Transcripts For CNBC Squawk Box 20131217 : vimarsana.com

People frightened about how much you want to invest in the United States at this time based upon regulatory requirements and so on. The other is banks are concerned about lending. You get anywhere near a risky loan and they get in trouble, so why bother . Were going to talk more about expectations. Then at the top of the next hour, Steve Liesman will join us with the exclusive cnbc survey. As for the markets, stocks rallied to start the week. The dow and the s p are down a rlths more than 1 actually, theyre only off by about 1 from the record closes. Youre looking at dow industrials there. 15,884. The futures this morning are indicating not much movement. The dow futures are up by 13 points. S p up 0. 5 . Nasdaq up by less than a point, as well. Were paying close attention to treasury yields in advance of a fed decision. The tenyear note is yielding 2. 782 . As the yield came down, that is what gave stocks to breathe and room to run a little bit yesterday. Well be watching that closely. Among our special market guests this morning, well known newsletter writer jim grant, paul isaac of arbiter partners and the firms Flagship Fund is said to be up 30 this year, so we have a full morning of market discussions. First, andrew has the top headlines. The first one i dont know how i feel about. Facebook is expected to start selling video ads later this week. Thats not what bothers me. The journal says the Company Plans to make that announcement today. But get this part. The ads will play automatically in users news feeds. So youre going to go to facebook and a video is going to play. I dont know if were all going to like that or not. Boeing raising its dividend by 50 . The board approving a new 10 billion share buyback. The company says the buyback will occur over the next two to three years. And get your boxing gloves on. Another round of the herbalife battle playing out yesterday. The Company Announced a new audit yielded no changes to its financial statements. Shares jumped on that news, of course, in a blow to hemg fund manager bill ackman who has been betting against that stock. But he is not backing down. In a statement late yesterday, ackman argues its not the role of herbalifes auditor toes determine if its a pyramid scheme. He once against predicts that it will be shut down by regulators. Of course, it has not yet. A different take from carl icahn, talking to scott wapner on cnbc yesterday. I never really doubted that this is a viable company. You know, i guess i was one of the few people that bothered to read that report a year ago when they made so much of it. And when you read the report, if you bothered to read it, it was, i believe, nonsense then and i think all these criticisms are pretty much nonsense to begin with. You know, the statements got about certain people the statement offered rolling, never in doubt. And i think the case of herbalife and ackman, that step is the quintessential statement of that. You can have all the respect in the world you have for bill ackman, and i do, but at what point do us you have to hang it up, you cant keep this going . Is it unfair to keep saying its a pyramid scheme . Is it really a pyramid scheme . Thats the question. We dont know. No, but its been a year. I think its been now i dont know if its been a year or more than a year. No regulators have come out and said we have a problem. Right . I mean, its just i used to fly over that building, you know, 25 years ago flying into l. A. The herbalife building is green with a leaf on the thing. I dont know. Its a long time for the pyramid scheme to, you know, not but do you fight it for years and years and years . Doesnt if its Something Like that, doesnt the accounting finally sort of implode on itself . Life. Erral ive. Sooner of later, you cant get the loans and it all collapses. Ackman has been right on some of that stuff. Its like the facebook story. That will not affect me. I like the herbalife candy bars. I wish they would send me some more. I guess the question is how long can he stay in . How long can you publicly be i mean, look, David Einhorn was out there for many, many years. And he wrote a book about it. Maybe you can hang out. But its a tough sledding. And youre look, i think his greatest hope is that a regulator would get involved and go in and look a it. But if a regulator doesnt get involved, you know, who knows . This is something that and theres no definitive solution out there. Somebody out there, the consumer out there is like using herbalife, id like to hear from them. Could we find someone that uses it all the time and pays a lot of money for the powder . If youre an herbalife user, send aus tweet. I like their candy bars. Did you have one of those . I dont think i ever tried the candy bar. I tried the protein shake. You did . I wasnt so bad. I guess i dont know. I saw this yesterday and i you know, we got icahn again, great. So i dont know. Maybe im sick and in a bad mood. But i didnt really care that much. Well, my question is, if he stays in this, does ackman stay in this for the long haul or is it going to be like where he turns around and sells the stake . What is the market cap . Its all the way up to i think it was 75 yesterday i saw. Yeah. 6. 9. Thats a lot of money, a lot of dough. In other news this morning, glaxosmithkline is going to stop paying doctors to promote its products. The company will end linking compensation for its Sales Representatives to the number of prescriptions the doctors write and stop payment to Health Care Professionals for attending some of these medical conferences. The announcement comes amid criticism of aggressive Industry Sales tactics. In washington today i think thats a great you do . Dont you think . I do. You know, i like i Like Companies to be able to do what they and they will probably try and force the other Drug Companies to follow suit. The regulators are not telling them to do it. Theyre doing it on their own, i understand. You dont want demand push for a lot of pharmaceuticals. Its like, ive got something wrong with me. The drug will help what i have wrong. Therefore, i come to you, please give me that drug. Its not like we got the drugs, were going to all you people need them. Its a push, its a demand push. It would be better to be a demand pull. I applaud this as a patient. I like watching nightly news where its about ten seconds of what it does for you and then like two full minutes of i watch in horror at what could happen to me if i ever ingest one of these pills by accident or something. You know . You should thank the regulators for those extra two minutes. For me, there cant be enough regulation. Im like you. There cant be enough regulation. In washington today, president obama is going to meet executives from leading Tech Companies to discuss ways to improve the Health Care Website. Healthcare. G healthcare. Gov. The meeting is going to include executives such as apples tim cook, twitters activity costolo, eric schmidt, cheryl sandburg. Comcasts Brian Roberts and at ts stephenson. The meeting will discuss issues having to do with the nsa Surveillance Program and the impact on Technology Companies that comes a day after a federal judge said that the program almost certainly violates the law. Its weird. The judiciary is weird. And its funny the way one judge can see one thing and one judge can see and to interpret the law, its you would think it would be objective, but its not very subjective. Thats why very activist judges are the ones that worry me and scare me. And thats why we have a system of higher and higher appeals. Hopefully the best ones are at the very top. Thats what this does, basically pushes this to the Supreme Court, stops that process so the Supreme Court can weigh in on whats happening. Its pretty neat the way we do it. People complain about appointments getting held up and things. But theres a lot of Due Diligence done. When you get into a place where it really matters what you decide, hopefully your opinions and how you feel like you see how this splits people, the nsa. Theres people that hero versus someone who so if you have a judge that isnt objectively viewing it, but that comes down on one of those two sides, its bad for him to be able to say yes or no that its the law or not. Its a lifetime too. So its and then you have to get you cant just be appointed most of the time. You have to be confirmed. I know you want what did you want . You wanted this guy, edwards for the man of the year, you want him the guest host i would have him as the guest host. You wouldnt want to at least ask him hes from he turned into sort of this i wanted to seriousry, there are people that think he should be canonized. It could be nothing more than just like a little snitch, sort of, right . Im arguing that he do you think hes this really moral character . No, no. There was a push yesterday to see would he get clemency if he would stop doing leaks and the Obama Administration said no way. And by saying that, this proves that what i did was a patriotic thing to do. And im just hoping the judge isnt as opinionated as me on things. Talking about opinionated judges, did you see the judge reycoff article . I didnt see that. Judge reycoff, who is supposed to be an objective judge involved in a lot of on these financial cases writes this why hasnt anyone gotten a deal . Writes this article in the new york book review and basically says, why has nobody gone to jail . And he said maybe there wasnt any fraud committed and he rolled his eyes and said yeah, right. And the prosecutors arent on doing their jobs. This is what im talking about. Hes not going to allow plea bargains any more where the Companies Say they didnt do anything wrong and pay a fine. He wants people and companies to so hes been somewhat activist, but to be out there publicly, this article almost tried to shame the prosecutors into prosecuting. Which is its interesting. If youre the judge there are people on both sides that think someone should have been in jail and then theres people on the other side that say, you know, if youre working within flawed laws and regulatory rules, and youre working within it, then youre supposed to maximize what your so many things went into that. And now the narrative that we hear now in hindsight is so different than when youre actually there. You werent there for the meeting. They had an off the record meeting. At the time, it wasnt nearly as clear that the whole thing was ready to immediately, like, burst. And people were still talking about how small subprime was. People were still andrew knows that. Right. People were still begging for long mortgage product. It wasnt nearly as obviously. I dont agree with you at all. Judges, lawyers. Would you ever want to be a judge . Yeah, that would be great. In the miss america pageant, maybe. That kind of judge . No, thats too much responsibility. I wouldnt want to do that, either. Lets go back to washington on clip capitol hill. Budget legislation is gaining momentum in the senate. Republican senators orren hatch, johnny isaacson, chambliss all say they will vote to send the measure over the critical hurdle. In other d. C. News, Senate Majority leader harry reid is pledging to keep the senate in session until christmas. Politico reports the main desire is to approve nominees because the nominees hit the reset button when a new session convene necessary january. If they dont get it done before christmas, they basically have to start from scratch. Now it is time for the Global Markets report. Were going to head over to london to see our good friend, ross westgate, who is standing by. Ross. Good morning, andrew. Good to see you. After the gains yesterday, a little softer today for European Equity markets. Decliners outpacing advancers by around about six to three. The ftse yesterday was up some 82 points after being down the previous week. So today were down 23 points. Not big losses, just down 0. 3 at the moment. Along with the xetra dax. We had the latest print of inflation today out of the uk. Came in weaker. The annual rate of cpi, 2. 1 . But inflation hasnt been a real issue with the bank of england. The economy is doing better. They have revised up their growth forecast as we know. And there is a sense that the market doesnt necessarily believe their Forward Guidance at the moment. But still, not too bad. It may take some pressure over Household Incomes that have been strapped a little bit on the cost of living crisis. The cac 40 is do you know 0. 8 . The ftse mib is currently off 0. 3 . Lets break that down into sectors for you. Yesterday, there were no sectors that were down. Today, there are only three that are up. Also the travel measure is fairly light. Down side reresources for once doing better. But only just by a little bit. Construction and materials, oil and gas, banks are weaker, as well. Banks are very much in focused. Were focused on comments from mario draghi who has come out and basically said, look, at the moment, the single resolution mechanism as proposed from last weeks meeting doesnt cut the mustard because its too complex and it is still a collection of National Funds to bail them out. We have got another Euro Group Meeting this week where they will try and hammer that out. Dont hold your breath. There may still be one around christmastime, as well. Thats where we stand in europe. Back to you. Hey, ross, do your judges still ware those wigs . Yes, they do. In our courts, they still do wear the wigs, yes. You guys never change anything, right . If it worked for you, you think thats you know, youve got a lot of history and, you know, the british empire, all that stuff, trying to cling to the last vestiges of that. There has been a there has been a debate, joe, about whether they should change that, when they go into court they should not be wearing wigs for some of the reasons youre saying. Im not quite sure where we are with that discussion. But it has been under discussion. We stopped in like the 18th century, i think. Yeah. Some of us. What is the point . I dont know is the answer. Im not quite sure what the point is. But they still wear the stiff collars, the wil wigs, the sort of gowns that go with it, as well. So its what is the point . I dont know. Its tradition. People like i say, people tweet that to me, whats the point . They think i wear one. Anyway, coming up, ross, at least 40 of americans start off the day with a multi vitamin. This was all over the news last night. But were going to talk about our take on it, i guess, because people know about it. But new research could change that. How does this affect vitaminmakers, gnc, these companies that sort of talk about demand push. That story next. First, though, squawk sports news. The Baltimore Ravens still have control of the final anc wild card burst after 