Transcripts For CNBC Squawk Box 20121120 : vimarsana.com

You can see oil prices pulling back about 27 cents, still just about 89 for wti crude. We will have a live report from our nbc colleagues on the ground in the middle east coming up in the next half hour. Lets talk about some of the main market events of the morning. Actually today fed chairman Ben Bernankes speech at the economics sclub of new york is coming up at 12 15 eastern time. Traders will be listening no any comments on the Central Banks operation twist program and discussions about changing how the fed communicates about Interest Rates. Operation twist expires next month. And there is some speculation the fed will continue making asset purchases by expanding the size of its 40 billion a month quantitate of it easing program. Also on the economic agenda today, october Housing Starts released at 8 30 a. M. Analysts looking for a decline in new building despite a steady stream of positive news on housing lately. Yesterday the National Association of Home Builders said the confidence between the nations Home Builders has risk to its highest level in 6 1 2 years. And earnings front, a number of Companies Set to post quarterly results. Hewlettpackard and best buy. Shares of hp down more than 48 so far this year. Meg whitman has a lot of explaining to do. And shares of best buy have fallen more than 41 since january. The retailer has been the subject the speculation about whether its founder will be bidding for the company to take it private. Its schultz. We went back and forth. The guy from hogans heros. True. This guy was i know nothing. Im not sure hes going to take over the company. I know its schultz. Lets talk about some Corporate News thats unusual for them to report before the bell, isnt it . I always thought hp was a reporter after the bell. All i know is they have a different fiscal year and so they report this is staggered. Everybody else already finished. So i usually ignore them. Lets do two other pieces of Corporate News. Jpmorgan naming a new chief financial officer, marianne lake. That will happen early next year. Shell be reporting directly to jamie dimon and this is important because it reestablishes a reporting line that was taken away from the cfo post this summer after the london whale trading loss hurt the companys credibility with analysts. Bra bra bra braunstein will become vice chairman. Doug is one of the great deal makers out there. This is a role that may be where he wants to spend his time. He was still reporting to jamie, wasnt he . No. He was the cfo reporting to jamie. Postwhale, they took that reporting line away. Reported to someone under jamie . He did it. And people started to speculate what was going to be happening. But hell go back to being one of the lead deal makers at that company. The new York Attorney general reportedly preparing to file a civil lawsuit against Credit Suisse, at issue is whether the firm misled investors who lost billions on Mortgage Backed securities. Lawsuit expected to be filed tomorrow. It will allege Credit Suisse misrepresented the quality of the loans that were packaged in securities. And arch stone plans to raise up to 3. 5 billion in its ipo, the Apartment Building owner and developer. Owned by Lehman Brothers holdings and a thing aaron callon used to talk about. An ill fated acquisition at the time. David einhorn had made the bid deal. Target would make arch stone the biggest commercial real estate ipo ever and the listing will be in the form of a real estate investment. And twinkies arent dead yesterday. Hostess and its second Largest Union have agreed or a bankruptcy judge has said why dont you need mediate. Try to save the 18,000 jobs. Although theyre been arguing for a year already. If they cant agree, theyll go back to it. But the goal is to keep the maker of baked goods like twinkies, ding dongs and hohos from going out of business. I have a picture of my stash. How much did you get . They were going store to store. And the only reason i didnt, we had such a crazy weekend. Two of everything, like noahs ark . Yeah, ive been watching to see if they would make more so ill never run out. But no movement in the boxes. Keep one box and eat the other box. Some new tabt id like to make a bet at this table right now. I did some reporting on this yesterday because i wrote my column about twinkies. There is very little chance. You know why we had two boxes. Because you can eat one and save the other. Yes. And i tried i got to say, i found them not quite for not allowing myself to have any for a long time, because you just dont eat that before. I havent had a twinkie in forever. But i thought the twinkie was good. Some of them like a ring ding, probably not. It looked like a twinkie, but it was brown chocolate, but i dont know what and it had the cream in the center. Was it rolled . No, it wasnt rolled. P. I know it looked like a twinkie because chocolate twinkie. I had one friday and it had been so long. It was good. And that bread is supposedly isnt very good. Wonder bread. But they also have a wheat brand i think. In tech news, the u. S. International trade commission will review a judges decision that apple didnt violate samsung patents when it made the ipod touch, the iphone and the ipad. In september, an Administrative Law judge said apple was innocent of violating those patents. Up like 30 yesterday or something. And check out the shares of yahoo . They reached their highest level in 18 months. Analysts say Investor Confidence is growing that Marissa Mayer can pull off a comeback. Is is that possible . We can all hope. I want everybody to succeed. Do you want bad people to succeed . Bad in what way . I mean bad people. Do you want bad products, Bad Companies . No, no, but i want people to good people to succeed. You just never know, though, with some people, right . You never know. They say theyre good. I dont know. I think we just need to be let the chips fall where they may. If someone really needs our i want growth in this country. How about that . You have not given me any reason to think that you want that over the last couple of years. Not with your antigrowth policies. You never did mention the 91 yesterday. You just totally blew you knew better than to bring that up. Because even you cant say that with a straight face. I cant get behind that. This is paul krugman whose column advocated briefly for 91 i think its counterproductive to bring it up in an actual discussion of mainstream economic policies. Hes just so out of the mainstream that it doesnt just giving it that much credibility of actually talking about it on on a Financial Network but did you talk about it. And i know. And i wasnt going to yesterday either. But he thinks thats the way to narrow the income disparity. You cant go back to the i think you can find a way of a wealth tax or Something Like that. This is the new york times. Tax policy center has now scored what if you had an adjusted gross income between 1200,000 and 500,000, your average tax increase would go up 4446. Do you think thats a lot, a little . At this point now, if people like the clinton tax structure that much, then just get rid of sequester and just question back to clinton. Now were getting in to the higher incomes. A married couple with two children earning 2 million, you will see your effective federal income tax rate rise to 26. 8 from 21. 6 . That would be your effective tax rate. I dont understand how thats the effective tax rate, because i dont understand how it is. This person that i know pay 3 3 . They must be making assumptions some of it is in Capital Gains. Unfortunately, we forget that theyre marginal. Really . I dont forget that. But we often talk about it as if its sort of like a monolithic but when obama says, hey, you still get that tax cut on under 250, if you make 2 million and you keep the tax cut under 250, its ludicrous to talk about that. But the effective rates versus the marginal rates is very interesting. Effective rates are because of all the deductions and everything. But im at this point, i do a radio interview if you do do something with the mortgage interest, that has a lot of people worried about the housing industry. Then if you do something with charitable deductions, that has people really worried about the charitable world. His contention was, listen, about it worked so well, go back to the clinton tax rates. Not just on 250, but let them all go back. That goes instead of 80 billion a year, its like 800 billion out of the trillion dollar deficit that were running. So if youre worried about the sequester, do something with the sequester, figure out a way that you dont cut spending as much, let all of them expire. And then sgllt president made the argument that you dont want to raise taxes on the people who are most in need at this point. Thats the argument. That are most in need. But they dont pay taxes right now. So youre talking about people that do pay taxes that are from 50 to 250, they go back a couple of points like they did in the clinton years. Thats why i say the whole argument is kind of ridiculous, that if its below 250, wow, its all the difference in the world. And if its above 250, it doesnt hurt Small Businesses some . Its a catch 22 on both sides because republicans said they dont want to raise taxes on the wealthiest because this is not the time to do it. You shouldnt raise them on anyone. But neither of them are making a holistic argument. Right. For the left side to say you couldnt possibly raise it on up up to 200, it would hurt, but above that is fine. And you cant raise it on the wealthiest because it would hurt job creation. And its not the a holistic art. I see the argument that every deduction has its advocacy group. And if you really want to do it easily and quickly, you know it will happen either way but thats why it was amazing that simpsonbowles actually got 11 votes. They didnt get the supermajority needed, but they got 11 votes and that was shocking because there are so many things that so many people see as sacred. But the only reason to do simpsonbowles and to get rid of the deconstructiduck dedeductio and still raise marginal rates, that defeats the purpose. There are so many people who pay random numbers. You look at the effective tax rates, you can see rick says zero Home Mortgage. Get rid of all the deductions and let the chips fall where they may. Simple code. You wont have to hire a tax preparer. You cant spend any mothney anywhere. Im proudly cheap. Dont you get to writeoff what you pay your tax preparer . I think you do. Look, im good about tipping the taxi driver. But thats i saw one of the weeks that youre off because youre not coming in to the christmass party, thats the week im told where things change. The rates at all the places where you go, they stay low and then theres a shift. The next week youre in christmas season, so the rates go up. You though where to go when the rates are still at the you know which week to take the reason im taking that week is because fwhi friend becky quick and my good friend joe kernen are taking christmas week. See, i thought it was because the very next week all the room rates go up. That was an add benefit that i realized after the fact. Right. That was like a bonus. All right. Time it for the Global Markets report. Ross westgate is standing by in london. James bond does not need to be tall. Did you see those numbers over the weekend, ross . Must be the opening sequence. Wasnt it like 150, 170 million or something is this . You be unbelievable. Breaking records. You saw it or you were part of it. Esty forbids. I was doing that jump no, i didnt do that. Motorcycle jump. I saw that. Yeah. Joe, were about three hours in to the session ahead of the u. S. Hope and pretty flat really. Advancers and decliners evenly matched on the Dow Jones Stoxx 600. This after pretty good gains yesterday. Take a look at the ftse, nearly 3 gains for the cac 40. A little more red than green. Ftse only down 6 points. Xetra dax up a quarter. Cac 40 down 0. 2 . Smi down about a half percent. Being dragged lower by Credit Suisse. Talked about possible more legal action. Theyve also come out with a restructuring. Asset management business will be followed into the private Bank Business this morning. Credit suisse stock down 2. 3 . What is interesting, we know ubs is getting out of fixed income. Doesnt appear that will be the case at Credit Suisse because they have promoted further up into the management board. So looks like theyll be holding on to that. Weve also had an auction today out of spain. Only tbills, 12 and 18 month tbills, but the key thing here as far as spain is concerned, and its pushed their yields lower, theyve raised a little bit more than they thought, 4. 93 billion euros. This is money that they are now raising for 2013. They met the 2012 issuance. And funding targets. So anything they get in now is a head start on next year. So good news for spain. France got a downgrade from moodys. Second Ratings Agency after s p to cut their aaa. French yields slightly higher this morning. But no big market reaction. It was widely expected. Back to you. Ross, thank you. Coming up, well come back and talk whats going on in the market, but also a live report from brussels where euro finance ministers are meeting. Plus the big ten could be getting a big bigger. Becky quick has a little news. And your National Weather forecast as americans get ready to hit the road for thanksgiving. [ penelope ] i found the best cafe in the world. Nespresso. Where i never have to compromise on anything. Where just one touch creates the perfect coffee. Where every cappuccino and latte is only made with fresh milk. And where the staff is exceptionally friendly. Nespresso. What else . Futures indicated a little lower. Dow by about 22, s p by less than a point. And this is coming after a big rally for the markets yesterday. Carl icahn reporting an 8. 