Transcripts For CNBC Closing Bell 20121204

First, get you caught up on the markets. Kind of a meandering day. A few economic bits of data out today. Other than that, not a lot going on as far as Economic Data go. Were all just waiting to see that white puff of smoke come out of washington and nothing yet so far. The dow virtually unchanged right now at 12,966. The nasdaq is down seven points right now. Well talk with seema mody about that. And the s p 500 index at this hour is down 1. 80 in change at 1407. In todays closing bell exchange, we go over what is going on as we head toward the end of the year. Seema mody is at the nasdaq today. Jeff, what do you make of whats going on in washington . Im most interested in the fact that the markets have lost the volatili volatility. Were not seeing the markets respond to every single statement that comes out of washington right now. What do you make of that . I think its the same washington waltz we saw last year. They didnt extend the bush tax cuts until december 17th. They didnt handle the payroll tax until december 23rd. I lived inside the beltway. I have a pretty good network on the hill. I think theyre going to have some kind of staged in agreement and then agree to attack the entitlement situation in the new year. Michael, what do you make of whats going on . How do you try and trade this . At least we had some volatility the traders could trade on. Now we dont have that. I think the lower volatility is telling you this is an extremely resilient stock market. Ive been calling this the rocky balboa stock market. The entire scenario playing out is the fiscal cliff ends up being bullish no matter what. Spending cuts makes bonds rise, yields fall and making stocks paradoxically even more attractive. They become the new bonds. Alan, can you tell from option activity which way the markets are betting right now, presuming that not going over the fiscal cliff would be positive for stocks and going over the cliff would be negative . Whats the market betting on right now . Well, i wont even make that presumption because we dont focus on what the event is. We focus on how the market is going to react. The vix has increased a little over the last week or so, but its still at a historically low level. I think im very encouraged by the price action weve seen where we made this bottom and followed through last week, which is key, and were Holding Strong this week. I i think the key for the market is to follow the dollar. Were below 80. That can really add another boost to the markets over the longer term. Thats positive for corporations to get some more growth out of this overall strong trend we already have. Seema, we talk often about those Industry Groups that would be most affected if we go over the cliff, if we dont go over the cliff. What about technology . Bill, i was speaking to an analyst. He says the fiscal cliff is at the forefront of investors minds. Thats why were seeing shortterm profit taking in tech. However, on the long term, there are strong secular trends that support attractive growth in technology. The famed tech internet analyst of the 1990s came out with her most recent updated industry trend report. Im going to give you a couple of those stats. Mobile traffic now makes up 13 of web traffic versus 4 back in 2010. Overseas in markets like india, mobile internet traffic has surpassed desk top internet usage. The reason i bring those points up, there does seem to be a lot of internet for tech firms to capitalize on the growth were seeing within the tech space. Over the long term, there could be a big opportunity. Jeff, is there a group you feel comfortable investing in right now whether we go over the cliff or not . I like the tower stocks. I think the computer is eventually going into your cell phone. You can think of the Tower Companies as real estate. Cell Tower Companies. Yeah. You need more bandwidth, hang another device on the tower. I like the obesity thing as the baby boomers approach their diabetes years. Speak for yourself there. This seems to be some of those major trends happening in the world, whether it be living longer or obesity or some of those things that are structural in nature. So are those hmore resilient thn other areas . I think those things have long legs for a long time. Michael thompson now joins us here on the floor of the New York Stock Exchange. Welcome to the conversation. Are you inclined to stand back and wait for something to happen in washington before you inves anything, or are you jumping in right now . What were seeing is a lot of folks are just chasing income. Were seeing it with our dividend funds. Theyve been outperforming in terms of gathering assets like crazy, even though they dont always have the best track record. Usually its really interesting when you watch money flows. You see 12month track records dictating where the funds go. What were seeing is investors climbing into the Dividend Growth funds. I think people are going to continue to do that. I dont think you wait. Michael, the