1816, this beat the lions. Justin tucker his six field goals. He was go ahead including a go ahead, a 61 yarder with 68 seconds left. The lions dropped to 77, one game behind chicago. Now to the National Weather forecast and reynolds wolf, snow again headed to wall street, right, reynolds . Youre absolutely right about that. Today we could see in some spots, anywhere from 2 to 4, maybe as much as 5 inches in some spots. All compliments of this winter storm. Although its going to mean for snowfall for parts of new york, you make your way south to the nations capital, kind of a wintry mix. Your rain, your sleet, your snow. The question is, how is this going to affect your travel . Well, it depends on where you happen to be. If you look at this map, its going to pop up any second now, you could see some delays in a few spots. Chicago, backups. Cleveland, new york, boston delays are possible. Folks, be patient. For more on squawk box, we have more coming up in just a few moments. Welcome back, everybody. Right now, its time for the executive edge, our daily segment focused on giving Business Leaders a leg up. If a multi vitamin is part of your morning routine, you are certainly not alone. But new Clinical Trials have found the supplements dont ward off chronic disease. Researchers say at best the vitamins have no effect and in some cases they could cause harm. My favorite part about this was the part in the story where it said they just realized that it not only does it not prevent diseases, but it doesnt prevent death, either. No. Were working on that. Did they think it did, though . No. That was any point. We just realized taking vitamins doesnt prevent you from dying. But theyre saying all of these things, even the drugs that work, like lipitor, things like that, you can look at do they reduce bad cholesterol . Does it seem like it helps in terms of plaque . And then longterm use, is there any change when you actually die and theres all these things that go into when a person dies. But it is sort of interesting to know if you look, did that help people at all not die any quicker . Do you take a vitamin . You told me to take a sen trum silver. I take a centrum silver. I dont know if i should any more. I dont even enough vegetables because i do the carb thing. Yesterday, after i saw this those are good carbs. You can have those carbs. Which ones . Vegetables. No, but i usually just eat meat and stuff like that, which is bad. But i looked yesterday and i take two pills, this is tmi, but i take the centrum and i take a fibercon because i dont get enough fiber. Yesterday i was thinking, if i were to not take one, which one do i definitely want to take . Youre going to get rid of the centrum and keep the fibercon, right . Right. I could be 20 as far as im concerned. Things are moving along. Moving along . Perfectly. I think we would prefer that you continue to take that, too. Okay. You, too . I found things like vitamin b do help. If you think youre getting sick. How would you this is the anecdotalal stuff people use for this junk science. How would you possibly know whether a vitamin is working . It gives you some kind of energy or something. The thing that worries me about this is that what they do say is pregnant women should continue to take this. Folic acid can have a huge impact. Becky, the most interesting story, its not this next one about the eye tan bacterial soap. No. The next one is my favorite. The more interesting one for you is that children that grow up with pets are much less likely to get allergies and other problems because it changes the bacteria in their gut. Really . So they have a different theres different bacteria that end up in your gut because the pet introduces these to you. Hey, im all in favor of that. I want a dog and cat. You about you worry about germs. No, i want a dog and cat. Why do you worry about bacteria everywhere . Dogs i dont know whether you worry about what dogs do. They do a lot of stuff. And when they lick you in the face, you better know you just licked everything. Look, i just think you kneed to wash your hands once in a while, thats all. Your dog, and when your mouth is dirtier than your hands . Just wash your hands. You get yeah, when i start thinking about all the nasty stuff. Well, now you know you hurt yourself with this next story. No, this is very important. And i knew this. We stopped using antibacteria soap a while ago. But the fda says antibacteria soap dont seem to add any killing power to regulators and regulators say now the soap may have new health risks. So the agency are asking to prove that the products that have antibacterial ingredien are safe and effective. This kal in this that has been they worry actu l hormonal issues. I just took antibiotics last week. No. Thats antibiotics that you take internally. These are antibiotics that they add to the soap that creates super bugs because were killing off the weakest of the bugs and letting the stronger ones stick around. And thats why well all have to take cypro in the furp because all of these things will be resistant. I have a lot of confidence that we will be able to find another pathway to these bugs to knock something out. You because we know more and more about how they work. There arent any really new antibiotics in a long time. We could find one, though. Theres a lot of different way toes attack these now. You have to make sure theres no side effects, things like that. Yeah, but if you get mrsa in the hospital and these things, there are some super bugs that can kill you. Theres a million steps in the way these things flourish and survive. Were doing these rational drug designs now, like the key into a lock. A lot of good things. With your scientists regulator hat on, do you think of this as overregulation . Not as much. You know what i think of as overregulation . Bloomberg. Just anything that hes decided to do is overregulation. This stuff, you know, this okay. You dont want super resistant bugs. No. This is stupid. Theyre not even effective and they can kids who are using these things, they can affect how about the latest thing is the smokeless stuff, right . The cigarettes. And someone wrote in yesterday, just because water looks like vodka doesnt mean you cant let kids have it. You how would this cause you to get how does some vapor they want to ban the vapor. Im not a big fan of the vapor. It gets you off cigarettes. It gets people who were using cigarettes off cigarettes and the idea is should you be allowed to smoke these things in bars like that. You dont want any water vapor in bars, either . Im anxious that kids are going to that these ecigarettes will become come lar and take kids who were never interested in either to be interested in real cigarettes again. Id much rather have them if theyre going to be interested in something, its going to probably be cigarettes. I dont think anyone wants to smoke on an electronic device, do they . But thats my point. They think it looks cool to smoke an electronic i dont know. It could look cool. They think it might help other people quit. I used to think when i was junker, when i looked at someone at a bar smoking, i thought they were coolinger than i was. But you dont smoke. You never have, right . No, i never have. I think everyone was cooler. It had nothing to do with the cigarettes, though. Lets talk about andrews column in today aps New York Times. It takes a look at bonus seasons. Some say bonuses should rise as much as 10 across the board. But andrew points out that it matters who you are and what you do for a living. For example, if you are a bond trader, bonuses are expected to be tiny. I guess, andrew, your point was dont you stick your column in the things you talk about . I did not do this. The producer read the article and apparently liked it enough to put it in. I woke up this morning and got a note you had nothing to do with this . Zero, nada. Andrew, i think its interesting because youre right, we are talking about bonuses being back, but this is not necessarily back to the heydays. Its not back to the heydays. And the bigger issue is the people who used to make the money money and the people who had the most prestige to the fortune 500 ceos, those are the guys who made seven, eightfigure sums. Theyre no long ter hot property any more. Youre no longer a hot property. The real hot property is basically anybody who is an asset manager of any sort, hedge funds, obviously, and others, and anyone underwriting ipos given that it was a hot ipo season this year. And there could be a secular switch, too, on this. Its not a oneyear issue. It wasnt understood that this producer might get a bigger Christmas Present than some of the other producers on the set . I didnt say that. That is possible . They know where their bread is buttered. Just like the disk jockey industry. Its old school. That is the way things work, isnt it . So its okay then. Thank you. When we come back New York Times . Where do you write the piece . The question of the day may be the taper, maybe the question of the day and maybe the question of the year, to taper or not to taper. Were going to talk fed expectations right after this. But first, the Mega Millions jackpot is likely to pass 600 million ahead of tonights drawing. Tickets are estimated to sell at the rate of 11 million an hour in 43 states. At 586 million, the drawing is already the fourth largest ever. I bought some tickets yesterday. I guess i didnt win. Im surprised. Oh, its tonight . Oh, okay. I bought two tickets. Im in. First, as we head to a break, take a look at yesterdays winners and losers. vo you are a business pro. Seeker of the sublime. You can separate runway ridiculousness. From fashion that flies off the shelves. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. natalie ooooh, i like your style. vo so do we, business pro. So do we. 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You know what were going to hear on cnbc, like repeatedly in the next two days. Taper, taper, taper, not to taper . No. All eyes. I already heard that about four times today. Because its not true. I would say very few eyes in the country are actually on this. Im keeping one eye on the lottery, too. I want things to be true. Joining us now is beth ann fesino. You two might be interested in this, i guess. Is it drama . Is it high drama . Im bringing my popcorn. How about . Its about time. Were ready for the reel to roll. You see, i think they should have done it the last time. They should do it before this time. Ive been expecting them to do it december since june. I didnt think they happen going to why not . I thought there was a lot of uncertainty from capitol hill. Certainly we experienced that. But now i think the fed has a lot of reasons to move. One, the jobs numbers. Thats pretty nice. And then we have the and then, of course, with all the fiscal shock we saw some really good readings just because of that. People are still spending. Second, were looking at the bipartisan plan, which shows that there is some fine that basically congress is willing to compromise. Well, the two things that prevented them the last time, supposedly. One was the possibility of a government shutdown. And the second one was that they werent sure about the employment numbers. So weve had a couple good employment numbers and we got the deal done. So they should do it. I think they were spooked by the feedback that they created. The Interest Rates start to go rise, it looked like it might have been impacting the Housing Market. And it spooked them, which is remarkable because when the marginal buyer sets the price, theyre the marginal buyer of treasuries, they talk about buying less. Of course the price is going to react. So its remarkable that they were spooked by their own words. I think i agree, you know, were in an environment right now where whether its Industrial Production, Capacity Utilization is back up almost to precrisis levels, those employment numbers not employment numbers, but the unit labor costs when wages are growing, absolutely, more jobs are being created, its time. Its time to get a market determined Interest Rate. This is another one of those things, depending on who you are, that if theres no inflation at all and there still arent enough jobs, why not just keep doing it . If you think it was somewhat effective to this point and theres no inflation and theres no downside, i think these guys in that room think its all on their shoulders, the whole economy is on their shoulders. I wish they didnt think that. Well, i think they also recognize and theres been a lot of talk about this, theyre start to go focus a little bit more on the costs of quantitative easing rather than the benefits. And i think thats theyre very well aware that the more they do it, you know, the less impact it has and the move costs they have. So i think thats another reason why they might need and what are the costs . Basically, the cost of growing a Balance Sheet to the size of what, 3 trillion . That is what rick was pointing out yesterday, a that youre stuck with these longterm Interest Rates. If you look at the rise in the market weve had this year well, its an opinion. But its supported pretty nicely by the facts. Which Asset Classes are involved . U. S. Equities, right . You dont deserve a bubble territory. I would submit that they are. You would . You would submit u. S. Equity price res in bubble territory . Yeah. We had 5 . Whats the multiple . We had 5 Earnings Growth this year on an ltm basis on pe worldwide. 99 multiples 18 times earnings. When it gets up around in the 20 level, tease when you tend to get overvalued. But it doesnt stay there for long. Where do you think we are right now . Probably on 2013 numbers, were close to 17. Right . We started the year down on 13. On a bubble. Its not a growth bubble, but its no longer undervalued. Its a bulk fair value. And this is more due to the rise you know, the rise in the feds Balance Sheet. Is the bond market in a bubble . Theres a bubble there. Given the global weakness in growth, what is think about what you pay for what would fair value be for a ten year right now wab do you think . Think about it this way. How much are you paying for a dollars worth of that sovereign income . About 60 bucks, right . 55, 60 dollars. Normally youre paying Something Like 20. Depending on where you sit on the curve, youre losing money on that income because youre still get ago negative real Interest Rate. The longer stuff, youre paying a lot more than the shorter. So yeah, i think you have a bubble. I go back and forth on that because there are some people that think if you removed all fed accommodation, that rates would be pretty low because inflation is so low and because Global Growth rates are so low. When we talk about them, it bears repeating that its not tightening if they start to reduce their bond purchases. Its like theyre still driving, theyre just knot on the interstate any more. Compared to where we were. Im not expecting them to increase Interest Rates until, you know, early next year. Until 2015. In a car, when you go from 80 to 60 miles per hour, you can see it yourself. But youre still driving. You are, but you can feel the change in how, you know, it is the real thing. I think it begs the question, when they start to taper, you have to ask whats the end state look like . And i think the end state looks like tenyear treasuries somewhere on the order of 3. 