woman]don't touch my side! nwas the most watchedage otelevision event ever.s so, what's next? the upcoming winter games from sochi. where every second of nbc universal's coverage will be available on every device. on tv, online or streaming on the nbc sports live extra app. beginning february 6th, experience the winter games everywhere. welcome to what's next. comcast nbcuniversal group and check in with rick santelli. a very cold chicago for the santelli exchange, rick? >> we can take cold in the windy city. what we can't take is this ebbing and flowing of growth, lack of growth, and the questionable stops, starts, fits, starts that we see. yesterday down 7% on new home sales. listen, i understand that it is cold and there are weather factors and there are seasonal adjustments to these numbers that probably aren't exactly in sync anyway and then you toss in cold weather. remember, some of these seasonal adjustments were designed for an economy or a global economy or domestic economy that really hasn't existed probably since the credit crisis. and today's numbers on durable goods, just to be fair, the nonseasonably adjusted number look much better than the other. but that prince brings us to th. what are we agonizing over? five years after a crisis, 60 something months after zero interest rate policy t in the u.s. that the u.s. is spearheaded many of these programs. whether it's bailouts, stimulus, quantitative easing. and even though many, if they watch the emerging markets last week and part of this week kind of unravel to some extent, at least in a tight time frame, the issue then becomes why. and will it continue? many of the traders i talked to just didn't buy it, anything to do with the taper. they say it's too small. i disagree. i think just like in may when we just started bringing taper into the vernacular we saw a major adjustment. markets like to do things early and big. that reflect the emerging markets as we shift it into 2014. and outflows in both their debt and equities that's been going on for much of the end of 201. now add in what's going on with chip that banking system and don't dismiss that because what's going on there really does underscore, that slashing liquidity, getting in areas that aren't necessarily needing it and not getting into areas that really need it, that there's a lot of dislocations. and there's a lot of ingesters, globally and nep china, trying to get the 12%, 14% returns and getting them in the shadow banking system. what we need to talk about are relatives. no, not trying to compare that uncle that never goes open to the liquidity programs but relative value, relative costs, relative benefits. when you have a crisis and you do things that i don't personally agree with. then i guess the costs are worth it. as you move into the five-year sector and look at china who may be where we were several years ago, all of a sudden as you look at potentially five years, six years, who knows, look at the depression. i'll tell you, what if you look at the late '30 s not a lot really change. it was the advent of some of the turmoil in europe. what am i getting at here is we really need to be more honest. i think the markets are waking up to this. it can't go on forever. the costs, well, you you though, how many times have we heard that ben bernanke and paulson saved us. maybe they saved us if this all goes away in two or three years. if it goes on much longer, they don't save us. they clipped upside growth for bottom side guarantees. the variance i talked about yesterday is going to be the global growth rates as they get smaller. maybe there will be the end of cotas tro sfi but there aren't going to be ticker tape parades for giant economic horsepower. back to you. >> something to keep in mind as we look to fed chief ben bernanke's last fed meeting tomorrow. always great, rick santelli, with the santelli exchange. coming up next, why financial markets could be to blame for the wealth gap here in the united states. more on that when we come back. [ male announcer ] the new new york is open. open to innovation. open to ambition. open to bold ideas. that's why new york has a new plan -- dozens of tax free zones all across the state. move here, expand here, or start a new business here and pay no taxes for ten years... we're new york. if there's something that creates more jobs, and grows more businesses... we're open to it. start a tax-free business at startup-ny.com. there's nothing like being your own boss! and my customers are really liking your flat rate shipping. fedex one rate. really makes my life easier. maybe a promotion is in order. good news. i got a new title. and a raise? management couldn't make that happen. [ male announcer ] introducing fedex one rate. simple, flat rate shipping with the reliability of fedex. [ male announcer ] introducing fedex one rate. in a we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. [ male announcer ] what kind of energy is so abundant, it can help provide the power for all this? natural gas. ♪ more than ever before, america's electricity is generated by it. exxonmobil uses advanced visualization and drilling technologies to produce natural gas... powering our lives... while reducing emissions by up to 60%. energy lives here. ♪ welcome back to "squawk on the street." with are watching shares of rent a center hitting a two-year low today. the company reported weaker than expected forth quarter sales and profits. the reason, higher operating costs in the domestic market. that stock is down more than 18% today. in fact, it's one of the biggest losers on the nasdaq. carl? >> sheila, thank you. it's no se ze correct there's a stark divide between class necessary this country. could the financial markets be one of the reasons for the division? robert frank is back at hq with more on that question. >> good morning, carl. when you look at the growing gap between the rich and rest you're looking at two separate economic forces. the first is stagnation or slow growth at the bottom. you see the bottom and median growing about 25% since the 1960s. so they got richer but not as fast as the rich got richer. you can see here the top 5% is up 60%. but really it's a small group of super gainers that are really drive that 5% and even the 1%. let me show you a chart now showing the 1%. here's the 1% on the bottom. that's the 1%. this is the point 0.01%, those small super gainers, they account for much of the growth and inequality. their wealth is driven by stocks. now, if you look at stocks, when stocks go higher, inequality go higher. when stock falls, inequality falls. there are two distinct drivers of inequality. the bottom is not growing faster because lower skills and technology driven economy. lower union power, family breakdown. there's a high correlation now between marriage and wealth. they have less stock in the market. now, the high end, that's