question i always ask when asking about dividend payers is does the reason to own dividend payers change if we go over the cliff and dividend taxes go from 15 to 44 . Would you be peeling back . I knew you were going to ask me that question. I already have my answer. Good. Broken record on this question. Some income is better than no income. I think thats where people are. Were in a greatly diminished yield environment. People scramble for what they can. If you think yields are low know, a lot of investors think they could even go lower. Its unbelievable how low the yields are in the fixed income markets, but again, i think youre going to see compression with those types of stocks. I think what youre really going to see is dividend policies revisited contrary to the fact that from a tax point of view, folks are going to be basically less likely to buy dividend stocks because investors want income, and thats the only place they can get it. Michael, we get a handf fufu companies every day declaring dividends. Theyre accelerating the payment to try to beat out the fiscal cliff. Would you invest looking for Companies Like that right now . I think youre seeing the top of the dividend trade. I think if anything, whats going to end up happening is a focus back into cyclical sectors for 2013. You want the global trade. You dont want the Domestic Trade anymore. Youre not going to be jumping on the bandwagon here just because companies are announcing this special dividend . I think this is the final surge. We may see a real move back into cyclicality. All right. Folks, thank you all for your thoughts today. Appreciate it. Michael, wasnt that worth getting to the New York Stock Exchange for today . Thanks for being with us today. Appreciate it very much. Meanwhile, as we see move gold prices below 1700. This is the lowest price weve seen since november 5th. A lot of factors at work. We saw the plunge at open of floor trading here. Traders saying it had to do with the liquidation of a lot of global macro funds as well as some tax selling here as we approach the end of the year. With prices at these levels, the key level is around 1675. We saw more options activity today with puts being purchased at that 1675 strike price. That could perhaps be a magnet to send prices even lower. Back to you. All right, sharon. Thanks so much, sharon. Moving on as we do, netflix scoring a big movie rights win. Our Julia Boorstin is in los angeles with details on that. Reporter bill, netflix shares are soaring more than 13 right now in a major deal with disney. Netflix has beaten out pay tv channels for rights to disneys valuable catalog and its new titles starting in 2016. This is a landmark for fnetflix. Its the first time it rather than a Premium Cable Network has secured these rights from such a big studio. The fact netflix has a similar deal with Dreamworks Animation puts it in a position of strength when it comes to ondemand kids content. Theres no comment on the financial terms of the deal, but netflix must have paid up pretty big to win over disneys studio. Maria, back to you. Thank you so much, julia. About 50 minutes before the closing bell. Much more on that deal. Thats huge. Did you see the move on netflix . One of the biggest movers on the day for sure. We have a market fractionally moving. The Dow Jones Industrial average up about 20 points. Theres netflix. Big move. Companies are actually borrowing money to issue those special dividends in some cases because theyre hoarding cash overseas to avoid taxes. Smart business . Important Cash Management . Well talk about it coming up. Then a lot of excitement around here at the New York Stock Exchange downtown today. The nyse getting ready to celebrate its 89th annual Christmas Tree lighting. Ivanka trump in the middle of it all. Shell be with us in a minute to talk about how her familys companies are preparing ife ini fiscal cliff. And a developing story here. Ron is now cla were going to out the truth behind the spy game later. Mom . Dad . Guys . [ engine turns over ] [ engine revs ] hell be fine. [ male announcer ] more people are leaving bmw, mercedes and lexus for audi than ever before. Take advantage of exceptional values customer erin swenson tbought so, im happy. Today. Sales go up. Im happy. It went out today. Im happy. What if shes not home . together she wont be happy. Use ups she can get a text alert, reroute. Even reschedule her package. Its ups my choice. Are you happy . Im happy. Im happy. Im happy. Im happy. Im happy. Happy. Happy. Happy. Happy. together happy. I love logistics. Welcome back. Weve been talking all week and for days about Companies Issuing these special dividends to get ahead of anticipated higher tax rates in the new year. Now we find out many firms are actually borrowing money to pay out these dividends even though they have plenty of cash. Why borrow the money now . They have stashed cashes overseas is one reason, and they dont want the tax hit by bringing it back over shores. Plelets talk with michael po