Transcripts For CNBC Squawk Box 20091229 : vimarsana.com

it might. trebec was in when he still had a moustache. i begged him to be on. someone else did go on. you can find it on the web. yes, you can. the federal reserve i ll tell you about what paul said later. but the federal reserve rising in the last week, hitting its highest level in nearly a year. it declined earlier this year, but since then, the balance sheet has been growing amid the fed s asset buying program, the central bank s holding of agency debt and mortgage-backed securities has groan to more than $1 trillion. there s an interesting piece in the journal today about a great chart. i don t know if you saw that chart of what the fed balance sheet looks like at this point. but you go from 2008 to 2009, and you get a pretty good look at what the fed is going to have to orchestrate. it s going to be a little bit scary. page 3? yeah, page 3. look at that. i know. we were down under $1 trillion. and now we re it s just completely every part, every metric moved up. yeah. i don t know if you can actually see that, but that s in the journal and they re trying to figure out ways to do it and it may have something to do with certificates of deposit and the way things are done at different banks. but eventually and there s an editorial. the king james nightmare that was 2009 and 2008. but that was to make up for the disaster that was in 2009. meantime, retail gap prices increasing up slightly following two days of decline. the energy department says the average price of a gallon of regular unleaded is now $2.61, up a dollar from a year earlier. prices this morning hovering just below $79 a barrel. that s a 12% gain in the past couple of weeks. $2.61 compared to what we re paying here in jersey. good or bad? i look at premium, usually. and you can see the like at the factory, it s like one big two and the one-two splits into three. it s identical. but you ll be charged more. let s get to the futures this morning. we might add gains of the past six days, people in europe are back to work after a long christmas weekend. we re up about 17 points above fair value this morning. the ten-year, though, did you see the two-year auction yesterday? how did that go? not well. relatively weak. and we have the 10-year coming up today. the dollar is relatively firm. the euro gaining a little bit as some of those european traders come back. 1.4413. and gold with a relatively stable dollar, ticking up 4.10 to $1,103. chloe cho is stanning by in singapore. morning, chloe. hi. how are you, carl? yeah, it s me, right? you know, i m really tired because i ve been running around the building making friends with a lot of people to make sure there is no drilling going on, especially when i m doing hits for squawk box. well, as for the asian markets today, a range bound trading especially for the ones that saw a pretty run up over the past week or so. so not surprising to see the nikkei at pretty much flat and it s testing high for the year. do remember, though, we are testing, what do remember that the nikkei, 20 years ago, on this day, hit a record high of 38,915. it s tradeling at that was, what, four times the level than it is trading at this moment, so it s something to think about given that we are talking about the asset bubbles over in the greater china market. the kospi, slightly lower, off 0.8%. australia is certainly one of the better performers today opinion higher by 1.1%, not surprising given that we have oil trading at $79, $78 a barrel. also we have copper and other base metals gaining ground, as well. australia is playing catchup and taking yesterday off for the boxing holiday this past saturday. the shanghai composite managed to eek out another gain of 0.08%. cnr, they are a top trainmaker in china, they priced their ipo at the top of the indicative range but certainly disappointed. closed up by about 2% or so. this is the worst ipo prmper for the markets. a lot of analysts are saying this is a good thing because it sends out a signal to the markets that they can t set ipo prices at sky high prices and, in fact, that was what they did today. so overall, range bound trading and thinner trading volumes a we re about to close out the year for 2009. and let me send it over to carolin schober in zurich. thank you very much, chloe. and we are seeing modest gains on the european markets. remember, many of these markets did hit new year highs during yesterday s session. in england, that market was closed for a holiday yesterday, so we do see the ftse playing a bit of catchup in today s trading session. the ftse higher by more than 0.5%. in france, the cac higher by 0.3%. we also got the confirmation for that 0.3% increase in french third quarter gdp. so no revision here. and in germany, the dax is higher by 0.1%. in terms of the sector, we are seeing basic resources and construction stocks leading the gainers here, but we are seeing a bit of weakness in the chemical and the retail stocks. now, let me mention this one interesting story to you. jpmorgan s ceo, jamie dimon, he has reportly warned uk chance wore alistair darling that he may cancel plans for the bank s london headquarters. those plans are estimated to be worth around $6.4 billion. now jamie dimon s reasoning here is that he doesn t like the british government s 50% super tax on bankers bonuses. with that, i ll send it back over to you guys. carolin, thank you. we have general motors offering large incense ifrs to sell off vehicles of pant yaks and sat earn urns. the numbers, they re talk around 7 grand. yeah. but is that still what do you do two or three years from now? i mean, can you get it fixed? is there an aftermarket? the journal says that the company told its dealers that it would pay them $7,000 for each new sat earn or pontiac moved to service fleets or rental fleets. sales prices are said to drop by as much as 46% off the sticker price. half price. that could inflate the company s december sales figures, but that s not the way things are supposed to work. you need a car, though, if you need a new car that might get your attention. i might buy an oldsmobile. do they still make that? no. but that s what i grew up in. you ve got your ford flex now. i don t know if they re going to change you. i am. i got a little christmas you know, we re friends. you ve reached out. i had, why are you on all these other shows on this network? you said that to him? i did. he had win love squawk. well, we look forward to seeing him on our show. exactly. meanwhile, morgan stanley is looking at altering its pay plan for senior executives. morgan may give top officers about 25% of their pay in cash and the rest in stock. traders can see compensation adjusted for how much risk they take to the firm. final changes may come as soon as next month. not quite as far as goldman is going, but closer. yeah. i guess that s where we live. the world s biggest aluminummaker attract the a virtual who s who of investors. rusal solid targeting a four cornerstone investors. they reportedly include john paulson funds, nathaniel rothschild and a malaysian chinese businessman reportedly around $10 billion and a russian state-owned bank. ibm, the high, carl, 139 whack in 99. so we re at 132 right now. so we re not that fall away. and paul lasano said where is the revenue growth and margin? the stock going up a while ago. and then he also said, oh, what s going to do their next bump, the pc cycle? oh, yeah, that s going to work. that s basically what he said. really? yes. good. it s good to have a corporate battle in the public i think that maybe i don t know. they re very close in revenue, i think. there is one metric where hp is actually ahead. so the larger technology company in the world in terms of some i m not sure. not market caps. who has been more inquisitive? and ibm had something the last couple of years. yeah, but not to that extent, i don t think. edf definitely bolted them into the big league. so did compaq. dan dealingan, and bob gruska, chief economist and economist, dan, do you dangle in tech? do you like hp or ibm better? no, joe, we don t do any tech at the moment. and if we were going to do anything in stocks, which we are not, we would make sure that we had stop losses in place and protective put strategies in place. you have to start ajzing your bond portfolios and move out of your portfolios into cash. so you don t like any stocks or bonds? no, actually, the not at the moment. what we like how about 5s, 10s, 20s, 100s, what would you tell the viewers to put their money in? is there a denomination that you like? just get out of everything, then. well, i think it s a time, if you re going to stay in fixed income securities with the steepening yield curve, i think it s time the latter than in short-term maturities and take advantage of the move up in interest rates. i think it s clear with what has been happening in december that it s time to do that, the yield curve steepening. i think carl just said a moment ago that the two-year auction. the issues for the two-years yesterday were not good. it was weak. that s notice a surprise. the fact that the highest offering that we expect on the ten-years later today in four or five months, i mean, it s all an indicator that it s time to get out of oz. and you don t like stocks, either. and why don t you like stocks, for the same reason? well, yeah. primarily for the same reason, but also, this basically has been a trader s rally that we ve had since march. there s been very little retail, main street investor activity. as a matter of fact, in the last year, for every dollar that went into stock mutual funds, $13 went into bond-based mutual funds. that s unheard of. and so i think that there s a bubble there. and i think that bubble is going to burst. and when it does, one of the things that a lot of people went into bonds to begin with, they either went directly from stocks to bonds as it pained last year and in the first part of last year, the last part of 2008. and earlier this year, 2009, i m thinking 2010. and in the latter part of 2008, they went right from stocks into bonds or they went from stocks to cash with very little return and then changed yield out into bonds. and i think that that bubble is about ready to burst and people are about to find out if they don t get out, that is much more difficult to lick daid date a bond portfolio than it is a stock portfolio. bob, do you agree with that, that the bond market looks treacherous right now inspect. as you know, i ve been bullish on the economy for quite a while. you have a very bad recession and you wind up having a strong recovery. the thing i wonder about the most is this reference we just heard to bond funds. if you have a lot of money in bond funds, a lot of people don t understand what they are. it s true if you put money in a bond you ll get it all back, but a bond fund is not a bond. there s a lot of money in bond funds. and, you know, if you go interest rates moving up sharply, there are a lot of people concerned about the federal reserve growth. there is going to be a period of time when the market is going to get spooked about inflation. i m not an inflation worry wart. but you have to look at all the weak sisters out there and wonder what s going to happen. when that happens, you re not going to want to be in a bond fund and you may not want to be near the bond market, either. but i think the economy will be strong and the stock market will be able to with stand an increase in interest rates. i think that s what s coming. bonds are going to be toxic for a while. what s the fourth quarter gdp number going to look like? what do you have for next year? i think it will be the fourth quarter, something about 4%. i think we ll be averaging 4% and 5% over the next four quarters. really? so that s above consensus right now. we re at about 3.5% and i ve heard people say 2.5% for next year, but no double dip? if you get a double dip, it s not going to be next year. it will be sometime down the road when you run out of this recovery mode the economy has to go through. you ve got over 7 million people unemployed who will be actively looking to get back to work. we ll have a strong recovery next year, but there will be a lot of people feeling a lot of pain because they re not all going back to work. the economy is going to continue to have difficulty even with that strong growth rate and, you know, it s going to be challenging. will that give us will that give the dollar a boost, 4% or 5% here? yeah. i think the dollar has seen its worse for a while and it s showing signs of doing better and the european economies are struggling a little bit more with their growth. so far, their growth has been export lad and certainly that has to be challenged by the strength you ve seen in the euro and japan is struggling with deflation again. china has been a growing market, but china can t really provide much assistance because it s in that exporter. so it takes growth from the rest of the world. it doesn t give it out. i wondered when the are we starting to see that change because we re a consumer nation and we can all benefit from that? yeah. that s going to happen. you might not be alive to see it, but i m sure that s going to happen. well, if i m not going to be alive, you ll be long gone. i don t know what you re talking about. do you, carl? that was a cheap shot, wasn t it? i mean, i m going to have to talk to your wife about that. she was my friend. i don t know if everyone knows it, but all right, gentlemen, we appreciate your time this morning. i like that flag. i like that flag, dan. that s in a good spot. appreciate it. you are wake. and happy new year to you both. happy new year. likewise, happy new year to you both. thank you. keep up the good work you re doing. we ll try. i don t know for how much longer. do i look you re on death s door, so i mean, do i look you look okay. i do? yeah, you look fine for now. you look good. british airways reportedly on the verge of abandoning first class service on a lot of their routes. the london times says they would not offering first class on the boeing 777s next year. industry watchers say carriers are dropping first class after a bidding they lost the battle for the wealthiest passengers to asian and middle east carriers. what would you do? well, i know one anchor reading right now talking that is not going to be flying in a british airways jet any time soon. pretty much. you love your firsty, don t you? it s comfortable up there. you know where i get the mox? american express. oh, yeah, that s a good one. which is frightening. there are times when i see bills from there and i say, oh, that s okay. a lot of miles. where on the monthly bill, i m actually glad. when we come back this morning, we ll get a trivia question. which automaker is actually expanding the number of car that it makes? we ll get the answer and your traveler s forecast when squawk continues. carol, when you replaced casual friday with nordic tuesday, was it really for fun, or to save money on heat? why? don t you think nordic tuesday is fun? oh no, it s fun. you know, if you are trying to cut costs, fedex can help. we ve got express options, fast ground and freight service you can save money and keep the heat