Good friday morning. Welcome to squawk on the street on this final friday trading session of the year. Im Carl Quintanilla at the new york stock exchange, along with melissa lee. Thats a good song. I actually requested that a few moments ago. Cramer and faber had the day off. The market has a few jitters as we enter what is going to be an interesting day. Of course, the meeting at the white house, 3 00 between the president and some congressional leaders. As for europe, getting some data out of japan overnight and some data out of europe. Currently red arrows across the board, in london, paris, and frankfort. Our road map begins at the white house. Congressional leaders set to meet with the president , 3 00 p. M. This afternoon. Senator reid has already said hopes of a deal are fading quickly. Just two trading days left until the cliff. And its not just the fiscal cliff. Wind farms and dairy are set to get hit. The ports of the east coast and gulf coast are bracing for a potential strike. The potential for this, midnight sunday with a shutdown threatening to threaten 20 of the cargo traffic. And instagram feeling the sting of the flap around privacy with users, fleeing the site. How will this impact facebook . As we mentioned, dennis berman, wall street journal market place editor is joining us here on set once again for the next hour. Good to have you back, dennis. Lots to talk about between the cliff and other news. Three days before the u. S. Goes over the fiscal cliff, congressional leaders will meet with the president this afternoon. I remember standing on the white house north lawn last month, after leaders met with the president back then. Things looked pretty promising. Heres what they said after that meeting. I believe that the framework that ive outlined in our meeting today is consistent with the president s call for a fair and balanced approach. I feel confident that a solution may be in sight. It was a constructive meeting. We all understand where we are. We feel very comfortable with each other and this isnt something were going to wait until the last day of december to get it done. Isnt that special . Now were in the last days of december. And with just three days to go, the rhetoric has changed in the beltway. These are the latest comments. Republicans arent about to write a blank check for anything Senate Democrats put forward, just because we find ourselves at the edge of the cliff. That wouldnt be fair to the american people. The president s presented to him something that would prevent us from going over the cliff. It was in response to something the speaker gave to the president himself, but again, i guess with the dysfunctional Republican Caucus in the house, even the speaker cant tell what theyre going to do. I dont want taxes to go up. Republicans dont want taxes to go up. But we only run the house. Democrats continue to run washington. Call me a hopeless optimist, but i actually still think we can get it done. Eamon javers live in washington. Eamon, fascinating to look at that tape in retrospect. I think a lot of people in washington think the makeorbreak deal making sessions have already happened here. And one republican senator i talked to this morning said there are very low expectations now for this meeting at the white house today. And boy, how times have changed, carl. Just watching that tape that you just ran. One of the things that ill be watching for when im standing on the white house north lawn this afternoon is whether or not these four congressional leaders come out as they did back in november and talk to the press after the meeting. Weve had a lot of meetings at the white house where people have left very quickly, gotten into a suv and driven off the complex without talking to reporters. If they come out to those microphones after this meeting and come out together, i think that will be a hopeful sign that people will be looking for. But like i said, very low expectations here. The house will be in on sunday, in case theres anything to vote on by 6 30 p. M. , when they come back into session. But meanwhile, the deal making and the talking continues. Its just not clear that they can get there until after weve gone after the cliff. Eamon, as an average american sitting here on set, i wonder about the meeting at 3 00. Wli why not earlier . The clock is ticking, why dont these guys get together sooner, so if theres something to talk about, they can hammer it out before the house reconvenes on sunday . Its a good yes. You would think that none of these people have anything on their schedule more important than this meeting. So why are they waiting in l the end of the day to do it . Thats an open question. We know the Vice President will be there, all four congressional leaders will be there, but presumably, their schedules are pretty much centered around this fiscal cliff thing at this point, and theyre all in town, as we know. Eamon, whats the mood there in washington . Theres so much talk, so much anger from the rest of the country directed another washington. Is it seeping through the iron wall thats around the beltway or is it it is. It is. You know, look, they definitely feel it. And they feel the countrys frustration. I talked to, again, this one republican senator this morning who said they were getting realtime updates yesterday as the stock market was swinging wildly in response to what was going on in washington on the fiscal cliff. So they know this is angering people and they know this is affecting peoples fortunes and livelihoods. But what they dont want to do is give up on deeply held principles. And a lot of these house members got elected in districts that dont look anything like the rest of america. Theyre very extreme, gerrymandered districts in many case s with ca ca ca cases, and their own personal careers depend much more on how theyre perceived back at home. So they dont necessarily care that this is one of the most unpopular congresses in recent history and one of the most unproductive congresses in recent history. They want to stick by their principles. Its true. And a lot of them say, eamon, ive been elected to be a check on the president and thats what a lot of this is