Big headwinds facing the market, and the Obama Administration saying it is ready to act in syria if needed. Secretary jack lew on squawk saying moments ago the president will not negotiate over the debt ceiling. Good news for tiffany, and luxury, in that it was boosted by sales in china. And the end of the era, bill ackman is bailing on jcpenney, and they are looki in ing to ses shares. And we will look at the new home sales to be released. Treasury secretary jack lew telling our own john harwood that the president will not e negotiate over the debt limit which could be reached in midoctob midoctober. Take a listen. We wont be negotiating over the debt ceiling and congress has authorized funding and committed to expenditures and now the question is do we pay the bills that the United States has incurred. It is the only way for that to do is for congress the act and act quickly. What we need in the economy is certainlity, and we dont need a selfinflicted wound or crisis at the last minute. Congress should come back, and they should act. Jim, they say when it rains, it pours and government is part of the equation today. Well, think ant, it syria, and taper and new fed chairman and debt ceiling and budget battle and the rates going to wrong way, and down, not because of good news, but bad news, and the gasoline prices are going up. It is like we just suddenly have a lot of things on our plate that make it so you dont want to sit there and go buy caterpillar. You dont want caterpillar . The prices are going down. Well, i think that they will spike because of what is happening. Oh, that is interesting in the suez. Well, you know. If we do something there, it brings a wider that is the negative for the consumer, but when kerry spoke, and we were having a decent day yesterday and kerry speaks, and now we have to deal with that. That is real life. I listened to jack lew and it is interest interesting, because the conversation with mark zandi and he said, jim, it is business as usual. We well, every time we have business as usual and they talk, it is down. And it is business as usual and the president and congress and sell. September has never been a terrific month. No, the dow is on course for the biggest jump percentage and points since may of 2012. We have four days left in the month. We are coming off and we may open here lower than the august 21 lows, albeit on the light volume, and yesterdays volume was the lowest full day volume of the year. Yes, the year. And we are talking about the lowest volume of the weak, the year. You can move them easily. I do. I want to watch jcpenney, because that is a big piece of business there, and kit hold . If you have buyers coming in to buy the piece of business, it will be good. Which ve to get to talking about. But do we have the go to the playbook to how the play a debt ceiling showdown again . Yeah. The playbook that we rolled out last year which is sell them, sell them, sell them, and buy them. Do i have to go over it with you, gentlemen, what to do in the situation . Well right back on the red hot griddle and boy at 39 and sit back the make some money. That is the debt ceiling play . Yes. And you break the glass on the oh, here we are again. And the emergency buy of the bmy. Well, this is to get the ax out and buy a little pfizer. Pfizer and maybe yahoo and a big turn there, and maybe microsoft when it gets below a certain yield because of the activi activism. You go back to the playbook. Dont outthink this, david, carl. And the best sectors of the month, materials and tech. In fact, the only sectors positive for the month. Materials, and look, europe and china before this happened they were tailwinds and started to get some good news and i think it can still happen, and with syria, we have to wait for the geopolitical events. This is not james baker know negotiating to iran which didnt work. And this is not a big Oil Producing country in syria, but it is back to the playbook, and the playbook is a big drag. Big drag and in some ways it is more than the debt ceiling well, you cannot measure, and syria is going on for a while, and we may attack, but nobody is expecting us to go to war there. So to speak. If it werent thin. On land. And buyers would come in and say, i will take a good read and go buy some higher yielding stocks, because the 10year is going back to 2. 5 in this scenario and we go back. That is why the playbook works. If you want the buy the housing i dont know. And today, 2. 75, and usually we are tracking the yield the other way. Well, it is going down, and interest down for the wrong reason, and we want them down because the Central Banks are stopping to selling, and they dont deserve it, and then you say, why did we talk about taper . Geez. Always something somewhere. And listen, worse, we could be in emerging markets. No thank you. Right. We will stay right here. We dont have a lot of earnings, but the caseshiller news that could be impressive. And lets get on to other news this morning in the tiffanys retail Second Quarter profit rose more than expected up 16 which is thanks to the strong sales in china. The home of the little blue box boosted the full year earnings forecast, and there you have it, luxury doing well, and worldwide net sales up 4 to 926 million. And net earnings are up 16 as i said. Asia pacific up 20, and the sales in europe rose 11 . Everywhere but home. Everywhere but home. That is where we are, the tailwind tailwinds are out from the other countries, and now we have