on. great idea. that is a great idea. well, if nordic tuesday wasn t so much fun. (announcer) we understand. you need to save money. fedex welcome back. futures this more, modestly positive as the dow has put together six straight gaining days as we ve got three trading days left in 2009. making headlines this morning, volkswagen s audi reportedly plans to inch vest more than $10.5 billion in plant upgrades and r&d between now and 2010. the automaker says plant homes it will help it expand. they want to expand from 34 designs to 42. and then they ve got that sports car, which is really cool looking. the e.t.? no, no, a different one. one really expensive and really fast and cool looking. but i mean, like really high end. above ours? way above any favorite. at&t s website is once again selling the iphone to people in new york. new york city. you may have heard that the company temporarily stopped selling the device online during a weekend that anyone with a manhattan zip code, which would include metro. the phone was still available at retail stores. no official word from at&t. does this have to do with what becky was railing about? the at&t network has all the iphone at&t or there s no word from at&t on this. i m not sure what s going on. limited spectrum space. it s a problem for a lot of carriers. but it s especially a problem at at&t. because of the iphone. yeah. fannie mae s mortgage investment fell at a 20% annual rate. they report the delinquency rate on single family loan guarantees jumped in october. it has eaten into fannie mae s capital and forced borrowing from the treasury. a lot of the big economic bears we have here on the show point to fannie and freddie as some of the leading problems we ll face in the nmt several years. when you sell it, the cap was raised. now to this morning s travel forecast across the united states. let s check in with our friend, scott williams, as we do each morning at the weather channel. good morning, scott. good morning, joe. we will find problems in interior sections of the northeast due to the lake-effect snow. but the other story today will be the cold temperatures across the northeast and new england. and also the wind. look at the windy conditions right now around new york city. northwest, 25 to 30 miles an hour. as you move into baltimore, the nation s capital, as well, block out the wind. moving into the lonestar state, we re blocking out winter weather advisories as far north as the dallas/ft. worth area looking for a trace of a wintry mix as we move throughout the day today. so certainly, we ll be watching this very carefully here. so for today, dallas, 38 degrees and a chance for rain and snow. houston, about 45 degrees. so as we look at the overall travel delay forecast moving into your tuesday, new york city watching for the wind. dallas watching for some rain and some snow. as we move into the cleveland area, also watching for very gusty wind conditions with those winds out of the north and west, anywhere from 20 to 30 miles an hour. we ll look at the forecast for dallas. changes as the day progresses from rain mix, snow. temperatures in the 30s. watching for windy conditions as we watch new york s laguardia here. right now, no current airport delays. but as we go in time, that green light is likely to go into the yellow and red categories, not due to weather conditions as far as precipitation but due to the windy conditions that we re expecting throughout the day. now, back to you. coming up, have you seen these charts? no. aren t you leading the yeah, i am. but if you re way above a moving average, is that good? that means usually anyway, you ve got to see these. big reversal, right? possibly. but you ve got the other ones where it s reached a level where it s breaking out. that s what we re going to talk about, tech trends going into 2010 from one of the top technical analysts. then we ve got some top stories, a picture from the futures pits, as well. but i m interested in what these technical trends say about the outlook. that s when we return. guys, start the year off right! lose weight and jumpstart your year. any guy any age can do this. introducing the all-new jumpstart kit from nutrisystem. i m dan marino, and i lost 22 pounds with nutrisystem. that s me 32 pounds ago. i feel like i m 10 years younger. order now and get the jumpstart kit, specially designed to put you on the fast track to awesome weight loss. i did go.all.the.way! i lost 50 pounds with nutrisystem for men. nutrisystem is based on the proven science of the glycemic index that helps you feel fuller longer. for about $12 a day, you ll get 28 days of fantastic meals. fifty years old and back to my playing weight. order now and you can get two weeks of meals free, plus, the all-new jumpstart kit, our secrets to put you on the fast track to ultimate weight loss, based on more than 35 years of proven science. jumpstart your weight loss with nutrisystem. order now and jumpstart your year. call or click now. good morning. welcome back to squawk box here on cnbc. i m joe kernen along with carl quintanilla. becky is off today. she ll be back on monday, i think. making headlines, jpmorgan s chases ceo jamie dimon throwing doubts on plans to build the european headquarters in london. i wonder why. he had conversations with alistair darling. dimon expressed concerns about that company s 50% windfall tax to be levees on bankers bonuses. dimon is not said to have made explicit threats to scrap plans to build the headquarters, but reports say that jpmorgan was considering significantly scaling down the $2.4 billion planned to a building in london s canary wharf. i bet you that got their attention. they re doing it, anyway. a lot of people are talking about london is definitely going to feel it, the law of unintended consequences. yeah. especially after there was a period this new york and londoner vying for the number one spot of banking around the world. the obama administration is reportedly ready to announce loan guarantees to help jump start the country s nuclear power industry. the money would likely support construction of about two to three plants. a nuclear power plant can cost $6 billion to $7 billion to build, not to mention all of the years of applying for permits and getting the approvals to go ahead. having watched the simpsons for so long, i see just that structure makes me think the big pliers that he used to think it makes me think homer. a new survey today suggests that employerers plan to hire more workers than thn they did in 2009. a new survey says 20% of employerers plan to add more full time permanent employees next year. let s take a look at markets this morning. we have traders around the world pretty much back in full force. the nikkei is barely inching up to i think a four or five-month high this morning. so green arrows all the way around, although modest here in the states. oil is below $79 a barrel, but is at 12% in about two weeks. we ll get inventories numbers today and tomorrow. right now, down 4 cents on the february contract. the 10-year note, we re looking at the highest yield after the two-year auction did not go so well yesterday. we ll get another five-year auction later on today. dollars relatively firm, euro getting a little bit on the greenback this morning. on some thin volumes, obviously. 1.4421 euro/dollar. and then gold is losing a little bit today i think after gain something yesterday, off 2.90 to $1105 on the nose, just about 0.25%. comments or questions about anything you see here on squawk, e-mail us, squawk@cnbc.com. coming up, the tail of the tape. we re going to look at the charts from jeff weis and see what it might indicate for 2010. verizon makes a big deal about their maps, but when you look a little closer. their story begins to fall apart. see, at&t let s you talk on the phone while you surf the web. [ clattering ] verizon.doesn t. at&t has the most popular smartphones and the nation s fastest 3g network. verizon.doesn t. [ clattering ] glad that s cleared up. oh, boy. [ male announcer ] at&t. a better 3g experience. this holiday, get a touchscreen samsung solstice free after mail-in rebate. welcome back to a tuesday morning. futures are modestly higher in the states. officials stole or misused $34 million this year. investigators recovered $2.5 billion following audits. the chinese government releases information about audits in an attempt to allay corruption concerns. russia needs to develop new offensive weapons system toes keep the balance of power with the united states according to vladimir putin. mon cat cano vot near is here with the headlines. i m just talking to al roker this morning, as well. new photos obtained by nbc news reveal how 23-year-old abdulmutallab made the makeshift bomb. this was thwarted as retaliation for the attack against the group in yemen. crime rates in the big apple plunged to their lowest levels in more than four decades, all despite the sharp economic downturn. and one movie theater in california is ed adding extra motion to the motion picture experience. have you guys heard about this? these are moving seats. they turn and shake based on the action in the screen. so ideally, i guess the best example they keep giving is the car chase. so you ll feel like you re in the car, part of the chase. i don t know. what do you think, carl? theaters are desperate for people. there are things like that, like prototypes at most of the theme parks, monica, where you go, whether it s down in orlando or universal studios or disney where they have you can get a little bit of a spray if you re a rainforest, smell. there were bugs and there s an actual little, like, thing that sticks you in the back and everybody screams. there s all kinds of neat things. is it supposed to be fun? yeah. you paid for this? yeah. monica, you have your own show now, like for two hours now? what time does that start? i don t know what you re talking about. maybe it s from maybe that was a leak. somebody posted a schedule. a leaked schedule of msnbc for next year. but i think the network later said that we don t have on plans finalized yet. i think that was one of those arm chair fans who was saying, this is what we d like to see. just don t make any plans between 10:00 and 12:00 in the morning. i don t know. the new show, novotny. it rolls off the tongue. yeah. all right. take care, guys. see you tomorrow. that s good. i know it s good. we would love that. we don t get in trouble for msnbc management, do we? i don t think they can touch us. they can t? no. they have a huge river between us and then. the hudson. the s&p 500 is up almost 25% year-to-date, but 60% from the lows. jeff weis is here and he s the chief technical analyst. it used to be ef hutton when i was a kid. we go back a long way, joe. makeup is a wonderful thing. theater. these charts, we re so far above the moving average on the the 12-month. on the 12-month, that i thought that that comes back to the mean. let s show that chart. you re saying that s not the interpretation to give on this thing. well, right now, joe. and hello, carl. hello. we are approximately 18%, 19% above the 12-month moving average. and historically, the 18% to 24% range going back seven decades or so is a decent sized number. but there have been other periods where we ve maintained that type of momentum. and i ll point out that we ve had basically three wonderful i hate to use the word signals, but for lack of a better word the breaking of the moving average in october of 2000, at 1429. the close above it at 916 when the s&p close at 916 to end april and then a break of the moving average in december of 07 at 1468 which was not reverse e reversed, joe, until we closed at 1897. so those were positive times for stocks, is that what you re telling us? the last time we did, joe, we stayed above the moving average for 55 months in a row. nos not to say that that s going to happen this time, but if you look at the other times we ve gone above or below that moving average in the s&p on a monthly close, it s been over 1500 s&p points. really, 1500? that s amazing. so it is a positive signal. this is a positive signal. we re already up 14% since we got above it. really? do you want to go to the next chart? i d love to. so this looks like we re heading up to a line where it looks like it could hit that and be a resistance line. joe, it is. and the line is a little thick, so 1120 was the number. and isn t it interesting that that line, which goes back to january of 01, which is now in the 1120 area, is the same number, 1120 which represents the 50% retracement on a daily closing basis from the 07 s&p high to the 09 march daily closing low. and while thursday was a wawnor for many, many people, i was excited because we were able to get above 1120 on a daily close. the longer we maintain it, the better which would give us a target where we class from an 08, which is around 1170. so i think it s still a bull market. so it matters. if it hits that 50% retracement level, chakd indicate how much more upside. well, if we stay above that 11, 1125 area by 1% or more, the next area would be 1170. being we re still in a bull market, i don t put tops on how good i think something can get, but always a low on how low something could get. but a lot of times, futh a 50% retracement, that s it and it goes the other way. that s true, joe. and some people have compared this to the 20s, right, joe and carl where we ve we got about 50% of the loss back. this is not like that. we stayed below the 12-month moving average for something like 40 months plus. this is different. now we are above a rising 12-month moving average. this is not the period of the 20s, joe. great. and then the weekly closes of the s&p, this looks all extended, too. but you re saying that s good, too, right? well, this is good because at this juncture, one of the things that we have been talking about is 960-980 continually on your show, joe. and 960-980 goes back to the long-term capital management crisis. 98. right. it goes back to the weekly closing low of 965 and the halloween high in 08 which was a friday when we got to 969. so we have clear all that 960-980 overhead resistance out and at the same time, got above the 12-month moving average at the end of july at 987. so a bull, in my opinion, was born. we could argue whether he s standing on all fours or threes or how sharp his horns are, but i think it is a bull, nonetheless, with initial s&p support just under 1100 and we ll take it from there. deploy risk management and see where this bull takes us. then the bull started in march? i believe the bum started in a primary trend basis at the end of july/early august. when we got back, the snapback from what may have been irrational fear levels down in the 6s, huh? and it s interesting that i think it started at precisely the time where a lot of people said, look, we ve come from 666 up to 960, 980, where are we going to go? are we in a psychological period where it looks like it s petered out? i hear technicals low, no more new highs, this is a tired market, sugar high. no retail participation. well, they say that, but if you take a look, the daily and weekly accumulate listen lines on the big board have made new highs. it seems in a bull market, joe and carl, there s always just enough things to even keep some of my fellow brethren technicians off kilter much like in a bear market there s a few hooks that always seem to be able to keep you in while the market i think it s a bull. i just want to mention as someone who lived through 73 and 74 and gave back a good deal of my bar mitzvah profits i was alive, but i was not active, carl. i already had one guy say i m not going to say the risk management is everything. capital preservation comes first. appreciation second. jeff weiss, thank you. thank you, sir. good to see you. and to you, joe. when we come back, becky is away on vacation today, so joe and i will go to chairs alone. the man show. for a look at today s favorite headlines and some gossip. later on, it s game on. modern warfare, guitar hero, madden, can one name save the future of the bruised and battered video industry? 