really a tale of stock market wealth. top 10% holding 80% of stocks and they are the winners in the global economy. the top 0.1% made half of all capital gains. when everyone agrees we should increase in equality for the bottom, shrinking broader would take a major decline in stocks. that doesn't make anyone wealthier. back to you. >> interesting. not only the figures but the chart where you can barely see where the middle has seen their income go. thank you for that. >> thank you. all fodder for the president tonight when we speaks about income inequality in the state of the union. the market finally for the first time in six days have s. having sustained green arrows. even though apple, down some 40 some odd bucks puff stocks in the nasdaq doing okay. >> nasdaq is doing all right. apple is having its worst day of the year. >> of the year. >> when you talk about the apple numbers, just unbelievable giving up on market cap of $32 billion. apple plunged. but, yeah, the social stocks, facebook set to report results later this week and some of the other players have been holding the nasdaq higher. overseas, it was calm. that's been a keogh sgloe yen coming in under 103. >> the yen going back to weakening ways. the question is will the calm stay in emerging markets. overnight a rate increase from india. that went a long way. emergency meeting from turkey as well. >> also impressive action among the homebuilders today. d.r. horton is the single biggest gainer. up almost 10%. all the metrics were higher. backlog, average price, closings, new orders p. they said the selling pace was pretty good into the month of january. that's leading to strength from the vulcans, pultes and so forth. >> well for the housing market. >> even as interest rates have come in a bit, too. >> yeah. >> for the time being if you're just joining us this morning, here's what you missed. welcome to "squawk on the street." here's what's happened so far. >> emerging market economies maybe account for 10%. s&p 500 earnings. if you throw in china, maybe close to 15%. it's not inissue that they can dramatically affect the big picture. >> came out of 201 wi3 with a se of euphoria. the emerging markets and what's going on in emerging markets right now. let's pull back a little bit. >> what they're saying is, you know, we don't care about your expectations, analysts. we're doing this for the average person who owns the stock of apple. the average person who owns the stock of apple just totally takes their queue from how the stock is doing, which is horribly. the absolute wrangling, the shut down of the government was horrendous for our economy. which do we blame, obamacare for durable goods, do we blame weather, do we blame the cutoff in unemployment benefits? one thing we can't do is say the government is doing anything to help. >> there's the opening bell. >> the real story in my mind is tim cook still confirmed that they're going to have some big product announcements this year. and the one i'm watching for is in mobile payments. >> generally i think that there's been pretty broad support for a hike in the minimum wage that's reasonable that enables them to continue to grow their business and get quality employees. good tuesday morning. we're live at post at the new york stock exchange for the first time in five, six day or so the dow finally hanging on to green arrows. up triple digits not too far from the levels at 15932. s&p has cloued its way back to 1793. shares of comcast are rallying after fourth quarter revenues beat estimates. comcast raising the dividend 15%. increase the stock buy back program to $17.5 billion. a quick disclaimer, come cast is the parent company or cnbc. shares of d.r. horton are rallying. up in orders up by 4% year over year. road map goes like this. we'll start with apple today. shares down after the tech giant missed expectations despite selling a record 51 million iphones in q4 and things may get worse. they offered some weak guidance for the first quarter of the year. >> meantime, shares of ford are in the green after its earnings beat estimates. ford cfo is here to tell us why kn north america and asia led higher in an exclusive. >> plus, tonight, the president will give the state of the union address and the speech is set to put a focus on inequality. bob corker will talk to us about what he wants to hear from the president. back to the news of the morning. apple is having the worst day in a year after a company revealed iphone sales missed estimates. company lost around $32 billion in market cap from today's move alone. but is this now a chance to buy? brian marshall is an analyst with isi, strong buy with apple. channing smith is an apple shareholder, portfolio for capital advisers. good morning to all of you. >> good morning. >> a lot of analysts beginning to turn their back on them. oppenheimer, why keep the buy or the strong buy? >> well, carl, i think at the end of the day the valuations pretty attractive. they have about a third of their market cap in net cash and we're in front of what we refer to as the mother lode of all apple upgrade cycles. the upgrade to the iphone 56, the larger irkiphone. $500 is not the time to throw in the towel. >> why is this the mother lode? >> because if you look at it, you know, most of the smartphone subscribers of the iphone are basically upgrading every two years. so last year we estimate that the iphone 5 shipped about 40 million subs. all of those guys are probably going to be willing to upgrade to the iphone 56. we think the demand for the iphone 6 is going to be tremendous when that comes six, nine months down the road. >> bryan and channing, let me direct this toward channing. i'd want you to take a look at a chart here. based on question about apple's performance. right here i've got a chart showing apple's iphone sales. we can see what has happened right here in the most recent quarter. 