Closing bell is next. See you tomorrow. Hi, everybody. Good afternoon. Welcome to the closing bell. Im Maria Bartiromo at the new york stock exchange. Good to see you, scotty. A steady drip lower for this market today. Nice to see you as well. Im scott wapner in today for bill griffith. In the markets right now, take a look at the major averages. Dow down 71. 5 points, at its worse. The dow was looking at a tripledigit loss. Got down to about 91 points or so, still sitting down right now. Nasdaq, s p are off with one hour to go in this trading day. Maria . Well get much more on the markets coming up, but first Steve Liesman with breaking news right now. This is the latest read on the u. S. Economy. Steve, what can you tell us . Maria, thanks very much. The Federal Reserve reporting Consumer Credit for november, consumers in a borrowing mood with Consumer Credit rising 7 . Nonrevolving credit, auto, student loans, up by 9. 6 with a big rise in student loans. The federal part of this thing was up pretty strongly, and nonrevolving credit was up 1. 1 . Student loans up by 5 billion to a record 521 billion, and Outstanding Bank credit card was up by 6 billion as well so banks were not shy about alleged on the credit cards. Meanwhile, jeff lacquer, fed president saying growth at 2 it is is what is expected for 2013 but 2014 could be stronger with reduced risk and ending some of the financial uncertainties that have that he says hobbled growth in 2012. He repeated his opposition to current fed policy and warned that a big fed Balance Sheet means that the economy is vulnerable to even small mistakes. Maria . All right. Steve, thank you very much. More weve got more breaking news. Well get to phil lebeau momentarily. A market down in the double digits, off of the worse levels of the afternoon, but nonetheless we continue to see a lack of buyers after that huge rally that we saw last week, scott. Yeah, and this is a couple days in a row now where weve, you know, havent been able to put much together after what we had with such a great week last week. Yeah. All that new money coming in from 401 k s and pensions and the market feels like it wants to go higher, even though the fundamentals of the economy probably weakened. Very much wait and see, and well get a good see after the bell today when alcoa reports. You guys will hear directly from Klaus Kleinfeld, speaks with you before he even speaks with the analysts, will give a good read on what earnings season will be, and that will determine what the market does. The fundamentals certainly could drive things, even though weve got that debt ceiling, the washington dysfunction. Right now were all about earnings. That certainly will be the near term catalyst. Lets get this new information though. How about this for a prediction . A market crash coming in the Third Quarter of this year, and the u. S. Is head for bankruptcy . Thats how harry dent i was so taken aback. Thats how harry dent of h. S. Dent investment manager says happy new year and the author of the great crash ahead, strategies for a world turned upside down. Harry, come on, man. I mean, youve seen those guys on espn say come on, man. That seems a little bit over the top, doesnt it . How many crashes have we seen in the last ten years or so . 2000, 2002, bubble, crash. 2007, bubble, crash. Were getting a bubble and crash about every four or five years, so this is what we have when you go over a demographic cliff. Remember japan . Think back to japan. Japan went over the demographic cliff, peak and baby boom spending, peak real estate boo. They had a bust. Guess what . 22 years later real estate is still down over 60 , still drifting down. Stocks are down nearly 80 . Not that far off their low. They keep bubbling up and going down to new lows so this is the new normal given that baby boomers are aging and the next generation is not only not in the workforce yet largely but they are not as large when they do, so were never going to see real estate prices at these levels again and wont see stocks at the level we saw for a long time so to me this is not unusual at all. Youre looking at the demographic changes, and certainly that is a big sort of, you know, determinant, but what about the determinant that theres all this money in the markets, very few alternatives to u. S. Equities, theres so much money globally looking for a home. Early in the year 401 k s, Pension Funds this. Market feels like it wants to go higher so what do you have to say about all the positives, not to mention the fact that underlying economics, not so bad. Youve got a Housing Market that has turned. An enormous amount of cash on Balance Sheets. China looking better, europe not as bad. Youre, i dont know about that. Well, we call this the economy in a coma. Basically without these trillions of dollars of stimulus, we would be in a downturn, in a depression because we also have 42 trillion in private debt, the greatest debt bubble in history and that needs to unwind. Basically ben bernanke and the economists are just saying were just not going to let this slowdown happen. Were not going to let the debt deleverage. If you dont let the debt deleverage or restructure japan, the same thing japan has done, quantitative easing forever, you never come out of this because the debt keeps weighing on the economy so not only do you have slowing demographics. Weve got a 200 to 300pound weight on our back and you cant run very fast. We get 2 growth with massive life support. Were in the emergency room on life support only because of this trillions of dollars of stimulus. I guarantee whats the catalyst . You take away this stimulus for one year, and this economy dies. Harry, stay right there. Want to get to phil lebeau because theres breaking news and want to get to it on boeing. Phil, over to you. Weve heard from the ntsb, expecting an update from them. They have at least an initial report regarding the Fire Investigation of that 77 dreamliner in