9 stake. And british prosecutors plan to charge former News Corp Executives in connection with a bribery probe. Accused of paying Public Officials to obtain contact informati information. Now todays National Weather forecast. Todd santos two in a row. I dont know if thats ever happened. You know what that mean respect when you totally screw up, well remember from the day before. All right. I will try my best to keep this one on point. You know, yesterday we were talking, there was a system still really close to the carolinas. It is moving farther off the coastline, so still gusty winds. Well see some of the clouds on and off during the daytime. Some sunshine mixing in. Not looking at showers in new york. In is drier air at the surface, so a lot of it is evaporating. Maybe light drizzle closer towards the lake shores. Northern lower michigan, a better chance to get showers over the short term. To the south, a few more areas of the light rain. The northwest is really the messy spot today, tomorrow and on into the holiday itself. So for those of your viewers heading on out to do some skiing, looking great especially many of these western destinations. But for the parade. No rain and temperatures in the 50s. I knee you hassled me for cooling it cool, but maybe you were calling me cool. 50s is cool for atlanta. Okay. Thank you, todd. Sure thing. In squawk sports news, 49ers whipping the bears 327. Kaepernick came in in place of the injured al lebs smith. And in College Sports news, joe, you will admit this is worthy. Rutgers is widely expected to announce today that it is joining the big ten. Yesterday maryland announced that it will join the conference in 2014. Im kind of glad. Why . Because then you play a real schedule. And youll never have to hear about us again. Very ratherly will i see rutgers in the teleprompter anymore. This is a big deal. You this this is how you build they never have to beat cincinnati again. How much more money is in it for rut ggerrutgers . Its a big deal because of the high profile games theyll be playing. And the big ten gets rutgers is a huge media profiled team because its so close to the new york area. But maryland has to pay like 50 million fee to leave . There is all this talk about how kevin planning 15 million is the break up fee apparently. Colorado, i dont know what theyre doing every week. But its how you build a Bigger Program and penn state, with all the trouble they ran in, to they would get all the new jersey talent and theyre not doing that anymore. Do you remember the rogue trader at ubs . Just found guilty. Less exciting to you . I do see you like to change the fubt with football. I wouldnt go to europe where they call it soccer. You know more about that than either college or pro, right . Which rogue trading was this one . This was one of the first ones back during the financial crisis. You interrupted a conference for rutgers about this . Usual defendingdefending rut. Silvia is in brussels with news on what may be happening over there. I thought when you were talking about screwing up, you were getting into the eurozone crisis management. But then i could relax again, you werent quite. Although this might be one epitaph we could put on. But on the agenda, were talking about greece again. Will they or will they not get the latest tranche. I think we can reasonably safely say that they will get the next tranche. They were supposed to kind of agree on on that last week. But we used to this what is on the agenda is what will greece get in terms of relief. The 31 billion they will probably get, but what else can they get them. We all know greece cant meet the debt rerequirements in the next few years and the debt keeps mounting up. Imf says they should stick to the debt sustainability that has been agreed to. What could also be decided on, a little bit of debt relief through lower Interest Rates. So fash of course weve only had private sector haircuts. They said, no, we wont writeoff any of our debt and thats of course a political issue because if all these leaders have to go home, we did give up part of the debt and youll pay for it, so they have to find a compromise hopefully before we all go on the midnight oil here. Rise above can be andrew is right, theres apparently a breakup fee of 50 million. Used to be only 20. Theyre so worried about teams leaving that they increased it to 15 million. And there was recent speculation that kevin planning just sold a big tranche of stock and some people think hell donate that money to maryland to make up for the payment. I dont know if thats true. The big hower houses would be much mf they do have a good basketball team. Lets get to middle east. Mf they do have a good basketball team. Lets get to middle east. They do have a good basketball team. Lets get to middle east. Israel and hamas exchanges more fire overnight. Eamon did great duty on nightly with Brian Williams and hes joining us from the gaza trip. Let me start off with some interests developments. An audio recording was released saying the organization is still determined, will remain defiant vowing to continue the fight for the liberation of all palestinian lands. This is significant because there was some speculation that he himself may have been actually injured in an attack earlier this week p. The leader of the military wing was the man killed on wednesday. So still very much in command of its forces and the leader vowed to continue the fight. It has targeted about 100 different targets in the gaza strip, palestinian Officials Say the death toll from the seven days of fighting has reached 115 palestinians with a third being children alone. So you get a sense really that the situation here is still very volatile on the ground despite the flurry of diplomatic activity taking place in cairo. Hillary clinton will be arriving later this evening to have negotiations with her israeli counterparts as well as palestinian officials. She will also be heading to cairo to meet with morsi who is meeting with the u. N. Secretary general and so every is hoping truth does stick. Officials have been hinting there could be one in the next several hours. But on the ground, they are bracing for a possible Ground Invasion with thousands of soldiers on the border. Back to you. Stay with us over there. Well be watching hopefully it doesnt happen, but a possibility. We appreciate your report. The nbc team over there, rich article ard engel, he must live in the area because hes always where needs to be. Always things exploding around. When we come back, well talk more about the stories that are likely to drive todays trading, including the crisis in the middle east. Weve also got earnings coming up and a speech from ben bernanke. Well be talking about the looming fiscal cliff. Well put them all into perspective. Im glad we got cdw and cisco to design our data center. Yeah, the cisco ucsc series server, with the intel xeon processors, help us scale smoothly, like a perfect golf swing. How was it before . Clunky and full of unnecessary impediments. Like charles swing. I heard that. Or that printing in color had to cost a fortune. Nobody said an allinone had to be bulky. Or that you had to print from your desk. At least, nobody said it to us. Introducing the business smart inkjet allinone series from brother. Easy to use. Its the ultimate combination of speed, small size, and lowcost printing. Customer erin swenson bought so, im happy. Today. Sales go up. Im happy. It went out today. Im happy. What if shes not home . together she wont be happy. Use ups she can get a text alert, reroute. Even reschedule her package. Its ups my choice. Are you happy . Im happy. Im happy. Im happy. Im happy. Im happy. Happy. Happy. Happy. Happy. together happy. I love logistics. Stocks kicking off the week with strong gains. Joining us is chief market strategist. Yesterday kevin had more to do with an oversold bounce or the notion that maybe well make progress in washington with the fiscal cliff . What do you think . Oh, two kevins. Ferry will talk about like chip spreads or something. Their effect on the serbian dollar. I dont know. Market was fairly well oversold. As we look out into 2013, we certainly have the fiscal cliff thats there, but beyond that, we have a barometer that we track for fundamental conditions and thats improved for a couple months now. So thats a hopeful sign. And the market has come in pretty sharply from where we were a month or so ago. So i think we have decent valuations. What do you think politically finally happens . Your opinion doesnt matter to anyone else obviously, we all have our opinions, but does it end up with a simpsonbowles type agreement sn. First you have to get us away from the crisis of january. 700 billion hits to the economy, which is the sum total. Ultimately the bigger question is what do we do with debt and deficits. The cbo has us with massive increases in taxes, very small increases in spending. And as a result, they keep the debt looking reasonable. Youre absolutely sure that if we were to take a bite like that out of our deficit problems, and or cutting spending and raising taxes, out of the trillion dollars that were spending over and above the deficit were running for the last four year, 700 billion goes away, youre sure thats a bad thing near term . Thats what im starting to think. Youre taking care of almost 75 of our deficit problem in one fell swoop. Its tough and its austerity and we demand it out of greece and countries of europe. We dont demand anything for ourses . I dont think anybody looks the at the trillion dollar deficits without budgets as 234ig that anything thats sustainable. We can take care of 75 of it by not doing anything. You can take care of some of the longer term issues which i think is what the markets will be more focused on. The reality is that over the next ten years, you have to get to a point where you dont have debt rising substantially more than gdp. You have to do something, though. Everything to this point is kicking the can down the road. And when s p downgraded our debt, one of the things they cited was an inability for washington to work together. Theyre not going off the fiscal dilemma in one fell swoop, but if they can mak it look like theyre working together better, i think that would take some of the pressure off. So were agreeing at 2 , were going over on the clip and it knocks two Percentage Points off, we get down to zero or negative. But if we were growing at four, if we finally had it going agai again,ss is that the time when you cut it back to two . Easier to do when youre up four . Never a good time to do these things. Heres the way i look at it. And i have my pin. Its on my tie. Thats too low. Move it up. Andrew has worn it as an earring. We have the pin kind, so i didnt jam it in there. But heres what i think. And im not a big cliffer. We were more constructive. They beat us up a little last would he be and then the market came back all in one swoop yesterday. But the change the direction of the trend. And then concentrate on growth. And so i think these grand yoes ideas and the big ten year numbers are missing the point of whats really going to happen on the on the ground level. And that is that youre going to change the Trend Direction of the problem. And when that happens, i think that a lot of good things happen behind it. So thats what were dealing with right now. And what you have is an extreme low amount of volatility in the Interest Rate market, and extreme amount of hyperactivity over the short term in equities. And so thats good. As a trader, im all for something moving. But i dont think you want to drive too many big long term macro conclusions like people were trying to do last week as it was falling. There was a short lived pin kron. So youre basically saying the same thing, that we need to get our house in order, but we cant do it all at once is this. Right. And i think that the the other thing is it tends to be globe is talking in imf style which is always about cutting, cutting. Just change the direction and then talk about a larger growth number. You want to nominally grow out of this thing. Ill give you a little contrarian type of view. My professor used to always teach me economic knowledge is inversely proportional to concern for public debt. And i think when people start to get a grip on that, then theyll calm down a little bit and just turn the direction of the problem. Okay. Well think about that. Say it one more time. We have to do it on break. We have to go. I can remember what you said. Well hash it out. Kevin and kevin, thats what messed me up. Its weird, though, i asked a question of kevin and neither one of you answered. They were being polite. Thanks, guys. See you. When we come back, if you want to know how the fiscal cliff is going to directly impact you, sure, theres this issue of taxes, but what about the issue of Health Care Costs . We have a scary scenario when we come back. In the world. You see they all have something very interesting in common. They have teachers. With a deeper knowledge of their subjects. As a result, their students achieve at a higher level. Lets develop more stars in education. Lets invest in our teachers. So they can inspire our students. Lets solve this. Care costs. Whats the big source of the problem . This is as we get ready to embrace the new Health Care Laws coming in. Exactly. So will doesnt really impact Big Companies like citigroup or nbc but it does impact people who buy insurance on an individual basis and the biggest driver is all the changes coming because of Health Reform in 2014. How does that drive up individuals costs is this weve been hearing about it from Small Business owners who have joined us here onset who talk about how theyve had issues theyre facing. Its really four things. Theres Health Insurance industry tax that starts, a reinsurance charge pushes up pricing. The would btwo biggest dreeiver individuals will be forced to buy better policies than they have today. So that cost more. Other thing is that theres some restrictions on on how much insurers can charge their sickest customers. And the result of that is that you have to raise rates significantly on your youngest healthiest customers. Whats significantly . I think in 2014, were looking at an average individual rate increase of around 20 on . But if youre one of the youngest healthiest customers, you could easily see your insurance rates rise more than 100 in 2014. When will people see those bills hitting . The first indication is whens insurers start to file their rates for the Health Insurance exchanges