51 million iphones, the most ever but up just marginally from a year before. got it on my ipad here. let me zoom in. right? and we've got these big dips showing up during the year. when you factor in all of that, when you factor in the fact that they've expanded distribution in china and japan, the question is, how much growth potential is there really even considering that upgrade cycle coming. brian? >> well, at the end of the day, you know, what we saw is low 10% growth. so the smartphone industry is growing 20%, 30% year over year. the iphone is growing 7% in the most recent quarter. so what it tells you is that ap ships 200 million smartt phones into a $2 billion unit market but dominate the high end of the market so there isn't that much growth at that high end. i think unfortunately what we're relegated to is a replacement cycle story largely versus sort of new subscriber growth for the iphone. >> channing, as we're speaking, the coincidence, the timing makes you shake your head. carl icahn just tweeed, bout bought 500 mm more am shares. my buying seems to be going neck and neck with apple's buy back program but hope they win that race. as we all are sure he does. what do you make of where he's coming from and how much ammunition did last night's quarter give him? >> i think he'll continue to buy. is that for me? >> i was asking brian, but go ahead, channing. >> sorry. >> no, i think he will continue to buy. i think what's interesting here and it's been touched on is management is really limiting the business model to the upper end. that's going to hurt volume and unite growth but it's going to preserve profitability as we saw with the gross margins. the smartphone market is getting saturated. you're going to see a lot of growth investors exit the stock and we're probably going to see a lot of value investors come in. there's going to be a couple months of churn here. i don't see the catalyst until summer. maybe we get mobile payments. until we get new products in september. i think it's -- we're in a similar situation we were in last year. disappointing quarter. we have worries. the worrys last year were gross margin deterioration, product unknu innovation. >> channing, that is a question that i have, is expectations. i mean, given how successful happenle has been up to this point. new products is going to be wearables which could be high volume but probably lower margin or television which are going to be lower volume but potentially higher margin. are we right to look forward to new products as being a real needle mover or might it take a while even once we get new products? >> you know, if you look at the new products we're not excited about the watch or the tv. i think the iphone, if you look at from that unit it's the most profitable. i think that's why investors are so concerned. when you see north american sales year over year decline, can this business be a great stock, a good business model? absolutely. but it's probably no longer the growth stock that it once was. growth is going to slow. the company is going to focus on profitabili profitability. carl icahn is going to do his thing. will the stock perform? yes. we think it's dead money for the next three months. as we move into the last part of the year we might see a rise. it's going to be a good stock but not a great stock anymore. >> channing, brian, thank you. as iphone sales slow apple is increasingly counting on display technology to lure customers. that has certainly elevated the importance of corning. the top supplier of glass for high-end phones. today they reported profit that jumped. corning's vice chairman and cfo gin joins us now for an exclusive cnbc interview. what do you see about this gorilla glass that is used for iphones and ipads? >> demand for gorilla for smartphones and tablets was very strong in quarter four. the only disappointment that we saw was real think new touch on notebooks. but we believe this upcoming year we will see good growth from smartphones and tablets. we're expecting our volume from gorilla to grow 30% this upcoming year. >> is that going to be driven mostly by apple or also increasingly your partnership with samsung? >> well, we sell to almost everybody in the supply chain. we don't name individual customers but obviously apple and samsung are very large customers to us. we sell to other people, also. but we expect to see growth across the whole smartphone area. and as you were commenting we're focused on how we get gorilla on low-end phones, also. but we expect gorilla to have a strong year in 2014. >> jim, it seems that gorilla glass might be facing more competition from sapphire glass which apple is using to cover its touch id sensors, potentially looking to do more with it. what are you guys doing with sapphire? potentially other materials to be even strocker than gorilla glass? >> well, sapphire today is used primarily as a lens for the camera or the touch sensor. our job is to make a gorilla product that's better than sapphire. we think sapphire has a number of weaknesses. number one, it's at least ten times more expensive than gorilla. it transmits less light. it's heavier than gorilla and it's thicker. it does have better scratch resistance but it can fail when it has any kind of scratches. our job is to innovate and we believe that we will bring out another version of gorilla that will be very good for our customers and be better than sapphire. >> what are you seeing in terms of i innovation and demand on customers on kurcurved glass an wearable glass technology? >> well, wearables are essentially an lcd with a cover glass on it. we already have gorilla glass on top of some of the wearables today. for example, like the samsung watch. on the curve televisions that you saw at consumer electronics, that's our normal lcd glass used in most of them. if it's an o led it could be the lotus glass. so we are going to be in curve televisions. we believe that the ultrahigh definition televisions that you're starting to see will, over the next couple of years, spur replacement cycle in television. so we remain upbeat about lcd televisions. actually the area of growth televisions this past year grew about 10%. >> all right. le well, thanks for joining us with color on those results. jim flaws, vice chairman and vfo for corning. >> scratch resistant window. >> scratch resistant window. very good. clever, john. meantime, take a scratch resistant look at ford in the green this morning after reporting a best year in its history. what went right in 2013 and what might go right in 2014? plus, icy cold weather returning to the midwest. in fact, the windchill in chicago could reach negative 40 tonight. but our own rick santelli is braving the elements, none the less. >> wow, is it cold in chicago i'm here in minus ten below. that's without windchill. add in windchill, probably around minus 25. it's pretty cold out here. a lot of people taking hot water, throwing it and it almost freezes into ice cubes before you even know it. i guess it's better than the ice machine. if you're coming to chicago, bring a better coat than i have on. [woman]ask me... [announcer]...if you think the best bed for one of you might be a compromise for the other one... [woman]ask me about our tempur-pedic. [announcer] they're sleeping on the newest tempur-pedic bed... the new tempur choice... [man]two people.two remotes. [announcer] firmness settings for the head,legs,and back... and with tempur on top,that famous tempur-pedic comfort comes any way you like it! [woman]ask me about the lumbar button. [man]she's got her side...and i've got my side. [announcer] tempur-pedic.the most highly recommended bed in america. [woman]don't touch my side! take a look at the health care sector. sheila is back at hq watching those. >> carl, it's a very good day for health care stock. up more than 1% today and leading