Captioning sponsored by wpbt this is n. B. R. Susie good evening everyone. Im susie gharib. President Obama Tells Congress were not a deadbeat nation, and they need to raise the debt ceiling now, so we can pay our bills on time. Tom im tom hudson. A sour day for apple investors. The stock tumbles to 11 month lows on new worries about waning demand for the iphone 5. Susie but a banner day for g. M. , the cadillac ats takes car of the year at the big auto show in detroit, and its new corvette stingray wows gear heads around the globe. Tom that and more tonight on n. B. R. susie the next big fight in washington has begun. President obama today called on republican lawmakers to authorize an increase in the nations debt limit, saying that messing with it could potentially have catastrophic results for Many Americans and the overall economy. He warned markets would go haywire if congress does not act, Interest Rates would rise, and checks to Social Security beneficiaries would stop. And he said even thinking about the u. S. Not paying its bills is irresponsible and, absurd. Darren gersh reports. Reporter in his first News Conference of the new year the president gave a harsh lecture to republicans about the need to raise the debt ceiling and he once again said there was no way hed negotiate with congress about something it should do anyway. They will not collect a ransom in exchange for not crashing the american economy. The Financial Wellbeing of the American People is not leverage to be used. The full faith and credit of the United States of america is not a bargaining chip. Reporter republicans called the president hypocritical for saying he will not negotiate over the debt limit while blasting republicans for refusing to negotiate. And they fired back that the debate over the debt ceiling was the perfect time to consider legislation to cut spending. At the same time, only a handful of republicans have actually said theyd let the United States default on its bills. T predent claims this, but republicans have always raised the debt ceiling. Weve never seen the debt limit fail to be raised. All they have said is we want to apply the same criteria that the president himself applied when he was a senator and say we dont want to give the president a blank check. We would like to fix the substantive problem which is the level and the growth in the debt. Reporter markets are almost treating the fight over the debt ceiling as the sequel to a bad movie. And investors have a pretty good feel for how this cliffhanger ends. They dont really care about the brinksmanship until they are right up to the brink, but also, the more dangerous the fall, off the brink, they figure the less likely tt it going to happen. Reporter treasury secretary Timothy Geithner told Congress Today that unless it acts, the nation will not be able to pay its bills sometime around mid february or early march. So with a month of so to go, there is no solution in sight. Darren gersh, washington, d. C. Tom Federal Reserve chairman ben bernanke echoed the president s comments on the debt ceiling today, in a speech at the university of michigan, he said congress has to take action to avoid a situation where our governme doesnt pay its bills. Ahead of that, stocks were mixed, the blue chip dow rose almost 19 points, while the nasdaq dropped eight, and the s p 500 down a point. Susie weighing on the nasdaq today apple. The stock got crushed, on word demand for the iphone 5 is slipping. The stock closed just shy of 502, losing almost 4 . In premarket trading the shares briefly fell below 500, the first time in nearly a year. Suzanne pratt reports. Reporter apple has been taking a big bruising. First, it was the earnings miss for the september quarter, the second straight. Then, theres been growing speculation the tech innovator is losing its edge to competitors, particularly samsung with its popular galaxy smartphone. Finally, today there were reports apple dramatically cut orders for iphone 5 components, due to weak demand. To be sure, apple has not confirmed soft sales with hard numbers. But, experts it would not surprise them if consumers were sour on iphone 5. It may be significant, we just came through the Consumer Electronics show and virtually all of the high profile phones that were introduced there had very large screens. Some manufacturers like samsung have done very well with screens that are five inches or more in size. The iphone 5 is a four inch screen. Reporter apple is still far more profitable than any other Consumers Electronics firm in the world. But, analysts celestial expectations have led to a crushing fall for apple shares. Since hitting a high of 705 in september, the stock has lost nearly 30 . The selloff has trigged a big debate on wall street. Are the shares cheap enough to buy, or is the market darling done . Apple bulls argue the gadget maker has a p. E. Of just 11. Apple bears say the companys days as a fast growth giant are over. For investors on the fence, it may make sense to wait until apple releases it latest Quarterly Results next wednesday. Some experts are speculating apple will fall short on revenues, because of weak ipad demand. In the tablet world youve certainly seen the android tablets get more of a foothold into the tablet market, a market that was almost entirely apples for quite a while. Reporter if apple doesnt have enough troubles, heres potentially one more headache. Rim is due to release its much awaited blackberry 10 later this month. And, so far it seems the reviews are generally positive. Suzanne pratt, n. B. R. , new york. Susie dell stock also making news today, on reports the company is in talks with private equity firms regarding a potential buyout. Investors snapped up the stock dell shares posted their best day in months, rising 13 to 12. 