5 , maybe 4 . Thats the end state. Because it maybe for good reasons, though, hans. Those would be great reasons. Because the economy by then, maybe were at 3 . And that also means it brings up Mortgage Rates. So maybe with 3. 5 , it brings up Mortgage Rates to maybe 5 . The Housing Market can with stand that. If people are concerned that the economy cant sustain the momentum without taper, the way i look at it is something would be profoundly wrong if the economy needs it, right . You dont have a market at 17 times earnings. If it needs assistance by a money printer. Its suggestive of some more more troubling thing, which i dont think exists. Can i ask you one question here. I was listening to a report about the Unemployment Benefits this morning because they run out on december 20th. The extended Employment Benefits run out on december 28th for a lot of people who have been longterm unemployed. That number is Something Like 276 of the unemployed, which is a much higher population. I heard the American Enterprise institute saying this is the wrong thing to cut these benefits at this point because youre going to push those people into welfare roles and this is something they think at this point reinvesting by keeping Unemployment Benefits is a good thing. What do you think . I think that the impact first of all, im glad there was some kind of some kind of compromise among politicians, right and left. That was good news. Indeed, kind of the basically the sequester relief does help give gdp a boost in 2014 and 15 if it goes through. However, what you pointed out, that cost not extending the emergency unemployment rates for a lot of people who are unemployment, thats going to have a lot of people on people if they still stay in the jobs market, youre going to see a bump up in the unemployment rate. Youre going to see a lot of people who had checks not being able to get them and theyre not going to be able to spend. Its a big drag. Well see what happens. I was not expect that to be i was expecting it to be extended, so thats a drag for growth in 2014 and it hurts a lot of people. You know, i saw over the weekend, the cartoon, i guess it would have been in the post, but it had obama talking to someone and it said for every dollar of Unemployment Benefits, its 1. 80 you get back and obama says lets make them permanent for everyone, then. So obviously this was a question when do you, then . Youre not dealing with a why not make them permanent, then . The point was, if the economy improves a little bit more, maybe over the next year, and this was the American Enterprise institute. I did not expect to hear in from them. I know. But its a contentious issue. Once again, theyve done all these studies about whether its you know, when you stay out of it for that long i dont think you want to make but if youre looking at people who now have been unemployed for a year or longer, employers tend to look at people but i dont think its positive just because theyre able to spend money. Eventually it becomes a but their point is these are people who are going to get pushed on to Social Security benefits as a result. Or disability. Or disability and that theyll get picked up that way and that will Coast Society more over 20 or 30 years. Look at those programs, food stamps, we are it is exploding. But the Unemployment Benefits, if you get taken off of it i would add one anyway i would add one more point in terms of unemployment. Indeed these people that go on, youre going to have a situation of you have the labor Market Participation rate at a 35year low. This is even lower. That has longterm issues for productivity. Thank you, guys. Happy holidays. 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Tdd 18886486021 so you can take charge tdd 18886486021 of your trading. I want to spread a little love this year [ male announcer ] this december, experience the gift of unsurpassed craftsmanship and some of the best offers of the year at the lexus december to remember sales event. This is the pursuit of perfection. Welcome back, the everybody. It is time for the squawk box mraern. Weve talked about the fed meeting. Also on the agenda today, we have the november Consumer Price intext hitting the tape at 8 30 eastern time. That is a gauge of inflation and that is one thing that the fed is watching ago it decides whether or not to taper. Economy ichts are looking for the headline number to rise by 0. 1 . Then at 10 00 eastern time, we have the disease housing index seen rising slightly. And Amc Entertainment holdings, the Parent Company of amc though theaters is going public. The ipo is expected to price tonight. Julia boorstin will have more coming up in the next half hour. That music that we played again at the top, how many times can we play that . How many times can we make fun of it and still fought get rid of it . Were not going to play it. When we come back, were going to talk about the farm indicator. What sales of Agricultural Equipment tell us about the state of the economy, the ceo of agco joins us after this. A confident retirement. Those dreams, theres just no way were going to let them die. Like they helped millions of others. By listening. Planning. Working one on one. Thats what Ameriprise Financial does. Thats what they can do with you. Thats how ameriprise puts more within reach. [ male announcer ] how can power consumption in china, impact wool exports from new zealand, textile production in spain, and the use of medical technology in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 70 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. You can fill that box and pay one flat rate. How naughty was he . Oh boy. [ male announcer ] fedex one rate. Simple, flat rate shipping with the reliability of fedex. [ male announcer ] fedex one rate. If yand youre talking toevere rheuyour rheumatologistike me, about trying or adding a biologic. This is humira, adalimumab. This is humira working to help relieve my pain. This is humira helping me through the twists and turns. This is humira helping to protect my joints from further damage. Doctors have been prescribing humira for over ten years. Humira works by targeting and helping to block a specific source of inflammation that contributes to ra symptoms. For many adults, humira is proven to help relieve pain and stop further joint damage. Humira can lower your ability to fight infections, including tuberculosis. Serious, sometimes fatal events, such as infections, lymphoma, or other types of cancer, have happened. Blood, liver and nervous system problems, serious allergic reactions, and new or worsening Heart Failure have occurred. Before starting humira , your doctor should test you for tb. Ask your doctor if you live in or have been to a region where certain fungal infections are common. Tell your doctor if you have had tb, hepatitis b, are prone to infections, or have symptoms such as fever, fatigue, cough, or sores. You should not start humira if you have any kind of infection. Ask your doctor if humira can work for you. This is humira at work. Welcome back, everybody, agco will be holding the annual Analyst Briefing to talk about the 2014 outlook. Martin richenhagen is the chairman and ceo. Whats your outlook for 2014 . Well, its a little bit too early to go too much into detail, but we think we will face a solid year, 2014. So we are in the fourth record year in a row this year. And we think that we are in a position to stay on very, very similar level next year, as well. I realize you are a global company. When you look at whats been happening with agriculture here in the United States, there have been concerns. Farm prices have hit record levels and seem to be coming back down a little bit off of that. The corn crop is not what it was a year and a half ago. And there are people who are now thinking that farmers are not going to have as much money to spend on equipment. What do you see . Our analysts know the industry very, very well. They understand the business. I think whats important is farm income. And farm income in the u. S. In 2013, it will be up 15 . So farmers doing the last years businesses and i think they will have the money to invest. Everybodys expecting some kind of a slowdown. Right. Ive heard about some corn farmers actually hoarding the corn, holding on to it because the price has come down so much. Thats good for us. Last year we bought a storage business, Market Leader in grain storage and grain handling. Thats a little bit tail wind. That means when they decide to store, they might invest some of them investing in terms of the equipment next year. What do you see in markets like brazil . We see some because of the bnds which is the state bank system, basically they subsidize lower Interest Rates for investments. Like Farm Equipment and other things. They make certain the government makes funds available. And they cut that down for 2014. So that might be a little more difficult next year. We do a lot of that here. Now we dont know whats going to happen with the farm bill. We do this ethanol stuff. Do you lobby to keep these programs intact . A lot of people think theyre just pork. One thing is, of course, most of the money in the farm bill goes into food stamps and farmers dont get it. Only paid out. You like ethanol . You like subsidized ethanol . I like ethanol in a way that is first, i have to because its good for our business. But in general, its renewable. When you think about you might want to save some of the crude oils for generations, i think it makes sense. Doesnt make too much sense. A lot of natural gas. Thats the advantage of america now, but we discovered that recently. Thats why corn prices are so high, though. In countries like brazil, where you can have it, thats a good alternative. Okay. Thank you, martin. Whats that . Martin, thank you, martin. Have a nice day. Have a great day. When we come back jim grant and a lot more on whether were going to taper or not. Mine was earned orbiting the moon in 1971. Afghanistan in 2009. On the u. S. S. Saratoga in 1982. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation because it offers a superior level of protection and because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Taper now or taper later. Ben bernanke and his band of central bank elves have a critical decision to make. It is not our fight. It is our fight. Maybe cnbcs exclusive fed survey results will give the market a sneak preview. tis the season for outlooks and predictions. Why not ask one of the most followed names in the financial world. Jim grant of grants Interest Rate observer will join the gang as guest host this morning. The best weve ever done. Plus, the holidays mean big debuts at the box office. I swear ill be number one again. Just in time for Amc Entertainment to make its grand entrance on wall street. Nobody knows if this stock is going to go up, down, sideways or in circles. Will it be a block buster open for the theater chain . Im going to do what god put ron burgandy on this earth to do, have salonquality hair and read the news. Squawk box continues right now. Good morning, im Andrew Ross Sorkin along with joe kernan and becky quick. Theres salonquality hair on this set. Were doing well with ron burgandy there. Steve liesman with the exclusive fed survey. But, first, before we do that, lets take a quick look at the marke market. Dow looks like it would open 17, 18 points high, nasdaq, a little over a point and a half in the s p 500 would open up a point higher, as well. We see that at 2. 87. Lets talk about Corporate News. Facebook expected to start selling video ads later this week. The wall street journal saying the Company Plans to make an announcement today. Heres the problem, at least for me, the ads are going to play automatically in users news feeds. All of a sudden youre going to be watching something that you might not be planning on. Also in washington today, president obama, hes going to be meeting executives from leading Technology Companies to discuss ways to improve health care the Health Care Website healthcare. Gov. Going to include apples ceo tim cook, eric schmidt, others expected to include netflix reid hastings, also our own boss there, comcast Brian Roberts will be in attendance along with at ts randall stevenson. That meeting will also include discussions of issues having to do with the nsa Surveillance Program and the impact on Technology Companies. The gathering comes a day after a federal judge said the nsa program appears to actually violate the constitution. Youve got a cold. Yeah. Yours. I did not give you this cold. Yeah, you did. Huh . I cannot be held responsible. Youre sitting right there and you had it last week and you were not yourself. You know, you were no fun last week. At all. Remember . Listen to you. Yeah. I dont think i was contagious at that point. Think, as if you would know. How do you know anecdotally. Can i read this . Yes, please. Its been a week now since regulators gave the green light to the volcker rule. A piece in the wall street journal says banks are scrambling to reshuffle their portfolios. For example, firms are trying to line up a new way to finance muni bond investments. Also, more than a dozen small and midsized banks are expected to need to sell collateralized debt obligations under the volcker rule under that provision which limits, as you know, what are seen to be risky bank investments. Now, lets get to the cnbc fed survey. Steve liesman joins us with the finding. Weve been waiting to hear. Yes, becky, and the answer is, not december, notary, but february. Thats the average month. And well have a little change compared to our october survey from the october meeting. The start of the taper had been in april and its moved back. You can see here to february. Back two months for the average. And well see in a second that, in fact, the our 43 respondents are a little more hawkish than that. And ill show you in a second. Watch this, stopping qe, that hasnt changed from december 2014. All we have here is a somewhat longer trajectory here. And then here we go hiking the funds rate, same thing, Third Quarter 2015 remains the same. But lets take a look at how this all works out. First thing you can see here is watch how the blue bars are the old survey and the green bars shifted this way. Tapering up this way here. Another way to look at it. We have stek as our operator on the camera. He can help us out. Look at the plurality, here it was 44 for march, the plurality now 33 . Tapering by january, that includes december and january. 