about that. He owns his own firm and says he would never borrow money just to give it away. John burns says all this is just one more sign the Corporate Tax environment is not working. Michael, this is obviously a case of borrowing from peter to pay paul, which you call crazy, right . Well, when the Federal Reserve takes Interest Rates to ridiculously low levels, people do dumb things. They borrow money to buy nasdaq stocks. They borrow money to flip houses. Sometimes they borrow money, corporations do, just to send it out the back door. They dont use it to create capital goods or to raise the revenue and earnings. They just send it out the back door, and they leverage up their balance sheet. I want to put to you on notice that corporations vin creased their debt by over 1 trillion since december of 2007. Horribly inefficient way to grow an economy. Its interesting you say that. I feel like one day were going to back and say, remember whe could borrow at 3 to buy a house. If companies have to borrow the money to pay a dividend, why issue a dividend . Well, i think we forgot whose money it is. Its the shareholders money through the company. Tax law makes it very difficult to bring the money back in. Theyve already made the money selling their products and service around the world. So its much cheaper with low Interest Rates the way they are to borrow the money and pay the dividends to the shareholders. The tax code actually just represents a very inefficient methodology of transferring the profits to the shareholders as well as influencing where companies are likely to be looking for future profits around the world. Theyve talked in washington periodically about a moratorium on allowing corporations to repatriate some of that money without a tax a consequence. That would help to some degree, wouldnt it . Absolutely. That would be a very fabulous thing to do. The companies have already made the money, its real money, its profits theyve made selling their products and services around the world, and its going to sit there to be used to build profits with potential Growth Opportunities there versus here because of the tax code. They make it very unaffordable to bring it here, then theyll pursue opportunities there. Its as simple as that. Theres nothing wrong with paying a dividend. Its not coming out of retained earnings. Its increasing the money supply by leveraging out the balance sheet. Theyre not going to allow that cash signature overseas to come here because they dont want our u. S. Dollar strengthened. They dont want to strengthen the middle class. Thats the real issue here. What about these companies that arent paying the dividend . Are shareholders getting mad or angry at companies sitting on cash, not paying it out . Are companies under pressure . Michael, what do you think . Thats going to come around at some point. Its up to a corporation to do what they want to do with retained earnings. My problem is leveraging up the balance sheet, being allured by these phoney, fake, factitious Interest Rates and setting up this whole with corporation, this whole company, this whole private sector for an Interest Rate shock that nobody is prepared for. Michael, what are you doing with your money right now . Well, im 50 in cash. Im going in and out of lockheed martin. You dont get paid to be 50 cash, right . Why dont you pay a special dividend . Thats my prerogative. I sure as heck am not going to leverage up to send money out the book door without any chance of increasing revenue and earnings. I believe were going to have this continued waning away, whittling away of the stock market until they come up with a deal. There will be a deal. Itll be about 1 trillion in tax increases and about 1 trillion in spending cuts and about 1 trillion raise in the debt ceiling. Then its off to the races in the stock market. Ill get prices that are much lower. John, would you look to buy some of these Companies Issuing these special dividends . Sure. We already own many of those companies. So we want to own the companies that are doing the best business around the world. They create a lot of profits, and our clients, the shareholders of those companies, are receiving those profits. Were absolutely great with owning them. All right. Thank you, both, for your talks today. Appreciate your time. See you soon, guys. All right. Were going to take a break here. Well come back. The market kind of levitating a little bit. We hear the bias so the close is to the buy side. The dow up 12 points right now. Well look at pandora next. Company set to report earnings after the bell. Will it only get worse for pandora if apple launches that competing Music Service next year . Apple versus pandora coming up next. Also, forget star wars and the clone wars. We have real life drone wars. Did iran really capture one of our drones . The truth behind the shocking claims straight ahead. And more than 100,000 egyptian protesters reportedly forcing president Mohamed Morsi to flee the palace. The latest on the story coming up next. [ male announcer ] at scottrade, you wont just find us online, youll also find us in person, with dedicated support teams at over 500 branches nationwide. 