29 a share. Dell had no comment on the report. Tom still ahead, tonights word on the street facebook. The social network promises a mystery announcement tomorrow, how friendly could that be for shareholders . Susie stocks are up so far this year, but adam parker expects the markets will close flat for 2013. Hes chief u. S. Equity strategist at Morgan Stanley. So adam why so gloomy so, many strategists are much more positive than you are. What is your thinking . Well, look, we have a more cautious earnings outlook than i think some of our peers. The macroeconomy is not that strong right now. And corporate earnings arent growing that much. I think that is the root of our nearterm caution. Susie on earnings also youre not so upbeat. Are you looking for them to be flattodown 1 , again conscientious. Up 11 percent. The distect disconnect . Look, im pretty certain the conscientious estimates are too high this he have been too shy for a year now. We saw the worst quarter in the Third Quarter this cycle on the revenue side. And i think that will continue. I think the question isnt are the consensus earnings too high t is will the stock market care. Because the last year the s p total returns basically now is right near its alltime high even as the earnings have come down. So its not about are the earnings too high or not, they are. Its about will anybody care as they decline sudz well, one thing that investors cared a lot about today was apple. You heard our story on that i know you cant speak specifically about the stock. But are you also not a fan, a real fan of technology. Why not . Well, look, we look at a few things when we make our recommendations, susie. We look at the the achieve ability. Are the estimates achievable. I think for tech it is tough right now. A lot of the conditions in the economy are slow. It spending is to the really that great. So i dont know if the estimates are that achievable. I also think that yeah, better risk reward in other sectors in the market. Were trying to advise our clients how to outperform the s p. I think there is better opportuniy. Within tech there are some things we like where recommending suck stocks for example. I think that is one economically sensitive area that the stocks havent participated that much in the rally. Susie lets talk about the areas that have been telling your clients, Morgan Stanley clients which direction to go. You have three big themes for your clients. Buy stocks with from American Companies with exposure to china, positive on china. Buy dividend paying stocks and you like very large stocks, what you call megastocks. Why are these the themes for you . Well, look, for china i think we identified late last fall that the u. S. Companies with china exposure had really lagged the Broader Market and had gotten quite cheap. And the China Economy started to stabilize a little, we thought that was good risk reward. On the dividend theme i think our call was that the tax rate wasnt going to rise the way it was written in the law. We have seen that and this is a pretty compelling group of stocks. You have low payout and bond rates are low so you can buy dividend stocks that yield well relative total attorney difficults in the bond market. On the megacap stocks you have a lot of large high quality American Companies that should be able to grow at or higher than the rate of the market or cheaper than the market and also have those higher dividends. Susie and the other two sectors that you also recommend to your Morgan Stanley clients, health care, Companies Like cardinal health, and industrials like honeywell, General Motors what is the story there . Well, for health care look, when you want to be a little defensive in the marketss natural for people to think about two sectors, health care and staples. We really Like Health Care more than staples right now. We see that pretty clearly. Healthcare companies are beating estimates more, they have higher cash balances and you know they are much cheaper. They really never have been cheaper on forward earnings relative to staples so we really like that overweight Health Quarter underweight staples call. As for industrials you have a lot of high quality u. S. Companies. Some have the china exposure. Others benefit from energy and infrastructure or improvement in housing so it seemed like there were fundamental reasons to be more optimistic on that group of stocks. Susie okay. Well, well see how it goes this year. Thanks for coming on the program. Weve been speaking with adam pozen. Susie its not easy being a retailer these days, especially if you rely on customers buying at your store. Many consumers come in and browse, but make their purchases online. But Tech Innovations are helping to change that. Erika miller got a sneak peek at the intel booth at the National Retail federations convention. Reporter adidas had a problem. Thats the company most americans call adidas. It needed to figure out how to get customers to buy merchandise in its stores, instead of on line for less. It found the answer in this interactive display, which has boosted traffic, and dollars spent per transaction. Normally, in a physical store you can get maybe 200 different products. But with this, you are not really limited. But rather than just put a little kiosk in the store, what we wanted was to put this wall in the store so you could tryout the products in real size. Like you would in a normal store. Reporter mccormick is hoping to spice up sales with this interactive game, called guess this spice, with scent that comes out. You get a coupon at the end. Mccormick has another display to identify your flavor profile. Im cocoa loco. In the store, nows the time you can sign up for more information about this, where we can send you recipes, our about information in the store, so we can drive more traffic to the store. Reporter