the way is pfizer moving higher after the drug maker reported a better than expected sales figure. rounding off the top five, we have abbvie and cardinal health ford beat the street but not really igniting the stock this morning. the automaker coming off the second best year in recent memory but emerging markets have the company leaders worried. phil lebeau joins us with another first on cnbc interview. this one with bob shanks, ford cfo and the counsel. take it away, phil. >> bring in bob shanks rights now from headquarters in dear born. you capped 2013 calling it perhaps the second best year ever for ford motor company. a lot of people are looking at the results. you beat the street by three cents and saying is this as good as it gets for ford? >> oh, no, i don't think it's as good as it gets. certainly in 2014, you know, is going to be a building block year for us in terms of better growth and growth in '15 and beyond p this is a great year. best in our history and so many accolades we could talk about. very, very strong year and sets us up well for what we're going to do this year with a launch of new products including the ser isries for that stronger growth and results in '15 and beyond. >> and let's talk about the f series because this is what concerns a lot of investors. you're going to bring down your fer isries production by 11 weeks here in the u.s. and a lot of people are saying is that going to be all or is there a potential that you may have to bring down f series production longer and do you have enough inventory built up to manage this as smoothly as possible? >> we are going to be taking down time for changeover of about 13 weeks. 11 is at dearborn, two weeks at kansas city which will then launch in '15. no, we think that the team is completely prepared and ready for the all new f series launch. we think we've got adequate stock. as you know, the two plants we're building with three crews today. we think we're in pretty good shape throughout the course of the year and satisfy demand and feel ready and extremely excited given the reception we saw in detroit to reveal of the all new product. in good shape on f series. >> bob, let's talk about emerging markets. how concerned are you about what we're seeing in these markets and how much is it impacting your bottom line? >> well, it's a concern. we've been there before. i mean, we've been in argentina, for example, for 100 years. so we're used to these types of situations. but you have to live through them. and what we're seeing in the case of argentina and venezuela in particular, there are differenter shus but policy related from the respective governments. in the case of argentina where we've seen a lot of news lately, high local inflation, accelerating depreciation, and we're just going have to deal with it. we know how to do that but it's certainly, you know, gives you a pretty bumpy ride while you're going through a cycle like this. >> on the flip side, let's talk about china. this is becoming rapidly the second most important market in the world for you guys. eclipses europe in many regards for a lot of people. when you look at china and people see the economy slowing down there, you're still bullish in terms of the auto market. you're starting to go into a bit of bifurcation there, iright? >> the market there is booming. we're starting to see the gdp growth in the 7 1/2 'range. we still think we're going to have healthy growth there as they transition from a consumption driven economy. we had fantastic growth. about 50% in terms of volume year over year. expanding the portfolio. we still have four plants under construction as we speak. two will launch in '14. we're set up for even more growth in the years ahead. and the reaction of consumers to the products and the brand there has just been mind boggling. it's so exciting. >> bob shanks, cfo of the ford motor company in dearborn, michigan. this is a day when a lot of ford investors are looking at the stock and saying, what, second best year ever and we're not getting much of a bounce. keep in mind, they did guide tin vestment community down last month. so that's why you're still seeing the stock. it's going to take a while before they start to see make some acceleration there. >> funny you say that, phil. some tweets read just like that, word for word. thanks so much. is the beard a major threat to razor companies everywhere? as you moiight have heard, p&g says the grooming sales were essentially flat thanks to the no shave november movement better known as movember. should they fear the beard? we'll will ask one of them in a moment. you make a great team. it's been that way since the day you met. but your erectile dysfunction - it could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph like needing to go frequently or urgently. tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess with cialis. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, seek immediate medical help for an erection lasting more than 4 hours. if you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a 30-tablet free trial. in today's market, a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price, maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today. afghanistan, in 2009. orbiting the moon in 1971. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection. and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve. ♪ razor sales are not booming. a shift to disposable raisers and movember movement. is november hurting razor sales across the board? let's ask jeff and andy, co-founders of harry's which is now 10 months old already. the razor and blade start-up guys. great to have you back at post 9. the cynic in all of us makes us think that p&g is looking for an excuse. did they? >> maybe even before we start we should look back and tell people about what we do. remake our observe brand of exceptionally high quality razor blades we sell to our consumers on our website, harry's.com. we do that for a fraction of the price of leading brands. >> we are in saelsz, man. no doubt about that. you can take your question and shove it. but does this dynamic, is this for real? did you see any of this in your recent results? >> well, you know, our business has been performing great. you know, we've acquired over 100,000 customers to date in the first ten months and traffic to harrys.com is way up. we haven't seen any market effect. >> we see tremendous business. >> this is a subject that is near and dear to my heart and head. i've tried some other kind of off-brand types of razors. usually had a disappointing experience and gone to, you know, brand a which you guys say is over priced. what's your method of convincing people that these german engineered razors you are are really that high quality. >> i think for us we actually just purchased the german factory that makes our razor blades. and so we've