boston yesterday. The ntsb saying that they have decided they are going to send two more investigators to look at the dreamliner in question and that at least initially taking a look at the fire in question they found severe fire damage to the battery of the auxiliary power unit. Remember, the auxiliary power unit is what is used to provide power to an airplane when it is parked on the tarmac, not while its in flight so the battery unit, severe fire kagge there, and its pretty clear, scott and maria, that we are going to see more airlines, if they havent already, they are going to start checking their wiring on the battery unit. I just spoke with the folks out of ana in japan. They have a number of dreamliners, checked theirs overnight at the urging of the ministry of transportation in j. I just talked with united airlines. It has checked the Battery Power wiring on all of its dreamliners, all six of them. The wall street journal reports that one of them did not have the wiring done properly, so thats clearly where the investigation is headed regarding those dreamliners and the fire we saw yesterday in boston. Back to you. Thanks. Certainly will continue watching that story. Boeing a dreadful couple of days as a result of this and traded already more than two times its average daily volume as a result of the negative stories. Harry, thanks for your patience. What was your predictions for stocks in the year 2012 . Basically we thought they would peak around midyear. They did not. We got qe3. We think markets are going to go up for a while. I think maria is right. The market wants to go up. Well see one more connection into this soaked fiscal cliff. I think well see another rally into maybe march, april, may. What gets us by summer we get another crash. What takes us up another 1,000 points on the dow . I think its just basically youve had strong stimulus. Youve got qe3, trillion dollars over the next year committed to. Thats being questioned now, but at least the next year were going to see that. I think youre going to see europe come back a little bit. I think youll see china do better. We actually think the u. S. Economy will slow a bit in the first quarter, thats what our leading indicators say. I think it will be a cheap rally, up, down, up, down. Its the second half that we think a crash happens, lasts a year and a half, goes into 2014, 2015, slight new high in the dow and a slight new low. Thats the pattern, higher highs in each bubble and lower lows in each crash. No something where people say oh, my gosh, how could this happen . Been happening since 1995 boubl crash, bubble crash, bubble crash because stimulus doesnt last. Lets say your scenario materializes, want to talk about how to protect yourself and what sectors or stocks out there might be immune to that, if any. Want to get your reaction to the outlook closing bell exchange. Joining the conversation ed pbatowski, carol roth and our own rick santelli. You heard harry in terms of an expectation of a huge crash. Ed, what do you say about that . Well, i dont know. Harrys philosophy and his thought process i agree with. Its just very difficult for the timing. I dont see a huge crash coming. I do saw that, you know, you asked what is the stimulus for markets going higher. Youll see what harry said, a stronger worldwide economy. The United States, you know, the best thing that will happen to the United States is we wont see terrible earnings right now. The thing to watch, maria, is the tenyear treasury. When the tenyear treasury starts to Gain Momentum in terms of rates rising, youll actually see the stock market do well, but at some point after about another 150 to 200 basis points on the tenyear treasury rising. Right. Well start seeing valuations stretch, and thats going to happen towards the second half of the year. I agree, well have a rough market towards second half of the year based on what we know now, but do i agree with harry that the world will come to an end this year . Harry, just not going to happen. Rick, whats the line in the sand then for treasury rates to rise . Is 2 , is that what you guys are talking about on the floor of the c me as the number that will push money into the bond markets . I think its closer to 2. 5 . Im in doubt whether well spend a significant time over 2. 5 but thats the area to Pay Attention to and jump into this conversation on Interest Rates. I would probably say that some of the issues of how the fed has managed to keep Mortgage Rates low, how they have managed to help the stock market go up, how they have managed to immerse themselves in housing and how we finance housing from zombies in the form of fannie and freddie. What harry is saying and our last guest said i agree with everything. I think theres huge structural issues were very dishonest about and we whitewash it all because the stocks go up. Just the time frame of what happens when that unravels, i think its a long process, and i think japan is the example of that. Well, carol, whats your take on this . Mean, lets say weve got a slow, anemic economy. Youve got some of these issues around the dysfunction in washington. Do you put credence into harrys call that were going to see a crash second half of the year . Im in agreement with what rick said. I do think that structurally we have problems. I just dont agree with the time frame. I think that this is going to take a long time to play out in the system. I dont see a massive bubble and a catalyst for that bubble bursting. What i do see is that weve got companies who have a perception now of certainty even though there really isnt any, but they will probably be putting some capital back to work thats been amassed on their Balance Sheets. We have consumers who have been deleveraging so they have some credit to spend, so i think well see things going up and getting more frothy before we end up seeing a crash. So i do think that there is something down the road, but i certainly dont see it in