55 . And then tapering by february, 62 . So you can see theyre a little bit more hawkish than that february average, which is influenced by some of the green bars on the outliers. Stays about the same, were going to do 1 trillion this year. And you can see thats come down to about 450 from 650. So that 200 billion, that comes off over the time period that they suggest its going to happen. And finally, some tapering expected for 2015. 31 of our respondents think there will be some qe in 2015. Moving on and how about the amount of taper. This is just looking at you can see here, weve come up, up there in october, we thought thered be more in 2014. And now we see just about 500 billion in 2014. Did we have another one . No, that was it. The average tapering well get to in the next hour. And well also talk about the different views here about why some people think the fed ought to go now. Some people think the fed will wait, becky. If they do it in december, will you stop doing this . Doing what . The fed survey . Yeah, so we realize its useless because they know nothing . If they dont do it in december. Joe, its sponsored. Its what . Its sponsored. Oh. Thats an awesome theres 40, how many 40 . 45, we know some of them. We know all of them. Pretty much. Between 40 and 60. Knowing who they are also makes me think yeah, anyway. The fed follows this survey. Joe, all it is. They dont have to be right. Were simply gauging market expectation. Obviously they dont have to be right. Theyre economists. We try to figure out, is the fed meeting, beating, exceeding or otherwise what theyre doing relative to what the market expects . The fed uses this as a tool to see if the communication is working properly . Thats one of the tools they use. They dont release the results of that to us for three weeks. We can put this out and we know they read it. They do . The central bank. Yes, absolutely. Steve, thank you. My pleasure. Well have more on this fed meeting. Right now, were joined by bob hellor, also a cnbc contributor and jim grant, he is the founder and editor of grants Interest Rate observer. So bob, steve says the can economists are expecting this not to happen until march. You think theres a pretty good odds of it happening right now, this week. Well, i suddenly think they should be doing it right now. Theres no reason for it to keep putting all that money into the market. The economys performing very well, Industrial Production is at an alltime high again. So why not taper right now . All the stars are lined up. You know, bob, youve been in the room before, the two issues they can point to are the idea that the jobless numbers theyd like to see more months of improvement before they do something. The second would be the Inflation Numbers are running so low it gives them cover. How big of a factor do you think those issues play . Well, they always are. And i think theyll be very stimulative discussion around the table. And the magic of the Federal Reserve Board Meeting really is that at the end therell be a consensus. Youll have an almost unanimous, i dont think totally unanimous, but almost unanimous view that will crystallize around the issue. One key person is janet yellen. Does she want it off the table. Jim, i know you think this is long overdue. A move to taper, the effectiveness of qe stopped a long time ago and there are Serious Problems that could come up from extending this, correct . You see it all over the economy. You see it in health care, of course, on swal street. Ben bernanke addressing the students of George Washington university. He seemed not to have the selfawareness to recognize what the fed is doing is exercise in price control. This is stocks. Gov, bonds. Gov. You know, you hear these medications advertised on tv and they say, you know, for heart condition. Then they tell you what theyll do for you. Then in the end, they say, well, it could also induce hair loss, nausea, impotence, weight loss, weight gain. Those are good things. Cancer. Then you think, heart attack, whats so bad about that. Right. The unintended consequences of this exercise are much more interesting than the very meager results to date. And the unintended consequences will roll out over the years. I have a quick question for steve. New york times today, right here, many detect end of line for stimulus by fed. Last week my good friend yeah. Last week last week definitely not happening this year. Same story with a different lead on it. No, he said will probably not come on wednesday. Probably not come. Whats happened here . I think he may have seen the world a little more like i saw it. Which is i very clinical, looked at the three tests the fed gave us, found them generally to be met and said it could happen this week. And i thought it was more likely than not. And the people out there agree with me. All of this is based on clinical stuff. You know, its just our reporting, andrew. And just as much as you would discuss your reporting, i would discuss my reporting. I want to make sure its more than clinical. Its more than clinical. He says its can i ask jim a question . Yeah. Youve been pounding the table about the negative effects for some time, and i dont see them yet. When do you give up the ghost and say i was wrong about this. The currency hasnt crashed. And you know what, judging by how the market reacts to less qe or more qe, qe looks extremely effective. Well, im reminded of the bra brainiac who said its very well in practice, but whats the theory . Tell me, steve, what is the theory of price administration. Ill tell you simply what the fed thinks its doing. It believes the zero lower bound it has a role to play in putting the economy back on the track of what it considers to be potential growth. Five years and they are conjuring 85 billion a month with which to buy with which to buy securities, with which to enrich greenwich, connecticut even more. Steve, i got up this early to talk. I can listen to you at home sitting in bed. Let me finish. I thought the criticism of the fed was that it was hurting savers. The criticism of the fed is that it is embarked on a dangerous course of monetary manipulation. You said theres no inflation, how about on wall street, how about stocks and bonds and art and ferraris and farmland. Assets are up. The Asset Holding portion of the community thinks its great. You think its great. It is not great. The fed cant the fed can change how things look, it cant change what things are. The fed suppresses the rate at which earning assets are valued. And everyone thinks, oh, no problem. Jim, what do you think our fair value is . Okay. Biotech, 600 billion market cap, never before valued at seven times book value, all these ipos. 33 times price earnings ratio of the few companies that have earnings. Somebodys going to get hurt. And at the end of well say, oh, yes, they shouldnt have manipulated the stock market. But the idea as i said, the idea that something bad will happen is not a model. You call for inflation for five years, it never happens. At some point you know what a model is . Not having a model. The fed wouldve done better by all of us if it didnt have the equilibrium model. Not sure what that means. But okay. Were going to continue this conversation. Youre back on the you think you score points with saying that the savers are the same people that own the assets, theyre not. The savers are the people that have 50,000 total in cds and trying to live on it. Not the greenwich people. No, the savers are the rich people, joe. Theyre fine. Hes right. Theyre fine. The savers its different from but you cant argue. That argument two weeks ago, you bring it back did not. Yeah, you did. Savers are different than the people that own ferraris. The people with the money are the savers. They hold stocks and they own bonds. Rich people get helped by this, poor people dont. Rich people arent in stocks if you have a lot of money, assets what has the fed done with Mortgage Rates . What has the fed done with Mortgage Rates . You can qualify for a mortgage if you have an 800 credit score. Elderly people on fixed income. How about those people . They dont own stocks. Some of them do. Id say a lot of them just have the money. A lot of them are trying to live on fixed income from cd. Rich people dont have cds. Greenwich people dont have cds. The poor have been hurt. Thats the conventional wisdom at the table. Youre sure . I dont agree one bit. We know that. I dont agree one bit. People can show you facts and you dont change your opinion. What facts, joe . Because the rich people arent in cds. Theyve got art. Why not . By definition rich people are the savers. Everybodys got a little savings and theyre trying to use some are hurt more than others. The people hurt more than others are the people on the fringes and those are the ones who potentially could have been helped by the mortgage situation. The people who are helped the most are the people that are the richest. All those people. Not people that arie looking at their some people got a much bigger bang out of this. They dont have mortgages theyre paying lower rates on. Not necessarily. If you dont have an 800 credit score, you didnt necessarily qualify people who had 700 credit scores. Steve, i know people who were under water in situations you could know any number of things, but that doesnt make it accurate in terms of the total percentage of people. Were going to continue this conversation. We do have a twohour show today. Steves coming back later today. Jim grant will be with us for the next two hours. Bob, thank you for your time this morning. Coming up, we have a topranked value investor. Plus, more snow for the northeast. It could mean a Winter Wonderland on wall street today. Were back in a moment. The American Dream is of a better future, a confident retirement. Those dreams, theres just no way were going to let them die. Like they helped millions of others. By listening. Planning. Working one on one. Thats what Ameriprise Financial does. Thats what they can do with you. Thats how ameriprise puts more within reach. Welcome back, everybody. In Corporate News this morning, a federal judge has rejected nasdaqs bid to dismiss lawsuits by investors who accuse the Exchange Operator of botching the ipo. The status as a selfregulatory organization gives it immunity of claims it broke securities laws and negligent in how it executed orders to buy and sell facebook shares. Speaking of the social networks public offering, a former candidate of governor of oregon has been sentenced to prison for fraudulently convincing investors. Craig birkman told investors he would use the money to buy preipo shares on facebook and other companies. Instead, he used new investor money to pay off earlier investors and to fund his own expenses. Was that the american greed guy, too . I dont think another guy. Different guy. Two of them. American greeds like like americas most wanted. Yeah. It is. I had a friend who got to answer the phones. He did a lot. Guy that tragedy hit him and he did he turned that into really when we come back, weve got names that should be in your portfolio. A special whats working is up next. With the fund manager who is not so hot for amazon. Com. Were going to find out why right after this. Trading inspires your life. Tdd 18003452550 life inspires your trading. Tdd 18003452550 where others see fads. Tdd 18003452550. You see opportunities. Tdd 18003452550 at schwab, were here to help tdd 18003452550 turn inspiration into action. 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[ female announcer ] today, cisco is connecting the internet of everything. So everyone goes home happy. Welcome back to squawk box. In the midst of a booming stock market, lets hear whats workingone gurus portfolio. Paul isaac is founder and joins us onset this morning. Good morp. Good morning. Lets talk about whats working. If youd indulge me on one thing because we teased it before the break. We said theres one thing thats not working, something you dont like, which was amazon. And im fascinated because we talk about amazon every day around this table. Why dont you like amazon . Theres a growth model where you have companies theoretically will grow into great profitability. And in the meantime, theyre funded through the combination of negative working capital dynamics, stockbased compensation and antidilutive capital raises. And i think amazon is probably the most Successful Company in that model. It hasnt worked so far, some of the other things have worked. I think amazon has probably some very good businesses in it, but given its valuation, i think its very expensive. Are you shorting the company . Yes. You are shorting the company. And separately before we get to some of the longs what price . Well, weve actually your voice doesnt sound that high yet, but if you were shorting it at 200, youd be talking like that because you were getting squeezed. Some other things have worked this week, too. What we do is roll calls in it and basically have been doing people who have shorted amazon. Its been a hard trade. Most of them arent in the business anymore. You run a whole bunch of different positions. This wasnt hasnt worked. Some other things youve been doing it for years . Shorting it . Weve shorted it off and on for some time. The short position that we have on now has gotten larger because the stock has run up. It doesnt start as a particularly large position. Cant win them all. Before we hit actually the long names. Jim, i think you suggested in your own way that we are in an equity bubble. Do you buy that . Different question. Which is that you have somewhat officially high valuation of certain equities because your discount rates are being suppressed in comparison to the very low bond rates that have been maintained as a result of fed policy. In that sense, you may very well be getting some distortion of the market. And i think the fact that the stock market is as nervous as it is about the taper is an indication that other people implicitly have some concerns that your valuation relationships will change if you move away from this highly stimulative monetary policy. I didnt want to put words in your mouth. No, you didnt have to because paul just said them. Bravo, paul. Lets talk about a couple of stocks you like. Capital senior living, why . Basically its you still have below replacement costs returns on independent living units. Youre getting some escalation of rents over time. It actually is able to fund itself with term financing at very low rates today. And theres a its trading at a reasonable multiple to the funds from operations partially because its a c corporation, and it would have a significantly higher valuation. Were going to have to run, but devon energy you like and xpress scripts. Its a reasonably priced Energy Company and theyve done terrific over the long haul in allocating capital. Amazons going to make 73 cents. 