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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 whats in your wallet . The Christmas Tree Lighting Ceremony at New York Stock Exchange under way during this hour. Maria will be going out there. In the meantime, shares of pandora have been trading higher today ahead of its earnings that are coming out in the next hour. The stock has been resilient overall this year in the face of reported competition from apple, which said it might launch its own competing Music Service in the new year. Its sort of a case of david versus goliath. Could pandora be the better shortterm trade versus apple . Thats what were talking about today in talking numbers. Good to see you both, guys. Ennis, youre not a fan of either one of these stocks right now. If you had to pick one, who would it be . Youre putting me in a tough spot. Yes, i did. I would say this is what ill say. Lets start with the apple chart. Apple, for three years, didnt breach the 200day moving average for more than a day or two, which is an incredible run. However, in the most recent selloff from 700 to 500, we saw a severe breach. I think the longterm trend in app le is clearly lower now. If we look at pandora, the chart doesnt look much better. Its a severe down trend ever since the ipo. This is a feature. The stock really probably should have never went public. The only positive argument for pandora is it has 45 Short Interest and a ton of sentiments bearishness. I wouldnt own it just for that. Jeff . I disagree with you. Im actually very bullish on apple. Theres a lot of in this recent setback, 20 down movement. Remember one thing. I dont know if the risk reversal team has already dipped into the eggnog, but one thing you have to remember is the fundamental story is intact. The iphone 5 represents nearly twothirds of the revenue for apple. Right now in these next two weeks, theyre going to be launching the iphone 5 in nearly 50 more countries. Bringing that total to 100 different countries. Theyve missed earnings two straight quarters. Thats the biggest problem for me. Even though everyone says the fundamentals are great, i dont see where the incremental buyer comes from. Well, think about this. We just moved down from the september 700 level. Why did that happen . A lot of hedge funds as well as investors looked at their Largest Holdings as well as their largest winners and booked those profits. Right now this is a wonderful opportunity. Were assessing clients risk right now. Were selling puts to get that risk premium and put us in this chain. At the end of the day, i think theres an 11 move up to 640 after the new year because theyre going to get after selling products this holiday season. I think 600 is a huge sale. This is a great opportunity to lighten up after this 20 rally from the bottom. Very good. Thanks, guys. Good to see you both. Appreciate your thoughts. Jeff, id love to, but were out of time. Were going to move on. By the way, well have those pandora earnings numbers coming up at the top of the hour. All right, bill. Thank you. Meanwhile, iran claiming it has captured one of the u. S. s drones. The u. S. Is casting doubt on that. I want to get to nbc chief pentagon correspondent. Hes got the latest on the developing story. Jim, what can you tell us . Well, if youre with with the ian y iranian military, this is a good tale. If youre with the u. S. Military, its a fabrication. Yes, indeed, that is an eagle scan or a scan eagle drone. It just doesnt happen to be one of the u. S. Militarys. The u. S. Navy claims that all its scan eagle drones have been accounted for. The iranians have said they captured the drone, they claim, by taking it over electronically as it was flying over u. S. Air space. Now, the problem with this is that scan eagle drones are pretty common in that region. When it comes to technology, theyre at the very low end of the scale. Theyre readily available to almost every government in the region. Many gulf states have them. Intelligence indicates that the iranians either stole or perhaps bought this from under the table from some gulf state nation. But it doesnt appear that according to the u. S. Navy, anyway, that theres any truth to the claims that the iranians actually seized a u. S. Navy drone. All right, jim. Thanks very much. We want to get to mary thompson. We have more breaking news right now on the arrest of a trader. Mary. Hey there, bill. This is about a securities trader, david miller. Hes been arrested for wire fraud and charged with wire fraud by the connecticut u. S. Attorney. In a statement, the u. S. Attorney from connecticut stating this defendant orchestrated the unauthorized purchase of approximately 1 billion of apple stock in a fraudulent getrichquick scheme that back fired, causing massive losses for his employer. Once again, rockdale securities trader david miller arrested and charges with wire fraud. Back to you. All right, mary. Thanks very much. We have 30 minutes until the closing bell sounds for the day. Up about 19 points on the Dow Jones Industrial average. Nasdaq in the negative right now. Famed fund mortgage jeremy grantham, remember him . He warned of the tech and housing bubbles before they burst. Now hes making a new dire prediction. If hes right t would make the tech and housing bubble look like a walk in the park. Details coming up. Then, businesswoman and Donald Trumps daughter ivanka trump is with us. Shes finding it hard to operate in the economic uncertainty. Well ask her about that. Shell join us later outside the New York Stock Exchange. 