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[dripping] [shower running] they can be damaged. they can be stolen. happily, there s the american express charge card. if something you recently bought with the card breaks, it can be repaired. replaced. or your account can be credited. you ll even get membership rewards points with each purchase. and peace of mind when you travel. can your card say that? jooishg. we are in the chairs. everybody s still talking about that near catastrophe that was thwarted for however you want to phrase it, the bumbling of the bomber himself or the passengers. thank god it didn t happen on christmas day. a couple of i m going to look at the cover of the daily news and the new york post in a second, but i think it s interesting that al qaeda would say, yeah, that was us. i mean, it was a total botched attempt. that s the best they can they re willing to take credit for something like that, that it didn t you know, they haven t had a success in this country since 2001. they got to take credit for this? yeah, he s our guy. yeah, we could have. we almost. well, you watch it. and then, the idiots say, we ve got 25 more guys that might have it in their pants, too. we re not going to check everybody s underwear now? they tell us they have 25 more bombers if you were smart you tell us we have 25 more on the way? wouldn t you beef up security? i don t think their strategy is all that clean but you would argue we ve spent $40 billion on security it s not good. we need more full-body scanners, i guess, and some of these we can do it. the equipment is there. the high-tech equipment is possible, but it s just a matter of how mruvent you want to make flying. exactly. this is a sobering experience. it s nothing to make light of. the daily news call it pants on fire, liar, liar, with a picture of these weird what he was wearing. yeah. they don t look like men s underwear. maybe they got burned. i don t know what happened. and then the post, you can always count on the post, great balls of fire. balls of fire. you know, they ll do that. that s the post, that s what they re good at. yesterday we did not one of our producers came up with nad bomber, the nad bomber. not mad bomber, which which i thought was better than either of those. if you were going to use it. we did not use it yesterday and we re not going to put it in actually up on the screen today. but, rob, you ve got for those who are listening. exactly. you have to give props to one of our producers for coming up with nad bomber. there he is. we ll let you know if anybody get fired, there he is. he came up with that. thanks to rob. from jersey shore. you might recognize him. that s the situation. that s paulie. you drink a lot of coffee before you get to work. how many cups are in the it s a 20-ouncer. i have to actually leave right now. the journal has a piece on health benefits coming from coffee. the results, one cup lowers some types of diabetes. two, suicide rates lower. three cups, gallstones lower. four cups a day cuts the risk of troek. five cups a day, less risk of alzheimer s. if you drink six cups, lowers the risk of advanced prostate cancer. are you kidding me? no. obviously, still raises blood pressure and higher risk of stroke in some cases. they don t know how many cups provide optimal health and not enough evidence to say if you re a nondrinker you should start drinking. what s your impression of caffeine and its effect on you? do you not have a negative impression of caffeine? no. over the years, you don t think we ve sort of the pc thing is that caffeine s bad. you shouldn t give it to your kids. you think it s you re not on the do you not appreciate the benefits of caffeine? i do. but i always feel like it s sort of a you know, a vise, like red meat. i don t see it that way. but only 54% of americans drink it on a daily basis. red wine is the same way. now we find it has some things that could actually help you in terms of longevity. are you telling us absolutely everything? not exactly. we re also out of coffee. nice. so howard schultz was on to something with this? i think you re right. sounds like a clean jout. some over there. help yourself. when we come back, we ll get top stories, welcome our guest host, jim reynolds, member of the president s inner circle, major investment player. our guest host for two hours when squawk continues. national car rental? that s my choice. because with national, i roll past the counter. and choose any car in the aisle. choosing your own car? now, that s a good call. go national. go like a pro. it all starts with havinglocks more hotels to choose from.. that s why i book with expedia. so i can find someplace familiar. or somewhere more distinctive. nice! then i can compare dates to find out when i can save the most cash. done and done. we should do this more often. more choices, more savings. where you book matters. expedia. dot com geopolitics in the markets. we ll continue to use every element of our national power to disrupt, dismantle and defeat the extremists who. should investors expect bigger flare-ups in the new year? the countdown to 2010. we have a five-star fund manager s outlook for the new year in investing. and find out which stocks could be immune from health care reform. squawk box begins right now. good morning and welcome back to squawk box here on cnbc. i m joe kernen along with carl quintanilla. becky quick is off this week. we get some stock picks for 2010. we have stocks that could be immune from the sweeping overhaul plans going through congress right now. a five-star fund manager will give us his strategy for investing in the new year. we also have our guest host today, jim reynolds, co-founder, chairman and ceo of loop capital markets, largest minority investment bank, also a member of the president s finance team during the presidential campaign. we ll have plenty to talk to him about over the next two hours. first, though, this morning s top headlines. gm is offering large inventives to sell off vehicles like saturn and pontiac, both have been discontinued. the journal says the company told dealers it would pay them $7,000 for each new saturn or pontiac that was moved to a rental fleet or a service fleet that was operated by dealers. the price of said cars is said to be dropping by as much as 46% from the sticker price. the push could inflate the company s december sales figures. you wonder how profitable it is that how much you have to move them, though. morgan stanley is considering altering pay plan for senior executives. the senior execs will have more pay deferred over time and benchmarked at rival firms. morgan stanley may give top bosses 25% of pay in cash. and then adjusted for how much risk they take for the firm and a final decision on the changes may come as soon as next month. and then retail gasoline prices are creeping up slightly recently. following two straight weeks of declin but oil has been higher. the average price for regular unleaded is $2.61, up nearly a $1 from a year ago. that s like the 12-month hard to remember, but gas there was so much else going on at the time that gas was $1.60, below $2. at one point it was almost $4. that s right. a check on the markets this morning. going to get some action this morning. case schiller is coming out at 9:00 a.m. consumer confidence later on. a five-year note auction. for the time being, futures here relatively positive. actually gaining a little strength after decent mornings in asia and europe. oil hovering below $79, tacking on a pretty good 12% over the past couple of weeks. down 39 cents this morning. ten-year note after the two-year yesterday was the weakest in four months. the yield there 3.85, the highest we ve seen in quite a while. we ll keep an eye on the five-year note auction. dollar relatively stable. euro edging it out as european traders come back. 1.444 euro/dollar. gold is losing a little bit although it s still up 25% year to date. 26%. it s off 2.20 this morning to 11.05. the presidents the attempted attack on the northwest airlines jet will strengthen america s resolve to keep its citizens safe. we will continue to use every element of our national power to disrupt, to dismantle and defeat the violent extremists who threaten us, whether they are from afghanistan or pakistan, yemen or somalia, or anywhere, where they are plotting attacks against the u.s. homeland. this incident just one indication the geopolitical concerns will be a significant market factor in 2010. joining us this morning is greg, chief policy strategist for solet securities and jim reynolds, co-founder, chairman of loop capital. greg, good to see you this morning. you say that because everything else appears at least tentatively to be on track regarding the economy, the geopolitics may be the wild card of the year. absolutely, carl. you re going to have lower interest rates, low inflation, moderate economic growth, but geopolitics, as we ve seen in the last 72 hours, is absolutely the biggest, most unpredictable wild card of all. are you referring to things like extraneous, out of country event, israel/iran, or things like christmas day? two things. one is the totally unpredictable, a terrorist act. i think coming out of what happened near detroit, we may have to think about still another front in the war against terrorism. that, of course, would be yemen. the really bad guys are are in yemen. i don t think they re in afghanistan. we may have to consider striking some of the terrorist bases. the other big threat, obviously, is iran. that s a story that will be with us for the whole year. and it s one where, you know, their nuclear ambitions are a huge concern. how would the markets react to something that aggressive, that much offense on yemen? i think if it was a targeted hit on the terrorist bases in yemen, and i m sure our satellites have pinpointed where these bases are, i think it would be viewed as quite positive. do you go along with that, jim? i think that the markets would i would be hard-pressed to think they would be positive. i think the markets would have a reaction probably a little bit more of a flight to safety nature that we ve seen before. but, greg, let me ask you a question that i m curious about. sure. what about something of a more subtle nature like, say, sanctions or something that s not as violent or as aggressive as i think sanctions now are inevitable on iran. i don t see how we ll avoid them probably in the next month or two. unlike in the bush administration, with lots and lots of allies going along, we will announce big sanctions. you have to say, though, kind of cynically, have sax worked against fidel castro or kim jong-il? i m not sure nthey ll work. if you had to put odd ons an israeli strike, what would they be? i think they ve diminished for two or three reasons. one is i think it could take 1,000 israelis to get all the iranian facilities. it s not close. it s not going to be an easy fight. the more important thing are the demonstrations and beatings and killing in the streets of iran. the iranian government looks terrible around the world and i think they look terrible in the muslim world. why make them a martyr? why do something to get them sympathy? i think the imagery of these beatings is something that will hang out there and further erode credibility for radical islam. greg, who do you think the president should turn to for counsel in this area? obviously, he s a relatively new, although president, a relatively new individual on the national scene dealing with national issues and he has some experienced foerlgs around him. who would you turn to in this position? i think there are two people who stand head and shoulders above others. both are pretty hawkish. one would be gates, defense secretary, the other would be hillary. both of them, i think, are more hawkish than the president s political base. i do think that his homeland security chief did a pretty weak job the first 24 hours, i thought, were really lamentable. you would have to say, to be fair, what would the new york times have said if george w. bush had spent 48 hours at the ranch in crawford, said nothing, and then had his homeland security chief say, the system worked? the new york times would be apoplectic, so i don t think he ll rely on her but i think gates and hillary will be crucial right now. greg, you saw that maybe kerry would go over to iran. i mean, it s his idea, too, but it has the blessing of the white house. the criticism, which was immediate, was that everybody else in the entire country seems to be holding that regime sort of in contempt. it s as weak as it s been since the late 70s. would that legitimatize would they be able to point to the visit of senator kerry and say we are the legitimate regime of iran? that s a dumb move, isn t it? another dumb move? i think a visit by kerry would be ill-advised, considering what s happening in the streets right now, i think you re right, but they re so tone-deaf the iranian government would probably snub him or give him nothing in return. to me it would be a lose-lose for kerry to go right now. you mentioned the times, greg, and they do have a story this morning talking about the $40 billion we ve spent bolstering air security system since 2001. does someone need to be fired? does napolitano need to go? does there need to be some sacrificial lamb because this man got on the flight? i m not sure it s her. if someone goes to africa, amsterdam to detroit with no luggage? the system did not work. for her to allege the system worked, to me, is inexcusable. greg, we ve got the the 9/11 guys were from canada, or came from canada. then she said, any terrorists are going to be domestic because of the recession. and now saying the system worked. i mean yeah. that s not enough yet? yeah. as you guys know, i support obama in a lot of things, but on this i think they looked really bad for a good 24, 48 hours. yeah. we need some tough guy or gal. i miss i miss tom ridge. yeah. well, we ll talk to asa hutchinson later on in the program who has some experience in this world. greg, thanks for the insight. we re getting a lot of mail on whether the terrorists did win or not. if you re worried about another 25, you re terrorized, so that s what they do is breed terrorism. it does work when all of a sudden you re thinking about them again and costing all this money for