73 cents, 388. Yeah. But, look, the problem with amazon that is they probably have a pretty good media business. The problem is if they ever were to slow down revenue growth, theyd have a problem. Well talk more about the fed, squawk box will be right back. Change engineering in dubai, aluminum production in south africa, and the Aerospace Industry in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 70 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. I wanna spread a little love this year i wanna spread a little love and cheer [ male announcer ] this december, remember true artistry is measured by a passion for bold design and advanced technology at the lexus december to remember sales event, with some of our best offers of the year on our most luxurious models. This is the pursuit of perfection. Welcome back to squawk box, everyone. In our headlines this morning, kkr is acquiring its specifically financed company Kkr Financial Holdings and a 2. 6 billion deal. Itll be paid for those with kkr shares trading at an alltime high. The sec has asked a federal judge to order former Goldman Sachs Vice President to pay more than 1. 1 million for his role in a failed 2007 mortgage deal. The trial stems from the governments investigations into causes of the 2008 financial crisis. And aaa says that nearly 30 of americans are expected to take a trip this holiday season. More than 94 Million People will be traveling 50 miles or more from home some time between saturday and wednesday. Its going to be crowded on the roadways. Its fabulous fab was tourre already taken . Hes on the cycle. So we had to go its got an e, doesnt it . The 1. 1 million theyre going after, by the way, Goldman Sachs may end up paying. Youve asked that before. I wrote about it. We talked about it on the show. They claim theres no deal. But if you read the papers that the government actually cited this conversation. Weve seen your column today. We need to go back and look up this previous column. You are grouchy today. Hes got a cold. From you. By the way, if i get sick on my vacation, im blaming you. Get away. Youre disgusting. Weve got to stop holding hands. Doing footsie. That is so nasty. At least wash your hands with that soap. We have a fed panel now. He threw a dirty tissue at her and know her thing about germs. The fed meeting kicks off today and the markets focused on one thing. A finance minister and a former Federal Reserve senior economist and a professor at the university of Maryland School of Public Policy and a former treasury chief economist. Professor mahon, we had an argument about savers being hurt. I think youve been a pretty big proponent of the accommodative fed and qe, does it ever cause you pause to think about People Living on fixed income and the people buying rothcos are doing well but the people trying to make ends meet arent doing so well . Well, actually, ive sort of argued that quantitative easing three was one too many or perhaps two too many. And earlier in the segment, you had mr. Grant talking about the differential wealth impact of the Purchase Program, the equity valuations are benefitting a relatively small share of the population. So what i see Going Forward is no taper in december because its a little bit too early, but i think a nuanced approach to taper in the march meeting will be to reduce the tapering or reducing the expenditures on u. S. Treasuries because thats elevating the market too much. But they will continue to purchase the mortgage back securities because those are supporting the housing sector. And the bulk of wealth in the middle class is in housing. I think this nuanced approach to taper in at the end of q1 is really the direction theyre going to take. You werent necessarily saying that that that was that you agreed with everything. You said what theyre looking at. Because the economy not that great. No, its not. Housing still isnt up, construction, employment, all those things. And that is what were seeing from people that are sort of enablers. They talk about why not do it when things still arent great and youre not seeing any negative effects anyway. Do you think there are negative effects that we will know about two and three years from now . No, i think the Federal Reserve has the capability to reduce the size of the Balance Sheet and continues to have inflation in its sights. I mean, thats one of the reasons why theyre continuing on with the Purchase Program in both of its forms. The treasuries and the mortgage back securities is that inflation is still, you know, basically dead. Theyve got their eye on it, though. And they have the tools in order to prevent its return. Were not looking at 1970s again. Professor, where are you on all this . I understand why the feds going to wait. I do worry more about the asset bubbles and things about that. Im not all the way to jim grant. Inflation is low right now. I worry about the distortions in markets and worry that in 2015 we might see some of the negative impacts of the distortions caused by the fed. Which market worries you the most . Is it a worry the feds going to own a lot of this paper when rates go up they could have a huge loss . Is it more what you think in just equities being valued at more than theyre worth . Yeah, its probably the fed. I dont worry too much about the feds profits. You know, i worry more about the bond markets that companies, i mean, sort of financing deals that you guys talk about every day have become addicted to that. Kind of 2006 concern where any deal could be done. And when that environment ends, then we have fallout. Weve got other people, i think of druckenmiller and other people, Business People right now they dont know how its going to play out the exit, theyre not doing things now to help the economy. Its actually counterproductive and raising the uncertainty now because were unsure of how the fed exits. And thats actually hurting the economy. Is there any truth to that . Thats interesting. Yeah, sure, there could be some uncertainty. The fed is, i think, given a road map of what theyre going to do. And then, you know, were into 2015 before the fed funds rate goes up. So, i think, you know, business is not investing because right now theres insufficient aggregate demand. And why is this insufficient aggregate demand . Because the wealth and capability of consumers in the middle class really isnt there. And thats partly like we have a negative feedback loop because, no hiring, no demand, no hiring, no demand, no business investment. So i think focusing on the asset channel, which is the one that the Federal Reserve is focused on. Theyve sort of given up on the bank credit channel. And i think theyre going to increasingly focus on trying to get the Housing Market really going more. Small business and mediumsized business, they cant go to the markets use home equity lines of credit as the principal form of financing. And so, you know, this increasing focus on the Housing Market and mortgage back securities is probably the direction theyre going to go. I would like to see them do a little bit more on the credit channel. But they really dont seem to have been willing to go that route. Now, janet might possibly do that. But bernanke has chosen not to. Professor mann, this is jim grant. Early in the 2000s, the fed decided to stimulate the Housing Market after the difficulties with tech. Are we not going back to the same place . Well, i think were a long way away from where we were in 2007. So im not worried about, you know, repeating where we were back then. Yeah, there are dangers, absolutely, dangers of focusing on mortgage back securities. We have the you know, we could end up in a situation where the Federal Reserve is financing f financing fannie and freddie. We like private sector participation in the Mortgage Market again. Theyre barely there a little bit, but not really. Mostly in terms of buying up a lot of housing and turning it into rental units. But, you know, i think thats the direction that we have to go. Theres just not sufficient aggregate demand at the lower 80 . Personal consumption expenditures were revised down in the last revisions to the accounts. If you look at retail inventories, they are way out of whack. The christmas sales are not going to be what people expect. Point to a tremendous sluggishness kind of like the lower 3 4 of the income distribution. And figuring out how to manage that is something the fed cares about. Okay. All right, professors. You do have a pretty good basketball team, i see. But maryland actually, we have a very good soccer team. Soccer. The claim to fame. The claim to fame. Fencing team thats great, too. Thats what i do in my spare time. But i was listening. Anyway, thank you, professor. See you later. Coming up, the Parent Company of amc theaters taking some very unusual steps in its ipo. Inviting loyal customers to buy in alongside wall street pros. Will the move pay off . Julia boorstin has a take and the preview of the entertainment companys big debut on wall street. Then at the top of the hour, the founder and chief Investment Officer of solus asset management. Who . Going to join us to talk fed moves and what he thinks the market will do in 2014. Squawk box, coming right back after that. It raises the price of fishmeal, cattle feed and beef. Bny mellon turns insights like these into powerful investment strategies. For a university endowment. It funds a marine biologist. Who studies the peruvian anchovy. Invested in the world. Bny mellon. Lifes an adventure and it always has been. But your erectile dysfunction it could be a question of blood flow. Cialis tadalafil for daily use helps you be Ready Anytime the moments right. You can be more confident in your ability to be ready. And the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. Tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. Do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. Do not drink alcohol in excess with cialis. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, seek immediate medical help for an erection lasting more than 4 hours. If you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use and a 30tablet free trial. Welcome back to squawk box. Weve got headlines for you. Facebook is going to start selling video advertisements and the first ads are set to run on thursday. Wall street journal reporting that the ads will automatically play in facebooks user news feeds and an official announcement expected today. The first ads will be a made for facebook trailer for divergent. Also, this morning, upgrading the rating on the stock and increased the price target to 68 a share. We were also talking about this a little earlier during the break. Amc Entertainment Holdings, Parent Company of amc theaters is offering small percentage direct to loyal movie fans. The appeal to movie goers pay off and will the stock have a blockbuster opening. Julia boorstin here with more on tonights big pricing. Julia . Amc Entertainment Holdings will price the shares thats expected to price the shares this afternoon to start trading tomorrow morning under the ticker amc. Inviting the 2. 5 million members of the tickets Loyalty Program called stubs along with the employees to buy and sell between 100 and 2,500 worth of stock each fee free through loyalfee. Com. It allows loyal consumers to invest in ipos without the traditional fees. Amc is allotting a small percentage of the offering for the loyal movie goers. But if they become shareholders, that could give them more reason to buy movie tickets and give amc an advantage. In a business where consumers make decisions based on schedule and convenience. Will movie goers buy into the ipo . The companys offering 18. 4 million shares and 18 to 20 per share price range to raise as much as 368 million. Now, investors would be buying into the nearly 5,000 screens which are 13 of the u. S. Total screens plus imax screens and its rivals. Now, in the 12 months ending september 30th, the Company Brought in 2. 7 billion in revenue and nearly 200 million in operating income. It does have 2. 2 billion in debt making it the most leveraged of the big three cinema exhibitors. Debt which the ipo will help pay down. Now, in comparison to rivals regal and scinemark, amenities like bars attached to the movie theaters, but analysts are focused on dividend payouts. I believe that amc deserves to trade at a discount to both its bigger peers regal and cinemark. They will have comparable dividend yields. Regal has an established history of paying special dividends over the last ten years. The fact that pretty much everyone goes to the movies isnt the only reason investors and analysts may be familiar with the company. It has been public on and off over the years and it has publicly traded debt. So now well have to see how many of those movie fans take advantage of amcs offer. Becky . All right, julia, thank you very much. When we come back, we have much more from our guest host jim grant. And coming up at the top of the hour, we have the results from cnbcs exclusive fed survey. Steve liesman breaks down what the nations Top Economists are predicting. Squawk box will be right back after a quick break. Americans take care of business. They always have. They always will. Thats why you take charge of your future. Your retirement. Ameriprise advisors can help you like theyve helped millions of others. Listening, planning, working one on one. To help you retire your way. With confidence. Thats what Ameriprise Financial does. Thats what they can do with you. Ameriprise financial. More within reach. Open to innovation. Open to ambition. Open to bold ideas. Thats why new york has a new plan dozens of tax free zones all across the state. Move here, expand here, or start a new business here and pay no taxes for ten years. Were new york. If theres something that creates more jobs, and grows more businesses. Were open to it. Start a taxfree business at startupny. Com. Welcome back, everybody, lets get some thoughts from jim grant, the founder and editor of grants Interest Rate observer. And, jim, lets start there, andrew brought up the point before wondering if you were saying the stock market was overvalued. What do you think . There are distortions out there. The question is how big. By most numbers, the stock market is not especially overvalued. There are segments, biotech, for example, is definitely in bubble territory. I think that the clearer than the proposition that the stock market is too rich is the proposition that the stock market is being