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Joining us now, Steve Liesman and an economist from ftm financial. Steve, is it really as bad as all of that . Were talking about some very anemic numbers. The question is, what part is bad . I really disagree with this report in the sense that i dont see how he can possibly know what the growth rate is going to be in 2050. I dont think he knows what the growth rate is going to be next year let alone in 2050. The second thing wrong with this prediction is growth rates are something that are within control of a society or nation. With the policies now, i think hes right were aiming right now for a growth rate that may be unattainable. Longterm, a society cannot exactly choose but can adjust this level of growth. Third, some of the things that hes most concerned about, for example, global competition, are some of the things that make me optimistic about the future, not pessimistic. But lindsay, part of his reasoning is were adding too much debt to the equation. Debt servicing takes up more of our growth at this point. Too many bandaids solving problems that need surgery, not sor shortterm gaps. Theres a lot of assumptions built into his analysis. We continue to see policies out of washington that disincentivize businesses to invest and grow. Remember, this is a longterm trend weve been seeing over decades. If you go back to 1960, we were growing on average of 4 . 1980, that lowers to 2. 5 . Since 2000, we have been growing at less than 1. 5 . So you agree with jeremy . I certainly agree with his longterm assessment, but i disagree with his time line. So where does the growth come from, steve . Where does it come from in your view . First of all, we should have a little humility about not knowing where the growth is going to come from. If we all knew where tomorrows jobs were going to be, wed all be investors in those. No, but i think there are areas of the economy that are clearly growing. Technology is growing. There are jobs within technology. There are areas you can identify that, in fact, are seeing growth. As long as we continue to innova innovate, as long as we do not quash down on entrepreneurs and innovation, then i think well have the possibility that tomorrows jobs in tomorrows industries, which are not known to us, can develop. One of the things that really bugs me about this is he talks about 1980 or the growth until 1980 as if it were some housean period. We had lower Living Standards back then. Since 1980, just ask yourself this question, maria. Do you want to be driving a 1979 gremlin or a car available today . Do you want to use a computer from back then or a computer from today . Steve, what about the notion and whose health care do you want . I think thats what about the notion were boxing ourselves in with all this debt right now that we just cannot afford . We i think the debt is an issue. Its something well work out. I dont think its something that determines our future. How are we going to work it out, steve . Theyre not working it out. You heard the president and boehner say today, you know, theres no room right now for a meeting behind closed doors. We dont necessarily need to sit down face to face and figure this out, even though were in countdown mode. Fiscal cliff is going to impact a lot of industries and arguably put us into recession next year. Thats the problem with shortterm growth. If we get some sort of compromise, that doesnt peen were going to have a negative effect on the economy. Even the president s proposal, that could be less than 1 for already, this anticipation going into arguably the most important time of the year in terms of consumer spending, certainly the holidays, this anticipation of, you know, we dont know whats going on in the next couple of months, coupled with the fact we just came off of hurricane sandy, this is not the time to play games and taunt one another with these plans that Everybody Knows are not real plans. I agree, but i think we should look beyond one years growth. Were talking about growth through 2050. The gentleman pretending to know he knows the growth rate between now and 2050 he gets paid to make predictions, steve. Thats what hes doing. By the way, his former predictions have been right. Lets give him that. Some of them have been right. There was a guy in the 