gotten to be very deep into the razor blade making process. it's actually incredibly hard to make great blades. they have to be strong at their base and sharp at their tip to give you a great shave. we want to make it affordable for you to try harry's. for us, more than 50% of our customers have come back and purchased for second time after they tried it for a first time. we've got a lot of conviction that people love the product. >> what's interest second quarter the disruption aspect about what you're trying to do. i know that you guys were parker, that whole disruption of the model with eye glasses. you're going up against other giants here, gillette and schick. what makes you think you have an opportunity and how you taking what you learned with parker and doing it with razors? >> i think what's awesome about our company is we are the first vertically integrated brand from the sense that we do everything from manufacturering the product now that we own the factory to having direct relationship wsz our customers and it creates a positive feedback loop where we're able to take that information from our customers and feed it back to product development and make sure we can deliver the highest quality product and do it as sufficiently as possible which is who enables us to feel half the price. >> are you feeling the ability to raise price it is you wanted? >> i think for us instead of raising prices, you know, what we want to do is make sure we continue to maintain incredible value proposition for our customers and -- that could mean raising prices even if you come in under where your competitor might be, right? >> sure. we're pretty dedicated to making the product really affordable and for us it's really important in terms of building a trusting and loyal relationship with our customers that we keep prices as low as we possibly can. >> yeah. we want to have an honest contract with them. we want them to know that we make a little bit of money they get a great deal and everybody comes out ahead. >> who are your customers? are they younger? >> they run the gamut but they tend to be guys who care a lot about how they look and what to really take care of themselves and, you know, want to feel proud shaving every morning with a product they like. >> we were just joking the day you guys come in with a little stubble -- look how well he save shaves up. >> women's legs, next, guys. world market? >> jeff, andy, thank you for coming in. congratulations coming up on a year. that's great. >> thank you very much. the bells are about to sound across europe. just a few minutes left in europe's trading day. we'll bring you the latest details on the close and impact on u.s. stocks. first, rick santelli, come inside from the frigid cold and watching the federal reserve. >> yes. we're going to talk about the last mean meeting from ben bernanke and income inequality and why you have to pump your own gas. who are we going to discuss all of these issues with? jim, the man, from one economist i don't mind standing right next to. bottom of the hour right after the break. we know we're not the center of your life, but we'll do our best to help you connect to what is. if you have a business idea, we have a personalized legal solution that's right for you. with easy step-by-step guidance, we're here to help you turn your dream into a reality. start your business today with legalzoom. we're here to help you turn your dream into a reality. sometimes they just drop in. always obvious. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. markets are closing across europe. not coincidentally. we'll see if it has an impact here in the states. well already off our highs. paired our gains in half. europe is climbing back from the biggest three-day decline since june of 2012. for the full year, gdp showed 19, the strongest since 2007. some of the spanish banks among the big winners. some reports say spain's is supposed to grow close to 1% of this year. shares of seem members on the rise. germany's second biggest company at higher margins. 20% increase in quarterly net. siemens ceo is going to press on with the price cuts. in europe, partly because turkey's central bank would hold an emergency meeting later today. everybody is watching turkey. cnbc's national correspondent michelle-caruso cabrera is joining us on the phone in turkey. you just arrived there. >> we're just a few hours a way from the announcement on the central bank. if you had any doubt how much pressure the head of the central bank is under, politically here in turkey, i want you to look at the front page of one of the newspapers that supports the prime minister here. there is a photo of the head of the central bank tantd head says, don't pike, stand firm. we have 5 1/2 hours away from announcement by the strashl bank where we think they are going to do the opposite. they're going to raise interest rates twibetween 2% and 5%. it's important to understand though that in turkey central banking is political. there are several interest rates set by this turkish central bank. someone political. one is actual. there is a printed level corridor for interstates here in turkey but no one pays that. actually there's a much higher rate that they set for extraordinary days. and that's the number that if you're a primary dealer or you want to try to buy money from the central bank, that's the rate that you have to pay. why would they do that? so that way when they say, oh, what's our official policy rate? it actually looks much lower than what they're charging in the market. central banking here is extremely political. to try to offset that, the head of the central bank had a news conference today saying he would do whatever it takes. repeatedly referring dot nmgs of the central bank. he's got a lot of pressure on him tonight at midnight local time. they're doing that supposedly because one of the numbers of the committee had to come back from new york and they wanted everyone there physically. many in the market believe they were doing that to simply make the announcement when most of the major markets in the world are closed. >> we will continue to check in with you. a lot of pressure on one hand politically and on the other from the markets. i know the lira has gotten some relief. india raised interest rates. michelle caruso-cabrera reporting from turkey. bringing in courtney reagan with what is moving here on the stock exchange floor. >> everybody ties together, everything that michelle is saying and what we anticipate will happen out of turkey is making u.s. investors feel a little better. if we can look at the s&p 500, started the day higher. moved beyond 1791 which was a technical support level. fell back a little before moving again higher. shrugging off the disappointing durable goods number. perhaps paying more attention to the case shiller number and the stabilization from