the Third Quarter. Harry, whats the biggest risk then to your forecast . What could prove you ultimately wrong . Well, you know, again, its stimulus. The government keeps upping the ante, europe and here, china, japan, everywhere, england, and the thing is what weve seen in the past, especially in japan. Always look back at japan. Same things are happening here as japan on an 11year lag, booms bust, and we do have another bubble in stocks. Stocks have already gone up faster in four years than they did in five years in the last bubble that crashed. The last bubble crashed because of the subprime crisis. That was four states. Spain and greece are as big in population as those four big states and spain has a much bigger real estate bubble bursting. Thats all it would take to trigger the next crash. They always say dont fight the fed. I dont want to know what triggers the crash. What proves you wrong . Hes not going to tell. You why is he going to tell you . Hes expecting a crash. The stock market does not have we do not have a bubble in the stock market. Thats what i dont agree, harry. We will at some point when the tenyear. Not like 2002 to 2007, are you blind . Harry, im far from blind. Were not that far from historical averages. All artificial. That was partially real. Heres whats not artificial. Let me finish my point. Got to finish my point. Heres whats not artificial, 3. 6 trillion in cash on Balance Sheets of the s p 500. Heres whats not artificial. Corporate profits because businesses dont see any longterm growth. Companies cutting, s assets, cutting down, becoming lean and mean after the 2008 crisis. Thats not artificial. Thats real business, real profits and real cold cash. Thats good. I need to finish my point. What about the 2 trillion in debt which doubled in eight years under george bush . That debt started to deleverage and the fed stopped t. Until you bring 42 trillion back down to levels like weve done in every austerity crisis in history, you cant grow very fast again. Japan will never grow fast again because they have not deleveraged their debt, and were going in the same direction, a coma economy. And by the way, the debts only gotten worse under president barack obama, thats for sure. Only gotten worse. And its going higher. They are expecting 22 trillion. Going higher. In debt in the next eight years. Thanks, everybody. Please let me ive got to make my point here. Go ahead. Make your point here. Okay. The point im trying to make, when you say am i blind, what im saying im not blind to it. The bottom line is stocks, we are 15 undervalued, and we should be about 10 to 15 overvalued so right now i believe were undervalued. Theres no bubble right now in terms of earnings expectations. What did earnings look like in 2007 in the United States, in 1989 in japan . They looked great until they crashed. Thats what makes it i dont know why we should be overvalued, by the way. Fundamentals are not that great. Appreciate your time. Got final stretch here. 45 minutes until the closing bell sounds on wall street. That was a goodspirited conversation. Down 53 on the dow. And this one is for harry. Enough of the pessimism, already. Bob doll manages 17 million bucks, and hes up next with his 2013 predictions, and lets just say if harry dent is right, bob doll aint. How bullish is he. Find out next. Mcdonalds, is it playing chicken with kfc and young by getting into the chicken game . The wing games coming up next. And earnings season kicks off when alcoa reports less than an hour from now. As usual well speak exclusively to ceo Klaus Kleinfeld about the aluminum giants forecasts before he speaks to the analysts. Dont miss it. With the spark cash card from capital one, sven gets great rewards for his Small Business how does this thing work . Oh, i like it [ garth ] svens Small Business earns 2 cash back on every purchase, every day woohoo so thats 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 whats in your wallet . Heres your invoice. [ male announcer ] staples is the numberone Office Superstore ink retailer in america. Now get 6 back in staples rewards for every ink cartridge you recycle when you spend 50 on hp ink. Staples. That was easy. We have more breaking news now on boeing. Lets send it back to our phil lebeau in chicago. Phil . Reporter first comment in chicago regarding yesterdays dreamliner accident. Officials saying the source of the fire traced to the battery to start the auxiliary power unit that gives the plane power while parked on the ground. The company is saying nothing that they have seen in this case so far in the investigation indicates a relationship to any previous 787 power system events. All of the electrical power problems that weve been reporting w. Finally the company says well give our technical teams the time they need to go and do a thorough job and ensure were dealing with facts, not speculation, so the bottom line is this, guys. Increasingly the focus is on the battery and the connection with the auction you willy power unit on the dreamliners as they continue investigating yesterdays fire. Back to you. Thank you so. Last weeks rally seems oh, so long ago. The market retreating for a second day in a row as wall street gets set to kick off earnings action tonight. Lets check in with bob pisani. Hello, everybody over there. Lack of buyers. Thats whats going on. S p 500, folks, ten points off the high. Friday, a fiveyear high. Know we dont have a lot of energy, but im not that worried about it right now. See a bigger drop before people got concerned. Upside, boeing having a lot of problems. Airlines, all up today. The numbers have been great. Fares up and revenue trends stable and fuel prices are stable. Weve got a potential deal out there with u. S. Air, and and amr out there, so the important thing is good news for the airlines in general. All the Jewelry Companies having a great day. Cignet great sales, most Jewelry Stores to the upside. Telecoms on the weak