about. Right. This is deeply held, fundamental belief on both sides and theres a huge chasm between the two sides on these issues. And somebodys going to be a loser here if theres a deal. Somebodys going to be perceived as having gotten rolled and neither side wants to be the party who got rolled here. I think both sides are looking at if fiscal cliff right now and saying, well, we could go over this thing. It wouldnt be the end of the world and thats a very different view in washington than it is on wall street. I can tell you that. Eamon, thanks. I know youve got a long day ahead, a long afternoon as well. Eamon javers in washington. Isnt it unbelievable. You have this huge, looming problem, ill wait until later this afternoon to deal with it. And the whole sequester was a way to deal with this later. And corker, i think, on some of the morning shows this morning, senator corker said the worst case today would be to set up another later deadline that would keep the hard questions and i think a lot of this is so abstract, but if those milk prices go up for people around this country, thats going to be the thing that gets people really animated. That and payroll taxes, if they go up, that will hit a lot of americans across the board. Interesting to see a lot of the stocks today that have exposure to dairy futures, whether its an hsy, who knows . I havent even gone through the whole list, but a lot of them are going to be seeing some action today. And it was crazy yesterday, watching that market. It was a little bit after we left the set yesterday morning, but watching it in the afternoon, there was information about scott brown, and oh, there is going to be a call to Bring Congress back in. It was amazing to see the market on that scott brown bottom, as a lot of people were calling it. You were down more than 51. And it is amazing to see how our fortunes are being tied the at this point to what is going on in d. C. And every minor tweet or post or headline or what not, at the end of the day, it was four straight losing sessions for the dow, nasdaq, as well as the s p 500. Certainly something we have to watch. In the meantime, the clock is not only ticking for the fiscal cliff, but time is running out to avoid a strike at ports in massachusetts and texas, that could affect containers to and from the u. S. From reaching their destination. Talks are taking place in secrecy between the International Long shoresman association and the u. S. Maritime alliance in an effort to keep 14,000 longshoreman from walking off the job. The National Association of manufacturers puts the cost of a potential strike at 1 billion a day. And this is not just finished goods, obviously, but also Raw Materials and parts come through these ports. So it could really stymie factories in terms of production of goods here in the United States as well. There have been some estimates about how this strike could affect overall gdp, moving a few tenths of a percentage point, which is a huge, huge number. And at the end, you have to think that this in situation, with money at stake, and not principle, perhaps the two sides are a little more amen table to deal than our congress. Saw a quote from the rmfs supply chain policy guide. At this point, we do not expect a statement. A lot of inventory for gardening season is coming in about now. Thats where they make the lions share of their money. Not like a typical christmastime retailer. Spring is christmas for home depot and lowes, and about 28 of home depots annual revenue comes for the quarter that ends in july, about the same for lowes as well. Those are two stocks to watch in todays decision. But the nrf guy also made a point of saying that containers are coming in, and there could be a backup that needs to be resolved. Even if the situation is resolved in a matter of days, there are still going to be containers that are stacked and theyve got to work through that backlog before they can take in new containers. So there will be a ripple effect. Lets bring in peter anderson, senior Portfolio Manager with congress manage asset. Good to see you. Thank you. At this point, what is the risk to the markets . Risk to the upside or the downside if a deal is reached . Well, i first have to tell you that strategically, im not really factoring that the whole fiscal cliff picture into a longer term portfolio strategy. I think its very, very difficult to do that however, like everybody else, we are glued to the headlines to see how this thing is going to play out. Butting that being said, i think the main important reason is the continued volatility and also the correlations. You know, i get very concerned about such high correlations. The journal this morning talked about, and whatever the resolution will be, and i think thereby a resolution, perhaps not by the end of this year, but certainly within the next month or so, whatever that resolution will be, the longer term prospects for the market are what bother me. And that has to do with what we call these high correlations. Lets say we are living in a high correlated world. We had lived in that sort of world during the european crisis, when we saw so many of the Asset Classes as well as sectors is move in tandem. How do you protect yourself against that longer term . Well, its tough. I manage a long short strategy. And when you have a long short strategy, of course, what it depends on are correlations, and you love low correlations. The way to look at it now is to look for what i call event risk. I think next year is going to be, if you want to make the market work for you, and you are in a long short strategy, for instance, the shorts have to be uncorrelated. And the way you have to do that now, i think, is to look at event risk. High event risk situations. That factors into also a scenario of what i would call a sideways market. So im thinking on topline revenues, theyre going to be pretty flat for the year coming, but you will still be able to find spinoffs, companies that might still pay special dividends and still announce buybacks. You have to find the activist Investor Movement as one that will try to find the stocks that are uncorrelated to just the general Market Movement. Peter, can