additional security. so that works. i haven t heard a lot of people say they are now not going to fly, have you? no. i have heard people write in they re terrified of the tsa. you know, there are our viewers are very quick with a lot of this stuff. cass wrote in and said lines in laguardia going to palm beach were worse than they ve ever seen it. kidding? yes. yesterday wasn t bad. it wasn t bad at newark yesterday. more with our guest host. jim, we re going to shift gears quickly because we ve had guys come on today, a couple of them, talking about the bond market as if this is a huge accident waiting to happen for anybody in a bond fund. i mean, is that do you a lot with bonds. we do. we do a lot in the bond market. clearly, we ve had an adjustment in the bond market. i don t know it s something that hasn t been anticipated. certainly not the speed of the adjustment being anticipated. i don t necessarily see a train wreck coming in bonds. we don t see that at all. we see treasuries backing up, but that was well telegraphed, well expected. converse conversely, though, what we re seeing in other parts of bond land, corporate finance, corporate market, we re seeing spreads tighten at levels that have probably been tighter since the tightest all year in investment-grade korments and high yields. i expect a pretty good year in corporate bonds next year. a strong year in corporate bonds while yields move higher on the ten-year and other. well, you have several things that how high on the ten-year, you think? obviously, i think i saw a report yesterday as high as 550 from morgan stanley analyst. i wouldn t expect to see anything of that nature unless this economy is really, really, you know, going gang busters. i don t think that s expected. but i think you could reasonably expect to see north of four, we re already there, 385, 4.25. much consensus appears to be 4, 4.25 range. which i don t think would be enough to stunt any growth or dissuade investors or issuers from tapping that market. and it s still not that much i mean, you wouldn t put take all your money out of stocks to get 4%, 4.5%, right? it doesn t become that attractive to hurt the equity markets. the equity market, from our view, i expect a good market in the corporate debt issuance marketplace for a myriad of reasons. most of which, you know, capital improvements, funds need to be raised. i think the financials, as they tap that tlgp program last year, those were a lot of short issuances. and spreads are still very attractive. so i think you ll see good issuance there. in equities, my expectation is if you looked at 2009, we talked about it earlier in the year, joe, when i was here, back right around i think i was here right after march, in the march lows. happy times. those were times where you were gnawing on your fingernails. the stock market pulled it out. we kept waiting for another shoe to drop. we had prognosticators on that talked about it a lot, but it never dropped. so i think as we move into 2010, there s going to be a pretty good comfort level in and around the stock market. so i expect that what happens in the bond market isn t unless we see the yields go up crazy, really won t necessarily be negative pull. because, like everything, if rates were to raise that quickly, it would mean, like you said, the economy s going gangbusters. then you think back on japan, you know, they never raised rates. they had low rates forever. i mean, is that what we want? no inflation ever again? no pricing pressure? and i think 20 years ago this month the nikkei was four times what it is today. exactly. low interest rates, sometimes it s nice when they go up because it means there s some economic activity. remember, we got in a lot of trouble, as a lot of criticism of greenspan having kept them too low for too long. so there s a cost there. we have we ve got to we need that cover of the men who saved the world. we need to be able to bring that up the time magazine. summers, ruben it was ruben, greenspan, summers. they re there the world now we know, the world wasn t at risk then. it didn t it wasn t at risk until last year. and those guys didn t save it. a couple of them might have greased contributed a little bit, yeah. you spent 14 years in an eight by ten cell surrounded by people that were less than human. cape fear. yeah. thank you, jim. more throughout the show from jim reynolds. more from us with our unbelievable banter and rapport. incredible. any questions or comment this morning, we would love to hear from you. i think we already are. our address is squawk@cnbc.com. coming up, sector success. the areas poised to perform best in the new year. how you can take advantage of the new trends. time now for today s aflac trivia question. in what year was the first american test-tube baby born? (sneezing): ah-choo! hope i don t miss work this christmas. yeah, how will you pay for things like food.electricity? dental bills. gazooks. you need a back-up plan ho, ho, ho. that s why we have aflac! so i ll have cash to help pay bills! great.but what if you re still not better by christmas? hmm. afllaaccccccccc!!!!!!! (santa): aflac. we ve got you under our wing. rudolph s better. but now blitzen s sick! now the answer to today s aflac trivia question. in what year was the first american test-tube baby born? the answer, 1981. the dow and s&p are both up over 20% this year, but not all sectors were created equal. joining us is mark killion, world industry services for ihs global insight. it would really help if we knew what sectors were going to do better next year, mark. do you have some ideas there for us? yes, we do, based upon our ihs global insight forecast we ve identified the sectors that have the best prospects for investment return based upon their growth prospects as well as their valuation currently. and if you re looking to take exposure, equity exposure in the united states, we recommend constructing the portfolio so that have you an overweight position for the investment information technology sectors as well as telecomes. other areas that merit an overweight position include consumer staples as well as the energy sector, under weights for consumer discretionary. why? is your thinking about overall trends that makes you positive on the aforementioned and negative on the ones you just mentioned because of a single trend? well, multiple trends, multiple factors. yeah. what are those? the nature of the economic growth that we expect is one factor. we re looking for companies that are able to generate independent liquidity, have strong balance sheets and have exposure to faster growing markets around the world. and companies in the technology sector, as many of them fit that criteria very well, growth rates are expected to be very fast, double the growth rate of overall gdp, for example, and valuations look very good. the dividend yield is twice its historical average. the pe ratio has come down to half of what it s been over history. so you have a nice marriage of growth prospects and nice valuation. it sounds like you start from the macro view of where you think the growth is going to occur, and then you go back and find those companies best positioned to accomplish that? is that how you you sort of work backwards? certainly we have a top-down perspective. we have global views on economies, currencies, sectors, commodities. we don t make recommendations for individual companies, but stop at the level of sectors. we re looking for those sectors that have certain attractive characteristics in terms of their growth prospects as well as the price you pay to buy the securities. how worried are you about i see you mentioned industrials and sort of the fear of this global capacity overhang. we all worry about china buying more than they need or more than they think they may need eventually. is that going to be a serious problem for that sector? the industrials do face some headwin headwinds. typically they lag behind over the course of the business recovery. they take a year or two longer to gain momentum. in addition, this time around in the yashg the united states, industrials are exposed to markets which still have a lot of weakness. automobiles, construction, areas like that. the best prospects for industrials are faster growing markets overseas. they do face very companies in the united states trying to sell abroad, face very stiff competition from other parts of the world, including world class companies out of europe. you know, one of the sectors that you have underweight, one of my favorite sectors, that s financials, it s near and dear to my heart. why do you put underweight there? well, a couple of reasons. from a big picture perspective, the sectors which led the last recovery are rarely those which will lead this recovery. so that brings financials out of the picture. also, financials as a sector tends to lag behind recovery because of lingering credit problems. the credit cycle just takes a lot longer. i m sure you know very well credit cycle takes a lot longer to play out than does the economic cycle. so the financials are, you know, very poor positioned this time around of having led us into the recession with all the difficulties they had in their sector and the recovery will be very muted, the weight of bad loans, commercial real estate will keep a lid on many parts of this sector for the next year. mark, did you say anything about health care? we have a slight underweight position for health care. even the insurers? yes, even the insurers. that would be something i like to know. if they get 30 million new customers but if they do something with medical loss ratios, what is that, like an avoid, an underweight? who knows, just stay away? they do get a whole pool of new customers, but their markets are under pressure. they don t have high margins but they re not going to rise. likely they ll be squeezed . they were going to do 90 on the medical loss, now 80. make it up in volume. make it up in volume, all right. medical device makers, sack them. now i can t go to a tanning machine anymore but it will cost you. i can still get botox or r restalin around here? i don t know, a needle it will be worth it for all of us. thank you. see you later. a little turkey neck? i don t know. could they put some filler in there or thanksgiving was months ago. i know. i was hiding. i think the makeup lady could do a job for you, too. you just sat in makeup, too, didn t you? don t be troeing any stones. when we come back this morning, another day, another blizzard watch. don t leave for the airport without first checking in with our friends at the weather channel. we ll find out where some of the backups are this morning. this is a honda pilot, and this is the chevy traverse. it has more cargo space than pilot, and traverse beats honda on highway gas mileage too. more fuel efficient and 30% more room. maybe traverse can carry that stuff too. now get 0% apr for 72 months, or during the chevy red tag event, use $1,000 holiday cash to get $4,500 total cash back on select 09 traverse ltz vehicles in stock so you can download faster on your smartphone than verizon. to prove it, i m downloading myself on both networks at the same time. at&t download s done. verizon, sorry, your time s up. look at this at&t download. hi. 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[ male announcer ] a better 3g experience. this holiday, get 50% off all blackberry smartphones after mail-in rebate. let s get to this morning s trail forecast across the united states with scott williams at the weather channel. good morning, scott. good morning there. certainly, we have a lot of weather to talk about in the northeast and new england, it is the cold temperatures. look around new york city this morning. temperatures only in the 20s. we have 25 degrees as we move into the baltimore area. pittsburgh in the teens. we also have lake-effect snow. wind, adding insult to injury out of the northwest, anywhere from 25 to 30 miles an hour as we move into new york city. baltimore, northwest wind about 15 miles an hour with higher gusts. hold onto those steering wheels if you drive a-profile vehicle. texas, watching for wintry weather around el paso. eventually as we move into north texas, around the dallas/ft. worth area. winter weather advisories have been posted in purple through oklahoma city, tulsa, el paso under a winter weather warning. this is what we ll watch, especially into texas, a mixture of rain, sleet and snow. around san anglo, around the dallas/ft. worth area, and the northeast the snow off the lakes and wind. new york city, watching for some wind delays. dallas later on as we see the moisture and precipitation working in. this is what your temps will look like. right now 31 degrees, dfw. no current airport delays. watching for the rain and snow showers as the day progresses, likely to cause airport delays. new york s laguardia, quiet for now. that wind, that will be the deal as we move throughout the day here. green light eventually going into the yellow and the red category due to the wind. that will be gusting at times upwards of 30 to 40 miles an hour. back to you. yeah, we re feeling it here, at least in the northeast, scott. thanks for that. any comments or questions, drop us an e-mail. our address is squawk@cnbc.com. when we come back, we ll stop by the floor of the futures pit, get the early morning trading buzz on tuesday. the cure for the portfolio blues. stocks poised to profit from the health care debate in washington. something joe was just talking about. what s on the minds of independent investors? 