led rather than leading itself through discovery of earnings and how to discount them. You know, its a basic fact of investing that you take a projected stream of earnings and discount that by an Interest Rate and then you have some present value. But if the Interest Rate at which you discount is under the thumb of the government, then every calculation is hash. And that to me is the clear and present risk of the stock market is that we seem to we necessarily living in a kind of hall of mirrors. And these mirrors are not straight up and down, but theyre contoured and make some things look tall, some things look short. And its hard, you know. Its hard to know where one is. Were lacking an objective standard of value. It has come to seem normal. Its been five years, and we have guest upon guest come by and professor upon professor. And nobody seems to object that we live in a regime of administered prices. Paint, though, the dire scenario. What is the Tipping Point . And what does the other side of it look like if this is a hall of mirrors that ends badly. Well, if one cant know, it doesnt have to end dramatically and noisily quickly. So this could be a successful handoff where the economy picks up from it could be years ago, i would have been much more certain of the future. Birthday candles have succeeded. Birthday candles have become humbler in the face of the unknown and the future does not hold. It seems to me the odds are against a successful withdrawal by the fed. People give the fed every benefit of the doubt. The fed saw none of this coming, not one of this coming in 2007. And now were meant to assume that the fed in its wisdom and technical confidence will disengage from what it is wrought. And i say the odds on that as the common sense proposition are low. I think its a buy between now a and the next year and a half. Interest rates determined by people buying and selling and not by people administrating. This business about a dozen or 15 people sitting around a table and deciding what rates ought to be is such an inaccraism. Its an argument for central bank. What gives these what forward knowledge do they have . They will say we have 0 rates until 2016. Is it going to snow next thursday. How can they possibly know whats going to happen . Theyve said everything they say is data dependent so they can change their mind. Right. Well, that case, its not very helpful, is it . Right. I think we ought to see qe and these other tricks in the context, for example, obama care. We live in an era of state administered pricing and control. And to me, qe is part in parcel of obama care. So we have a tiny Publishing Business much smaller than the New York Times. Now, if our Health Care Plan is yanked in january and theres rumors theres more of these cancellations coming. Then, will my cost of living go up 20 , suddenly . Is that going to contribute to a free and easy Christmas Shopping season . People say, oh, its all about tapering. No, its all about its all about statism it seems to me. All about the suppression of Market Forces, the campaign to raise minimum wages, to administer Health Care Costs under the governments edict. All of these things contribute to a very poor one thing that people seem like they can always point to as a you know, you just cant argue with this. And thats that the Mortgage Market and the Housing Market has healed more quickly because of what the fed has done. And its recovering. And my question is, its nice to put off pain and think of all the programs that the government tried to put in to ease the pain of the housing crisis and mortgage. When things dont clear where theyre supposed to clear and sometimes, unfortunately, it does cause pain. And when you sort of prevent the pain near term, down the road, how do but that pain would have been so politically unpalatable. Is there more pain because of what you did down the road . Five years of more or less stagnation. The pain of 20 somethings not finding meaningful thats the thing, the pain of 60 Million People on food stamps, the pain of all of these things. The question is whether the shortterm pain wouldve turned into longer term pain. I think a threshold question is do markets work . Do markets when left to themselves . Do they clear and reach some sort of sensible equilibrium . When the Housing Market heals more quickly and you say, wow, the Housing Market has healed, is it built on a foundation that it would have been built up with normal Market Forces . Or is it still sort of built up on you have to decide the yields on the prices of the new houses are competitive with the rental yields. And you compare against Interest Rates, youre up against the feds administered rate. Everything looks a little better than it might have. Certainly the fed has made it easier to get a mortgage, house prices are up reflecting that fact. But everything is comeuppance for that. 0 discount rate or 1 discount rate. I wonder if we dont know if theres a day of reckoning. Japan found out, theyre still finding out by not letting things clear. They should have. The fed invariably went back and said let us not have 1929, 32. All right. But there are other examples to look at. Up next, though, fed and the markets. The president and chief Investment Officer from solus Investment Management will give us his secret to market success. Robert frank gives us his top ten presents for those who have everything. Squawk box will be right back. 0 searching for trade ideas that spark your curiosity tdd 18003452550 can take you in many directions. Tdd 18003452550 you read this. Watch that. Tdd 18003452550 you look for whats next. Tdd 18003452550 at schwab, we can help turn inspiration into action tdd 18003452550 boost your trading iq with the help of tdd 18003452550 our live online workshops tdd 18003452550 like identifying market trends. Tdd 18003452550 now, earn 300 commissionfree online trades. Call 18886282419 or go to schwab. Com trading to learn how. 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A special report from cnbcs robert frank. And breaking economic news. Could low inflation number in november put further pressure on the fed not to taper . Well get the latest Consumer Price index number as the final hour of squawk box begins right now. Welcome back to squawk box here on cnbc. While youre down there welcome back to cnbc first in business worldwide. Im joe kernan along with becky quick and Andrew Ross Sorkin. Jim grant, founder and editor of grants Interest Rate observer. Todays top story is the fed and the start of that twoday meeting. Well find out tomorrow what happened, and well talk expectations with Steve Liesman in a minute. Ahead of that policy announcement. But futures this morning are extending yesterdays gains, at least a little bit up 30 points now. The tenyear eventually is going either up or down. Today its at 2. 87. What do we think . Three eventually . Yeah. I think three. Itll be interesting if they taper if the interesting if they taper and went down to 2. 80 or 2. 75, that could happen. I think up. I think 3 . Im saying down. Im saying up. Im saying down. Now, becky, in addition to being wrong to where Interest Rates are heading has some of this mornings top headlines. Whats our time frame on this so we can declare a winner . 2. 87, ill say by now im getting scared. Okay. By lets say by february 1st. No, im talking oh, the end of this week. I dont think its going to be 3 by the end of the week. I think lower than it is now after they decide below 2. 80. Im assuming theyre tapering. If they dont taper. You think it goes higher if they taper . I think 2. 875 you think theyre not going to taper . The argument is if they do taper were talking about what happens. I say it goes down if they taper. Down from 2. 873. Ill take the up. Ill take the up, too. And by friday is our closing . Close on friday . Monday. Im not here on monday. What do we get . Nothing. I pick up that tissue on the floor. Lets talk about some of the headlines this morning. Shares of boeing getting a boost after the Aerospace Giant raises its dividend about 50 . The board approving a new 10 billion share buyback. The buyback will occur over the next two to three years. Another round in the her ball life battle. The Company Announcing a new audit yielded no changes to the financial statements. Shares jumped on that news which was a blow to Hedge Fund Manager bill ackman betting against the stock. In a statement late yesterday, ackman argues its not the role of the auditor to determine if the company is a period scheme. He goes on to reiterate the company is a pyramid scheme and predicts it will be shut down by regulators. Very different take from carl icahn talking to scott wapner on cnbc yesterday. Ive never really doubted that this was a viable company. You know, i guess i was one of the few people that bothered to read that report a year ago when they made so much of it. And when you read the report, if you bothered to read it, it was, i believe nonsense then and i believe all these criticisms are pretty much nonsense to begin with. And other Corporate News this morning, the company will end linking to the number of prescriptions that the doctors write and stop payments to Health Care Professionals for attending medical conferences. That announcement comes amid criticism of aggressive industry tactics. Why are you shaking your head . This is a good thing. I didnt move my head. Oh, i thought that was you wanting to try to start something . Im for paying doctors . I thought you were im just sitting here. Weve got a lot to talk about this morning. Now weve been talking about the fed meeting all morning. An article in todays Financial Times said alternative bond funds apparently seeing massive inflows. This comes as traditional bond funds are on pace to say record outflows this year. Lets get to cnbcs exclusive fed survey. Steve liesman is back with more. Good morning to you, steve. Hey, andrew, and our survey of 43 economists and Money Managers and advisers shows that the fed may have made some progress in convincing the market that tapering is not tightening. I want to show you how you arrive at that conclusion from the data. First of all, i want you to focus on this. This green line is the outlook for the fed funds rate in 2015. Something the fed watches very carefully. This is what spooked them back in june and july. They started all that rhetoric about tapering not being tightening. It was up at 1 suggesting the market saw a lot of hike in the funds rate in addition to the tapering. And you see that coming down to 0. 7 where it is now. And heres the outlook for tapering, how thats changed. It was gone when it was 0. 82 , the outlook was april 2014, now its come back to february. Theyve increased the pace or the timing when they think the taperings going to happen. They have lowered the feds fund rate. Thats one of the things the feds looking for. The amount of taper thats expected. Come up by about 1 billion. They were very optimistic. Thought the fed was going to be very aggressive back in july, 22 billion on average. Thats come down a little bit, 15. 2 billion is the expected taper. How about the mix . 36 treasury, 64 mortgage back securities, thats expected in terms of the taper. Moving on now, i want to show you the taper talk which we talked about earlier. You can see the plurality of when this happens has moved from march and october survey to january, and about 55 think its going to happen by january, february is the average. And thats changed, you can see quite a bit from where it was in the october survey. Here are some comments that show on this issue of whether or not the tapering is happening. Despite mounting evidence of an impending taper and compares that to last time. By contrast, when taper expectations first emerged in may and june of 2013, swelled to 528 basis points. Writes in response to the survey, tapering is coming and i expect qe to be reduced by 40 for the full year 2014 versus 13, but thats still a lot of money after early volatility, stocks should have another good year, he says. Finally, points out that the Federal Reserve officials are wary of removing the training wheels too soon. At some point the economy will need to ride on its own, but policy makers are worried about inflicting too many scrapes and bruises. You can see from that chart, guys, an awful lot of dispersion as to where people think the fed will be. At the same time, i think whats significant for the Federal Reserve is the outlook for the fed funds rate in 2015 has come down while the talk of tapering has come up. Joe . What do you think . Weve been trying to figure out if the fed actually does taper tomorrow, what that does to the bond yield for the tenyear. Does the yield go up or down from this . I think the yield is probably where it needs to be, not needs to be, where it probably will be. The bond market has priced in more of the taper than the equity market has. So you dont i think were right around there, 280, 2. 90. So youre betting it stays where it is. It stays pretty much where it is. Youre not helping. Were having a bet here, steve. Well, what are the odds on the over under. The odds are we do taper. What are your odds there, by the way . I think 55 , 60 , they do taper. Those are not great odds. What is going on here . Hes pushing the dirty tissues at me. Disgusting. You dropped your mike again. Anyway steve, you say that the market is kind of expecting this. Treasuries, mortgages. Theyre expecting its going down. Whats that, joe, expecting the yield will go down. Yes. That may be, but i think it has to do with the guidance. Do they come across and say, we are tapering and on a march to taper. Or do they say were going to do a little bit this month or go out and wait and see and were also going to give you more guidance, Forward Guidance on rates, on the back end of this thing. That could change the whole mix and how bonds react. I think its priced in in the sense that if youre not expecting a taper this month or next month, youre simply not paying attention. Right. Exactly. Thank you, steve. My pleasure. Thank you. How does an investor play the current market environment . Joining us now is chris pachillo. Got it. Ceo and chief Investment Officer. Yep. Of 3. 