19th century who predicted we were all going to starve as he predicted the proplatiopulation of the world with but forgot to predict the agricultural technology. You cant hold one constant and let the other variable be a variable. Right now this country is focusing on policies that continue to predistribute from the most productive members to those that may be more favorable. Thats his point, that weve continued to lose momentum for the past several decades and continuing to implement those same policies that are going to undermine growth. What policies would you like to see, lindsay . Incentivize businesses to grow and invest in this country. Incentivize businesses to take on that extra employee, build that extra factory. Right now we dont have that. We continue to keep businesses sidelines. They have billions of dollars that could be put to work. Were arguing over 800 billion in tax increases. I cant argue with that. Youre right. I mean, you hit the nail on the head on that one. Thank you, folks. Appreciate it. Were going to head to the bell here with the market let me take a quick look. Kind of Holding Steady with a gain of about nine points. When we come back, ivanka trump is here to explain how shes preparing her businesses for a. Fall off the fiscal cliff. Then after the bell, wealthy homeowners are racing to sell their properties before the end of the year. Its all to avoid much higher taxes if we go over the cliff. Thats coming up later on the closing bell. And were lighting the Christmas Tree here at big board today. Stay tuned. If we want to improve 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. Lets build a strong foundation. Lets invest in our teachers so they can inspire our students. Lets solve this. Try running four. Ning a restaurant is hard, fortunately weve got ink. It gives us 5x the rewards on our internet, phone charges and cable, plus at Office Supply stores. Rewards we put right back into our business. This is the only thing weve ever wanted to do and ink helps us do it. Make your mark with ink from chase. Welcome back. Im here outside the New York Stock Exchange because in a little while, theyre going to be lighting the tree. Im with ivanka trump. Shes going to be lighting the tree and ringing the closing bell today. Shes the executive Vice President of development and acquisitions at the trump organization. Good to see you. Thank you. What an exciting day for you to be here. Tell me why youre here and some of the charities youre involved with as you get ready to ring the closing bell on Tree Lighting day. I teamed up for the second year for cookies for kids with cancer. Were actually raising money for holiday bake sales. Its an incredible platform. Im working with g. L. A. D. Product companies. Its really amazing. You can go to cookiesforkidswithcancer. Org. Thats a great, great idea. Thank you for doing that. Let me ask you about the New York Stock Exchange. Not exactly new to you. Talk us to about business right now. Were repositioning a legendary resort in miami. We also just won the concession to build the Old Post Office building in d. C. So were going to convert it into a luxury hotel. Were finding very interesting deals. Theres not a lot ofly widty out there. Theres not a lot of lending happening for largescale development projects. Were in a good position where we have a lot of cash in the bank, and were able to take advantage of that discrepancy. Are you finding deals and taking advantage of those deals as a result of low Interest Rates . Whats the catalyst . A lot of people are worried about fiscal cliff and sort of reluctant to put money to work. Why are you so active . Its all about appropriate amounts of leverage. You cant borrow a lot, so you have to have the cash to be able to build. When you have a conservative capital structure and youre buying iconic assets in great cities, i think youll do very well over time. Traditionally, thats been proven in real estate. We all know it was a very hotly contested president ial election, and of course your dad, donald, has been on our program a lot. He was a big supporter of romney. There were stories going around that you said, dad, pull it back a bit. You dont have to be so negative on the president. Is that what happened . It was fascinating because this was a widely circulated report that was without fact at all, and not one reporter actually called and asked the question you just did, which is, is that true . No, it wasnt. My father has been a very important part of the dialogue. Hes been saying a lot of things that other people, you know, not wanting to be in a space where theyre talking about politics, they dont see it as advantageous. Theyre not really speaking their minds. It would not be my place to tell him to tone anything down. Are you worried about the fiscal cliff . How is business going . Youre an entrepreneur in your own right. I want to talk to you about business, but how you preparing for the cliff . Well, theres no way one can be preparing. You have to be think about