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what s going to be a top amind, the numbers we ll get today or the hangover from that lousy two-year yesterday? well, obviously, i think the auctions are weighing on the markets coming into the low volume this week. however, i do think people are going to continue to look at home prices. people are going to continue to look at the consumer confidence. and i really think, you know, we look at thursday, looking at the unemployment or, sorry, jobless numbers. that was something that moved the markets starting back on december 4th when we had that surprise. i think people are going to continue to follow that closely. does it feel to you like on these auctions, like the wheels are coming off the bus a little bit, or does it still seem relatively stable? try to characterize what demand was like yesterday? i think when you re looking at demand, we re coming into year-end, we re coming into portfolio rebalancing. in the mindset of majority of investors, they re forecasting a rise in fed rates toward the end of next year. stepping into the long end of the curve, when yields have been quite low, it s not as attractive. that s why i think you ve seen this push up. that in conjunction with a stronger dollar has really moved yields to the higher side. demand and the end of the year volume, i think it s an interesting piece to be putting out such large volumes on the auction. how about it s szing to me, at least, you walk in of day, the nikkei is up just by a touch. europe up by a touch. we ve had six days here for a total gain of just more than 2%. i mean, the trend seems to be positive but just by a sliver each day. i would agree. i think, though, it goes back to the fact that, you know, people are stepping aside and waiting until next year and just following what the overall action is. obviously, there s a lot of positive data coming out. people are continuing to focus on the stimulus and what the fmoc s going to do. people think that stepping into the first quarter we ll begin to see the great unraveling begin. it s not just action taking place but change in policy and statement. we ll see how the drip on that iv continues to get into the economy. thanks. talk to you later. investors we were trying to sort out some winners and losers. the health care sector, as that reform bill makes its way through congress. joining me now with his picks, arthur henderson, managing director of at jeffries and company. you ve got some individual names we ll get to in just a second. but just is it bbifurcated? i would say the insurance companies are going to continue to do well. we ve seen about a 35% move in those names higher. certainly with the public option being off the table and the medicare buy-in being off the table, i think people are feeling a little more comfortable the discounted valuations at the big insurance carriers are still actually yielding present more opportunity. so they won t do what if they did the 80 as far as the medical loss ratio? you know, it s not ideal. certainly that s going to pressure the margins. again, i think people had been waiting for a doomsday scenario. you know, a public option would come in and totally undercut them. with that being off the table, i think you ve got a lot more people saying, okay, a lot of these provisions are you know you know, the companies are going to be able to work through. you ve had aetna get out and describe they can do it. i think you ll see more people, particularly generalists who have waited for finality. who will benefit? you ve got some names here. joe, i think, you know, people have been moving into the larger cap side. they re going to start moving more into the smaller cap areas now that the risk tolerance levels is going higher. home nursing, which is what a medicist does, was an area targeted in the reforms. again, the valuations are more than discounting the risk associated with the reforms that are in there today. so there s real upside in that name. there s real upside in names like skilled nursing that have also been on the sidelines waiting for some visibility. and i think you re going to see relative performance in those names. again, once you have finality on the issue, a rising tide lifts all boats in the space. so you ve got to look for the relative performers. and i think the areas that have been targeted, managed care, home nursing, home respiratory is another area that really wasn t specifically targeted but has some upside for not being mentioned, continue to go higher. they all went down, so now maybe it wasn t as bad as people thought. that s interesting. what about expressscripts? here s the thing about pbms, we ve seen stellar performance in that sector this year because people have gravitated into larger cap names that seem to be immune from the reform. now, once we get visibility on managed care, i think what you re going to see is some people moving out of the pbms into managed care. now, that s going to last probably until midyear. now, express scripts made a big acquisition of a company that wellpointe owned. that will add in 2011. what you want to do is play targeted reform areas like managed care early on and then really reposition later on in the year, once 2011 becomes more visible, and we get closer to those reforms that are impacting those targeted areas that people start to look at the company performance, start moving into the pbms again, like express scripts. that will be a strong back year end performer. you don t like vca. yeah. this was an interesting one. that s a veterinary company that explains the symbol? exactly. wolf. here s the thing, that s an empty pl economy pay. people are not paying as much on their pets as they once were. they take them into the vet if they re sick but they don t necessarily buy up on the higher-end procedures the way they were before the economy started breaking down. so this is a dog with fleas. that s exactly right. woof. good to talk to you. in the interview notes, woof, that was my primary objective, to get to the bottom of the symbol w-o-o-f. do upon gpongo and reagan no receive the best care? pongo got a snuggie, a blue one. and reagan got a bed. a really it s just it s soft on the bones, because she s getting up there. yep. you need to keep her comfortable. yep. but we ve got fish now. really? yep. and a russian tortoise that will live to be 160. that will outlive you. exactly. when we come back, how geopolitics will play into 2010 and a five-star fund in the new year. get some pens and paper ready. 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[ tires screech ] bringing you the first and only wireless 4g network, as well as the most impressive lineup of phones. sprint. the now network. deaf, hard-of-hearing and people with speech disabilities access www.sprintrelay.com. because we believe in the strength of american businesses. ge capital understands what small businesses need to grow and create jobs. today, over 300,000 businesses rely on ge capital for the critical financing they need to help get our economy back on track. the american renewal is happening. right now. in these markets, i m glad i turned to fidelity for an annuity with guaranteed income for life. that s right, guaranteed income for life. my annuity from fidelity means my retirement income is safe. it s guaranteed, no matter what happens. if guaranteed income for life sounds good to you, do what i did let fidelity be your guide. call fidelity at. for details about guaranteed income for life. welcome back. futures at this hour indicating a somewhat even better opening, up about 34 points after gang more than 20 points yesterday for the sixth straight up day. the uk is soon going to ban home repossessions by mortgage lenders. you don t have a court order. the london times says a legal loophole is being closed. it will be announced tomorrow. did you see how many pending cases are in new york courts? did you see that yesterday? 4.5 million things, things, just various things that judges have to work through, whether it s foreclosures or bankruptcies or really? personal litigation. it s so backed up because of the recession that can you imagine the court dockets and having that job? no. that s what they talk about when they talk about shadow inventory, eventually homes on the market once these defaults turn into real bankruptcies. but i think 400,000 foreclosures or something like that, and each one of them, you know, it s a court a judge decides how to go about it and whether to what s ironic, that you could actually repossess a home without a court order anyway? how in the world are you able to do that? that one judge, they cited him yesterday that said, no you can t have it. a couple of times the lender was just too nasty and he says, no you can you can keep your home. kelly blook book says the most researched vehicles of 2009 were the honda civic, honda accord and toyota camry. the top three most researched new vehicles every year since 2004. new name on the top 20 list, though, the chevy equinox, the camaro that s camaro. i see it. and the lexus rx350 and the ford fusion. fusion. sorry. the nation s top fund managers positioning themselves for the new year. the ivy asset strategy fund rated five stars by morning star. up 23.5% year to date, beating the market, over 9% over three years, nearly 13% over five years. good to see you this morning. thanks for being with us, ryan. thanks, guys. good morning. one thing that s clear in the notes is that you are almost fully invested, just 5% cash, right? that s correct. is that a reflection of your confidence in the markets? well, you know, we ve been through this this fund has a lot of flexibility and we ve been through a couple iterations this year of what our asset allocation would look like. this is the most fully invested we ve been really since the third quarter of 2006. and, really, it s a reflection of our outlook for the profit cycle. what we think we very well could get a sluggish economy recovery in the g3, we think there s a pretty good profit cycle occurring on top of that so we re trying to position for that profit cycle. two-thirds of your he can pose you re is outside the u.s. a lot of exposure in hong kong. we ll get to some picks in a second. why that balance of leading outside the country rather than u.s.-centric? well, we continue to think the prospects for better top-line growth are going to be outside the u.s., in places like china, india, brazil, southeast asia. so if you combine what we think is pretty good imbedded margins globally on top of what we think is going to be accelerating top line growth in those places, we think it makes for a pretty good mix for earnings recovery. speaking of asia and places outside of the u.s., you like wynn resorts. 80% of earnings are now out of macaw? that s correct. that number continues to excel rate. vegas has been depressed in 2009 and will probably continue to be in 2010. the macaw business for wynn is flying. they re looking at being capacity-constrained right now. they have a new property, new addition to their property in macaw opening up in april. encore macaw, is capacity they sorely need, given that market is growing 15%, 20% now on a year over year base. and so, yeah, they really have become a macaw story, not really a vegas story anymore. where do you think the stock can go? you know, we think the stock actually can reach kind of the low 90s once they get up to full capacity at encore and then people start to think about them bringing on their project 2012, 2013. how about taiwan semi, speaking of the boom in southeast asia, where can that stock end up? you know, we re a big fan of tsmc. if you think about the product cycle and all the new products that are coming out, handsets, l.e.d. lcd tvs, leading technolo technology, they re the leader. it s not an enss ive stock for how well positioned we think they are. stock is trading at ten times earning with 5% dividend yield, 8% free cash yield. we think that stock has a fairly long way to go as they re starting to ramp up for big product cycles for their customers. as you think about all the phone launches and all the new product launches we have in consumer electronics globally. another stock that s gotten a lot of attention this week, apple, all-time high. you think there s going to be a tablet early this year. and you think this exclusivity agreement with at&t could actually lapse, right? yeah. we think maybe, you know, toward the back half of 2010 they ll go ahead and let that exclusivity agreement lapse. we think it s probably in their benefit at this point to start moving over other to carriers like verizon, t-mobile as well. as you were pointing out earlier, at&t has been struggling with some network issues and the capacity that iphone takes up on the network. we think some of the other carriers like verizon can benefit from that. we think it could actually help apple as well. what we really like about apple, though, is that they re in over 90 different countries but the penetration rate is under 1% if you look at their international business. we think if they can get price points right on iphones with some carriers they work with internationally, specifically like china with china unicom where the price point is way too high, but over time if they can can get that pricing right, you could have another leg up for handset iphone. it s come an awful long way this year but we ll see where it can go. it s been a great stock. yeah. thank you very much. thank you, guys. call it modern warfare, if you will, the battle between video game makers for your investment dollars as we check out winners and losers and the titles bringing in the big sales. all that, plus stocks to watch. i don t know, probably no animal orchestra. take a look at some stocks to watch. you prefer that? actually, no. thanks. now that i listen to it, it s a little dry. microsoft estimate and target raised at thomas weisel, firm noting higher pc and shipments and better cost controls. they raised fiscal 10. 31.17, my friend. remember how excited you got when it no longer had a two handle? yes. and as people were predicting that maybe look at where it was, carl, in the last year. unbelievable. market cap must be huge on that thing by now. is it 200 oh, my god, 280 billion. that s huge. amazon, piper raising amazon s price target to 172 from 163. rating is overweight. apple, overweight at barclay s. attractive and new products coming for next year. and vivus announcing a new drug application has been submitted to the fbi fda. for qnexa. i was ahead of myself. drug for treatment of obesity, including weight loss. they filed for that. does a lot of different things. vivus and butthead. nice. when we come back this morning, we ll get top stories, prus the future of air travel in this country. tougher security measures, longer waits, the impact on the already pressured airline industry when we come back. also, changing the rules of the game. the future of financial regulation and what that might mean to your investments in the new year. is that going to be a good or bad thing? squawk box is back. these are the building blocks of a perfect girls weekend. it all starts with having more hotels to choose from. that s why i book with expedia. so i can find someplace familiar. or somewhere more distinctive. nice! then i can compare dates to find out when i can save the most cash. done and done. we should do this more often. more choices, more savings. where you book matters. expedia. dot com i hired him to speak. a lot of fortune 500 companies use him. but-i m your only employee. we re going to start using fedex to ship globally- that means billions of potential customers. we re gonna be huge. good morning! you know business is a lot like football. i just don t understand. i m sorry dick butkus (announcer) we understand. your business could use a pep talk. visit fedex.com/peptalk host: could switching to geico 15% or more on car insurance? host: does charlie daniels play a mean fiddle? fiddle music charlie:hat s how you do it son. vo: geico. 