you give us a few examples that youve been thinking about for 2013 . Well, news corp. , for instance. I mean, that has two of the three issues ive mentioned. It has announced an additional stock buyback. And as we know, it is in the throes of spinning off its newsprint division. Now, thats rather difficult to analyze, but i can pretty much assure you that that correlation with the general Market Movement is not going to be as high as it would if you were in just a standard, what i would call, almost an indextype stock that would move along in lockstep, for instance, the headlines of today. Another stock that might, you might look at because it might have high dividendpaying potential and continue to raise its dividend, in spite of the fact that youve got higher tax scenarios out there would be Phillip Morris international. Has a great history of raising dividends, and even in a higher tax environment. For instance, i dont think an investor would say, im going to shun higher dividend stocks, because now my tax rate is up. Unfortunately, it will be higher, but you still will pursue dividend stocks. Got it. Peter. Thank you. Happy new year to you. Peter anderson of asset management. Still ahead, the head of the campaign to fix the debt joins us live. What needs to happen so we can get a deal done and can it done at this meeting the today . Also ahead, were live from the port area of bay young, new jersey, with an update on a possible strike that could affect businesses from texas to massachusetts. Also got the houston mayor to tell us how her city is preparing for a strike. Futures still a little jittery here this morning. Dow down 86. Squawk on the street back in a minute. At a dry cleaner, we replaced people with a machine. What . Customers didnt like it. So why do banks do it . Hello . Hello . if your bank doesnt let you talk to a real person 24 7, you need an ally. Hello . Ally bank. Your money needs an ally. Mine was earned off vietnam in 1968. Over the South Pacific in 1943. I got mine in iraq, 2003. 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 the military, veterans and their families is without equal. Begin your legacy, get an Auto Insurance quote. Usaa. We know what it means to serve. Instagram users may have made good on their threat to dump the photo sharing app after the controversy over new privacy rules, according to app data in the new york post. App data says that instagram may have shed almost 25 of its daily active users as a result of the debacle. Facebook bought instagram for 1 billion earlier this year. Dont know if thats going to pay off at all. Ive had some discussions about this morning, dennis, i have a hard time believing they would lose that much me too. Why . In the end, facebook and instagr instagram, they were treated on their new rules. So i think 25 for a huge install base just seems a bit youre talking going from 16. 4 million, i think to 12 million, basically. Whats interesting about whats going on in the tech space, an app like snap chat, which are these disposable videos which are great for teens who want to relate to each other via video. Said the new father. Its really just become quite a phenomenon. And it does seem possible that you can have the next generation of apps that does eat away at the established leaders, of which instagram is current one. Theres been chatter that flickr has got a second win because of that. But longterm, you have to think that more people will be sharing more pictures over social networks than they are today. We have become a sharing society and instagram will probably benefit. And well bring people like melissa kicking and screaming. I dont trust the privacy settings. The video disappears. Everything lives forever in technology. It does. It doesnt. It will be interesting to see on the next reading on users if users come back, because instagram denounced what theyre going to do with the photos. Its amazing how one lawyer, one draft had such a big affect. Exactly. Markets are set to decline sharply at the open. How do you prepare for todays session . Well get the word from the street, that is next. And jim paulson tells us why hes expecting a 15 to 20 gain for the s p 500 in 2013. Looks like were going to lose 10. 5 on the s p right at the open. More squawk on the street, right ahead. P for an idea. A grand idea called america. The idea that if you work hard, if you have a dream, if you work with your neighbors. You can do most anything. This led to other ideas like liberty and rock n roll. To free markets, free enterprise, and free refills. It put a man on the moon and a phone in your pocket. Our countrys gone through a lot over the centuries and a half. But this idea isnt fragile. When times get tough, it rallies us as one. Every day, more people believe in the american idea and when they do, the dream comes true. Were grateful to be a part of it. Executor of efficiency. You can spot an amateur from a mile away. While going shoeless and metalfree in seconds. 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. Now this. Will work. [ male announcer ] just like you, business pro. Just like you. Go national. Go like a pro. What starts with adding a friend. Could end with adding a close friend. The lexus december to remember sales event is on. This is the pursuit of perfection. As you can see, futures down sharply here this morning, after the dow is down four straight, five out of six. Were about seven minutes before the bell. Lets bring in gordon, a trader at rosenblatt securities, joins us here at post 9 00. How you doing . Okay, thanks. The term, headline roulette has been tossed around this morning. Is that what were going to play . Carl, if i were asked, what does this remind me of, i would say, it reminds me of 2008 when w. Was a lame duck and every time a politician came on television, it was always bad news. And thats kind of what youre seeing now. We make deals now. Thats what brokers do. So if republicans are at million and the democrats are 250, okay, lets go to 900, lets make a market and get the trade on the table. Its not that hard. And yet they go back, and the first thing they do is start blaming each other. And the second whammy of the