become a decent engine, but im looking for the china turn and we are seeing somewhat of a china turn, and europe is Getting Better and this could be a setback. I look at the european prices in the market today and obviously bailing out of everything, and taking profits and my Favorite Bank are kcoming in. And margin pressure is easing a little bit. What is with all of the unnecessary warnings and the profit warnings, and issuing conservative guidance they didnt need to in the end. No. No to abercrombie, and going into the tiffany mode. Stop with the, and i mean, abercrombie with the most bull ish proje ish estimates ever. And also amf and slnr. And big solar where they got a nice price. Solar is interesting, but a a f, and eaero postal, we put togethr a big basket and just insure it. Write it up. Whatever it takes. And like subprime housing. You dont see tiffany as a proxy for luxury at large . I mean, luxury is back and you are not saying that today . Well, we are in a period, and i go back to the berman interview that you did that it is not the consumer in trouble, but the retailer. If you are selling apparel, they dont want it. Ok okay. Im not just saying this because Mickey Drexel was obviously getting his car washed in albuquerque, and he has moved on to other things with j. Crew. Hosting the oscars and small time parts and car wash guy, whatever it takes. Tiffany and best buy, and the people are buying the hard goods and tiffany, by the way, that stuff lasts. Apparently it does and you have have to get insurance for it, too. And squeeze in jcpenney with the drama continuing. The companys biggest shareholder bill ackman will share his sell in the company after his campaign to overhaul the company failed and others said that the it would be a tenb tenbagger, david. Yes, delivering alpha at 2012 it was not a tenbagger, but a significant loss for mr. Ackman, and interesting choice on his part, and not surprising that he was going to sell and the letter last week telegraphed the possibility of a sell. But, jim, doing it all at once sends the message, i dont believe what is going on here. Why not dribble it out and do the best for the fund holders instead of taking 12. 90 here. Does he need the chunk of money . Well, i would not have done it, because i believe that jcpenney was down a lot already and you let it ride. Like soros appears to be doing . Well, that is many other smart guys. And other hedge fund guys, soros or perry or my friend carl bassenhimen. They do quality work. Yes, and they believe a turn there and at 12. 90, and by the way, citi which bought the stock from ackman well over subscribe and in fact, the reverse inquiries came in and citi acted on them, and people said we want an opportunity to buy the stock, and citi had the book and way oversubscribed and some hedge funds were putting in that got pulled way back on what their allocation might have been or what they were looking for, so there seems to be a lot of potential interest at least. Well, ullman is not doing a bad job. They have the housewares business under control and they had a core business and the Balance Sheet is good and the apparel is not that good in the sense for anybody, but i just think that you are giving away the stock here. Well, a couple of weeks ago on the earnings you said that, bill ackman, you said it on the show to apologize to mike ullman did he issue that apology . Well, this is a white flag of sorts . Well, it is. And does he go the buy herbalife at 80 . Well, i would have loved carl to come in and take down the whole block. Well, that would have been poetic. But, david, because you are familiar with the queens and jack lews queens. And not just queens. And is this a situation where carl icahn would say that he is at the schoolyard and he got beat up and does he go to his mom . Did he go to his mom . Yes, to the mom, and carl said, i will take care of that. And remember when you beat somebody up and their mom called your mom . Oh, that is is that who you were, the one doing the beating . Well, i hope so. I take a beating . Well, it is interesting to note that the hedge funds long jcpenney are long herbalife. Yes, yes, yes. And listening to ackman, well to a certain extent. We will see how it plays out. He is gone. Off. Gone. No more ackman and jcpenney. And all of the jobs lost and what is that about . It is a doroefr . A big dooff . Well, here is a big headline, the u. S. Missile strikes against syria could come as early as thursday according to u. S. Officials and chuck hagel the u. S. Defense minister has told the bbc that the u. S. Military is in his words ready to go if the white house makes this call. Our own Richard Engel has been on theed boa border of syria, a is reporting that the rebels had promised to launch their own offensive to coincide with any u. S. Offensive, and finally some sources at reuters are saying that the rebels are suggesting, and giving a list of suggested strike locations to the u. S. This thing is gathering lot of team quickly. And what happened to the other guys in europe . They are like, what . France and turkey is the one who has the most on the border. It is interesting. Although we have four destroyer destroyers in the mediterranean with tomahawks to basically hit anywhere in the kun tcountry. But it feels like what are the russians going to feel like. It is a little cold war like. And russia back at them. I dont know, i think that it is a vacuum, and we are trading in a vacuum here. We will see if oil goes over 110 then i know that the situation is that you have to take action on and be a little reshuffle. Not there yet. 1. 