emerging markets. if you look at the trans ports versus the industries. transports out performing the industrials. led in part by the airlines. we did get southwest adding three additional international locations or their first international location getting an upgrade. delta air lines, american airlines not part of the transport index, traded on the nasdaq but moving higher on the back of strong earnings reports there as well. if you look at the sector breakdown we are led today by health care and financial finan. we've got eight sectors positive. two sectors lagging. look at waters, they make the analytical technology devices and different programs that are used by health kare companies. trading at levels not seen since 1995. really helping to lift the entire group. if you just take a look at some of the tech laggards we have to point these out because the numbers are pretty big. seagate down. apple down as we've. talking about and corning down. the cfo was on earlier. it want to give you a check back in on that. we do have breaking news here. let's get back to scott wapner at headquarters. >> carl, thanks. fresh off buying $500 million more in apple stock, carl icahn telling me just a short time ago the following. over the years i've made a great deal of money buying on these dips of companies i think are no brainers, especially when i think the reason for the dip is completely misinterpreted. carl goes on to tell me, in fact, i believe there was a major positive in apple's message when tim cook stated within the year new products and new categories will finally be introduced. it should be noted the last new product in a new category was introduced four years ago. it was called the ipad. he says the long-term picture at apple is completely unchanged. to me, it is even more compelling for apple to buy back stock now. it should also be noted, carl, from the earnings yesterday we learned the that the cash hoard at apple had gon grown to $159 billion. if you back it the cash here it's trading eight times earning. thus, to the folks over there, carl specifically, that 86 now for apple to do that buyback. he's had a chance to get the earnings with his team. he clearly voted with his wallet. >> scott, having some audio difficulties. we think we got the construction of your report. there have been some discussion that the so of called half life of carl's tweets may be shortening because apple saw a mild pop and basically -- >> interesting pattern from carl icahn. >> i'm not suggest that carl is interested in that to any degree but it's something that people are watching among day traders and short-term investorses. >> he's continuing a theme that it's a no brainer. loading up on apple. he doesn't question the innovative siinnovate ive cycle. the fed is going to announce another 10 billion reduction in bond buying program. rick santelli is in chicago with more. hey, rick. >> hi, carl. yes, i'd like to welcome my guest jim bianco. you heard carl. everybody expects that the fed is going to add to the reduction on the taper. you and i have always had the same mission statement, the fed wants out. elaborate. >> yes, the fed definitely wants out. when hilsenrath put in the paper last week, the fed is going to go ten billion this meeting, probably ten billion the next meeting. i think it's starting to affect the markets. as you move up the risk curve, the fed buys bonds so we don't have to. push everybody out. what's the end of the risk curve? emerging markets. with where are the producting starting to come? emerging markets. why in the last few weeks? because the market is starting to realize the fed is serious. they're going to go 10 million every meeting and that's where it starts. it starts at the riskiest assets. >> you agree with that, don't you? i snow i do but you're more important. you're the desk. >> absolutely i agree with it. this emerging market instability we've seen, there are other issues with it. but don't descount that it also has something to do with the fed. i know the fed says it's not their problem but they are in some respects causing it. they pushed everybody out the risk curve and now that they want to pull them back, they shouldn't expect it. we saw this within the last summer when we first started talking about tapering. it's not unique. >> state of the union tonight. one of the main themes, the tables being set for the disparity in wealth and income. you know, i still can't believe we're talking off camera. when it comes to creating wealth the fastest way to do it is through financial investing and what is the federal reserve done to those investment vehicle snsz. >> pushed them higher. >> they pumped it up, baby! >> absolutely. the fed wants a wealth effect. >> they can't have it both ways. if you don't want so much disparity get ben bernanke on the phone or go the other way, if this is a good plan and wealth has that trickle down effect, well, then that's the way it is. that would change all the tax issues we're constantly debating. >> absolutely. he can't have it both ways. if he wants to push wealth in equality maybe say janet yellen, end qe as quickly as possible. it's the biggest wealth inequality machine that we have going today. >> you're an economist. it's the minimum wage and off camera we were talking. okay. raise them t. minimum wage. you know what's going to happen? all the fast food restaurants are going to go to automated menus. you brought up the greatest example i've heard in the last time. >> when was the last time you did not pump your own gags. there are no full-service gas stations anymore. minimum winage priced them out. a minority of studies tend to get a lot more press. if you raise the cost of something, entry level jobs, you get less of them. it's basic economics. >> thanks, jim, for taking the time on this first day of two-day fed meeting. mr. ben bernanke's last. guys and gals, back to you. >> all right, thanks very much, jim bianco, rick santelli. and up next, as they were discussing president obama is set to give his annual state of the union address and they are set to talk. there will be a lot of talk of income inequality. what are republicans actually want to hear on this issue? and from the president, we'll ask republican senator bob corker in just a moment. ♪ ♪ [ male announcer ] a car that is able to see, to calculate, to think -- and can respond to what it encounters. ♪ even if that means completely stopping itself. it's the stuff of science fiction... minus the fiction. the 2014 e-class. see your authorized dealer for exceptional offers through mercedes-benz financial services. i nethat's my geico digital for exinsurance id card - gots all my pertinents on it and such. works for me. turn to the camera. ah, actually i think my eyes might ha... next! digital insurance id cards. just a tap away on the geico app. could save you fifteen percent or more on