uncertainty as you make your investment decision. In terms of fiscal policy, obviously theres a great goal between the republicans and the democrats. At least theres a bit of talk on the table now. Hopefully that can start to narrow. Were certainly still living in uncertain times. Were cognizant of that as we inves invest. As a Small Business owner, how would you characterize business right now . Your jewelry line, Small Business activities pmplg. Ive had the good fortune of creating a fashion brand. I have jewelry, shoes, handbags, et cetera. I found a niche within the market hthats looking for affordable price points. Its really been resonating very well. Sounds like youre on style, actually. Ivanka, good to have you on the program. We look forward to you ringing the bell and lighting the Christmas Tree out here. Well see you soon. Over to you, bill. All right. Thank you very much. Thanks to ivanka as well. 15 minutes left in the trading session. The dow Holding Steady with a gain of about seven points. One of our next guests says the market or that printing in color had to cost a fortune. Nobody said an allinone 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 allinone series from brother. Easy to use. Its the ultimate combination of speed, small size, and lowcost printing. Since Ameriprise Financial was founded back in 1894, theyve 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 onetoone relationship. Together for your future. It would seem the stock market is forecasting some kind of a deal that will keep us from going over the fiscal cliff. Markets have been known to be wrong. This market is definitely expecting a deal, otherwise this market would be plunging. What do you do with your money if the worst happens and we do see this negative disappointment . Thats what our own jeff cox has been writing about today on cnbc. Com. Good to see you. Thanks for joining us. How do you make money if we go over the fiscal cliff . I think first and foremost, investors should recognize that a deal is likely to happen. Whether it happens before the end of the year or after the ends of the year, something is likely to happen. I think you are going to see a relief rally on the end of that. Fist and foremost, its to remain calm and not to sell out of all risk assets and equities. You may be in for a bit of a bumpy ride. As such, theres an opportunity to be defensive. Look for some of those lower beta strategies. Look for the defense sectors. In the meantime, it is pretty clear the markets are anticipating were not going to go over this cliff, isnt it . Yeah, they sure are. Im surprised to see the level of optimism that congress is going to come to some resolution here. I think its scary theres no plan b. I kind of have three ideas of my own. The first one is lets get real, folks. If everybody on wall street thinks something is going to happen, theres a good possibility the opposite is going to happen. To me, i think its a good time to maybe take a little money off the table, go to a little cash. The second thing is, when this market if we go into january without a deal, we could see a market drop on a level of what happened in 2008 when we failed to come to a t. A. R. P. Agreement. 30 the market lost. That was a 700point selloff. Just like that. So joe, what do you think about that . I know youre saying, look, dont freak out, stay calm, assess the situation. But what kind of a decline might you expect if, in fact, we go over the cliff . 700 points, 1,000 points . Everything is within the realm of possibility, but thats really the thing. How do you identify when that bottom of the market is going to be . Of course, that one day that you actually have president obama and boehner come out on the white house lawn saying theyre announcing some kind of a deal, youre probably going to see a sharp rebound on the back end of it. You certainly dont want to miss out. Jeff, whats the third thing you do . Buy cans of tuna fish . No, i think you have to watch it. The one thing i would disagree with is i dont like dividend payers right now. I think this idea of rushing to these special dividends could come back to actually backfire on some of these companies if theyre not putting their cash to good use. Its almost like theyre trying to bar the door to keep investors from going out. Im a little afraid there. Im also afraid of munis here. On the back end of this, theres a good chance munis could lose their taxexempt status. That could cause some problems. Theyve had great run here. I think theyre very susceptible to talks coming from the fiscal cliff. I think if they took the taxexempt status away, wed all be in trouble. Then what do you do . Its a horrible thing as far as local governments go. Big problems. The Governors Association met with the Vice President today in washington. Im sure that was on the table. Thats not going to happen. They dont want to burden localities with this fiscal cliff thing. Youre absolutely right. That would be a huge issue. I dont think that would be the case. The