15 minutes could save you 15% or more on car insurance. this is a honda pilot, and this is the chevy traverse. it has more cargo space than pilot, and traverse beats honda on highway gas mileage too. more fuel efficient and 30% more room. maybe traverse can carry that stuff too. now get 0% apr for 72 months, or during the chevy red tag event, use $1,000 holiday cash to get $4,500 total cash back on select 09 traverse ltz vehicles in stock airline security, under scrutiny. the american people should be assured that we are doing everything in our power to keep you and your family safe and secure during this busy holiday season. asa hutchinson, former head of border and transportation security for the homeland security department, will tell us what needs to change at airports. thank you. the holiday shopping season it s not over yet. returns, gift cards, year-end discounts. find out which retailer will start 2010 on the right foot. shall we play a game? oh. and call it modern warfare. video game makers trying to top each other with bigger and better titles. we look at which company in the sector will make you a winner. squawk box begins right now. snshg welcome back. is that pacman? mario brothers. welcome back to squawk box on cnbc, first in business worldwide. i m joe kernen along with carl quintanilla. becky is off all week. our guest host, jim reynolds, co-founder and chairman and ceo of loop capital markets, the nation s largest minority-owned investment bank. he was also a member of the president s finance team during the presidential campaign. let s check out the markets right now. futures are indicating another positive open today. now up about 35 points. that would be seven straight sessions, if it were to close higher. again, we probably just have this trading until things get started january the 1st is a friday? 4th is is a monday. did you that fast. yeah. you shouldn t expect to see much this week. everything is light. folks are on vacation or thinking about going on vacation, so you ll see very, very light trading. especially after a year like this, folks are just ready to pack it in. well, some of the top headlines this morning, investors pouring $11 billion into u.s. equity funds. fund tracker epfr global says that s the highest amount in 79 weeks. meantime, global bond fund attracted 2 billion in the week, extending their record yearly inflows. fed s balance sheet rising in the last week, hitting highest level in nearly a year. the balance sheet is a broad gauge of the central bank s lending to the financial system. it s been growing amid the fed s asset buying program. a great chart in the journal today, as we mentioned at the top, of what s happened different color for all the different instruments they have saved the world with, i guess. gm offering large incentives to sell off vehicles carrying saturn and pont yam nameplates. the journal says the companies told dealers they would pay them $7,000 for each pontiac or saturn moved moved to rental fleet or service fleets operated by dealers. sales price are said to drop by as much as 46% off sticker price. that s a bargain, but who knows if you can have it serviced after you buy it. i guess you could? that s a great idea. do you care what kind of rental car when you get a rental car? no. i d still take one i m kicking myself. i bought a car in december. i would have waited. 46%. saturn, don t care. 46% is i would have, yeah. let s get to something more serious. the state of the security at the world s airports, which is now, again, under scrutiny. asa hutchinson, former head of border and transportation security for homeland security department, also a republican congressman from arkansas. congressman, it s do you prefer congressman or mr. secretary? what do you think? either one will do. secretary congressman, all right. these guys, no matter what hole we plug, there s another one that opens up somewhere. what is the correct course of action, congressman? well, it s certainly a horrific reminder of the threat we face in the united states. it s a general threat we re targeted, but it s very specific toward the aviation industry. you think about abdulmutallab could have landed in detroit, gone out and used explosive devices in a mall and accomplished a great deal but he targeted the airplane. he wanted to bring that down, presumably, at least al qaeda has taken responsibility for it. and so a reminder of the threat as to what we need to do. first of all, i fully support the congressional hearings that will be held presumably in january. there s so many unanswered questions here. clearly, it was a breach of our security system. i think the question is, is whether it s a total system failure or whether it s human error that prevented the system from working. a lot of questions about whether the information was entered properly, whenever the father reported it in nigeria as to his concerns about the son, whether that should have was properly placed and investigated for placement in the terrorist watch list. obviously, should have been subject to greater scrutiny going into the airport. so there was a break in the system. was it a human error, a systems error? that s what we hope the congressional hearings will determine, as well as the administration review. congressman, once he once his father did that, and we also put him on one of the lists, whether it s the lowest list whichever list, he could have revoked his visa. we asked people about that earlier. he had gotten that months before. it s good for a certain amount of time. but if he s on the list, why not just take why does he need to come here at all if he s on that list? well, absolutely. first of all, was the visa properly issued to him? was the proper review done at the time he requested and was given the original visa. secondly, when the additional information was provided to the embassy, about one month before the flight took off and he purchased his ticket, was the information that was provided properly evaluated and put into the system? and why was his visa not revoked at that time? i happen to be very aware, as former head of the dea, that if someone is alleged to be engaged in drug trafficking, the state department can and very often does revoke that visa. obviously, if there s an association with terrorist activity, it s a privilege to come to the united states of america, they have the authority to revoke that visa. why was it not done in this case? and so those are the right questions. and all the i think what we have to guard against is to punish 2 million travelers and the whole aviation industry whenever we should be focusing on proper intelligence, making sure that we have further inspection of those that pose a risk to us, trying to have that targeted inspection that has worked swa effectiomewhat effec other transportation sectors. asa, let me ask you, how much can we effectively do and how much can we do we have to rely on our partners, other countries, to do some of the things they should do? he went from lagos to amsterdam to detroit. where does sort of our authority stop or the cooperation that we expect to have, how could that be better going forward? well, that s a good question, but quite frankly, whenever i was involved in homeland security, we had international flights come to the united states and it was our view that we did not have to allow that flight into our air space. and so we share the responsibility with our partners overseas. we worked closely with them. but here the flight took off for amsterdam. if there was any question about the person being on that flight, we did not have to grant them into our air space, that permission. we have tsa personnel on the ground in europe working with our international partners. they ve been very cooperative in following our lead in working with us and improving air security. i think that if there s a lesson here, is that we do need to have additional tsa inspectors in overseas posts as they review airports and their security. we have to certify an airport that it meets our security standards before we ll allow the international flights to take off and come into our air space. we have to make sure that our databases are have information properly in there when we increase our inspections on our international flights. and so we continue to work with our partners, but we have to recognize it s a privilege to fly in our air space. we have to protect that and guard that very carefully for the safety of the passengers. did skiple have a reputation of being good or bad relative to other european airports? well, oh, absolutely. i mean, amsterdam has worked very well. there is a tremendous amount of international flights. and some, as in this instance, coming from part of the world that pose a risk to us. so we have to watch that very carefully. but there s some airports internationally that i would not fly through because tsa has looked at it and said their security does not measure up. amsterdam is not one of those. but we have to europe has to be careful because they have a more lax approach to security. they approach it a little differently than we do. they re more willing to pat down passengers, but they re also not wanting to do anything to slow down flights that take off. so we have to continue to work with them, make sure they measure up to our standards. asa, let me ask you another one, which i sort of heard talked about recently, and that s the idea that profiling fliers might be a good thing. i certainly have strong views about that. but what do you think about singling certain types of individuals out to be profiled? as a security measure. well, it depends upon good question. it depends upon the basis of the profiling. if you re talking about racial profiling, i think it s wrong. i think that creates more vulnerabilities that al qaeda can exploit. but if you re talking about profiling based upon specific intelligence information, then, absolutely, that s the right direction to go. it could be flight patterns, it could be, you know, where they re originating from, where their visas are issued from that might have a high connection to terrorist activity that would require greater scrutiny. so we have to use intelligence-based targeting. some people would call that profiling. but, obviously, information is what should point us in the right direction for security. the watch list, the key no-fly list has been reduced from like 30 50,000 names down substantially because of pressure from privacy groups that we have too many people on that list. and that s a we cannot close off every vulnerability in a free society. we have to constantly balance that. we have to have more resources on who s reviewing those watch lists to make sure they re properly investigated and wrong information is not put into those systems. we ve got to do everything. there is a machine that you can use that detects this stuff, but then there will be some other stuff. you can t keep getting new machines every you know, put in every single airport around the world. so you ve got to do it in combination with intelligence and with you know, you get a guy with paying cash for a one-way ticket and no luggage, check that guy out or pat him down. profile that guy. take his clothes off, if you have to, right? absolutely. the instruss ive inspections don t have to be for every passenger. the intrusive inspections should be those who pose a risk to our security. then they ll put it on a grandma traveling with children. you know, they ll they re very industrious. go ahead, congressman, one final word? no. i think that you re right. we have to continually adjust, close off our vulnerabilities and balance is the key, balance in cost and balance in freedom, with security. well, we solved a lot of problems here. i m going to call him mr. secretary to end. thanks. we appreciate your time today, congressman hutchinson. good to be with you. are you sure? yeah. i m ready for you. no, no, no no. coming up, the future of financial regulatory reform. we have the outlook for 2010. even better than getting the cheap coats for your video games, we ll give you the video game makers that will make your portfolio a winner. as we head to break, i ll pat carl down. national car rental? that s my choice. because with national, i roll past the counter. and choose any car in the aisle. choosing your own car? now, that s a good call. go national. go like a pro. s stands for straightforward. as in up-front, honest. total transparency. straightforward is the way td ameritrade does business. simple, fair pricing. no hidden account fees. no shenanigans. just good value. real help. smart people who are easy to work with. that s what td ameritrade stands for. what does your investment firm stand for? it s time for fresh thinking. it s time for td ameritrade. market s looking for seven straight days up. we might do it judging from future at this hour. moderate as they have been for the past few segs. up about 28 points or so above fair value. making headlines, the head of the world health organization warns the h1n1 flew pandemic may not be conquered until 2011. she also says the world is not ready to combat a pandemic of the separate h5n1 bird flu virus. south korea will pardon one of the country s most influential businessman, samsung chairman, who was handed a suspended three year jail term for tax evasion. country is offering the pardon so he can resume his position with the olympic committee and help land a bid for the winter olympics. amazing. samsung, i mean, i ve got is that what you bought i ve got a couple of them. was that the l.e.d. you just bought? l.e.d. and lcd. next guest is a former s.e.c. insider, sees a certainty for 2010, joining us is ron geffner, head of financial services group, s.e.c. enforcement attorney and jim reynolds of loop capital markets is here. we had cass on yesterday, ron, talking about all kinds of things that are likely to come down in 2010. what is most likely, in your view? registration of investment advisers that manage hedge funds. that s coming? almost a guaranteed certainty. should we feel bad for these guys? i don t think we should necessarily feel bad but as a taxpayer are our taxes going up, i don t think that s a good use of our money. i think we ve lost that fight in congress and they ve demonized fund managers. well, how much why is it going i mean, we spend taxes on everything under the sun. it seems like that they, perhaps, were not complicit in what happened over the last year but they look like, down the road, they control a lot of money. they do control a lot of money. and the buzz word this year in your stocking stuffer is systematic risk. but nonetheless, with regard to the fund industry, you have a third of the funds in the marketplace control about 95% of the assets. so the reality is are they registered already? some are, some aren t. so the reality is we re going to intelligent legislation. i have no issue with legislation. i would rather save us a little money or if you re going to charge the us the same amount, use our money efficiently so we get the most bang for our buck. if you re going to try to protect us as a society, regulate those top one-third funds and leave the other two-thirds out. top one-third control 95% of the assets, governing the other two-thirds for that extra 5% hit isn t much benefit to the society. could do you that legally? yes. really? they re trying to legislate that by minimum assets under management threshold. what s proposed by the house is a threshold of $150 million of assets under management. what did a a part of conversation that got denied was threshold of $500 million. house of reps did not approve that. they re kafshing out venture capital firpz as well. i m very interested, ron n looking at the packages between reform package between the house and the senate. and the senate version seems stob much more punitive toward the fed and the responsibilities lied therein. how do you reconcile the two? how what are your views? my views with regard to the federal financial shortstervice council, that s better than than you demolished all the acronyms. the