in 2014. So that will start to come in mid 2013. And i think at that point youre going to see some regulators look to try to phase in some of these changes in order to try to mitigate some of the rate shock that the consumers are going to face in 14. If everythings supposed to kick into place by 2014, you can really push back some of these new rules and regulations some do you think washington will say maybe were pushing this too fast . I think there is a push and theres a way to do it. A lot of regulations that say well make a change to something specific in 14. No reason why that couldnt be phased in over a couple year period. I dont get the sense that people recognize the higher rates are necessarily coming, at least not in that order. I think your average consumer out there thinks that Health Insurance will become more affordable in 2014. If youre lower income in 2014, you are going to get a subsidy from the government that will help to offset that cost. So for certain consumer, the actual out of pocket cost is going to be lower or not increase that much. How low income do you have to be to qualify . Up to 400 of poverty is where youll get some subsidies. So 80,000 . For a family of four. But whats interesting about the subsidies is that if you make 20,000 a year, youll get a pretty significant subsidy. You make 35,000 a year as a single person, youll get a subsidy, but very modest. So your Health Care Costs may go up anyway just because rates are increasing . Correct. Whats that mean for the mmos and for some of the Health Care Providers who are out there . Theyll feel some heat. I think 2014 specifically Health Reform is bad for the insurers. It puts pressure on margins. All of this focused on Health Care Costs, trends, generally has not been good for for 2013 group actually has some upside, partly because i think theres a pretty good chance that some of these reform regulations do get delayed and things dont start on january 1st of 14, and then as i mentioned some of these specific factor, going to ultimately be phased in, mitigate some of the impact the insurers are facing. You have a buy on some of the companies but by the middle of 2013 when consumers realize whats happening, maybe thats the time to get out of the stocks . It will be choppy then. At the same time the stocks are trading at 7, 7. 5 times miss torqual multiple, 13 or 14 times so you can make the argument that a lot of stuff thats happening in 14 already discounted evaluations here. Carl, thank you for coming in. Coming up well head to chairs, well talk about twinkies and other important issues of the day. Lot of folks are writing in about the rutgers basketball team. Never having been competitive the record of 1418, 1517, 1517, 1121, 1120, theyve never had a winning record over the past thats when i was there. Theyve been good in recent years, too, they got a new basketball coach. It gives you the record, tied for 13th, 14th, 15th, tied for 15th, tied for 14th. Here, look . Well talk about it, plus im sorry, im all about accuracy. Im all about, anyway, cheesesteak for breakfast . Fifth, seventh, ninth. Thats little a little focker, has the medals for finishing 11th. Charlies grilled subs companys ceo joins us to talk food. I think its nice you love your alma mater. I always wait until the last minute. Can i still ship a gift in time for christmas . Yeah, sure you can. Great. Wheres your gift . Uh. Whew. [ male announcer ] break from the holiday stress. Ship Fedex Express by december 22nd for christmas delivery. Monarch of marketing analysis. With the ability to improve roi through seo all by cob. And you. Rent from national. 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Sure on the beach, in the woods, at the lake. What about on the green . Lets not get ahead of ourselves. Oh were back in chairs talking about some of the offbeat stories in todays paper. The one that caught my eye was a story in the science times and it is about ecstasy. Post traumatic stress, people coming back from of afan stanaf iraq, rape victims, using ecstasy. People are providing this out of their home, done the studies saying this is helping. Longterm . No, this is helping people longterm. Theyre not taking it longterm. Thats weird. Those who have taken it its helped enormously. The mcafee was telling you bath salts are good for you, too. Gross. Check out my stash. You have an offbeat story. The Harvard Business reviewpointed out the day twinkies became cool again. We have never had one of those products in our house. Thats part of our stash the things my wife and kids went out and bout these things but suddenly they became cool again. It was nostalgia, when we thought we were going to lose them, we wanted them even though theres not a single Natural Ingredient in them. Maybe New Buildings . What about updated equipment . They can help, but recent research shows. Nothing transforms schools like investing in advanced teacher education. Lets build a strong foundation. Lets invest in our teachers so they can inspire our students. Lets solve this. Or that printing in color had to cost a fortune. Nobody said an allinone had to be bulky. Or that you had to print from your desk. At least, nobody said it to us. Introducing the business smart inkjet allinone series from brother. Easy to use. Its the ultimate combination of speed, small size, and lowcost printing. Nespresso. Where i never have to compromise on anything. Where just one touch creates the perfect coffee. Where every cappuccino and latte is only made with fresh milk. And where the staff is exceptionally friendly. Nespresso. What else . Boproductivity up, costs down, thtime to market reduced. Those are good things. Upstairs, they will see fantasy. Not fantasy. Logistics. Ups came in, analyzed our supply chain, inventory systems. Ups . Ups. Not fantasy . Who would have thought . I did. We did, bob. We did. Got it. Cliff jumper. Stocks kicking off a shortened holiday week with a rally on hopes that lawmakers can resolve the looming fiscal cliff. Dueling guest hosts to prep your portfolio. Harold ford jr. And former white house aide under president bush joe watkins. A look at Home Grown Companies and how they got their start and what they think of the economy. Today were grilling cheesesteaks and talking business with the ceo of charlesys subs as the second hour of squawk box begins right now. Good morning and welcome to squawk box here on cnbc. Im Andrew Ross Sorkin along with becky quick and joe kernen. Take a look at the futures this morning after a big day yesterday. S p 500 looks like it would open up a point and a half down, dow jones off marginally as the nasdaq. Through some of the headline this is morning, we are 30 minutes away from the latest Earnings Report from hewlettpacka hewlettpackard. This is a switch for hp which usually reports after the closing bell. Well have the numbers as soon as they hit and Ceo Meg Whitman will be talking about the results at squawk on the street at 10 40 eastern time. Well get you another read on the Housing Market. The government is set to report Housing Starts for october at 8 30 a. M. Eastern. Economists are expecting a 4. 2 drop and a report likely impacted by superstorm sandy. Fed chairman ben bernanke is talking about the economic recovery today, we hope so. Hell have our lunch time address the Economic Club of new york and that starts at 12 45 eastern. Harold ford jr. , reasonable and good friend, joe watkins, white house aide to former president george h. W. Bush. You didnt say hes reasonable. Joe is right, but harold has potential. Joe and i have known each other for almost 20 years, go back to university of pennsylvania, but joe and i have been friends for a long time. Youwith you well talk fisc cliff in a second but you want to do a postmortem . You cant win without women, and cant win without latinos, you cant win without young people. You cant win on a single issue, and i just think there were a host of challenges. For me, the whole time, the sense that i had was that it was obamas race to lose, that he had the advantage. Anybody look at the Electoral College would have to say there were seven or eight easy ways for the president to win, i mean one or two ways for the president to win and for mitt romney, he had like seven or eight different paths that he had to work for him in order to become president in the Electoral College. It was obamas race to lose and the president s team did a great job. They did a great job. He called together a coalition and ended up in a victory. He said to his supporters, he got hammered by jindal and everyone, Lindsey Graham said im going to use this line as if youre in a hole, stop digging. Joe, thats not what he said. He said that the president provided gifts to various constituencies that allowed if you go back, immigration hispanics and joe biden did float the balloon on gay marriage. One of the things we agree, as bipartisanship in campaigns you try to appeal to various constituents and try to say things and provide comfort and assurances youre going to help the country grow. Inclusive. The 47 thing didnt help. Without the 47 , if the republicans have agreed on a single, the criminal definition of rape. Those guys killed us. Had they adopted a bush approach to immigration. Where would those guys be there was one issue that any one of those things that they had done they would have appealed to a broader base. You would imagine these would be easy, these are not labyri h labyrinthian things. Romney not only hurt his brand but made it a taller challenge for republicans to put this back together. You cant say weve embraced latino or hispanic outreach organizations. You have to do things fundamentally differently. You dont have the benefit of the doubt. What a core libertarian or conservative talks about, that is earned success, private sector prosperity, you know, individual initiative, all entrepreneurialship, all that stuff which is what you hang your hat on. To have it obscured by all ive told this story now like ten times but the night of the election, i worked late and in that car and there were radio callers, people calling in who had made their mind up in the last week and one guy dame on and gave a treatise on free Market Economics and entrepreneurialship but said im voting for obama because im gay. This guy everything ive ever said about free market hes totally with the republicans on this but he cant come into that party because the party doesnt want him and thats not right. Our party has to broaden the tent. I went to the Republican National convention again and i saw about eight people that looked like me, and its not just a matter of having more people that looked like me at the convention, brown or other persuasion and ethnicities but also policy. You have to have policy that attracts lots of new people. In addition to having new candidates youve got to have policies that are meaningful to people on immigration, policies that work for women, policies that are meaningful for people who happen to be minorities, and you cant ever have the during the Romney Campaign i dont remember seeing and this is no disrespect to joe and our friends and even governor romney whom i dont know well but i dont remember seeing one person of color at any point that he spoke to, that he addressed, that were, that might have been a part of the inner circle. With president bush you often saw secretary rice and general powell, with former president h. W. Bush you saw a Diverse Group of people around him. I just dont recall including me. Yes, so i didnt see that much around the governor. Is it the policy or is it about having the people around him in the pictures . He had some tara wall is wellknown, rnc person has huge credibility. In fairness, i did see her on television. The people of color from different groups was not great, basically what you saw were a lot of white men. In order to win today, you got to have people that look like america. Which is why you could be surprised that he thought he was going to win. He doesnt have anybody telling him anything other. The policies change. Not the fiscal policies but the other policies have to change. The social policies. Doesnt matter if your a social conservative, it means the tent has to be bigger, embrace people who are different, if we want to have a winning coalition, if we want to have a winning opportunity in 2016. Ill bet you would believe that the free enterprise, Free Market Solutions that the Republican Party puts forward over time lift more people into a situation, more prosperity. No doubt. Why does it matter who hes talking to at any given time if more people benefit longterm. Youre a free market guy. You know these are the policies that eventually will joe you wouldnt feel comfortable entering a room if you see no one that looks like you, you understand the person has made comments about women, suggested that half the country is unresponsive to him because theyre not accountable or responsible to the notion of america, and he never really did an if ektive job of defending, explaining or articulating where he would take all of us. This is not to suggestion that governor romney is this way. Its the way his policies were constructed, presented, created a discomfort level so great your story tells it all. You had a fellow who laid out the free market, but he couldnt be for governor romney because hes gay. Is it the policies of the party no, the policies end up being trumped by the core 47 . So you might agree with the fiscal its the party platform. Ultimately if you have to get through the primaries and rely on this core sort of right group how do you do that . How do you get past those policies . You got to have a team that gets you back to the center real fast. Youre saying lie to one group to get to the other group . Makes no sense either. Its the sad reality of politics and president ial primaries the groups that vote are more to the left or more to the right so you have to cater to the base to become the nominee. The president has to cater to a base and if hes going to tack it all back to the center on certain issues, whether its epa or even what he does to get over this fiscal cliff hes going to have to hes got four years and not facing another term. He could have to do some things to get the house on board that his base is not going to like and his legacy. A year ago today herman cain was leading all of the candidates, just to put it in perspective. Well come back and get your ideas on what we do to fix this fiscal cliff. I change every day on what i think we need to do. I dont know. Lets say we got rid of the sequester completely and didnt worry about spending, went back to the clinton tax rates for everybody. Is that the end of the world . I wouldnt think so. Threequarters of the deficit goes away. I think wed probably have to deal with some of the Investment Income rates perhaps. Youre talking from the republican side. No, i think we find ourselves at a different moment. I dont think it would be the end of the world but i think we can probably find a more Sustainable Way to do it, to not push. Where were the investment rates, capital rates and dividends under clinton, 25 . Brings it up 20 higher . Were in the no huddle offense for congress and we dont have a good track record. Congress has not performed well with this president in the no huddle offense. We have two minutes and got to score a touchdown. The reason they put in these things were to make sure they finally got done. Here were ready to delay it again and not face these things. So i dont know. By that i mean becky 20 cap gains, cap dividends at 25, i like the schumer idea, look at the democrats senators campaign on raising the number to 250,000 with the exception of one or two, you could find agreement and the president will have an easier time rinning support from some republicans, get the right coalition, this thing gets done quicker, sooner rather than later. Well continue this conversation in a moment. When we return president obama dispatching secretary of state Hillary Clinton to the middle east. Right now oil prices have been steady but this comes after a big jump yesterday. Down about 16 cents to 89. 