5 billion Distress Fund solus, up over 30 this year, a big player in the bankruptcy market. Trading claims and mf global, Bernie Madoff securities and others to name a few. 30 is pretty good. Do you do less well when times return to normal . Not necessarily. More opportunities exist when companies are in bankruptcy and we can play reorganizations, we can play liquidations. But there are good opportunities to buy and short in every market. What do you think youre going to be doing in 2014. I think 2014 will be very similar to this year. With Lehman Brothers and madoff, primarily. And post bankruptcy, post equities are very, very interesting opportunity that we did very well with this past year and well continue into next year. What kind of names beside the two that you mentioned. Those are liquidations, post bankruptcy equities would be American Airlines is the most recent. Just came out of bankruptcy merged with u. S. Air. Mgm studios, i talked about that last time i was on. Companies that had previously been in bankruptcy and equities trade at big valuation discounts to the rest of the market for a variety of reasons including a lot of street analysts dont follow the companies, the positions tend to be closely held amongst hedge funds and other investors that its difficult to get liquidity if youre a buyer. And, you know, takes a little while for those things to flow through. But once they do, theres a very big opportunity to monetize those positions, you know, more in line with the rest of the market trades. Go ahead. Chris, why did the market not see the fabulous promise in American Airlines was trading so low . You know, i think there was some question as to whether or not the merger was going to take place when the doj stepped in and they tried to block it. We actually thought even as a stand alone it would still be fine, you know, from where all the claims were trading. And i think just generally, the market doesnt understand enough about the bankruptcy process to take the leap. Is there anything that resembles that kind of risk and reward proposition out there now . Anything you really like . I think vistion is a similar situation. If you look as a sum of the parts. Vistion is two businesses now, it previously was three. It sold. And it has a 70 equity interest and a Climate Control company that trades in korea. So those two pieces alone, the cash from the sale of that of their joint venture and the publicly traded value of the korean Climate Control company basically approximate where the stock is trading. They have a remaining business which is an Electronics Business which trades around 2. 2 times ebitda and the rest of the market trades around eight in the Electronics Business. Why is high yield overvalued if were entering the sweet spot finally of the economic recovery. Well, i think you have to look at the reason why high yield is where it is and its purely because of fund flows. More money has come into the market driving, you know, rates and structure, you know, to is this what grants been talking about . The fed youre talking about . The fund flows. Is that a code word for ben bernanke . I think thats correct. The liquidity that the fed has created in the markets, you know, has basically forced individual investors as well as institutional investors. High yield is very much equitylike risk. Youll call this you have no problem calling high yield a bubble right now . I dont think like using the word bubble, sounds like hyperbole, but its overvalued. And i think itll stay overvalued for a little longer. Youre only earning 6. 5 in high yield and virtually taking equity risk. Why would you do that when you can invest in equities and get actual compensation for your risk . Yeah. Not a bad way to go. Guess treasurers im used to them being at 7 , 8 . Better off buying equities and treasuries than buying high yield. Well remember when high yield was the thing . Thats where they had high yields. Thats right. There was a moment post crisis, thats all you did. Well that was, again, that was also very much liquidity driven by the fed. A lot of money coming in, pushed people into high yield. If you compare 2003 recovery in the high yield market with 2009, you know, theres a big difference. One was the economy was improving and one was the fed. Yep. There you go. Thank you. Good luck. You got 3. 5 billion, dont screw up. Nope. Good luck. Coming up, were going to talk retail details with Courtney Reagan joining us with a special report on how outlets are fairing this holiday season. And coming up at 8 30 eastern time, inflationary data that could give investors insight on the state of the economy. November cpi, thats just ahead. [ male announcer ] what if a Small Company became big business overnight . Like, really big. Then expanded . Or their new product tanked . Or not . What if they embrace new technology instead . Imagine a companys future with the future of trading. Company profile. A Research Tool on thinkorswim. From td ameritrade. Afghanistan in 2009. On the u. S. S. Saratoga in 1982. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation because it offers a superior level of protection and because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Welcome back to squawk box this morning. Toys r us announcing the toy giant. Theyre going to be staying open for 87 hours straight. The company says the marathon begins on saturday at 6 00 a. M. And stores will remain open until 9 00 p. M. Christmas eve. Toys r us will also offer shoppers to buy items online and of course pick them up in the store within an hour. Analysts continue to believe that Outlet Centers are outperforming some of the traditional malls. Some think its the aspirational shoppers. Others point to the experience that some of these outlets offer. Courtney reagan is here and she wants to tell us why these outlets are in vogue. Why is that . The latest nrf survey says half of consumers plan to do the remainder of the shopping online. Well, online is the Fastest Growing shopping format. Reit analysts say many outlet malls are outperformers within the mall operators portfolio. 50 miles outside new york city, shoppers often wait in lines at Woodbury Commons premium outlets outside to get into some of the stores. Why do they do it . For many, its the aspirational brands at the lower prices, even if its different merchandise. Others make experience out of taking half or full day to get to the outlets. Now, International Tourists are very important shopper for many outlets outside these major metro areas. Its not uncommon to see tourists bring or buy suitcases and fill them up for the International Tourists the American Brands michael kors among the most popular. It isnt going unnoticed by retailers. Many are expanding, faster than traditional mall spaces. But macys recently opened a full line, not a Discount Store outside chicago. Heres what Terry Lundgren told jim cramer about their macys outlet plan. We can put them wherever it makes sense. Thats a nice growth, its not in the numbers, i dont think. Thats an uptick. And i wanted to get it right. Were now getting it right. Outlets will start to look more like traditional malls in the future which may not be a good thing. I guess for the mall operators. Yeah, exactly. Exactly if you have these fullline stores at an outlet and its a blend of the two is that really offering what shoppers want if they go because they get this value at a lower price. What macys what macys was telling jim cramer, what Terry Lundgren was saying, theyll put these stores in, but they are fullprice stores. Exactly. Macys does these blumi bluming. And thats a full line regular macys store. Theres traffic, sales, people are going there and theyre experimenting with it. Theyre taking their time as lundgren was saying, seeing if it resinates and if it works, theyre going to take the time to get it right. It could be an interesting strategy as long as they dont go too far and it becomes a normal mall and then you lose some of the experience that people go to an outlet mall for. Okay. Thank you, courtney. Sure. Coming up, the november Consumer Price index, those numbers and market reaction. Weve got that still ahead. But first, what does an nfl Football Player do when his quarterback throws a key interception in a big spot in the Fourth Quarter . The video may give you a hint. Squawk box comes right back after this. 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He was criticized earlier this year when he became overly agitated with quarterback tony romo. So theres history here. I think he had 11 catches, didnt he . And like 160 yards and he left when they were theres they were kneeling on you know, they were just running out they had like four downs, i think, to run out the minute and a half left. There was nothing else going to happen, but you cant do that to your teammates. Jerry jones said that was the worst loss in history. It wasnt even a playoff game because they were up by, i think, 4 points, i think tony romos awful good, though. You cried. I cried. You did. I cried thinking about it. All right. Still to come this morning, the Consumer Price index set to be released. The markets are going to be watching for signs of inflation in the economy. Right now as we head to break, take a look at the u. S. Equity futures. Youre going to see an additional 22 points of gains for the dow, at least up above where the futures would be set to open right now. S p 500 also indicated higher by 1 1 2 points. Squawk box will be right back. Hmm. Mmhmm. [ engine revs ] [ male announcer ] oh what fun it is to ride. Get the mercedesbenz on your wish list at the winter event going on now but hurry, the offers end december 31st. [ santa ] ho, ho, ho [ male announcer ] lease the 2014 ml350 for 599 a month at your local mercedesbenz dealer. [ male announcer ] lease the 2014 ml350 [ bagpipes and drums playing over ] [ music transitions to rock ] make it happen with the allnew fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Get 200 free trades when you open an account. Welcome back to squawk box, everybody. The American Bankers Association reports that the number of consumers who actually pay off the credit card balance monthly has grown 7 since 2008. According to a Quarterly Report out this morning, the number of subprime card holders has declined. And the Treasury Department reports a preliminary analysis of a new trove of hedge fund data shows the industry may not be as risky as conventionally thought. The tentative conclusion is based on the examination of hedge funds leverage levels, risk modelling and the amount of hard to value. That doesnt include what happens whether your earnings actually go up if youre investing in a hedge fund versus investing in an index fund. The government says it could reduce the support for highcost mortgages as soon as october of next year. This is a sign of confidence in the recovery of the american Housing Market. Right now, were a few seconds away from the Consumer Price index numbers for november. This is a key number that the feds going to be watching because it is an indication of inflation. Rick santelli is standing by at the cme in chicago. Steve liesman is right here with us in the studio. And rick, i know were looking for. 1 , thats the expectation for the headline number. But, again, this is an important number for the fed because it does indicate whether inflation is tame or something they want to start paying attention to. Go ahead and take it away. And the survey says cpi for the month of november was unchanged. You strip out the allimportant food and energy, it was up a little more than expected, up. 2 , no significant revisions. But, i do see that the cousin to the trade deficit, the trade account balance has now moved downward below the 100 billion. Its 94. 8 billion. That is really somewhat amazing. So the current account balance unlike the trade deficit seems to be moving in the right direction. Im not sure that were going to huge impact off of that alone. And last month was revised from 98 and change to 96 and change. So, here we have a 2. 87 yield on tens, hasnt changed dramatically since the date it was released. Were talking only up 15 dow points. Thats not fair value, thats where the futures are right now. We still have some other information to come out for the rest of the week that may be important. I liked your piece earlier, becky, tentative conclusion. Tentative conclusions. Would you think of the data . You know, rick, i dont have it in front of me. They decided to upgrade the software. Can you give me the yearoveryears. Yeah, 1. 7 on core. Yeah, we talked about a lot, the measure of the fed follows is the pce price index, which usually runs a little bit softer than the inflation index. And what i think is significant is people who dont think the fed is going to taper any time soon point out inflation is running below their target as surely as unemployment is running below their target. You know, jim grants onset and he has an argument that i think deserves a lot of credit and ive been through it a lot of times and i dont know the right answer, but the question as to whether or not changes in asset values into the price indicate. And, jim, i think its clear had we done so in the earlier part of this decade, the fed wouldve gotten a better indicator of things to come in the economy than it did by not having housing values in the price indicator. Your sense of whats going on with inflation right now and whether or not they should be looking at asset values as well. I think they certainly should be looking at asset values. You know, i think inflation is not so much too much money chasing too few goods as too much money, the object or objects that the money chases we find them out of that later. We can chase skirts at the check out counter or chase common stocks at the corner of wall and broad. It depends on the cycle, depends on a lot of things. There is no inflation as conventionally measured. But conventional measures dont often tell us the next thing to happen. It was next to no inflation. Inflation is not necessarily a leading indicator of inflation. One must be more all encompassing. Just to point out one thing, i dont know if we said this before, but part of the reason its lower is gasoline prices were down in november. I guess thats something that could turn around quickly, too. Absolutely. One of the things i really like is dallas has whats call ed trm mean. Some people want to know whats going with price of living. They use it as a policy indicator. In general, prior inflation readings do not give you the future. Thats been proven in one paper after another. Research and what does. Let me ask you this, though, in this globalized world where the supply chain is global, where labor in beijing is arbitraging labor. Are you more sangone given the capacity. I would say. The exertions we ought to be seeing dwindling prices. Prices ought to be softening. Improvements in cost of production and techniques of production. Last quarter the 19th century. The time of great Technological Progress was softening in prices. Now we have more or less ash trail rule. Prices have to rise 2 on the year. Never mind, they say it, we have to have new Central Bank Credit to affect that rise in prices. Seems to me in juicing the price level. Not so easy to calculate. But in trying to juice the price level, we juice other things not intended. Theres a lot of research out there