concept of mandating in writing a requirement that all the agencies work with one another, such as the s.e.c., cftc and the fed, it s good. reduces the rick sk of anything falling through the cracks. with regard to the reduction of the fed in the senate s version of the bill, i m more of a proponent you have a balanced power. don t give it to the fed. one of the themes that seems to have occurred and not gotten organered enough attention, the problems we re facing are a result of the real estate bubble that was created. artificially low interest rates. who s responsible for that? the fed in part. as i look at things that unfolded in 08, things in 06 and 07, the regulatory environment seemed to be particularly s.e.c., taking these toxic assets under their wal sheet, allowing investment banks to leverage themselves north of 30 times, to expose themselves to risks we know were detrimental to the environment. but no red flags were raised. i think it s interesting you re pinning it on the s.e.c. that s my first question. i don t know if it s s.e.c. having the new council proposed would reduce the likelihood that i think you re watching them and you think that i m watching them. that s one thing. two, leverage is something that the government s been able to mandate through laws, broker/dealers do have leverage they re able to propose. i don t see that sing can gog reoccur in the future. mad ooff was registered? right. he did provide transparency, albeit it wasn t accurate. new laws in place won t protect investors from another madoff. quite frankly, investors need to bear protection of their own. we can t mandate under law. another interesting proposal is doubling the s.e.c. s budget. when we say that the s.e.c. failed, i would argue that as a society we set them up for failure to some degree as well. you have the financial services industry growing at a quick clip annually and yet the s.e.c. s budget was anemic in growth. they weren t able to keep up. i m not suggesting they should not have done a better job. i m not here to say that. i think they should have done a better job. in the same respect, they re so understaffed comparative to the entire industry and they get paid nothing and they do a stint at the s.e.c. to get a better job at an investment bank. that happens at every firm. yeah, but not that s a little metaphor for how compensation can make a difference about how effective something is. definitely. i mean, if you gave these guys head hunter type fees, if they would have had a if you could have made a $1 million by exposing madoff, he would have been exposed. but if you make $250,000 a year as the s.e.c., you re going to let it go right under your nose. my recollection from having been at the s.e.c. is i wouldn t think most people are making $150,000 to begin with. i was thinking, you know, tv guys for us, you know kidding. i see what you re saying. what s the most you could make at the s.e.c., at this point? head of the s.e.c. probably makes $250,000. that would be my recollection. i m not enforcement, is it under $100,000? are there bounties now? i don t think there are. i have an issue how do i don t want a cop on the beat who gets paid to find drugs on a human being. it doesn t work well with me. i think that would be a conflict. when i was at the s.e.c., our motivation was trying to protect our mothers, our fathers, sisters, brothers. when we were there, we did hustle, we came in early, and i presume a lot of people at s.e.c., prior to madoff, post-madoff, a lot of people were working very, very hard. there s no excuse for madoff. the size of the option market couldn t have possibly supported the split, whae the heck and it wasn t a function of how many people they had on the case. i mean, they had people no. that s why i said i m not here to suggest the s.e.c. shouldn t have done a better job. as much as madoff is a worry, there are other traditional registered investment advisers and other region centes that co damaging to the consumer confidence. if you look at the bill they re trying to put under s.e.c. mandate the obligation to look at credit rating agencies and ab obligation they review them annually. which is probably a really good idea given how important the credit rating agencies are to the marketplace and to the confidence of the marketplace and how badly they missed it before. so how do you feel about that? i think it s a great idea to have somebody looking at them, and the s.e.c. to my mind is no worse and probably better than other agencies to look at them, but if we re doubling their budget so they could keep up with their demand from last year, and now we re also increasing the size of their play today, is doubling their budget even worthwhile or big enough? thank you. we have to run. appreciate your time. coming up this morning, it s in the game. electronic arts has an unstoppable franchise with the madden football games but is that enough motivation to buy the stock? who s going to win the battle? what s going on? we ordered a gift online and we really need to do something with it. i m just not sure what. what is it? oh just return it. returning gifts is easier than ever with priority mail flat rate boxes from the postal service. if it fits, it ships anywhere in the country for a low flat rate. plus i can pick it up for free. perfect because we have to get that outta this house. c mon, it s not that. gahh, oh yeah that s gotta go. priority mail flat rate shipping starts at $4.95 only from the postal service. a simpler way to ship and return. because we believe in the strength of american businesses. ge capital understands what small businesses need to grow and create jobs. today, over 300,000 businesses rely on ge capital for the critical financing they need to help get our economy back on track. the american renewal is happening. right now. coming up. the holiday shopping season is not over. we ll find out why some are waiting for gift cards to come in. modern warfare ii, some hottest games this season. are other video game makers in good shape or do they need a blockbuster of their own? 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[ male announcer ] at&t. a better 3g experience. this holiday, get 50% off all blackberry smartphones after mail-in rebate. this is a honda pilot. and this is the chevy traverse. it has more cargo space than pilot. and traverse beats honda on highway gas mileage too. more fuel efficient and 30% more room. maybe traverse can carry that stuff too. now during the chevy red tag event, get an 09 traverse with 0 percent apr for 72 months. see red and save green. now at your local chevy dealer. it all starts with havinglocks more hotels to choose from.. that s why i book with expedia. so i can find someplace familiar. or somewhere more distinctive. nice! then i can compare dates to find out when i can save the most cash. done and done. we should do this more often. more choices, more savings. where you book matters. expedia. dot com welcome back. futures looking pretty good after some green arrows in asia and europe overnight. we re about 28 points above fair value. we ll see what happens when the opening bell rings in an hour s time. jpmorgan chase s ceo jamie dimon throwing doubt on building the headquarters in london. he expressed concerns about that country s 50% tax to be levied on banker s bonuses over $40,000. johnson&johnson expanding a volunteer recall of tylenol arthritis caplets. there have been consumer reports of a moldy smell associated with nausea and stomach pain. j&j is recalling all product lots of 100-count bottles with the red ez-open cap. they say effects are temporary and not serious but might make you feel sick, joe, and you might smell like mildew. i m feeling sick now. mildew is my least favorite it s not good with the ladies. they don t appreciate that. is that what my that might be your problem. that explains . only three more trading sessions for 2009 and not much data to react to this week. santelli s here? wow. i think he is. are you kidding me? and scott nations joins us from the cme group in chicago. rick, you ve been out, right? i i can feel when you are out. how s that? because i can feel i mean, i know you have not been here and i think our viewers do, too. have you been out? i took a couple of days, yes. we miss you. what s going on? we re seeing some movement in rate that you ve been talking about, dude. well, i guess the one thing when i was off, you know, working on the wallpaper, working on the floors, was the freddie and fannie cap stops were removed. i love that. you hear about how government programs were working. we need to zero in like a laser beam how many hundreds and hundreds of billions of dollars of slop are being shovelled into these conservatorships and now look for large-scale buying of more pig slop because they re not going to have any limit to the amount of junk they can put in a pig pen. this should be the number one story. you know, the networks would never cover it. fannie mae to the networks is like, you know, candy you buy on valentine s day. the cap had been $200 billion, is that it? well, i don t know the exact cap, but i know that they it s in that neighborhood. and they removed that cap so we could go to 200 easy. it s got to go above 200? i don t look at it in a form of quantitative limit. i look at it as the fact is, is that it can go pretty much anywhere and nobody talks about it. you know we were talking about it. why weren t you watching squawk box ? that s where i hear it. it might have said infinity. debt ceiling being raised. i don t know if the average viewer can put their hands around it. for all of 09, a record year for hollywood, do you know what gross ticket sales are going to be? gross ticket sales? $10 billion. yes. we talked about that, too. we write a check for $10 billion like it s nothing, like it s a dollar. it s just unbelievable how we ve all become anecessasthetized toe numbers. yesterday s two-year note was nothing to write about. it was average. michelle did a great job giving it a hook. in the end, can you not see where this is going? the cost to service all of this wasted dough is going to come back to haunt us in the form of higher taxes. whether you like to pay taxes or not, it s going to really be a stranglehold on production and the economy. they might have to start taxing, you know, the people in hollywood for making all these hundreds of millions of dollars a picture, god forbid. have you been worried about this, scott nations? eye been worried about where rick is. boy, it s good to see rick hasn t changed any. you can just tell he s filled with the holiday spirit. yeah. well, the holiday spirit, scott. it s the spirit of giving. and our leaders in this administration and the last administration, they give, give, give because it isn t theirs. that s right. no, you are absolutely right. but the stock market is giving a little bit today, too. we re looking at like seven days straight of positive returns. now, the stock market s getting a little overbought here. you have to be pretty brave to step up to the plate and bid for some of these treasuries this week, because there s no telling what s going to happen in a week like this. if one of these auctions today or tomorrow doesn t go well, that s probably not good for the stock market. which again is a little overbought. there s not much support until we get down to 1092, the 50-day move moving average for the s&p. financials took it on the chin a little bit when they got a nonsensical downgrade because volume trading volume had trailed off starting in november. i mean, that s really not unexpected. and i think they re going to rebound. they re downgrading them? you know, people who were talking about the fact that trading volume had who who did you say downgraded? some there was a letter to the a letter yesterday that talked about some concern. downgraded may not have been the right term. all right. but, you know, it is certainly true that the bottom tier of banks and financials are in trouble. i think trading volume is going to explode after the first of the year, particularly in the option markets. a lot of money sitting on the sidelines waiting to participate. when we were on break at 8:30 the producer said we got a packed hour or half hour, so we have to go. thanks to see you, rick. happy new year. we ll see you again. the video game sector struckling this holiday season but it s not all bad news with activision call of duty selling over 6 million units since release in november. joining us, jim len for standard & poor s equity research. good to see you. thanks for being with us. good morning. you re bearish overall on the video game sector. i was reading that in order to break even with last year overall, december sales would have to be up 36%. that s probably not going to happen, right? no, i think things may pick up. i still think that year over year may be flat and overall i think the year will be down. what happened to the sector this year? why have we had so much negative guidance? why have sales been so disappointing? well, i think the predominant reason is consumer spending. this sector is one of the last to be hit in items of sales. so that s the main reason. just consumers spending less. number two is that, as a result, they tend to buy fewer games. therefore, they tend to trade in some of the older games. when they do these trade-ins, they re really not hurting the industry they re hurting the industry. third is that the video game console is at you know, the xbox and four years old, wii is three years old. we re at the tail end of a video game console so sales tend to be lag as we get to the end of the product cycle. you ve got to get people to buy razors before they start buying the blades to go along with it. you say you do think there will be a game console from microsoft sometime in 2010, right? yes. i do believe they will release a new console. it will be based on a new input device based on project nitel, a three-dimensional mapping software hardware that can detect space. they use the software to map out each individual skeleton and based on the movement it can detect the movement into the device without using any controller. so i think this is a total breakthrough and revolutionize the industry. so obviously that would be would it replace the xbox or would that sell alongside it, do you think? they said that this hardware will go with existing xbox 360. they ll sell this as a separate unit but probably will input introduce a new xbox that will be more advanced capability along with the hardware input device. a couple of your picks, do you like avtivision because of call of duty, i imagine, guitar hero, the new star trek game in the pipeline and nintendo as well, right, which you say the wii is long long in the tooth but still is the most popular console out there. i don t cover wii but we think it will continue to do well. they still have dominance in the casual gamer. so that sector continues to do well. we do like those two companies. and particularly activision, they have top brand names, strong recurrent revenue, again, call of duty along with war craft and guitar hero. in order to be an analyst in this sector, do you have to be really good at any of these games? i mean, do you