12. The outcome of the eurozone finance ministers meeting in brussels is out there. Well take a closer look at oil right after this. Comments . Questions . Send them to squawkcnbc on twitter. Follow the show and look for updates from andrew, becky, show and the squawk staff. Squawk box on cnbc, and on twitter. Americans are always ready to work hard for a better future. 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Gas prices are steadier but oil above 89, weve been watching whats been happening with the escalating situation in the middle east. The United States is sending secretary of state Hillary Clinton to the region to talk to leaders of both sides. Dan dickers, cnbc contributor and independent oil investor. Some of us were looking for iran to be the problem and other things to happen but once it starts it kicks things into a higher gear. Now what happens . I think all the sources that i talk to and in fact the market is kind of telling me that there is going to be another permanent truce thats going to be agreed to. Thats the word thats coming out of cairo and to a large degree i think the oil spike that youve seen over the last two or three days from what has been an array of images from the media about bombings going on in gaza will be short lived. The oil markets pretty much been in a bearish pattern since late september and before that after libya action stopped in april and i think that will continue going down, weve seen a consolidation area in oil, i think were at the upper end of that band and this may be an opportunity to short some oil here. Thats why you dont like oil stocks . Yes, and theres been a disconnecting between the oil stocks and oil market which is a good thing for us, in this case the oil stocks have shown ahead of time what has been going on to the futures. Usually the futures show whats happening with the oil drops and weve seen a drop in the major internationals and the Oil Service Stocks because of whats been going down in terms of rate counts. This has been interesting in how ive spent two, three, four years talking about how the fundamentals dont matter in the oil market and were at a Tipping Point where demand numbers in the United States are going up, supply rates are going up, thats where the rubbers are meeting the road. You think that leads us to continued slack demand, the talk of a global slowdown in. Yes, thats really where the rubbers are meeting the road in the oil market where there is for example talking at the break if we go over the cliff seeing a real recession in the country, 1. 5, to 2 growth. Lots of indications from china theyre slowing, lots of indications from india and theres only so far liquidity can go to keep asset prices pumped and were really at a turning point where well see Oil Prices Continue the downward move. The guys in the oil pits are watching the fiscal cliff negotiations, too . Absolutely, 100 . Where the money moves is whats important for the oil market. Its always been the number one consideration, what are asset prices going to be judged, where is Capital Gains taxes going to come in if they get some deal, that will affect the oil markets to a large degree. Do you want a deal or not . In terms of what . In terms of getting a fiscal cliff deal . I personally dont want one, but thats neither here nor there. To wish for asset prices to go down is not the most constructive thing. Youre not getting a penny. No. You are not getting a rise above pin because youre short oil. You knew you were coming on. Ill quote sarah palin, how is that rising above thing going for you so far . Have you seen a lot of rising above going on . We are seeing that. Ill refudiate everything you said. We have a strategory. Dont underestimate us. The deal is it will be short lived. I think youre seeing that. Simpsonbowles, you have no faith down the road we could do a grand bargain . I would love to see it. Do you want simpsonbowles . It will do things, could bring Capital Gains and dividends im just a realist. I think this is where we are in terms of the negotiations. Youve got two are you so short oil that would make up for Everything Else that would lose value in your life . He just wants to be right on oil. Thats all. I got lots of stocks that will get hurt in the process, andrew. So dan, a longer term deal will mean things if you get to simpsonbowles that is going to take Capital Gains dividends and taxed at the same level at ordinary income. The ordinary income tax levels are likely to drop, simpsonbowles at 28 , are you okay with that . That will drop oil, too. Whenever you get assets that are going to get taxed at a higher level than they are now youre going to see a shedding of those assets and that will impact the oil market as well. Youll see oil drop. Its a money play as much as it is a fundamental play. Everything is moving towards oil dropping, not just the fundamentals but any deal that comes on the table is going to hit Capital Gains taxes. Thats the first place theyre going to go for a compromise. Would you stay short for long if that were the situation or is this a situation where the market drops and rebounds been the next three months . Absolutely theres a rebound moment on all of these oil markets and you can see it in the market itself. I tend to look at the curve prices, crack spreads, a lot of things that are deep in the weeds in order to find the moments where i say its time to stop being short and time to get long again and you know, were not there yet. A quick check on european markets, moodys downgrading of frances Credit Rating and eu finance ministers meeting in brussels on greece. In the u. S. Were awaiting a speech from fed chairman ben bernanke, we have a preview and analysis of what traders are expecting today, earnings from hue l hewlettpackard, and best buy, these stories and more when we return. Time now for todays aflac trivia question. What song by lock stock and barrel was featured in the 1993 film Cool Runnings . The answer when cnbcs squawk box continues. Isnt Major Medical enough . Huh no whos gonna help cover the holes in their plans . Aflac quack like medical bills they dont pay for . Aflac or help pay the mortgage . Quack or child care . Quack aflaaac and everyday expenses . Huh . blurlbrlblrlbr [ thlurp ] aflac [ male announcer ] help your family stay afloat at aflac. Com. Plegh time for citi price rewind. Because your daughter really wants that pink castle thing. And you really dont want to pay more than you have to. Only citi price rewind automatically searches for the lowest price. And if it finds one, you get refunded the difference. Just use your citi card and register your purchase online. Have a super sparkly day ok. [ male announcer ] now all you need is a magic carriage. Citi price rewind. Buy now. Save later. [ male announcer ] you are a business pro. Governor of getting it done. You know how to dance. With a deadline. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. This is awesome. [ male announcer ] yes, it is, business pro. Yes, it is. Go national. Go like a pro. Rise, rise, rise, rise now the answer to todays aflac trivia question, what song by lock, stock and barrel was featured in the 1993 film Cool Runnings . The answer, rise above it. Aflac. Rise above coming up next weve got earnings from hewlettpackard, the numbers after the break and a fed look ahead, chairman ben bernanke is giving a speech later today in front of the Economic Club of new york. Steve liesman will be previewing that speech and what the markets want to take away from it. In just a bit the ceo of charleys grilled subs, what it means to be made in america and what all that holds for, onions . Were holding the onions. I dont want to hold the onions. I like onions. Squawk box returns with the onions when we return. Ally bank. Why they have a raise your rate cd. Tonight our guest, thomas sargent. Nobel laureate in economics, and one of the most cited economists in the world. Professor sargent, can you tell me what cd rates will be in two years . No. If he cant, no one can. Thats why ally has a raise your rate cd. Ally bank. Your money needs an ally. Well get back to the futures after a big up day yesterday, as you can see down less than 20 points as far as the Dow Jones Industrial average goes. And we do now have someone who has agreed, david, to rise above even earlier than 9 00, rising above with us today at 7 30, david faber, i dont know, did you not change to daylight savings time . Are you confused . Important news from hewlettpackard. Joe, the can. Is out with its Quarterly Earnings right now but as part of that Earnings Release the company is alleging that it was the victim of a massive fraud when it purchased the uk company autonomy at 10. 3 billion deal that closed in october of last year. Hp is taking an 8. 8 billion writedown on autonomy, more than 5 billion of that writedown is due to what hp is calling serious accounting impro price, misrepresentations and disclosure failures at autonomy. Last may after dr. Michael lynch was fired by meg whitman sources close to the company tell me a Senior Executive from autonomy came forward with evidence of what they were calling widespread accounting fraud that occurred at the company before it was bought by hewlettpackard. Hewlettpackard began an investigation and now almost seven months later concluded these accounting improprieties inflated autonomy by 5. 1 billion. They did rely on the audit the financials when they made the bid to buy the company. The financials were audited by deloitte. Sources close to the company allege autonomy pursued a number of avenues to make its margins and growth rate and overall value appear far higher than it actually was. Apparently the company was selling computer hardware, first of all it was a software company, what it was doing selling desktop computers, laptops, mouses, they sold them at a loss to supplement revenues and took much of the cost of the sales and treated it as a marketing cost so Gross Margins would not be impacted so you show significant revenues without the costs associated with them. These were sold at a loss. The company alleged to have pulled forward sales of its key Software Product idle and more so to have given money to valueadded resalers to buy the product from it, and then so it gave them the money, they bought the product, and by the way those are valueadded resellers rather than the regional equipment manufacturers that you would want to be buying the product. It would appear it was the oem buying the product all done to show a Significant Growth rate, great buy on the part of the key constituency. Sources close to the company tell me the investigation conducted for hp by Price Water House Coopers found that it was getting customers to pay a high up front licensing fee for the software but in return charging them low fees over a long period of time for hosting and that it also had companies that acquired, pursued the same strategy. All of this made margins at autonomy seem as high as 45 when they were closer to 28 . Hp has created a new baseline for profitability at the unit, finally aware of course that the organic growth rate of the company hit paid over 10 billin over a year ago it was nowhere near worth that. Autonomy is a uk company and been referred to as the fraud office. Dr. Lynch is a very wellknown figure in the uk, so youve got the Serious Fraud office there looking at it, and hp is also going to pursue its own civil litigation over time but probably will wait to see what happens with the sec and the uk office of fraud investigations. This was a deal done by former manager leo oppetecker who wanted the split the company up as well. He seemed hell bent on trying to end hewlettpackard. Lynch was fired by meg whitman because he came in so far below what were expected numbers at autonomy. One would imagine when autonomy became an hp company they would change the way they did business. They overpaid by 100 , number one. When you were describing those tricks, for some reason i was thinking about walter forbes. Do you remember of course i do. They had the same growth rates and margins and it was all from cooking the books. All revenue recognition. They dont use the word fraud. Theres a statement and press release, getting an Earnings Release they dont use the word fraud. Why not . Theyre using every other word in the book to say it, but it is fraud, no doubt about it. One of the larger frauds weve seen in quite some time if it is found to be fact, these are all allegations at this point. I have 100 questions. They paid 80 premium for this company which everybody all agrees was moronic to begin with. Right. Theyre claiming the value of the fraud was 5. 