P. M. Eastern time. Tenyear yield still a shade below 3 . Germany, italy, switzerland all closed today. London did just wrap up an early close with a 14 gain for the year. Stocks are set to open up high again today. Streaming video getting a little bit cheaper. Will it be a hit . Netflix working on a lower price plan that only lets you watch on one screen at a time. And the surge in home prices continue. Prices in october did jump over 13 yearonyear. Thats the highest gain since february 06. Robert shiller is here to tell us exactly what we need to know. The dow up nearly 26 , s p up 9, the nasdaq 38 this year. The dow is on pace for its best year since 96, s p the best since 97. All the coverage is trying to take stock of what went right . Or is it fewer things going wrong . David kelly in usa today saying it was the downsizing of fear that allowed money to come back in the market. Its interesting when you talk about that downsizing, we have not seen the broader participation of the retailer. We started to see inflows but nothing like you would have anticipated. Weve had a pretty good move since lets call it march of 09 and only recent lip has retailed seemed to get in the game, although etfs have taken in a lot of money and perhaps we should be more focused on that when we judge the overall participation. I was speaking with the head of jpmorgan and he was saying its important that the Retail Investors continues to come back in. Thats the inflexion point they would make note of. They always get the memo late, dont they . Thats the problem. I guess so. But it seemed like a huge amount of optimism this is going to continue for some years, it would appear, if you read what everyone is writing at the moment. When has everyone been write right. I would be careful. Whether its the boston bombing, syria, all the countries in europe that managed to be resilient, cypress, greece, italy, portugal, s. E. C. , Stock Exchange glitches, a shotdown here in the United States, ipos that may or may not have managed to get done. Black sten, while of course hilton we think of, there were any number of a couple of real estate related ones. You it has been. It funny, over the last couple of years when you see a delaugh rejing ipo, one from private equity or or being raised with paying down debt, the likes of a twitter, which is still one of the best ones weve seen in quite some time but this year everybody liked almost everything that came public. Almost. Not everything but almost. 26 minutes until we start trading for the last session of 2013. Ron, where do you think we will go next year . I think the big issue i wrestled with and we wrestled with coming into the end of the year is what kind of probability do you put on a recession in 2014 . Its probably the lowest probability of a recession that weve had since the recovery started. Its unlikely the stock market will have a bear market until we have a recession that really reduces earnings. That said, because the economy is doing so much better, this will be a mush more nuanced year. This is a year in our judgment where recovery will be felt on main street and the fed will have much more difficult decisions to make as to the speed at which they taper. So my guess is that this is quite typical that, good years follow great years. Weve had a great year. Were likely to have a good year but Risk Management and some kind of an air pocket during the year are likely to happen. John, some of the big names, barclays, goldman, citi are suggesting this market will only gain 3 next year. What do you think . I think obviously this is a bull market. So what im forecasting is a continuation of this bull market, at least until we reach some kind of modest overvaluation. Because right now were at fair value. As i look at it, it hard to do one year at a time. But if were look out three years, were likely to have at least one, two, or three points or more of market multiple expansion and each is worth about 120 points on the s p index. And the stronger economy we just referred to, i think its for real and well have at least 6 to 7 Earnings Growth over those three years, which is really just close to the historic average. Thats worth about 350 points on the s p 500. I dont want to get too technical on multiple expansions but why would people pay more for a given earning stream when there are not that many people that are pessimistic at the moment . I would argue that they wouldnt. Im sorry, to john. Please pick that up. You talked about confidence before we came on and i think thats the big thing. I mean, people have bain voiding stocks investors have been avoiding stocks for five years. Now were seeing inflows and the confidence builds on itself. Its just the typical thing, simon, in a bull market that we get to fair value but almost every bull market gets to at least modest valuation before its over. Jon merrill and john smith. I want to get to share of hertz this morning. The company yesterday put out an unexpected press release announcing had what the 10 threshold. Why is this interesting . Well, weve seen it in a number of cases recently because its been a sign that the Company Believes activism is not far from its doorstep. In this case hertz in its press release says it has observed unusual and substantial activity in the companys shares. Ackman did come very soon after and did agree to a deal with the company before entering a big proxy fight. Who will hologic, only they came too late. Who is that activist as we look at mr. Icahns bearded face . Its got to be a big guy. In this case given the size of hertz at 11. 