50 away from that level. And Robert Shiller reacts to the caseshiller numbers just released and is he looking for a doubledipper in the housing. And also, we will be joined by a exclusive interview following the companys results and look at the state of retail in general. There is futures implied open down 115 and talking about the critical levels when we come k back right here. 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 start using active trader pro today. Time to have new experiences with a familiar keyboard. To update our status without opening an app. To have all our messages in one place. To browse. And share. Faster than ever. Its time to do everything better than before. The new blackberry q10. Its time. Want to get back to the key housing data this morning and caseshiller report s as are shg that the home prices are continuing to climb. The 10 and 20 city compose sits rising 10 and 20 for june, and here is on cnbc, Robert Shiller, professor of economics at yale university. Robert, it is great to have you back, good morning. My pleasure. And we have the twin city up doubledigits for the fourth straight month. What do you make of that . Well, obviously, we are in a housing recovery, at least for the short term. I have always been less sanguine about this one, but housing is a market with momentum, and right now the momentum is up. Well, professor schiller, it looks like there are some, and i know in june, peaking in the rates, but i mean the spike in rates, but you do say that of only six cities where the prices were rising faster than a month last, and so is that some diminution of the game . Well, there are some, yeah, there are some weakening signs and the starts are down, and especially in the singlefamily realm. I think that there is a chance that there is weakening, and there is a all of the fear about the taper iing that is a cloud over the Housing Market right now. You seem reluctantly positive, and you have seen it for a long time. I mean, you almost feel like you want to say, ah, it is not for real. Well, none of this is for real. The Housing Market has gotten very speculative and it goes through the big cycles, and take california for example. It is and up and down and up and down and decade by decade and it does not go anywhere, but a roller coaster, and that is the way that the markets have become. So for a long term buyer the fact that they are going up now does not mean a lot about where it is going to be when you finally sell. And we have seen big disappointments and you have mentioned the starts a and the new home sales also disappointing and the soften ing in the terms of the purchase mortgage applications, do you see those trends continuing through the back half of the ye year . I think that there is a risk of a weakening Housing Market. It is a speculative market, and this has been not by research, but driven by irrational exuberance and that can suddenly change. It is a story, and evolving story, and nobody who can really predict this for sure. It is risky. Well, robert, we have seen a tremendous number of hedge funds, and private equity guys going to buy a lot of homes and fix them up and rent them. I have a feel that is the height of speculation. Is there a possibility that the homes will not be able to be staying in the hands of the private equity and they will dump them and that is going to cause the decline . Well, the right. The momentum that we have seen historically may be weakening, because theres so many more professionals in the market. It is kind of obvious to me what these Hedge Fund People are thinking. They are thinking it is a market with reel momentum, and it is going up, and i can flip something and buy it and sell ate year later,ed a it is pretty safe and i think they might right, but that means that the market going to change. Isnt this the Housing Market we have got. When is tlas time there was a normal Housing Market then, robert . Oh 1960s. Hard to tell. Days of the bewitched great. And robert, we keep hearing the pent up demand and every homeowner trying to outdo each other and even though the rates went up, and are they being realistic and is the pentup demand able to carry us into a bet better starting number in 2014. Well, pentup demand is important concept and after years of dearth in housing, you would expect pentup demand. But on the other hand, other things are working. There is an increased desire to rent, and less of an interest in the disbursed suburbs and more of a desire to stay close to the public transportation, and activity, and these things are downers and longterm downers for a good part of the real estate market. Another big piece is how the First Time Buyers making up a sma smaller part of the market, robert, and you could argue that the Housing Market is catering to those with money and not those who are looking to graduate from renting. That is a troublesome thing, yes. Ideally, we would like investors, and that is the American Dream to own a home and be part of a community for a long time. It is stability and connectiveness. This idea of a lot of speculators in the market is not healthy. Right. And robert, thank you so much for your time and interesting numbers worth seeing and people in houston want to know why they are on the 20city, but that is a new discussion. Well, we will get to that. 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