for now, many of these machines are primarily focused on managing inventories and raising brand awareness. But down the road you will likely see more exciting features that will help Companies Better meet customer needs. This is a peek at pepsis next Generation Vending machine. Not only does it have games, it also repairs itself. You can also see whether the machine is working or not. If it has some sort of glitch, it can be remotely healed. Reporter eventually, it may also track who buys what. It will be able to tell whether you or male or female and which of four age buckets you are in. It will basically know that possibly a young female in this category is the one buying diet pepsi, versus maybe a male in the senior category is the one buying the classic pepsi. Reporter coffee lovers may be interested in this new vending machine. Its made by costa, the second largest coffee chain in the world afr starbucks, although its not in the u. S. The machine pumps out cafe sounds, and the faint aroma of a bakery. And it could be a ticket to new Business Expansion this machine is far more aesthetically elegant. And the user interface is far more suitable for places like offices, hospitals, educational establishments. And possibly new international markets. Reporter he wouldnt say if that includes the u. S. But you have to wonder why costa would bother with this huge u. S. Retail trade show, if it didnt have plan brewing. Erika miller, n. B. R. , new york. Tom we continue our monday series with some of the nations top universities to bring you the best research on business, the economy and investing. We call it nbru. Our partners combine over 400 years of business knowledge harvard, stanford, wharton and vanderbilt universities. Every monday we speak with top professors about key money issues. And you can read indepth articles at www. Nbr. Com, just look for the nbru tab. Tonight money market funds. From small investors to giant Pension Funds and big corporations more than 2. 5 trillion are in money market accounts. But, as the credit crunch illustrated, one important difference is what those funds are invested in. We spoke with robert pozen, senior lecturer at Harvard Business school. Our money markets, i think theyre relatively safe and after the crieses the sec took several actions that made them a little safer. It reduced the average maturity from 90 days to 60 days. It now requires 97 or more percent of the assets of money market funds to be highly rated. And it also imposed certain liquidity requirements so they would have enough funds to meet redemptions. As we learned four nears iers ago not all money market funds are created equal. S thiss absolutely rightment one big division is between money market funds that invest only in treasuries and other government guaranteed securities. Now historically thats been a pretty safe group of money market funds. The group of money market funds where the issues have been are called prime funds because they invest in commercial paper of various sorts of companies. Sure. And so i think that we shouldnt take a broadbrush approach. We should really focus on those commercial paper or prime money market funds opinions and what are you referring to is the regulatory review of money markets trying to address some concerns that were brought up when a big prime fund broke the buck. That Net Asset Value which traditionally has been a dollar per share for money market funds went below testimony and the regulators have said do we want a floating fund . Right. And the regulators have proposed a number of different potential requirements. Theyve been very controversial am but i think the most important one is the one that you just mentioned. That instead of having a constant dollar Net Asset Value, it would fluctuation with the market every day. Now it probably wouldnt fluctuate by more than a part of a cents, of one cent but it still would fluctuate. Weve seen money come back into money market funds over the past couple of months, what does that tell you about the confidence of those investors . I think the investors are getting more confident. I think the secs new rules are helpful. They reduce the risk. And quite frankly the rates of return are not very good throughout the marketplace. That includes money market funds though. Its all a relative question as einstein said. And he was a smart guy. So money market funds have a modestly better yield than a lot of other instruments instruments. And they are viewed, especially government funds, and the Retail Investor i think is in a situation where there are lot oss of small accounts. Continued it would take a huge number of accounts to really cause a problem without the fund. Tom a multitrillion dollar market, bob pozen with us from Harvard Business school. Thanks, bob. Thanks for having me. Susie some big wins for General Motors on the first day of the north American International auto show in detroit. Gms cadillac ats took home car of the year honors at the shows kickoff event. The award is the latest in a string of accolades for the ats. Cadillacs luxury compact sports sedan is the lightest car in its class. G. M. Also unveiled its latest edition of the chevy corvette. The seventh Generation Model brings back the stingray nameplate, which babyboomers will remember last from the 1970s. G. M. Hopes the sleeker model will get corvette lovers to upgrade, while also attracting younger buyers. We also want to expand the owner base maybe to a younger audience those in their early 40s if you say who are looking to buy a sports car for the first time maybe considering a european brand and making sure that they recognize that if they want to get into this market they owe it to themselves to shop for chevrolet corvette. Susie truck of the year, went to the dodge ram. Tomorrow night we look at the truck wars