6 billion market value, to put it in at 10 , youre talking about somebody they believe can have taken as much as a 1. 1, 1. 2 billion position, so therefore, its got to be a bigger fund. Youre talk well see who comes to the fore here, if anyone. Can i not tell you specifically at think th point or ive not been able to identify what activist it is they believe is responsible for this unusual and substantial activity, though interesting to know the stop has been a name thats been around. The interesting, though, guys they came public in a way with this press release instead of doing it quietly, talk about all of these things. The expectations ive been able to have is there may very well be a large activist in hertz, who is girding for a fight. The company hoping that it part enough ahead of them or at lease but it is similar to where. In this case hertz may choose to stand and fight. When you look back at the performance of the stock, it been pretty good. So well see what develops here. But did want to mention on hertz, for those who are interested, yet another potential activist situation developing. Kind of refreshing they come out and say this is what were seeing, even though its a little odd. They have to tell the market theyve got that deal in place. They could have chosen to put a poison pill in and say nothing more about it. I dont know how close activist it. I dont know theyre exactly certain how big theyve gotten. Egot to 9. 8 . But this is an born and as mk has put inover night by the way, theres no suitor for hertz. So a lot of the focus does seem to be on capital return but also on this equipment businessing less al when we come back. By the way, heres a look at how the home sector has fared this year. If you had picked one at the beginning of the year to go negative, youd be out because not a single one did. A lot more squawk on the street live from post 9 in a moment. Although easier to get a new , easier to get a new , awarded j. D. Powers most appealing midsize car, two years in a row. And right now you can drive one home for practically just your signature. 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. For details, visit vwdealer. Com today gordons ready for the new year. Thanks, gordon. The highest gains in home prices. But there are signs the boom is fading. Here first is robert shiller, the founder of the caseshiller index. Its good to have you this morning. Good morning. These numbers are incredible. But blitzer says in the release we are living on borrowed time and the boom is fading. How does he get to that . How do you get to that . We have a futures market at chicago. The futures market does show it fading a bit. But its predicting the increase wont stop until after 2018. I still we still have time to go but it might be weaker. Barons over the weekend talked about price growth in 2014 being modest, positive but modest, thats where you guys were tomming down to. Can that be sustained in the face of higher rates. I imagine so. I think these markets are substantial. They have a lot of momentum. The Housing Market is fundamentally different from the stock market. We hope to change that if we could get things are changing but there has been tremendous momentum in the Housing Market. Things are changing, like blackstones reit and the market might show less momentum than it has in the past. We keep talking the degree to which firsttime buyers are locked out, the degree to which the high end is where all the action is and people who already have a home, graduating into a larger, more expensive home, is that trend going to remain i in especially big homes farp away from the center city. I think theres a new urbanism afloat. Housing is not monoit lick. I think this might be a tread toward more urban living and less suburban living. Were in a period of time where most of us have not seen before, very little inflation and very little wage growth. Well, it doesnt sound good, tothe market coral we had the haunting at the beginning of the session around 210. And as an economics professor, if you go pa because they were fixed assets, they would hold their value and if not, do better than that. Now that weve been through this and gold in particular has had a very bad year, what do you think about those theories . About a theory about gold about fixed assets in general. Yeah. Im a behavioral economist and i think that confidence plays a huge role. But confidence isnt a monolithic thing. It depends on theories. I find it very hard to predict the gold market. Ive never really tried to do that. Were sort of in the possible beginning of another housing bubble. I dont see it related to the other assets you describe. Theres a great piece this morning on the daily beast talking about what they call the decline of financial failure in this past year. You look at the resilience of europe, fewer bank busts, fewer bankruptcies, fewer foreclosures. Just the sheer though confidence hasnt really come back. Thats the problem. Well week do have record high at least consumer confidence, right . Its coming out this morning later, isnt it . The new number. But i havent well get confidence report today, yes. I have my own confidence report. You can see it on my web site. I dont see any big return to confidence at the moment. Robert, on that note well see what 2014 does bring us. Thanks as always being with us. Well see you next year. Next year. What does veteran trader art cash cashin watch . This. At bny mellon, our business is investments. Managing them, moving them, making them work. We oversee 20 of the worlds financial assets. And that gives us scale and insight no one else has. 