have a million lives every time you play? i play quite a bit of video games. but, no, i don t think that s a necessary requirement. it does help to appreciate some of the good qualities of the games and maybe have enjoyment of the game but what s your favorite? oh, my favorite, i play quite a bit of pc game called star craft and also i play quite a bit of nintendo. which one? star craft, activision but i also play mario kart. i ve gotta game down. eighth place. your kids are they kill me. jim, thank you. jim yin. my pleasure. when we come back, america is still shopping, holiday is not over but all the gift cards are starting to pour in. (announcer) if you want directions to the stadium, push here. if you want to see the weather ahead, push here. if you want to access 10 gigs of music you just downloaded to your hard drive, push here. and if you want to pull away from it all, you can push here. the all-new-40-gig hard drive nav and entertainment system on the 2010 lacrosse. from buick. it s the new class of world class. because with national, i roll past the counter. and choose any car in the aisle. choosing your own car? now, that s a good call. go national. go like a pro. in these markets, i m glad i turned to fidelity for an annuity with guaranteed income for life. that s right, guaranteed income for life. my annuity from fidelity means my retirement income is safe. it s guaranteed, no matter what happens. if guaranteed income for life sounds good to you, do what i did let fidelity be your guide. call fidelity at. for details about guaranteed income for life. christmas may be over but with gift cards and returns, the shopping season is as far from however. joining us is richard, good to see you this morning. good to be here. we ve been talking about retail for the past several weeks. and now trying to put it all together, what will the number be in terms of percentage increases for the season when it s all said and done? our model is november, december, january and the forecast came out in october for an increase year over year 2.5%. our model s a little broader, agt similar to a census bureau, last year that same model was down 7.6% year over year. so we had a pretty bar to jump over this time. right. but still better than the i mean, there was a point i remember when retailers were saying a flat number would be they would feel like they got away with murder. from what i can tell, our forecast was the highest out there, so, you know, there were a couple of spots over the last about six weeks where we held our nose every once in a while, but now we re looking good. the mastercard spending pulse data is very encouraging. the blizzard didn t help, the winter weather around the country, but oh, we think that it does help quite a bit. you think the cooler temperatures offset the trouble in getting into the malls, right? yeah. what happens with the blizzard that you get about a day and a half of disruption, store traffic will plummet. in the northeast, apparel accessories, footwear traffic declined on super start by 17.7%. but then within two days after that, it will start to rebound pretty quickly. people are able to get out and it looks like the post-christmas traffic at the stores is anecdotally has been very strong. it s looking good. the lines have been, at least what i ve seen, have been pretty long. everyone talks about how the retailers had a long time to prepare. their inventory strategies for the season executed well. of the retailers you look at, who do you think did the best job? who really was on their game? well, the most interesting thing is the multichannel strategy, your online and offline business kind of playing one off the other, we ve seen some very interesting developments over at sears holdings. they ve been working sears holdings, really? yeah. because they re looking to do a multichannel strategy where they have a lot of people going to the websites. the website traffic to kenmore.com was up 8% year over year. sears.com, the traffic there was about 22 million unique visitors in november. the december data is not out yell. kmart.com, landsends.com, kenmore.com, all double digits month over month and increases year over year. that was one of the more interesting things we think will have done nicely on multichannel through the christmas season. interesting. you also saw good trend at some of the department stores, even though things like apparel were not as strong and as exciting as electronics, let s say. well, you ve seen more of an erratic performance in department stores. men s sweaters, i got a bunch of sweaters you got three sweaters. isn t that wild? men s apparel, according to mastercard spending pulse up 3.8%. but things were more erratic. at saks fifth avenue, for example, women s resort wear, travel, handbags, accessories, very good. but if you go to the broader array of merchandise assortment it starts to get more erratic. department stores will benefit significantly from the wintry weather, colder temps, people will be wearing heavier apparel. cost-cutting is still in the system but then you re adding better sell through and better heavy-weighted apparel and better markups so you re going to get good q4 earnings. you said 80% of civilian workers have jobs now and half of them have more buying power this season because of the discounts that happened? basically because of the unemployment and this deflationary headwind in shelf durable consumer goods and also the housing market is still in a deflationary phase. basically, the buying power for the top 50% of the 80% of the civilian labor force that s still working, their buying power is going up. within that 50% you ve got a piece of that that has significant wealth effects from the stock market gain since march of 2009. so then you ve got even additional layers of wealth affecting buying power within that top 50% which is the reason why we were looking for an increase year over year. good insight. appreciate your time today. thank you. richard hastings. that makes sense, some people with a lot of stock holdings might be feeling better. exactly. we re not going to have a sweater for you. i asked, but to one answers. i send it and it goes off into a cyber you were looking for the sweater. weezer if you want to destroy my sweater you say it comes out there. the final countdown, only three trading days left for 2009. art cashin gets us ready for final sessions heading into the long weekend. first let s check on the dollar as we go to break. squawk box coming back. business on this spreadsheet. and all of these. paid invoices go right here. bang! - that hasn t been paid yet. - what? - huh-uh. - all my business information is just a phone call away to my wife. who s not answering. announcer: there s a better way to run your business. intuit quickbooks online organizes your business in one place. it easily creates invoices and helps you stay on top of your business anytime, anywhere. this is way better. get a 30-day free trial at intuit.com. because we believe in the strength of american businesses. ge capital understands what small businesses need to grow and create jobs. today, over 300,000 businesses rely on ge capital for the critical financing they need to help get our economy back on track. the american renewal is happening. right now. what s going on? we ordered a gift online and we really need to do something with it. i m just not sure what. what is it? oh just return it. returning gifts is easier than ever with priority mail flat rate boxes from the postal service. if it fits, it ships anywhere in the country for a low flat rate. plus i can pick it up for free. perfect because we have to get that outta this house. c mon, it s not that. gahh, oh yeah that s gotta go. priority mail flat rate shipping starts at $4.95 only from the postal service. a simpler way to ship and return. time for the trader s edge. art, we re in the netherland, art, between christmas and thank you year s and we discount everything that s happening. i don t know, it s firm, isn t it? there s a firm tone to everything for ten good things next year or not? traditional santa claus rally, which actually starts maybe just before christmas and then extend through this week into the first two days of next week. so there s a bullish bias here. we have been up six days in a row. unfortunately, the last five times we were up six days in a row, we had a down day. historically, six always leads to seven, except for those five times. all right. as far as 2010, give me your long view. when does the what s going to be the better half of the year for the bulls, do you think? the first half or the second half? i think the shout is for the first half. i think if you can get this rally extension, you know, could carry forward, we got up through that resistance in the s&p. people have targets of 1150, 1180, several with targets of 1200. i think if you get some new money for the new year, you can build it into an early spike. and after that, i think they hit a lot of headwinds in this economy. headwinds in the economy. is the bond market finally coming to its reckoning, its day of reckoning in the second half of the year? it could be even more than that. if the bond vigilantes get back and say wait a minute, i want to get some interest for all of this money i m putting out. you guys are looking for trillions. we need to be there. the key to this will be two-fold. does the world economy pick up? do the chinese get a lot of dollars to which to buy the new treasuries? if not, it could be very tough and the treasury may have difficulty financing so despite what the fed wants to do, rates could begin to inch up. how many guys are down there now? are you at 60% would you say? for this week? yeah. i would say about 60% is right. but we re going to leave the tapes on all day so the wives don t get suspicious. what happens on thursday? what happens on thursday, it is a full day. it is. okay. not that it affects us. no, we will be singing nely at 2:00, long after you get off. we do it christmas eve and new year s eve. come up with a different song. we have been doing it since the late 30s. come up with a new tradition. we can sing weezer . yeah, the sweater song for thursday. thanks, art. when we come back, parting shots from jim reynolds. first, check out gold prices this morning, i think getting a little back on track for some gains of 26% for the full year. we ll see you in a moment. sometimes the little things in life feel like our biggest enemies. [dripping] [shower running] they can be damaged. they can be stolen. happily, there s the american express charge card. if something you recently bought with the card breaks, it can be repaired. replaced. or your account can be credited. you ll even get membership rewards points with each purchase. and peace of mind when you travel. can your card say that?  it all starts with havinglocks more hotels to choose from.. that s why i book with expedia. so i can find someplace familiar. or somewhere more distinctive. nice! then i can compare dates to find out when i can save the most cash. done and done. we should do this more often. more choices, more savings. where you book matters. expedia. dot com st: could switching to geico 15% or more on car insurance?e you host: did the waltons take way too long to say goodnight? mom: g night john boy. g night mary ellen. mary ellen: g night mama. g night erin. elizabeth: g night john boy. jim bob: g night grandpa. elizabeth: g night ben. jim bob: night. elizabeth: g night jim bob. jim bob: g night everybody, grandpa: g night everybody. jim bob: g night daddy. vo: geico. 15 minutes could save you 15% or more. our guests home gin reynolds, capital markets, chairman and ceo. you want to do predictions for 2010? no come on! observations. i have been impressed with a few things. one, i have been impressed lately with the pay czar. i actually was a very firm critic of the pay czar. ken feinberg. ken feinberg. but i ve actually been impressed lately that he s looking at the reality of the marketplace, and it s a competitive marketplace with the competition to fanny make, freddie mac ceos, aig. i think he s letting the market pragmatist. i think he is. unlike england and france. that s punitive. even though it s going to make it harder for you to attract, because you will be fighting for bank that s can now pay more, right? yeah. right now the rush to pay the t.a.r.p. back was to get this freedom. but that s okay. this is a competitive system. you can t necessarily retain good folks in a synthetic, created marketplace. the marketplace is the marketplace. and so when you have good folks, and you can grab good folks, they pay for themselves many, many, many times over. there s nothing wrong with amer tok rasy, is there? it s the way this business has always been. they have been in it a long time, and it works. it works as long as people aren t taking money from the government, right? even if they take money for the government, then the taxpayer owns them and you still want them to do well. when people do well, they pay taxes back to the government. understood. but we tried this in cuba, q. it doesn t work, man. that s where joe and i what didn t work, what the banks were doing prior to the bailouts. but maybe they have learned their lessons. remember how that imploded? overall, though, you re looking for a decent 2010? i think 2010 is going to be awesome. the market goes up. i think the market will be good. i i have investment banks have an opportunity in 2010 than they had in 09 and they can pay their folks. jim, it s good having you. thank you for coming in. it s a pleasure to be here. happy new year, zblev maeverybo join us tomorrow for squawk on the street. live from the financial capital of the world, this is it, squawk on the street. throw another shrimp on the barbie edition. good morning, everybody. i m mark haines. you re accent is getting better and better. by the end of the week, you re going to be talking aussie. i m going to be talking american. i can try it get. throw another shrimp on the barbie. i m sitting in for erin burnett. good morning, everybody. erin is out at the hometown of the man who tried to blow up a northwest jet on christmas day. we will have more on that later. first, let s get down to business this tuesday morning. we have three trading days left in the first see, that s not true. there are no three days left in the decade. there are a year and three days left in the decade because there was no year zero. anyway, everyone else thinks, oh, it s the end of the decade. so in about 30 seconds, we ll get the key. chase chiller s reading on home prices. we will break that here on the show. we also have a report in the wall street journal saying morgan stanley may dramatically change the way it pays top executives with deferred payments. gm offering dealers big incentives to move saturn and pontiac brands out the door. both brands, of course, have been cut from gm s roster. and let s take a look at the futures right now. of course, yesterday we had the sixth consecutive day of gains for the u.s. market, and it looks as if we might possibly at least according to the futures get a seventh consecutive day of gains. looks like santa certainly has come to the u.s. market this year.