3 billion, under what multiple under the ridiculous multiple they started with to begin with . What i have heard from sources close to the company, and im sure theyre going to explain this is they came back after seven months of the Pricewaterhouse Coopers investigation and said whats the earnings baseline of the company. I dont know the answer as to whether they were still assuming same multiple or whether they lowered the multiple as a result of the organic growth rate being lower, the margins being lower. Andrew, let me add there was another 3. 5 billion writedown. Earlier . No, on autonomy this morning as well, an overall writedown of 8. 8 billion. Hp stock prices down. Lets take another look at the stock price. It took time for your report to get out onto the wires. Initially the street was just taking this down about 20 cents. Now its down more than 5. 8 , coming as what youve been talking about that has been hitting the wires. The company is out with earnings and they came in at 4. 05 a share. 1. 16 for the quarter, a penny above and they reaffirmed guidance but its really what youre talking about thats moving the stock. They generated about 4. 1 billion in cash during the quarter, about 10. 6 billion so far this year. The numbers themselves if theyd come out without this might not be viewed that badly but this is obviously a blow. Most of the board was in place when this acquisition took place including meg whitman but she clearly was not in charge. What does this say about the board, about the bankers who i believe were paid 30 million, about the accounting firms. About deloitte, the lawyers. The board as you know, hard for a board to weigh in. It was Henry Silverman who said fraud by its nature is hard to see so its hard to imagine a board say wait a minute. Why are you paying a high multiple. They finally got rid of oppotecker. Whitman was added since the deal was done. Hard to know it was a fraud. Interesting to see how poorly the Company Performed at hp when they reformed the accounting. That being said, hp is committed to autonomy, thinks its a strong business, just nowhere near worth it hadnt been written down at all up to this point . No, this had not been written down at all. Theyve taken a writedown for eds, a goodwill writedown but this had not been written down. They write down 8. 8 billion, 5. 3 billion is due to world. Its not worldcom, enron, senden but its high up there in terms of numbers. Mark herndon would tap the phone calls, what were they doing . Oh, yeah, andrew . Pretexting. Pretexting. That was before. You need information. That was the board oppitecker had scars from running s. A. P. , there was some legal stuff you wonder about, i dont know, if you sleep with dogs, you know. You do and listen by the way this will be a big story in the uk. This guy lynch is a big deal there so you know, hes going to be facing a firestorm im sure it just started, and theyre in the middle of their trading day. Autonomy, a uk company they got both fronts working. No sense at this point how far the investigations, the s. E. C. Has opinion working on it for a while and the uk fraud office, this was brought to their attention some time ago. Meg whitman has got to be, i need this . I took this job . Makes it even worse. It doesnt help. She didnt do the deal but shes going to take, its her 12. 17 stock at this point down from where she took over. All right, faber. Shell be joining us at 10 45. Okay, good, excellent. Thank you. All right. Sounds like sour grapes to me. 5. 3 billion, i was doing the math it cant be unless you include the 9 premium. Screwed up and now theyre looking for someone its the companys fault, they fooled us. If it was what we thought it was, it was worth it. Youre saying it wasnt worth it all along. Thats what im saying. Youre mean, thats mean to say. A preview of fed chairman Ben Bernankes speech in new york and much more on hewlettpackard. The king of caesars, chairman and ceo gary loveman will be joining us to talk to us about the state of his industry and why he joined the fix the Debt Campaign. Here is what else is on tap 8 30 eastern time Housing Starts for october and 8 40, michael powell, and much more from harold ford and joe watkins. Squawk will be back after a quick break. Or that printing in color had to cost a fortune. Nobody said an allinone had to be bulky. Or that you had to print from your desk. At least, nobody said it to us. Introducing the business smart inkjet allinone series from brother. Easy to use. Its the ultimate combination of speed, small size, and lowcost printing. I heard you guys can ship ground for less than the ups store. Thats right. Ive learned the only way to get a holiday deal is to camp out. You know weve been open all night. Is this a trick to get my spot . [ male announcer ] break from the holiday stress. Save on groushipping at fedex office. Welcome back to squawk box. Fed chairman ben bernanke is going to be giving a speech this afternoon in front of the Economic Club of new york. Senior economics reporter Steve Liesman joins us from new york with more on that plus louis crandall, chief economist on the set with us. What should we be looking out for today . Andrew, i think the first answer is not policy. For the if, time i can remember, chairman is giving a major speech and policy is set not just for next month but for quite some time to come, thats the general direction of policy being easy. What we need is specific guidance on what happens next month when operation twist expires and the expectation is operation twist buying longterm sturts we think it becomes asset purchases on the long end and the other thing i think that happens, andrew s the fed chairman will give an economic review and say like i told you before, the fed cannot undo the damage of the fiscal cliff. I think that will be a strong message in this speech today. Louis do you expect him to talk about the fiscal cliff today . Absolutely. It wont be a long one because we know what he thinks but hell repeat it, he wants to keep that message in front of people. Is there a surprise you think could come out of this or is this business as usual . Its going to be business as usual. There are two major issues the fed is looking at, whether to extend the asset purchases into the first quarter. He doesnt have to address it, theres not much controversy. The other part is how they restructure guidance about how theyll manage rates over the next three years. Theres a lot of controversy about that. Lou . Im just wondering, when i look at the guidance thing, theyre fixing something its not broken, its not the best optimal policy you could imagine but theyre fighting over this thing, cant come to a conclusion. They look amateur in that theyve had the whole debate out there, not ready for prime time really in terms of theyre not ready to make a decision. Why change it . Theres nothing urgent about this. Theyre telling us what theyre going to do with Interest Rates in 2015 and have a little time to get it right and theres uncertainty in the Economic Outlook. You dont want to lock yourself into another guidance now when the Economic Outlook to be in as little. Is the goal today to talk, talk, talk but not say anything . By not saying something is important, were staying the course, you know what were doing, im here to say nothing has changed and thats an Important Message right now. Becky i think the message on the fiscal cliff, im looking at sharper rhetoric than hes had before because hes doing what he can on his side what he believes to be the right thing to get the economic recovery going and what is washington doing but with every step theyre trying to undermine that policy. Theres no doubt a policy to taxes and the fiscal situation to help what the fed is trying to be doing. How far can he weigh into the conversation without scaring people . Steve every time he talks he says how its your job, guys, in congress and in washington. Its your job to do things from here. What does he do, call them a bunch of morons at this point . Maybe he tells them to rise above, that could be the thing he does. You got a pin on you . Im wearing a pin here. Are you going to bring an extra for bernanke . What would be the worst thing he could do today . Oh hes going to be extremely cautious. Theres no downside on this one. What he wont do is talk about anything the fed might do to tighten policy down the road. The one mistake they made over the years they were concerned people would be afraid of the inflation outlook that they constantly talked about when theyd take things back and what were dealing with right now is all of the expiration of the short term stimulus measures on the fiscal side, he doesnt want to create the same cliff problem on the monetary side. Will he undo what happened to the monetary market, investors decided theyre coming to a compromise and he gets on the floor today and says you guys arent compromising, you have to compromise and people will define something from that . If he pitches it too negatively he could fall into that trap. Have you seen the new paper that says the central bank has made the problem worse keeping rates so low for so long and we risk going down the same path as japan . There are good reasons to doubt whether low Interest Rates are having the effect they think theyre having. Its more a question of whether they have any fact. Theyre restraining Economic Growth at this point so yes ive seen the paper. Thank you. Coming up, caesars ceo a member of the fix the america campaign, gary loveman. Up next, hear how charleys grilled subs got its start from the campus of ohio state to hundreds of franchises around the world. Were going to grill up a few cheesesteaks and talk business next. D. You see they all have something very interesting in common. They have teachers. With a deeper knowledge of their subjects. As a result, their students achieve at a higher level. Lets develop more stars in education. Lets invest in our teachers. So they can inspire our students. Lets solve this. Welcome back, everybody. Shares of hewlettpackard the companys stock is down more than 10 in the premarket after it came out with a statement talking about an impairment charge it will be taking for a company it bought in 2011, autonomy is the name of the company. Theyre relating it to serious accounting improprieties. David faber, who broke the story, is saying its fraud. The can. Is not calling it but call it everything short of fraud when they lay out their own internal investigation. 8. 8 billion charge related to it, 5 billion of that is linked to serious accounting proprieties, disclosure failures discovered by an internal investigation by hp and forensic review, acquisition made under the last ceo, but meg whitman has to deal with this. Shell be joining david faber at 10 45 to talk more about it. The market is already paying big attention to the story that david faber broke just at 7 30, about 22 minutes ago. The stock is down by more than 10 . Also came out with earnings today but thats not the news the streets paying attention to. Its the story what happened at autonomy and the charges theyre taking as a result. Dow futures probably reflect that at this point. Despite the uncertainty hanging over the markets one American Made companies is having one of its best quarters ever. Bob wright of charleys, thanks for joining us. I can imagine during the financial crisis and afterwards with franchisees, they have to get business, Small Business loans. Thats probably been tough and facing the fiscal cliff youre hanging in there. We are, thanks very much, thanks for having me. Its like one thing after another. How is it right now, before the cliff and after the crisis, right . Well, weve been real fortunate through the recession and even during this slow recovery to be able to grow not only our samestore sales but also our unit count. As of today weve got 478 locations around the world, and weve built over 60 stores, closing in our 500th location before the end of the year. Weve got rapid growth, weve had samestore sales growth during that same period of time but yeah its tough. Whether its the fiscal cliff or you know, the looming debt discussion that we know is coming next year or the Ongoing Health care debate, these are serious issues and our franchisees know they impact them. We have as i mentioned over 400 stores. 210 individual franchisees so were a Small Business oriented company. Theyre just looking for some certainty, theyd like to know theyre in an environment thats more business friendly and of course for the brand, our job is to do all we can to build the brand and help them succeed not only with sales but were watching costs, too, if theyre operating in an environment with higher costs and regulation, weve got to do what we can to help them make a profit and employ people. They must be watching negotiations in washington closely. Do they care if taxes go up on the high end . They absolutely care. They are truly Small Business owners, and when you meet our franchisees like so many Small Business owners around the country, theyre in their stores, working the grill, dealing with their customers every day, theyre the ones on the front lines hiring employees,ing making decisions whether theyll buy new equipment or build another location. Theyd like to know what environment theyre operating in. They effect them personally and the families of the people that work for them. Can you get a franchise alone . Is it easier than it was a year ago . Yeah, credit market has loosened up a bit for our franchisees and were fortunate our model in the investment on the investment side that we dont have to be highly leveraged and our franchisees dont have to be highly leveraged going in. Theyre able to pay investment out of cash but whenner this borrow money theyre getting sba loans out there, Smaller Banks but it is tougher and it affects their growth. Thats for sure. The smell is killing me here, i mean in a good way. Its 5 00 somewhere or noon somewhere. Bob wright, thank you. We appreciate your time this morning and keep it short. Are you going for the sub . Which way . I dont know. I could eat it but i know hes an ohio state fan. Go blue this weekend. Im going to holdoff. When we come back well talk about betting on a deal to avoid the fiscal cliff. Caesars chairman and ceo gary loveman is also a member of the fix the Debt Campaign. How his business could be impacted if we go over the cliff and outlook for the gaming industry. David faber breaking the hp story just about 26 minutes ago, this is a big, big deal, hp is now saying its going to be taking a massive impairment charge, 8. 