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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 gastroenterologist about humira today. Remission is possible. Theres nothing like being your own boss and my customers are really liking your flat rate shipping. Fedex one rate. Really makes my life easier. Maybe a promotion is in order. Good news. I got a new title. And a raise . Management couldnt make that happen. [ male announcer ] introducing fedex one rate. Simple, flat rate shipping with the reliability of fedex. Waiting for tonight, oh, when you will be here in my arms waiting for tonight, oh, ive dreamed of this love for so long lets bring in art cashin, director of floor operation with ubs. We dont plan these in advance. Ill throw one at you, give you a second here. I love when you come up with one where there could be a surprise. But anything come to mind when you think about next year that would be unexpected but something we should keep in mind as a surprise that would have broad impact . I think it is the relationship of the bond market to the fed. That theyre expecting that theyre going to be able to work out of this thing slowly, quietly and effectively. And the bond market is giving some signs that theyre not quite so sure about that. So the two things i would be concerned about is if the bond market began to step out on its own and began to raise rates a little faster and a little further than the fed would prefer. And Something Else that ive discussed on squawk on the street before, the embarrassment of success. If suddenly money gained velocity, if banks started lending aggressively and people began spending, then those trillions of dollars resting in the fed vaults in the names of the banks could become inflationary tinder and that could cause the fed to taper at a far more accelerated rate. So those are two things relating to Interest Rates that is my concern. For today gold is not reflecting that at all, 1186 on strong volume, first decline since 2000 . I would watch it. Its very close to the years low, which was right around 1180 or so. Youve got the excuse of tax loss selling. Last day of the year, last chance to take it. Everything fits right in and i agree with you, been no sign of inflation yet. Thats one of the reasons that gold is having such an awful year. People want to know what your drink of choice is tonight at midnight. Well, i consider new yearsy to be amateur season. We professionals is stick with the drink of choice. I have a champagne tie with c k corks popping all over and i hope thats a sign that the markets will pop very readily. Thank you. Well see you very shortly in the new year. Well see the opening bell for this last day of trading in 2013 in just a few minutes. Squawk on the street is back after this. 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Its cold and you know. A lot to look forward to. In the meantime, looking at some of those names that might move, we havent mentioned hp, david, and the renewed estimates of how many people they may lay off by next year. Theyve always had a target that might have been as high as low 30s. They got more i think participants than they originally anticipated in terms of taking early retirement and things of that nature, but they are getting close to that 34,000 mark i think is what it will end up being, although again i do want to get a little more clarification. But there were some stories out there about that. As for the stock, its been an extraordinarily good year. Its up 97 this year. Coming off last the last quarter, which was better than anticipated but still trying to keep the bar low. 2014 the key year. Meg whitman has said it time and again, that theyve got a good grip on the turn around. You can go to your screen, were talking s pers here. Who would have expected that . Its like the Carolina Panthers of business. One of the second Largest Department stores has warned it has too much inventory. I wonder about best buy, whether they have to follow in those shoes. Whether its the tesla, people talk to twitter as one of the highest ipos and although weve been around the block and back, 63 is a gain of about 3 . But this was 74 just a few days ago. What was the first trade on twitter, carl . Was it 45 . Priced at 28, somewhere around 48. Not quite 50 as i recall. Its funny, having a conversation this morning with one of the few Hedge Fund Managers able to come to the phone about why you would want to own it here. I guess if you believe, as we talk so often that they are just at the cusp of figuring out their business model, and its exciting a lot of investors out there, do you believe it will be a hundred dollars stock by 2016, perhaps you still are happy to buy here and see what would be a little more than a 10 plus return until that year. Its anybodys guess at this point in terms of valuation. Its gone from 20 to 30 to 42. Just amazing swings. Paper wealth created by the stock market this year, 5. 3 trillion, according to wilshire. Its getting toward real money. Yeah. Did want to mention hertz. I wanted to get to bob pisani. Company puts the poison pill in. My expectation based on reporting is you may see evidence of a large, wellknown activist. The key argument being made from those who would want to see the company do something is to split off its Equipment Leasing business. Its a very capital entensive business. So you would not only benefit, they say, from the splitoff, which might be worth as much as 4 billion if they do that,