car insurance. everybody knows that. well, did you know that when a tree falls in the forest and no one's around, it does make a sound? ohhh...ugh. geico. little help here. olet's say you pay your tguy around 2 percent to manage your money. that's not much, you think except it's 2 percent every year. does that make a difference? search "cost of financial advisors" ouch! over time it really adds up. then go to e*trade and find out how much our advice costs. spoiler alert. it's low. really? yes, really. e*trade offers investment advice and guidance from dedicated professional financial consultants. it's guidance on your terms not ours that's how our system works. e*trade. less for us, more for you. coming up on the half time show, resources active today as one hedge fund manager pushes for major changes. we're going ask that activist donald drapkin what he wants from that company when he joins us excluesively in the next hour. and another stock that's getting slammed, apple. what went wrong and we're going to talk to a top tech fund manager and what he says is better for your money. and super bowl is all about the commercials. we're talking to one company who is making a million dollar bet on a spot during the game for the very first time ever. carl, we're going to have the latest on this conversation i had with carl icahn just a short time ago about apple, calling the long-term picture there completely unchanged saying it's more compelling for that company to buy back stock now. see you in a few. >> lining up the twitter verse as usual, scott. thank you. meantime, the president set to address the nation tonight outlining his plans for this year's agenda. the latest nbc/"wall street journal" poll shows that americans disapprove of his approvement so far. keep that in mind, what can we expect from tonight's state of the union? let's bring in republican senator of tennessee bob corker a member of the senate banking community. always great to see you. good morning. >> carl, good to see you, sir. >> the wall street post says this is going to a landing point -- a launching point for a year of sustained assaults on republicans. how likely do you think that is? >> oh, carl, i don't know. you know, i've been here seven years. and i've heard both republican and democratic presidents and i think these speeches would be much more transparent if you just had the chief pollster for the president give the talk, okay? i mean, these are really poll tested comments. you know, i go out of respect for the office of presidency and respect for the constituents that i represent. but it's a pretty painful evening no matter who is talking. so we'll see what happens. >> how do you feel about some of the bread and butter issues that are expected to come up? minimum wage, early childhood education, college affordability. >> yeah, so again, carl, you know, these are poll tested talks. i don't really care so much what's said tonight. i care what we do. and i would hope that what the president would do over the course of the next period of time is take advantage of where we are economically and deal with the fiscal issues of our nation. deal with some of the bred aad butter issues that will move the country ahead. i hope he will show the courage and leadership and hard work that it takes to bring our nation to the and not continue down this path of, again, using poll tested comments, doing things that basically divide us for electoral victory. but, look, i think we know what probably will happen. i'm going to continue to working on the fiscal issues. the trade opportunities that we have and hopesing that the president will take on his base and move us ahead in that way over the next year. but again, this will, i'm sure, will be more of the same. by the way, that's a bipartisan observation that i'm making. >> senator corker, i wonder what you think about the president and white house leaning towards more executive action. president going at it alone without the help of congress for issues that are most important to him. >> yeah, again, as i mentioned, look, to lead a great nation like ours it takes courage, it takes leadership, it takes hard work. you could always take some hort cuts like he may allude to tonight. but those are not the things that move the nation ahead. and i think we've seen the result of that type of activity over the course of the last several years. that's why you have such pessimism in our nation. what i would hope the president would commit himself to do with just three years left in his term is to really get that hard work and to really work legislatively to solve the bigger issues that we have. i'm afraid that based on the leaks and the kinds of pre-speech statements that have been made that's not what's going to happen. what our nation needs right now is that. and i hope somehow the president will move himself ahead at some point to do it in that manner and not the divisive way of taking executive orders and doing things again that candidly don't bring the nation together. >> are you convinced after all this time, senator, that any kind of additional outreach to the hill would actually be rel received? >> well, i think we've got tremendous opportunity, carl. i really do. the trade issue is one of the wiggest opportunities we have, both the tpp and the european u.s. trade agreements, outstanding opportunities if the president will deal with this base and move this along. so yes, i do. i think we've got opportunities with immigration. i think if we can focus more on those things that unite us as a nation, the country's pessimism would dissipate but we can also move ahead. again, unfortunately this speech will, i promise, it will be totally poll tested towards the november elections. and i just think, again, what a shame of just three years left in your presidency, at least that's the indication that we're getting relative to this evening. but again, that's what presidents on both sides of the aisle unfortunately have done for so many years with these state of the union talks. and almost wish they would just send a document up to us and avoid all of this hype, if you will, that we're going through right now. >> we're definitely going to go through with it, that's for sure, senator. thanks for your time. see you soon. bob corker of tennessee. keep it rig here for all of your state of the union coverage. i'll anchor along with kelly evans tonight. it all begins at 9:00 p.m. eastern time here on cnbc. have a look at shares of pfizer and seagate now making major moves on opposite directions. stay tuned because the earnings squad is here to breakdown that and more earnings you need to know, next. [ male announcer ] here's a question for you: is your tv powered by coal? natural gas? nuclear? or renewables like solar... and wind? let's find out. this is where america's electricity comes from. a diversity of energy sources