8 billion for autonomy, which is a company it acquired in 2011. Its saying that 5 billion is linked to serious accounting improprieties. David faber its fraud, impacting the dow futures because its a dow components. Dow futures down by 44 points. Bring some over, joe. [ engine revs ] [ male announcer ] the mercedesbenz winter event is back, with the perfect vehicle thats just right for you, no matter which list youre on. [ santa ] ho, ho, ho, ho [ male announcer ] lease a 2013 c250 for 349 a month at your local mercedesbenz dealer. Tdd 18003452550 tdd 18003452550 and the streetsmart edge Trading Platform from Charles Schwab. Tdd 18003452550 gives me tools that help me find opportunities more easily. Tdd 18003452550 i can even access it from the cloud and trade on any computer. Tdd 18003452550 and with schwab mobile, tdd 18003452550 i can focus on trading anyplace, anytime. Tdd 18003452550 until i choose to focus on something else. Tdd 18003452550 trade at Charles Schwab for 8. 95 a trade. Tdd 18003452550 open an account and trade up to tdd 18003452550 6 months commissionfree online equity trading tdd 18003452550 with a 50,000 deposit. Tdd 18003452550 call 18008368799. Washingtons big gamble. We get this a lot. Does caesar live here . Uhm, no. I didnt think so. Why the ceo of caesars is worried about what happens if the u. S. Goes over the fiscal cliff. Plus the ripple effects. Michael powell, former fcc chairman, makes the december 31st deadline regulation and media industry. Breaking economic news. October Housing Starts as the final hour of squawk box begins right now. Welcome back to squawk box here on cnbc, first in business worldwide. Im joe kernen along with becky quick and Andrew Ross Sorkin. Our guest host, former democratic congressman harold ford, now a Morgan Stanley managing director and joe watkins who served as a white house aide to former president xli, h. W. Bush. And not a managing director. No. Youre still doing gods work. You havent cashed in yet. Im kidding. Im kidding. No more cheesesteaks for you, young man. Exactly. U. S. Equity futures at this hour are down, wow, it was down 20, now its down 50, you know why . Because of hewlettpackard. This is a massive drop for hewlettpackard, only the third, its the third lightest stock in terms of the weightings in the dow components, makes up for 0. 8 , but that is a drop. Its trading at a tenyear low. 88 left. Could have brought that back in 2002. It was a 40 stock not that long ago. We dont even go back that far, unbelievable. Lets talk about exactly the details here. Hewlettpackard reporting Fourth Quarter earnings of 1. 16 a share, a twocent beat, Current Quarter Earnings Guidance short of street consensus. Here is what everybody is paying attention to, david faber talked in the last hour, hp is alleging it was the victim of a massive fraud when it purchased the uk company autonomy, the 10. 3 billion deal closed in october of last year. The stock falling to a tenyear low as we said in premarket trading. Ceo meg whitman is going to be joining us on squawk on the street at 10 40 a. M. Eastern. This is a story well be talking about all day. I was just looking at, we were talking about bankers before, this is not a good day if you were a banker on this deal so barclays advised hp to buy this thing on the sell side, you had everybody and their brother, frank quattrone, ubs, jpmorgan, bank of america, youd think somebody would have caught it. People want to get paid. Nightmare for bankers and deloitte. Best buy initially up on the news. This is a 13 stock at this point, the can. Is reporting three cents a share on an adjusted basis, below expectations, which were up at around 12 cents a share and samestore sales were down in the third quarter, 4. 3 . Why is the stock trading up . The company itself is saying this is an unsatisfactory performance. So the results only strengthen our sense of urgency and purpose, but the president and ceo is saying himself this is clearly unsatisfactory. Actually now it could be down. It could be moving a little bit lower. Now you can see it down five points or so but it was a 40 stock not that long ago either, now down at at this point isnt that a gamble on whether theres a takeout . Either its a takeover or its not. The guidance theyre giving is looking at Free Cash Flow, for 2013 theyre saying 850 million to 1. 05 billion for fiscal 2013, comparing with the companys previously given guidance of 1. 25 to 1. 5 billion provided back in august, so theyre lowering the Free Cash Flow guidance as well. I had a story last year, i buy the tv set for christmas, then over the weekend, the price went down at best buy, i go back to best buy and the price is lower than when i bought it two days ago. Oh, no, we cant match the price that we got for the weekend and i go but i can take it back . Yeah, you can take it back. Okay, so take it back and then i bought it on amazon. They wouldnt give me the credit. I told you the worst story was i go in and look for the stuff but with no intention of buying and the guy wants to help you and you dont want him to help you and you have to get out of the conversation at the end because youre not going to buy the thing and you say ill come back with my wife, some kind of nonsense. You say that in. What would you do . It affected you. You said im coming back and you never did . I bought it on amazon. Guy is still looking for you bought it on amazon. Our newsmaker of this hour is part of the fix the debt ceo leadership council. The group wants washington to rise above partisan politics to reach a budget deal before the end of the year. Gary loveman is Caesars Entertainment president and ceo. Great to have you here. Great to be here. Why is this an important issue . What happens if we go over the fiscal cliff . It would be an unpleasant experience for a company like everyone, for a company like mines that depends on abrupt reduction in gdp and rise in unemployment and concern for the country doesnt bode well for us and all of the ceos. We see this as an eminently preventable problem. As pragmatists there are a number of solutions and with he need to get one. Gary, until the last week or so the market seems to have factored in the idea wed get a fix to the ifisical cliff. Have you seen it at all in Consumer Spending that you monitor coming in . Our consumer Gaming Center has been lower in the last few weeks. If you think there is a deal to be had youre looking not only for an aversion of the fiscal cliff but maybe a broader deal beyond that . A broader deal. There has to be entitlement reform to address whats going on with the escalating cost of the governments undertakings and some expansion of revenue. We would hope through a broadening of the tax rates. We have a weak economy so the timing is important. You dont want to do something that makes a fragile economy immediately worse but you want to put the country on a sustainable path for fiscal x n discipline for a period of time. Our guests have offered us insight into what two sides are thinking. Harold, when you hear an idea of broadening the base without necessarily raising marginal rates do you think Something Like that is going to happen . Possibly. Although i would ask all around the table, particularly gary, youve had secretary geithner and the president , and i think its fair to say if there was one specific thing president obama campaigned on, it was raising revenue by raising the rates on the top earners as a part of any deal. Secretary geithner said you cant limit deductions and credits enough to create the revenue Going Forward to sustain, put us on a sustainable fiscal path. Could the fix the Debt Campaign embrace the marginal rates as well as address what we all know the entitlement challenge or the real money is and joes talked about this eloquently as well, could you embrace a revenue plan that increased rates on top earners as well as a plan to avoid going off the cliff . One of the premises is nothing is off the table. There if that has a broadening of the base and entitlement reform and entitlement reform is certainly the top item on the list of things that needs to be handled. Top earners, would that be 250, would it be a million . What would you say . I dont have a big dog in the fight as to where that cut would be but if youre really trying to generate income for the governments accounts it would have to be at the 250 threshold. As you escalate the threshold you get to a smaller and smaller population. Unless you broaden the base. I can sell broadening the base getting at a whole new pool of money that democrats, if they just looked at it and realized whats there. Broadening the base means a lot of things to a lot of people. Theyre jonesing for this four point increase which rich people you dont get at them with ordinary income. I think the issue is much of fairness. Fairness . 10 pay 70 , harold. You want to trade with the bottom 30, im sure theyd take the trade. Its a progressive code still. Im not here to make the argument for that. Im looking, we find ourselves at a moment at an election with consequences, one of the leading republicans in the tea party, allen west, congratulations to Patrick Murphy who beat him, one of the loudest tea party members, perhaps they get closer to getting a deal. The president won by saying he wanted to raise revenue. Won for a lot of reasons, i dont remember him pounding the table. Joe, he won. Im not here to litigate youve got domenici and rivlin, simpsonbowles, his own panel and theyre talking 28 . Ive written and said repeatedly that the president should have embraced that early on. Thats 28, not 39. Its below where it is now. He argued for this, the only reason i asked gary the question is we are now less than 40 days away from a big moment and the question is how do we get beyond it. We have a 50 50 chance of going over. The president is willing to take a bungy jump over the cliff if republicans dont move where he wants them to move . Austan goolsbee is quoted in the wall street journal yesterday saying if the president does not have the debt ceiling challenge attached to it or addressed in it, that its his belief that the president s not going to sign it. He didnt say hed go off the cliff but you dont have to be that bright to know what that means which is the only reason i asked gary as we look at big, medium and Small Business leaders, how willing are they over the next several days, next few weeks to say mr. President were willing to go with you and willing to ask republicans what is it you have to have as a part of this deal. Otherwise we find ourselves in a big, big mess here. Debris it would be unpleasant and painful for Companies Like yours and many others. Will the house go for just extending 250 . Nope. They will not do it. Nope. Its been two years the president has been saying it. Nope. First i thought it was about reelection, i thought he was backing the republicans into the obstruction corner making them look bad and driving their approval rate down. Now the election is over i want to broaden the base. I dont care about that. Youre talking about going after Capital Gains and dividends. I dont want to go through marginal rates. I want to do it through deductions. The math never gets you there, many say. The critical argument in this whole discussion is that you have to attack all of the elements of this. I dont think we have enough time to attack all of the elements and get consensus. How does the short term deal get to you a better longterm deal where you work out a lot of these things . You have to have the gross anatomy of this put in place early on. The driver of the federal budget problems principally is entitlement problems and you have to feather in a resolution at the same time. As an economist if you want less economic distortion and you want the country to have the biggest pie available for distribution, however politicians seek to distribute it, you want to broaden the base, generally seek to reduce rates, generate Economic Growth and all of us can fight over how we want to distribute the gains of that, but this notion of walking up to a cliff at the end of the year that will lead to an immediate reduction in gross domestic product, this is People Holding gasoline over each other and each holding a match daring to throw it. 250 and above, thats 80 billion on a trilliondollar deficit. You might have to do a combination of both though. To actually get to the real numbers that were talking about. It depends on if you assume, and see the promise people see broaden the base as a euphemism for making people pay taxes who arent. Not just 250 and above. Broadening the base of money that is available for taxation. Taxing everything at ordinary income rates. Its an enormous document littered with deductions. What is your effective tax rate. In the 20ish percent rate. We have a lot of other sources of income so if you say to someone like me your deductions are going to be capped at a certain level, 100,000, do whatever you want, knock yourself out. At the end of the day youll write 100,000 at the end of schedule a, and bring your rate down, there will be less economic distortion in the higher rate of growth and the government will have more proceeds in its treasury. Weve heard people say thats more likely a solution because it avoids the Home Mortgage deduction or going after charitable donations, you dont take out any of the sacred cows. This is crazy. Lets say you have your 50 pot of deductions, ultimately it will hit the mortgage deduction and hit the charities and hit everybody. As a politician you dont have to say youre the one. If it were 100 it would hit most people. Republicans argued forever you cant raise taxes because, and you frankly have to lower taxes so theres more money in the system. Thats right. What were talking about effectively no matter how you square it is raising taxes so theres less money in the system. This is probably the reason why i dont have confidence. You asked me at the beginning of the show what was my prediction, were we going to make it . Im not confident based on past performance of congress im not confident that we make it. We dont have enough time. There must be something to leaving money in the system because you wont raise below 250. You do realize, you only want to do it on the top 2 because theres some notion it would hurt the economy if you raised it on everybody else. Absolutely. The people making 250, depending on what part of the country 250 is not a big number. Two kids in college, a mortgage . He has made clear he does not want to impact and im not here to make the case this is the right course. Im not a member of fix the debt but i share their goal. The president said he will do nothing to impact adversely middle class earners. Talk about closing and limiting deductions, you have to measure that, too. They believe in fairness. Part of the argument for raising taxes on the highest earners if youre going to reform entitlements you have to do it in a fair way impact everybody. Im not sure the way they want to do it the best but with 40 days left we better figure out how to get closer to one another an further away. I applaud fix the debt but at the end of the day were 50 50 in getting this done and republicans, they lost eight seats in the house, democrats picked up seats in the senate and the president campaigned on one thing specifically, raising revenue by raising taxes. My own Commission Said lower rates to 28, why would i try to be raising. If you didnt embrace one could argue that wasnt your commission. He didnt embrace. He didnt embrace the findings. 