other thing you have to think about as far as these dividend paying stocks, so long as Interest Rates are likely to remain this low, and i dont think thats going to change for at least the next year or so, youre going to continue to have that bid for areas where you can receive income. That means areas like highdividend paying stocks, utilities, telecoms. So although valuation is there, maybe getting a little stretched, you have to ask yourself whats that catalyst to cause that change. What would you avoid . Jeff is talking about things he would steer clear of. I think you want to look for lower beta strategies. I would probably stay away from cyclicals. What thif they dont reach an agreement . Because the economy takes a hit. Cyclicals would bear the bankrupt of that. Aside from that, the important thing here is investors remain calm. You are going to have a resolution eventually take place. The last thing you want to do is be out of risk entirely. When you say eventually, what does that mean . Lets say we go over the cliff and come back in january and, you know, the white house says, look, we want to just roll it back for anybody making lower than 200,000. Youre still talking about higher taxes. Youre talking about cut backs in spending. We know the realities of the day. So, you know, what gets hit, and what are the areas that actually will benefit . I think in the end, you want to see the left and the right come together and find a credible plan in reducing the deficit but avoiding actually falling off a cliff at the end of the year. Its very possible that they dont reach an agreement between now and january 1st. However, when january 15th hits and most americans receive their first paycheck and they notice its actually lower, i think hell is going to break loose. As a result of that, theyll come back to the table and reach an agreement. I think dont panic is good advice, but i dont see what the problem is with taking a little cash off the table here and putting it on the side and waiting to see if we do get a major adverse Market Reaction to them putting that cash to work once we get a resolution. This is what makes a market. Thank you for your divergent thoughts on the market today. See you later. Thanks. When we come back, we have the closing countdown already for this tuesday. Then, were watching netflix. 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The markets really taking in stride the lack of progress in the fiscal cliff negotiations because there are no negotiations right now. Heres the dow today. A little volatility in the open today, essentially sideways. There are other markets that have moved today that i want to show you. The yield on the tenyear went down today. Part of operation twist to keep rates low on the long end of the yield curve. Were down to 1. 60 . Other traders were in there buying treasuries following on the feds coat tails. Another market moving right now, gold. Back below 1700 an ounce. This happened last december as well when there was some profit taking at that time, maybe to try and beat out the tax consequences. Were down 1. 4 , a decline of 23. Well watch that carefully to see if now were below this psychologically important level. The vix, the fear indicator, went higher today. Were still below considered yellow flag territory. We havent been above 20 in about seven months. I want to ask peter costa, how do you read that . Is the market being complacent about whats going on in washington . Because were not seeing much fear. I dont think there is in fear. If you look at the breadth of today and the last couple of weeks, its really been very narrow. I think theres two conflicting sides of the market there. People that are betting against, you know, any kind of resolution happening before the end of the year and then theres the ones that believe theres going to be one. Im more in the camp that i kind of doubt there will be one. You dont think there will be a resolution by december 31 . No, i dont. Any time you try to put two politicians in the same room, you might as well put the gloves on. What does the market do . It should sell off. The way im looking at it, it should sell off. I think the market is going to sell off. Id put it like a 10 from the, i think october, september high. A 10 drop from there, which would get us another 4 from where we are now. Thats not a major selloff, but its a buying opportunity. Meantime, all these companies rushing to issue these special dividends. You want to play those at all . Do you want to get into those . Do you want to anticipate other companies yet to declier that might and buy them ahead of time . What happens with dividends is they pay their dividend and it comes off the stock price. You know, youre just transferring money. Its a wash. Youre taking money out of the market. Youre taking it out of the price of the stock and giving it to your shareholders. It really is a wash. I dont think theres any play in it. I think maybe if you want to play a little risk, maybe you buy something after with