helps ensure the electricity we need is reliable. take the energy quiz. energy lives here. [ bell ringing, applause ] five tech stocks with more than a 10%... change in after-market trading. ♪ all the tech stocks with a market cap... of at least 50 billion... are up on the day. 12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up. [ male announcer ] now the world is your trading floor. get real-time market scanning wherever you are with the mobile trader app. from td ameritrade. squad. morgan brannon and herb greenberg who made it to the east coast. let's start off with seagate technology. the stock is declining on the back of earnings. second straight quarterly miss. the guidance is below consensus. gross margins came in disappointing the street. what is more concerning to investors is that there are questions as to whether the guidance was conservative enough. it's been trying to diversify the issues. come modity business overall but aquirtd a company which posted its own terrible fiscal fourth quarter results. a lot of investors at this point is saying what is seagate buying into and you see it in a stock that has been along with western digital. >> this is a company that's done a lot of buy backs in the -- as stock falls will it hit the buy back level? we don't know what the average price was until we see the 10 q or goggle it? >> let's talk about pfizer reporting better than expected fourth quarter refrigerator knews. you've been following this one. nice pop in the stock. >> 3% after the market opened. we saw earnings per share beat the street by four cents. revenues came in higher than expected. it's right in line with analyst expectations. that's the good news. also a $5 billion buyback for this stock this year. not so good news, 59% profit plunge in the fourth quarter. that versus 2012 over the same period. keep an eye on that because we're seeing a patent like lipitor in europe and viagra. >> it's a company that's been dealing with the patent for years now and investor are looking through to the pipeline. that's it for us. back on street signs with your earnings preview. up next on "squawk on the street," bitter cold as we're turning to the midwest in chicago and minnesota. the windchill, get this,is expected to hit 40 below zero today. we'll see what conditions are like on the ground when "squawk on the street" comes right backa . with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price, maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today. [ male announcer ] it's simple physics... a body at rest tends to stay at rest... while a body in motion tends to stay in motion. staying active can actually ease arthritis symptoms. but if you have arthritis, staying active can be difficult. prescription celebrex can help relieve arthritis pain so your body can stay in motion. because just one 200mg celebrex a day can provide 24 hour relief for many with arthritis pain and inflammation. plus, in clinical studies, celebrex is proven to improve daily physical function so moving is easier. celebrex can be taken with or without food. and it's not a narcotic. you and your doctor should balance the benefits with the risks. all prescription nsaids, like celebrex, ibuprofen, naproxen and meloxicam have the same cardiovascular warning. they all may increase the chance of heart attack or stroke, which can lead to death. this chance increases if you have heart disease or risk factors such as high blood pressure or when nsaids are taken for long periods. nsaids, like celebrex, increase the chance of serious skin or allergic reactions or stomach and intestine problems, such as bleeding and ulcers, which can occur without warning and may cause death. patients also taking aspirin and the elderly are at increased risk for stomach bleeding and ulcers. don't take celebrex if you have bleeding in the stomach or intestine, or had an asthma attack, hives, other allergies to aspirin, nsaids or sulfonamides. get help right away if you have swelling of the face or throat, or trouble breathing. tell your doctor your medical history. and find an arthritis treatment for you. visit celebrex.com and ask your doctor about celebrex. for a body in motion. better cold is returning to the midwest with windchill expect toetd hit a mind-boggling 40 degrees in some places today. the weather channel's janel klein is live in minneapolis where it's partly sunny, negative 9 degrees. >> negative 9, sarah. it is feeling at least that. actually windchills in many parts of minnesota are pushing negative 30 today. it is a rough day out here. one that unfortunately people in the midwest are getting used to. here in minneapolis this is the 27th day since december 1st that has been below zero. hard to believe that it could be that cold but it has had a big effect on many things including school schedules. this is the fourth day for most districts in minnesota that have been closed since january 1st. really a tough, tough stretch here of winter. of course, we're only into january. this past weekend it was especially bad with whiteout conditions in certain parts of minnesota. one of the major interstates, i-94, a portion of that was closed. a gas explosion, a pipeline explosion just south of winnipeg that was a major source for energy for much of the midwest causing many people to lose heat all together. 100,000 customers effected by that and even those that did not get directly impacted were asked to turn their thermostats down to 60 dreesz egrees to help wit situation. that could not have come at a worst time as temperatures continue to drop. we will see a little bit of a warm-up tomorrow. temperatures in the 20s. and then it will drop back down again to single digits going into the later part of the week and the weekend. this, again, has been one of the most recent cold snaps but certainly not the only one. definitely a tough winter for minnesota, even those who are used to the cold weather are saying they are losing their patience. a rough year so far, carl and sarah. we're hoping it's going to get a little bit better here. >> eventually we're pretty sure it will but it might take several months. tanks so much, janel klein. >> negative 4 in chicago sglun believable. the south is not going to get out of it, either. let's turn it over to scott wapner and the "halftime" with breaking news on icahn and lo a. lot more, too. >> we'll be following the apple story and what carl icahn was telling me. and nasdaq, if you talk about at what's on with apple you have to talk about the nasdaq coming off the worse three-day percentage drop since june of 2012. >> although some of those momo names managing to hold on to love today. >> yep. follow those as well. have a great day. welcome to the "halftime" show. following the biggest stories. activist action, hedge fund casablanca capital, big changes at cliffs natural. we're exactly what he wants. appl