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Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. Im going big. [ male announcer ] good choice business pro. Good choice. Go national. Go like a pro. Welcome back. If you are just waking up the big story of the morning is hewlettpackard, the company came out with earnings, but thats not what the market is focusing on. They said they are going to take a massive impairment charge of 8. 8 billion for a company autonomy that it purchased back in 2011, they say 5 billion of that is linked to serious accounting improprieties. David faber says its fraud. Hes using that word, he brought the story to us first at 8 30 and he will have meg whitman joining him on squawk on the street later this morning. That dow component down by 10. 9 . Well see where it continues to trade. Well take a quick break. When we come back caesars gary loveman takes a gamble on squawk. Stick around. , and save your money. Joe doesnt know it yet, but hell work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. Hell start investing early, hell find some good people to help guide him, and hell set money aside from his first day of work to his last, which isnt rocket science. Its just common sense. From td ameritrade. [ engine revs ] [ male announcer ] the mercedesbenz winter event is back, with the perfect vehicle thats just right for you, no matter which list youre on. [ santa ] ho, ho, ho, ho [ male announcer ] lease a 2013 c250 for 349 a month at your local mercedesbenz dealer. Can i still ship a gift in time for christmas . Yeah, sure you can. Great. Wheres your gift . Uh. Whew. [ male announcer ] break from the holiday stress. Ship Fedex Express by december 22nd for christmas delivery. Oh, just diagramming this accident with my state farm pocket agent app. You can also get a quote and pay your premium with this thing. I thought state farm didnt have all those apps . Where did you hear that . The internet. And you believed it . Yeah. They cant put anything on the internet that isnt true. Where did you hear that . [ both ] the internet. Oh look. Here comes my date. I met him on the internet. Hes a french model. Uh, bonjour. [ male announcer ] state farm. More mobile than ever. Get to a better state. Were back right now. Gary loveman is Caesars Entertainment chairman, president and ceo. We were having an interesting conversation during the break about charity. Youre a pretty charitable guy and one of the things that may happen in all of this depending on how we deal with deductions is charitable deductions may go away or at least be limited. How is that going to change for example your own giving . Well i think economists have to argue when the price of giving goes up you do less giving. I dont think it would affect me very much. It could affect some more modest contributors. You have another issue in the american tax system the estate tax so people in my circumstances are not planning against their current years tax obligation, making sure when they meet their maker theyre not handling all of their lifes work to the proceeds of government but instead to worthy causes. What is a fair number for the estate tax . I think very, very few americans should pay an estate tax so i think the threshold should remain close to where the president set it, many millions of dollars so youre looking at estate taxes on very wealthy people so maybe the threshold is 10 million or 15 million and you disemploy legions of people who spend their time trying to circumvent that rule. But is it funny we always say that people would like to leave their money to a worthy cause rather than the u. S. Government. That rings, i hear it. I hear it every time someone says that because do charities spend 1 more effectively and better way than the u. S. Government . The u. S. Government takes care of those that are in need. 2 of gdp is about 300 billion. The charity you give your money so youre exerting much more control over what it does. It speaks volumes about the effectiveness of government and that people really do want to give it to a place where they know 99 cents will be wrung out of every dollar instead of 32 cents. You have a situation going on at your church. Im sure im not alone. Weve got the same issue. It would have to be, folks who make contributions who are making yearly annual commitments and worried about this number going up or deductibility being limited who may not be in the same circumstance gary is but who are making 5,000 to 10,000, 15,000 contributions to the church and saying i may have to reduce that if taxes go up, rather if we change, if you put some limits on deductibility which will impact medium size, small institutions that rely heavily on charitable donations. We are all talking about it broadly but do you think we get there on charities . I havent heard it rise to the top of the discussion really. I think these other issues soak up so much oxygen its unlikely that charitable deductions will be prominent. Here is one positive. You look at the four major plans, simpsonbowles, the ryan plan, domenicirivlin, the gang of six, they agree from territorial tax system and agree on social security, restricting eligibility, raising the age. The departure is on medicare, and simpsonbowles doesnt speak to it, the other two closer to ryan. We can find ourselves at a starting point. Its unfortunate we have less than 45 days to get it done but the reality is we have to figure out how to get it done and theres enough body of work on the table. All of the wnz you mentioned talk about lowering rates. No doubt about it. Youre still arguing the other side. Im not. Youre assuming the president s rationale. He sees the same thing. He saw domenicirivlin and gang of six and simpsonbowles. Why still hang your hat on that in. You have to bring him and secretary geithner on the show. Youre giving up now. We have to run but if i want to grow caesars, i got to lower i assume your Corporate Tax rate . No, because were a levered company we dont pay much in Corporate Tax rates. Thats not my problem. If you want to introcaesars, make sure we dont run into an immediate recession, avoid the fiscal cliff. Theyre going to kick us out but gary thank you for being here. When you take a closer look. At the best schools in the world. You see they all have something very interesting in common. They have teachers. With a deeper knowledge of their subjects. As a result, their students achieve at a higher level. Lets develop more stars in education. Lets invest in our teachers. So they can inspire our students. Lets solve this. Welcome back to squawk box. Rick santelli here. We have housing data, 849,000. 849,000. On the starts at 866,000 on the perl permits. These numbers are within the expectations, and you could see that news systems sometimes arent right on. I was looking for a bit less on the starts and the permits. I was looking for 840,000, so were a bit more there and i guess the news here continues to be the improvement, how do these numbers stack up . If we look at the recent data points, we could see 872 is still somewhat the High Water Mark of the year but look at some of the data we were getting just a year ago in the high fives and low sixes, so whether youre looking at the National Association of home floridas index yesterday, marching up to the best levels since may of 06 or starts and permits, i would have to say that i cant tell you if every region is going to have hot Housing Market as some of the stories i was reading about in miami, but there seems little doubt at least at this point before everybody starts tackling deductions like Home Mortgage interest, that its trying to get a bite and trying to grab. Rates kicked up maybe a basis point. Dollar index under duress and doing better again, the dollar that is on the yen and that has been one of the big trades last several weeks. Back to you. Rick, thank you. Steve liesman is standing by in new york and steve the big thing coming up today has to be when bernanke is going to be speaking. We talked earlier about that. What really do you expect to hear today . Not unrelated to the report we just got, becky, i think thats a good question because i think bernanke is going to be relatively pleased with whats happened to mortgages. I think there are some on the fed who wanted more of an impact on mortgage rates, given the feds decision to buy 40 billion in mortgages on a monthly basis, but what they would argue is that the effects are yet to come, because they would say that the effect of fed purchases come with the total stock that the fed owns and or is taken off the market rather than the cumulative purchases and they really havent had a chance to wind up, if you look at the feds Balance Sheet it hasnt changed very much. Seriously . Yes. Wow. I think the fed is going to see, be relatively happy about whats happening in the Housing Market, this decline is within the tolerance, you had a big jump in october, people expected something, sorry, september, people expected something of a giveback in october, maybe a very slight, i didnt get to see the northeast numbers, maybe a very, very slight sandy effect in that some things didnt happen at the end of the month but you did have a large part of the month not affected by sandy, if there are sandy effects in the northeast theyll probably show up in the november data. Although steve it seems to me a lot of the stuff the fed is doing has to be around the margins, a bigger impact on what will happen on Housing Price has to be whats happening with the jobs outlook, with the economy and frankly if people can get mortgages or not. Thats been a big question. I think those are the two key things that are happening, employment is as well as whats happening with the Credit Availability and bernanke spoke about that last week saying it seemed that some banks were being tighter than they needed to be, he talked about the potential for discrimination when it comes to africanamericans and latinos in the data shown up and says the fed is urging lenders to lend where it is prudent. Obviously the fed is concerned about bank Balance Sheets right now, and beyond that, becky, those are factors number one and two, employment and Credit Availability and the third one the Interest Rate, the one the fed feels it can effect and trying to effect. It has been affecting. Not just trying. If you have a mortgage chart, becky, it looks good but not great. Ive had some fed guys talk to me, you know, a little bit on background saying they wouldnt mind seeing a two handle on mortgage rates. Holy cow. They think its possible, but really the markets been a little bit reluctant to go that way. You had some effect, its come down if you look at 309year mortgage, 10, 20 basis points. The question is will it come down more . What is the effect of this cumulative purchase it seems crazy this idea already for a bank to lone money for 30 years at 3. 5 , you have to think things are going to be really bad for a long time to come. If you want to get that number down below 3 , youll have a rough time, because if i was making decisions at a bank you dont want to get tied into those things. Its a 30year mortgage you the consumer has the right to get out of and pay off at any time you want. Right. Me the banker youre stuck with if things improve and turn around and you can find better places to put your money. I agree but the question becomes what is your cost of funds, what is the profit on the loan, what is the fica score of the borrower. And how long you keep rates low. If youre keeping them low for the next 30 years ill write the mortgages. Most people dont hold on to the mortgages for 30 years. The average life of the loans is seven years and the other part of that, becky, is the fed is out there saying im out there to take you out, which is another pretty important aspect of the banks writing these loans. One of the big uncertainties is doddfrank. We havent heard the issue of how much the banks have the retain of the mortgage pools they write. The end of the day, there is not enough money going into the Housing Market. I went back and looked just before this number came out. If we were doing 1. 4 million, 1. 