that questions this notion about whether or not we ought to fear deflation as much as the fed does. If things get cheaper, most americans spend most weekends looking for that. Why is that bad . I would tell you what ben bernanke would respond to. He would say when prices fall, incomes fall, as well. They can fall faster than prices do. Thats not the experience in american history. It was a time of rising wages and falling prices. Plenty where prices fell because of the race and real wages rose. Do you feel that would be the environment given labor markets . Well, i think the slack in labor markets has nothing to do with the direct effects of monetary policy. I think obama care is more to do the uncertainties created in the world of commerce by unpredictable government action. I should point out, well report this later today that our economists and respondents to the fed survey, 60 believe obama care will be negative for near term and longterm growth. And its not make sure there wasnt a shortterm issue. By the way, you can go online and see the survey. Shortterm, longterm. And not knowing what your cost in life are going to be. You wouldnt know your costs the way the market was before. Your policy wouldnt be canceled. Depending on who and where you were. A lot of those policies got changed every year. Well, i think nothing like were seeing now. I want to ask rick real quickly. Im sorry, what were you referring to before . The earlier thing we were talking about. Oh, you were talking about the risk in hedge funds. I like some of those. They had tentative conclusions. Yeah. When you put the word tentative in there. Everything after that, you can pretty much ignore. Mr. Grant, you know, the big boogy man, i understand why. But generically, oversimplify, who do you think a little bit of deflation would be tougher on . Those that have a lot of assets Financial Assets in particular . Or an average Median Income of 50,000 . Who would have a tougher time with deflation . The wealthy or the average . I dont know. A lot of traders think its mostly going to be the people that own a lot of things. The value of those things would move lower, where an average guy would find less activity to the upside of prices. Second question, mr. Grant, you are a legend down here. Do you believe the headline numbers that measure inflation as used by the fed . And, of course, most of these statistics or do you subscribe to the revisions weve had since the 80s really point to the fact that you can get these numbers pretty much anywhere you care to massage them . Well, its to a degree arbitrary. And the thing you come up with is not necessarily your own cost of living. I say that everyone looks on these things with a degree of suspicion and quite justifiable suspicion because it doesnt really reflect what we all experience. Thank you. All right. Rick, thank you. You had a quick last point . I just wanted to make sure jim had the opportunity to make the case for gold. Maybe nows not the time. Jim is the leading proponent of that. Seriously, steve, one of the leading the foremost and esteemed leaders. Well make sure we bring that up with him. Steve, thank you. Up next, though, were going to talk about gifts for the super rich. Bigtime presents for the people who already have it all. Well, they probably dont have a cd. Maybe we should give them a cd for the super rich. Snark. Snarky snark. And music news for you this morning. Seattle grunge band anywhenirva headed to the rock n roll hall of fame. Others inducted include kiss, and this induction ceremony will be taking place on april 10th in new york. By the way, people cant get enough beyonce. Her surprising album selling more than 6,000 units in the first three days on itunes. Thats a record for first week domestic sales. It was released unbeknownst to the public. Squawk box will be right back when we after this quick break. Tdd 18003452550 trading inspires your life. Tdd 18003452550 life inspires your trading. Tdd 18003452550 where others see fads. Tdd 18003452550. You see opportunities. Tdd 18003452550 at schwab, were here to help tdd 18003452550 turn inspiration into action. 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Get zero due at signing, zero down, zero deposit, and zero first months payment on any new 2014 volkswagen. Hurry, this offer ends january 2nd. Visit vwdealer. Com today open to innovation. Open to ambition. Open to bold ideas. Thats why new york has a new plan dozens of tax free zones all across the state. Move here, expand here, or start a new business here and pay no taxes for ten years. Were new york. If theres something that creates more jobs, and grows more businesses. Were open to it. Start a taxfree business at startupny. Com. Welcome back to squawk box. Futures right now, theyve been getting a little bit better as the morning has gone on. Well take a quick look. Because shares of 3m might be impacting to some extent. Now up 49. We were up 29. The company raising its Quarterly Dividend by about 35 to 86 cents from 64 cents. Ahead of an investor meeting today. Fullyear earnings between 7 30 and 7 55 a share. And that brackets a current consensus. Id said that really quickly, but that was a huge boost, wasnt it . Im not a smart man, but what did i just say . Did you notice that . Let me see if the yield had been. The yield was 2 and they went from what to what . 35 . Thats a huge its a huge jump. That explains why the stock is people dont raise dividends by 35 , they raise them by 10 . Ge usually does it in december, too. Not that im not that youre watching that closely. Anyway, what do you get someone who has it all . Well, believe it or not, there are some wish list items even for the super rich. Our next guest is absolutely obsessed with the super rich. His name is robert frank. Do you want to be the super rich . No. Do you live vicariously . No, because theyre important economically. And there are few people that cover them without judging them. That is my mission. The top 5 what you saying, judge them positively or negatively . I do neither. Most media when they cover the wealthy, its either stereotypes where they treat them negatively or idolize them. I do neither. And the top 5 of consumers account for 37 of outlays. Thats why for christmas, they matter. Talk about how theyre spending this holiday season. The wealthy are increasing their spending, doing well as wed been talking about all morning to 3. 8 billion. Thats for the top 1 . Spending per household around 3,400. But the big spending this year isnt going to be on stuff, on bling, its really around experiences and items of lasting and enduring value. What i want to look at today, were going to do the top ten gifts for the super rich. Were going to look at experiences mostly and start with a program called the ferrari on ice. A weekend in aspen where you stay at the fivestar. They give you a fleet of ferraris and expert instructors so you learn how to drive a ferrari on icy mountain roads. You travel on a private plane to a dedicated snow track in steam boat springs. Then after that, you get flown to a private dinner. Again, a lot of people buy these super cars, dont know how to drive them especially on snow and ice. This is a safety thing. Its 11,000 for the weekend . But you have to own a ferrari first. Oh. Youve got to buy a ferrari and then pay the 11,000. Next up, this is for andrew. A vacation up here. Yeah, there you are. Extraordinary journeys, this is a safari company. Theyre offering the 1 million safari. For a family of four, start with gorilla trekking, go to big game, and the sarangeti. You get it to yourself. To yourself . This one, you get the entire 1 million, andrew . No, he had to share it. Thats whats great about this one. You dont have to share it with anyone, you get the 350,000 acres to yourself. The whole thing . The whole thing. How many people were there when you were there . No, its like anyone else is too many. 30 to 40 people. Yeah. And anyway, you go to cape town, you do the wine thing, then you get a beach. Anyway, its a great safari. And victoria falls, too . You do everything. Its a 27day thing. Travel with family is where the rich are spending money right now. Now, the last ones for joe. Who has a month to even if theyre wealthy. Joe wants a jet, right . So i went shopping. Theres so many jets out there, used private jets for sale. I found you a g3, thats a good condition, really good condition, fairly low mileage, 3. 5. But we can get it for you for 3 million. I know youre a citation, guy. I found you a citation ten, 1998, a lot of miles on it. But that one is 13. 4 million the ge is 750,000. Thats a steal for you. That is a steal. How much do the pilots cost . Heres the thing here, i broke it down. I broke it down, you get 750,000. Hangars going to cost you 30,000 a month. A month . The crew is 20,000 a month. Crew training 4,000 a month, insurance 1,000, navigation subscriptions, you need subscriptions to your navigation system. Thats 1,000 a month. Youre talking 60,000 a month before youve even flown. Then youve got to pay for the fuel. Jet fuels 1,800 per hour. People told me unless you fly at least 125 hours a year, its better just to charter or to do a jet charter or something else. At this price point or any price point . The problem with this price point, youre going to need so much maintenance and engine upgrades on this plane, its going to cost you. Its amazing. You can find jets for 500,000 thats at gulfstream. You can park it in your front yard and say i own a gulfstream. And just take pictures of it. Thats worth it. Robert, the thing is, victor now has the beach craft turbo prop its like 3,900 an hour. If you add that up, i guess if you got enough people. If it was just you, its ten times commercial rates, really. Its just who who can spend ten times the commercial rate just because they want to . Youve got to be. 0001 . They say to own a private jet, you need at least 100 million. To charter or fly private, you need about 30 million. So 30 million. And then occasional flyers 10 million and up. I think hes the only one around here. Okay. That was thats what theyre buying. Fantastic. Coming up, jim cramers take on the fed sorkin with the book and everything. And much much more. Were coming back. Were aig. And were here. To help secure retirements and protect financial futures. To help communities recover and rebuild. For Companies Going from garage to global. On the ground, in the air, even into space. We repaid every dollar america lent us. And gave america back a profit. Were here to keep our promises. To help you realize a better tomorrow. From the families of aig, happy holidays. We go to the new york stock exchange. Who raises their dividend 35 . Whered they get all that money, jim . Went down to the mid 120s. This was the beginning of the rollover. This is the first one that fell down and its come back. If dow components start raising their dividend that is significant, 30 . You think other people have money like this in this economy . Boeing very big dividend boost. Whats happened is these companies that aare internation companies 3m is located here but its an international company, boeing is here but orders are overseas. Theyre not really focused on tapers. He doesnt focus on the vikings either. Hes not a football fan, hes an ice hockey fan. Youre still talking about the vikings. Im sorry about that. Youre still in first place, arent you . Yeah, but this game on sunday night, i hate to say this because its on tv, but if the cowboys win against the redskins, the game is inconsequence. Sunday the cowboys during the day and then the eagles. God, if there was just a Network Great enough to cover the eagles bears game on sunday night. Nbc flexed it. Is that going to be on nbc that night . Yeah. They flexed it, which means the eagles know whether the cowboys won at 1 00, which changes everything. I was hoping there would be a network with the guts to carry that that night. You knew that. Thank, jim. Well see you . Just a couple of minutes. Coming up, guest host jim grant on what you could expect Interest Rates to do with the fed decision. We have a bet on you took the under, we took the over. What do we get . Nothing. Stay tuned to cnbc. Walter robb and john mackey, coceos of whole foods will be up. Well be right back. And that gives us scale and insight no one else has. Investment management combined with investment servicing. Bringing the power of investments to peoples lives. Invested in the world. Bny mellon. Welcome back, everybody. Lets get back to our guest host, jim grant. We have a bet running if the fed does taper tomorrow, andrew and i have taken the over on the 10yearyearold, joe has taken the under. What do you think . I dont know. We dont either. You dont either, joe . No. I think its a very healthy thing for us to all admit it, that we have no clue. I think the rates will go down. This gets back to your point that the fed has made it an artificial Playing Field at this point. We dont know where rates should be. Free Interest Rates, thats my program. Steve talked about gold. We have not talked to you about gold today. Why dont you tell us where you think we should be in terms of a gold standard. First of all, lets talk about the gold price, which has had a terrible year. New mining leads the s p 500 by futility in half. As an investment proposition its weather the fed and Central Banks really do have it wired, whether they have it under control. If you dont think that, if you think that the Central Banks are the problem, not the solution, you are i think well advised to look at gold as an investment. Now, as to gold as a monetary standard, steve asked for a very concise answer of why that might be the way forward. And the way forward the answer to me is that it has worked. It has worked demonstrably over the course of hundreds of years. And it is as imperfect as any other human contrivance but is among the least imperfect of these monetary systems. Weve tried them all. What about bitcoin . Bitcoin is the u. S. Dollar without the United States navy behind it. It is a fiat currency without government. So i think its even less than a dollar. Though the people who promote bitcoin say this is a way of getting around the Federal Reserve. You can never create more money. Its a payment thats different. The fed at least has the decency to present a Balance Sheet. Bitcoin is whatever someone wants to pay you for. Ebay is in the business of payments technologies but thats not money. Jim, thank you. Youre welcome. Appreciate it. Make sure you join us tomorrow. Joe, get better. Squawk on the street begins right now. Luck be a lady tonight the jackpot 586 million now, they say its headed to a billion perhaps. Welcome to squawk on the street. Im Carl Quintanilla will jim cramer and david faber. The fed meeting begins today. Cpi relatively mild. The