5 million Housing Starts a year at an annual rate that would be nothing, that would be a rather mediocre and now were arguing over, not arguing, over whether 870 or 850 on an annual rate is a good or bad number. It could easily be double and be rather mediocre by itself. There is a huge issue as you point out of capital commitment to the housing industry, as well as demand. Steve, thank you. My pleasure. Our thanks to rick as well. Coming up, well talk about the fiscal cliff and what it has to do with cell phone carriers and cable companies. We got the answer coming up from former fcc chairman michael powell. First as we head to a break look again at shares of hewlettpackard as we hear call me maybe. You see the stock there down 1. 30, almost 10 in premarket trading after revelations of potential fraud at autonomy before they bought the company. Were back in just a moment. Or that printing in color had to cost a fortune. Nobody said an allinone had to be bulky. Or that you had to print from your desk. At least, nobody said it to us. Introducing the business smart inkjet allinone series from brother. Easy to use. Its the ultimate combination of speed, small size, and lowcost printing. With the fidelity stock screener, you can try strategies from independent experts and see what criteria they use. Such as a 5 yield on dividendpaying stocks. Then you can customize the strategies and narrow down to exactly those stocks you want to follow. Im mark allen of fidelity investments. The expert strategies feature is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Were back, encouraging folks, what are we doing . Were arguing is what were doing. Were trying to rise above, encouraging wash ush to rise above. Hes saying im with you. But i got these other guys we have to satisfy. Im trying to rise above. Youre with me though. Will you wear a rise above pin . If they give me one. I will wear one. Well get a pin in the next break. We are trying to rise above and trying to come one a real solution for fixing the debt. Well see about that. Michael powell is the former fcc chairman and current president of and ceo of the National Cable and telecommunications association. Were hoping youre going to rise above with us. We are all lifted. We are all lifted. Talk a little bit about the Telecom Industry. Has it hit the Telecom Industry next . The wall street journal had story about scaling back of expenditures and at t announced they were going to spend 14 billion. They are dealing with the continued extraordinary explosion in the Information Age and techor and continue to make investments to capitalize and deliver on the promise which is one of the reasons why were so focused and concerned about the fiscal cliff because anything that puts at risk the chance of returning to recession, having the return of unemployment at 9 to 10 or cutting into the Discretionary Income of the American Household is something that significantly impacts our businesses. Michael youre a washington guy, handicap it. Weve had lots of people give us their over under on what happens. January 1st where are we . I believe they can get something done. I have no idea what the something is. I think only john boehner and the president of the United States right now have the most information about how that will unfold but you know what . The night of the election everybody told me it was going to be a long night and wed wait weeks and weeks and it was over by 11 00. Sometimes this institution when under the right pressure can surprise you. The fiscal cliff is a policy choice, the leaders instituted this to make good on their actions and they better make good on the public. I got a Telecom Cable question. Jeff bucchus. He made the input, joe, andrew. Your question is you changed the input on the tv and you get he says you shouldnt worry about cord cutters, they should worry about cord nevers, entire generation of people not hooking themselves up at all. Do you agree with him . One of the things were seeing in the down economy is so many young people are moving back home with their parents, seeing less of the Young College kid opening up his apartment, calling up the cable guy, connecting up and being committed to the programming. Lots of programming is available online. One is the critical Marquee Program that is the premium that drives our collective water cooler conversation in this country, homeland or madmen. Squawk box. Yeah, squawk box. Thank you, michael. There you go. These are the shows that can be found on that plaz platform and seem significant to the American Television viewer. You have spoken at length about the regulations and footpoint needed to help the industry grow and continue the investment. When you have proceedings that get opened and seem to never terminate, when you can have a continued gyration about the outcome of these things, business is adaptable but had to know with some clarity what its adapting to so were looking for increased certainty around an emerging communication space thats filled with ambiguity. Secondly you want the incentives to continue significant investment of risk capital and believe the regulator has the understanding of the costbenefit analysis of the regulations. One last thing about the election, everyone squiz it as a status quo. Well see a wholesale swapping of who will lead with the regulatory agencies, new agendas and skills and talents and important to the u. S. Economy of the quality of those regulatory leaders and the agendas. Mirkle do you expect it harder to do a deal in the next four years . We saw what happened to at t when they tried to do a deal earlier last year with tmobile. Its hard to say. Ftc and the antitrust decision, who will be leading but i continue to believe that deals are slightly tougher under this administration thats a relatively natural cycle. This is not an opportunity time for firms and private equity given the environment . I talked to a friend in private equity said this is an opportunity time. You can buy distressed companies, you can gut them, and you can hire back, may sound a little mean but you can hire back the best employees and grow them and make money. Do you not see this as a time of opportunity for folks in private equity . When i was in private equity we seemed to say that frequently that it was a time of opportunity. There may be that kind of opportunity in the marketplace with companies that are struggling. I think from the governmental regulatory review process, it continues to be significant. Number of times in the last few years weve seen some of the private equity deals run into enormous headwinds having underappreciated the Regulatory Risk associated with that, and i think that should be factored in much more fully than it is at times. Michael, we appreciate your time this morning. Thank you. Thanks again. Well see you soon. No cable . No cable, thats what people bucchus said it. They get it from a wireless feed. You may not have an actual cable coming into the house but youll get it all. Wireless and people get netflix. No, no i dont want to, you know . You got to think this through. They will find their way to squawk box. Dont worry. Z yesterday, we had a big rally, would you call it the rise above rally . I think they started listening to the campaign here, people, the word got out. Maybe they will do the right thing. Either that or the dow was already down 1,100 points. There was the idea yesterday people will potentially rise above. Look how handsome you are now. Watch the futures turn around. Cramer is going to sound off on hewlettpackard. That was a little stumbling block for rising above, autonomy was definitely sinking below on those accounting irregularities. Hewlettpackard, best buy and tomorrow a man never afraid to speak his mind, wow, we got dick back, that will be fun, Dick Kovacevich may have said no to uncle sams t. A. R. P. Offering but yes to rise above and spend time with us on the set tomorrow at 8 00 eastern. Ready or not the stock of the day is coming up. Youre watching squawk box on cnbc. E want to improve our schools. What should we invest in . Maybe New Buildings . What about updated equipment . They can help, but recent research shows. Nothing transforms schools like investing in advanced teacher education. Lets build a strong foundation. Lets invest in our teachers so they can inspire our students. Lets solve this. You wont just find us online, youll also find us in person, with dedicated support teams at over 500 branches nationwide. So when you call or visit, you can ask for a name you know. Because personal Service Starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start. Our support teams are nearby, ready to help. Its no wonder so many investors are saying. [ all ] im with scottrade. Lets get down to the new york stock exchange. David, you brought us the story of the morning. I know you two will weigh in on this. Jim, i have seen your thoughts too. You are telling people to stay away from hp and you are sorry for being positive. I felt tough in the interview but i wanted people out of the stock. Bonds have come back a bit. Cash flow wasnt so bad. Bonds reflected negativity. Congratulations on a great story broken which is going to affect everything today. I mean, listen, what will get lost is that Hewlett Packard numbers werent that bad. First half of the year theyre going to play catchup in the second year. They did stick with overall numbers. They did generate cash. Youre right. This fraud im using the word all of the language they used, they didnt say the word fraud. It the is fraud. Thats what theyre alleging. We reported it in some detail and we will again at the top to refresh people of whats going on here. Its one of the larger frauds weve seen in some time. Where does it compare to enron . Well below enron. Youre mr. Fraud, mr. Alleged fraud. By the way, best buy, terrible. The cash flow down dramatically. Hewlett packard the cash flow is good. Trying to find something positive here. You guys are going to have meg whitman on later in the program. David, as you pointed out, this was not done on her watch but she has to deal with the cleanup. Exactly. Shes the one who has already been dealing with the cleanup as we reported they began the investigation in late may. Its already been going on for a number of months. And as you say, it was leo that did this deal. There were plenty of doubters about autonomy who doubted it. The management that bought the company was wrong. I beg you to ask meg just one question. Just 5. 3 billion number. Ask where that number comes from and whether thats based on the multiples that were used in the transaction originally. It isnt. You asked the question earlier. Ive been trying to figure it out. My sense is although i need to talk to more people, they made an assumption in terms of a multiple based on the group and growth rate and margins that were real but how you back into that number and what the real value of autonomy is still i dont have the full answer. Im not sure they used the original multiple to do that. Think about what it takes to dislodge both fiscal cliff and hostess twinkies from our discussion. It takes major fraud at Hewlett Packard and decline in best buy cash flow. It was a nice interlude while it lasted. You enjoyed it. Twinkies. Well see you shortly. Committee to protect journalists. Ill see you tonight. Coming up, stock of the day. The last word from our guest host harold ford and joe watkins and dont forget to watch as Hewlett Packard ceo will join david faber at 10 40 eastern time to talk about earnings and a lot more this morning when we come back weve got it. Can i help you . I heard you guys can ship ground for less than the ups store. Thats right. Ive learned the only way to get a holiday deal is to camp out. You know weve been open all night. Is this a trick to get my spot . [ male announcer ] break from the holiday stress. Save on ground shipping at fedex office. Thor gets great rewards for his Small Business your boa [ garth ] thors Small Business earns double miles on every purchase, every day ahh, the new fabrics. Put it on my spark card. Ow. [ garth ] why settle for less . The spiked heels are working. Wait [ garth ] great businesses deserve great rewards. [ male announcer ] the spark Business Card from capital one. Choose unlimited rewards with double miles or 2 cash back on every purchase, every day whats in your wallet . [ cheers and applause ] lets get back to harold ford and joe watkins for the last word. I decided that what you have told me basically is that simpsonbowles rksz simpsonbowles, i think thats the answer. You brought it into focus with me. I think it would be easier to get simpsonbowles with boehner than with president obama. I dont think hes a true believer. We can have that debate but were 40 days away from going off a cliff or small hill depending on who you ask. The question is what can each side give to get us where we need to be. But now you are really just talking about kicking the can again. Im about rising above and rising above calls for compromise. I think harold is prepared. You are a simpsonbowles guy. The challenge is the president has drawn a line in the sand saying i want a pound of flesh period. Dont get me a number. Dont say a combination of spending cuts and a combination of discretionary of entitlement cuts and some tax increases. Hes saying theres only one number. Theres only one number. You got to give me that number. Dont give me that number, the rest doesnt work. The problem is the country voted for him whether we like it or not. I like it he was reelected. Democrats picked up two seats in the senate. The country voted for him and theyre going to say no, no, no. Youll be surprised. I think there will be a number of republicans in the house who are going to come around. There will be enough to come around. They may have to raise that number to half a million or million. Then you dont raise money. Then its symbolic. You raise more than you think. Around 250 you raise 80 trillion. Theres too little to cover in too little time. Raise 50 billion a year with people over a million. They get to a toothless agreement that gets over the fiscal cliff but doesnt deal with fiscal abyss. The president and republicans are close to agreement around